FTSE 100 news summary: RBS, Lloyds, Rolls-Royce, Hammerson, BP, Xstrata, WPP, Whitbread
June 23 2012, 2:37pm
Banking stocks were under the spotlight on Friday after Moody’s downgrades 15 major banks.
Royal Bank of Scotland (LON:RBS) launched a scathing attack on Moody’s, disputing the ratings change after it was cut by one notch, calling it “backward-looking”.
The company said: “Moody’s ratings change… does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile.”
The bank said that the amount of collateral that may have to be posted could be as much as £9 billion as of the end of May this year.
It criticised Moody’s for its “negative outlook”, but added that the impacts of the downgrade are manageable given its £153 billion liquidity portfolio.
The bank claims it has made “significant progress” in strengthening its credit profile since 2008, which it pointed out had been recognised by other ratings agencies.
Both Standard & Poor’s and Fitch Ratings have RBS down as an ‘A’ and have upgraded the standalone rating by more than one notch over the past 18 months.
Elsewhere, Moody’s cut Barclays’ (LON:BARC) credit rating by two notches, while HSBC (LON:HSBA) and Lloyds Banking Group (LON:LLOY) were knocked down by one notch.
Lloyds was more satisfied with its rating, which it said reflects “substantial progress in delivering strategy”.
“These new ratings are not expected to have a material effect on our funding costs and market capacity,” the bank added, highlighting that its short-term funding rating remains unchanged.
Fellow blue chip Rolls-Royce (LON:RR.) has secured a £1 billion contract from the UK Ministry of Defence to supply reactor cores for the country's nuclear-armed submarine fleet.
The engine and turbine giant said the deal includes the refurbishment of its existing submarine reactor core manufacturing facility in Derby.
Rolls-Royce will also complete a phased rebuild to provide a manufacturing facility to support future MoD programme needs.
“This is excellent news that demonstrates the high level of trust the MoD has in both our technology and the expertise of our highly skilled workforce,” said chief operating officer of the group’s nuclear division Jason Smith.
“This new facility will deploy advanced manufacturing techniques to enhance our world leading nuclear manufacturing capability.”
In other news in the top flight, property developer Hammerson (LON:HMSO) has achieved its aim of focusing purely on the retail sector - as it announced the £518 million sale of most of its office portfolio.
Earlier this year, the company revealed its revised strategy and plan to sell its main London office assets.
The six assets being sold to Brookfield Office Properties include 99 Bishopsgate, EC2, its 50 per cent stake in 125 Old Broad Street, EC2, Leadenhall Court, EC3, and the commercial and residential development site Principal Place, also in EC2, it revealed this week.
Hammerson's chief executive David Atkins noted that earlier this year, the company had identified the opportunity to enhance returns by focusing energy and capital on the "successful sectors of retail".
In oil and gas, Russian billionaire Mikhail Fridman has reportedly met institutional investors in London in a bid to raise funds to buy half of BP’s (LON:BP.) stake in Russian venture TNK-BP.
TNK-BP is a joint venture between BP and the Alfa-Access-Renova (AAR) consortium, but the relationhsip between the two groups has become increasingly fractious and in May the UK oil giant announced its intention to offload its Russian arm, adding it had received approaches for the stake.
The Financial Times said that Fridman, who leads the AAR consortium, had proposed two scenarios for changing TNK-BP’s shareholder structure.
The first is that AAR sells its stake to BP for cash and shares, leaving the oligarchs with significant shareholdings in BP.
The second would see AAR buy half of BP’s stake in the venture.
The 50/50 split has caused tension between BP and AAR in recent times and observers said it is not likely BP will be enticed by either option.
Last year, AAR successfully blocked a major exploration and share swap deal between BP and Russian state oil firm Rosneft, claiming it had breached TNK-BP’s shareholder agreement, something BP vehemently denies.
Fridman, who is worth an estimated £8.5 billion, quit his role as TNK-BP chief executive at the end of last month as tensions rose to boiling point.
Analysts estimate that BP’s stake in TNK-BP is worth between US$25 billion and US$30 billion.
Moving to miners, Xstrata (LON: XTA) is selling its stake in a copper project in Papua New Guinea.
It emerged that the disposal of its interest, potentially worth more than £1.3 billion (US$2bn, follows a review of global activities.
It has been prompted by uncertainty about growth and rising prices.
As yet, the company has not decided whether to sell all or part of its 81.8 per cent stake in the Frieda River project, it was reported.
In 2010, Frieda River was assessed as hosting an estimated resource of 12 million tonnes of copper and 18.5 million ounces of gold, and could produce 246,000 tonnes of copper a year.
Meanwhile, advertising giant WPP (LON:WPP) said it has agreed to buy independent digital agency AKQA Holdings for an undisclosed sum.
Currently employing 1,160 staff worldwide, the agency operates through offices in the US, Europe and Asia and had gross assets of US$282 million as at December 31 2011.
Revenues are forecast to increase to around US$230 million this year from US$189 million in 2011.
AKQA provides digital communications campaigns, spanning social media, mobile, interactive experiences, gaming and content creation.
Clients include Delta, Diageo, EDF, GAP, Google, Microsoft Xbox, Nike, Target, Unilever and Virgin Money and many others.
Elsewhere in the FTSE 100, Whitbread (LON:WTB) said the performance of its Costa coffee chain underpinned a resilient quarterly sales performance.
Overall, the former publican’s underlying sales were up 4.5 per cent in the 13 weeks to May 31, while total sales including shops, restaurants and hotels opened in the last 12 months grew 13.9 per cent.
Costa’s like-for-like revenues advanced 8.4 per cent, while the Premier Inn hotel chain posted a robust 4.3 per cent increase in like-for-like sales with London and the south east more buoyant than the regions.
Like-for-like restaurant sales and hotel and restaurant sales were up 2.1 per cent and 3.1 per cent respectively.
