Shares: Financials head a queue of heavyweight results

Week Ahead
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The Independent Online
HEAVYWEIGHTS jostle to offer their profits this week. A dozen Footsie constituents should between them have pounds 12bn in their corporate lockers; dividend increases and perhaps more share buy-backs should enliven the proceedings.

Financials, which now represent approaching 30 per cent of Footsie, are due to make by far the biggest splash.

Their dominance is not surprising. The bank profit season is still in progress and insurers are getting up steam. As if to prove there are other industries beside money, energy and minerals also grace the Footsie list.

There is no indication whether the powerful array of financial profits will be accompanied by any corporate developments. Talk of bids and deals has helped financial shares hit new peaks and made a major contribution to Footsie's record-breaking run.

Institutions have also had to increase their involvement to adjust to the arrival of four building societies and Norwich Union, the insurer. They remain underweight in the former mutuals and their continuing need to be strongly represented on their share registers should at least offer support.

All the reporting money groups have been deeply involved in the swirling speculation which has engulfed the banking and insurance industries. HSBC, the giant international banking group, has been tantalisingly linked with a plethora of groups.

The owner of Midland Bank will account for a major part of the combined profits of the reporting Footsie constituents when it announces year's figures today. About pounds 5.1bn, up from pounds 4.5bn, is expected, indicating the Asian crisis has not had too much impact, although a big bad-debt provision hovers. Asia, however, has devastated the shares, ensuring they have missed what has truly been a bankers' feast.

For National Westminster Bank, final figures tomorrow, its been a traumatic year. Its unsuccessful venture into investment banking has left its image a little battered. The yearly results, likely to be a shade lower at just over pounds 1.1bn, will do little to restore its reputation.

Abbey National, the first of the building societies to escape their mutual heritage, will have a happier tale to relate on Thursday.

Profits should be up from pounds 1.169bn to pounds 1.4bn, demonstrating the remarkable progress made since it pioneered the switch from building society to bank with its 1989 flotation.

Abbey is now a rounded financial group and intends to become even more broadly based. Its ambitions have not been lost on the stock market rumour mill and, in recent times, it has been linked with the likes of the Pru and NatWest.

Last week it was the insurers who took up the bid running. Purely coincidentally three of them - Commercial Union, GRE and Pru - will have results on display on Wednesday.

The latest hot story is that CU and GRE are holding merger talks. There is also a long-simmering theory that Barclays and Lloyds TSB are keen to barge in among the quoted insurers. With foreign bidders also thought to lurk, it is unlikely the once sedate world of insurance will be able to throw off the speculation which has driven shares to new peaks.

CU and GRE are expected to record lower yearly figures. Fire damage, storms and the strong pound will impact on CU, likely to announce profits around pounds 420m against pounds 444m. It is expected that GRE's underwriting losses have increased as its investment income has fallen. Profits could be pounds 185m, off nearly pounds 100m.

The Pru should have scored from the growth in life profits, although the sale of Mercantile & General and the acquisition of Scottish Amicable may blur the results.

It is unlikely that much will emerge on the insurance mis-selling front. A highly charged issue only weeks ago, it is now fading as more companies move to clear their backlog of cases.

The figures, expected to be pounds 900m against pounds 873m, may also be distorted by the switch to "achieved profits" accounting which brought the Pru in line with the rest of the life assurance industry.

Standard Chartered, also on Wednesday, is another likely to notch lower profits - pounds 855m against pounds 870m. Like HSBC, its shares are a casualty of the Asian crisis.

Alliance & Leicester, the former building society now known as a mortgage bank, is due to make profits of pounds 400m, up from pounds 306m, on Friday.

BG, the old British Gas, may on Wednesday produce details of a further share buy-back, following last year's pounds 1.3bn affair. Net income will probably emerge at pounds 690m with fourth-quarter results hit by weak oil prices and warm weather.

Centrica, the gas supplier split from BG a year ago, will report operating profits of around pounds 100m but exceptionals could leave it up to pounds 400m in the red.

The Lasmo oil group is also seen as being hit by the declining oil price as well as suffering from flat production. It should on Thursday report net income of some pounds 50m, down from pounds 67m. Mining group RioTinto is a casualty of the fall in metal prices, although profits on the same day will be up some pounds 85m to pounds 785m.

Two of the bigger non-Footsie stocks on this week's list include Smith & Nephew, the health group expected to report pounds 160m (pounds 182.2m) on Thursday and builder George Wimpey, which on Tuesday is due to announce pounds 55m against pounds 31.7m.

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