Banks and Resource Stocks Lead European Markets 2% Rebound

Lucy Stoeva
17 Feb, 2016
New York City

European indexes gained 2% fueled by positive news from the banking and resource sectors. Glencore announced new loan facility. Credit Agricole posted better-than-expected results and simplified its ownership structure. Schneider Electric SE increased its dividend and share-buyback program.

[R]4:00 PM Frankfurt, Germany – European bourses gained more than 2% fueled by positive news from the banking and resource sectors. Glencore announced new loan facility. Credit Agricole posted better-than-expected results and simplified its ownership structure. Schneider Electric SE increased its dividend and share-buyback program.[/R]

European bourses regained momentum and charged higher Wednesday after volatile banking and resource sectors for the third day in a row.

Credit Agricole, French government controlled bank, climbed 14.1% after announcing better-than-expected quarterly results, a clearer ownership structure, and a forecast for stable future returns.

Glencore soared 10.3% after the U.K.-listed resource company completed loan financing facility.

Oil stocks also advanced after the OPEC President Mohammed al-Sada met in Tehran with ministers from Iran, Venezuela and Iraq to discuss imposing limits on crude oil production.

Brent crude oil futures added 2.9% to $33.11, while West Texas Intermediate crude oil gained 2.3% to $29.73.

On the negative side, RWE in Germany plummeted 13.1% after the utility suspended its dividend for the first time in decades amid falling electricity prices and investments in renewable energy.

In London, FTSE 100 index gained 135.47, or 2.31% to 5,997.64 and in Frankfurt, the DAX index added 204.04, or 2.23%, to 9,339.15.

In Paris, the CAC 40 index surged 101.92, or 2.48%, to 4,212.58.

Crédit Agricole SA rose 14.1% to €9.57 after the French bank said it would sell its 25% stake in the group’s regional lenders, simplify its corporate structure and improve capital strength.

The regional banks will pay about €18 billion to Crédit Agricole to buy back their shares.

Currently, the group’s regional retail lenders own 56% of the bank, while Crédit Agricole owns 25%.

In the fourth quarter, the net profit of France’s second-largest bank surged 28% to €882 million from the same period a year ago.

Revenue rose 11% to €4.29 billion from the previous year due to increasing demand.

Crédit Agricole targeted more than 10% return on tangible equity over the next years and proposed a dividend of €0.60 a share for 2015, compared with €0.30 last year.

Glencore Plc surged 10.3% to 113.6 pence, a three-month high, after the mining company said it completed the early refinancing of a loan facility worth $8.45 billion.

Glencore, along with most resource companies, has been struggling to decrease its debt amid the sharp decline in commodity prices.

The new syndicated credit facility, which can be extended by a year, received commitments from 37 banks for a total of $8.45 billion in the first phase.

Nibe Industrier AB advanced 6.1% to 245 Swedish kronor after reporting better-than-expected results.

The Swedish heating tech company said profit after net financial items increased 24.9% to SEK 1,614 million.

The company proposed a dividend of SEK3.35 per share.

“2015 was a strong year for NIBE, with an increase in both sales and profit. This was achieved in unsettled conditions globally with cautious demand, plummeting gas and oil prices and significant currency volatility,” said CEO Gerteric Lindquist.

Norsk Hydro rallied 11.3% to 31.94 Norwegian kroner after the aluminum producer reported improving profitability.

In 2015, underlying EBIT climbed to NOK 9,656 million from NOK 5,692 million in 2014, fueled by improvement programs and strong results in bauxite, alumina and rolled products.

Net income amounted to NOK 2,333 million, including a net foreign exchange loss of NOK 4,397 million, an increase from NOK 1,228 million from a year ago period.

Hydro proposed dividend of NOK 1 per share for the year 2015.

RWE AG plunged 13.1% to €10.26 to a three-month low after the German utility suspended its dividend for 2015 due to the collapse of wholesale electricity prices and the transition towards renewable energy.

In 2015, net loss amounted to €200 million after the utility took €2.1 billion impairment charges and €900 million write-downs in deferred taxes.

The company reported operating profit of €3.8 billion and adjusted net income of €1.1 billion.

Last year RWE announced plans to create a separately listed company for renewable power, grids and retail.

Schneider Electric SE jumped 9.8% to €52.75 despite reporting declining profits as the French power-equipment company said it would raise its dividend by 4% and expand its share-buyback program.

Net profit fell 28% to €1.41 billion in 2015 from the previous year due to write-downs and dwindling demand from China and the energy sector.

Revenue increased 6.8% to €26.64 billion from the previous year. On a comparable basis, 2015 revenue fell 1.0%.

Nevertheless, Schneider Electric sees improving trading conditions and better cost control in 2016, and the company forecasts higher profitability on flat revenue growth.

Schneider raised its dividend by 4% to €2 a share and expanded its share-buyback program to €900 million from €600 million in 2014.