Lonmin Plunges, HSBC Rising Bad Debts

123jump.com Staff
11 May, 2009
New York City

Stocks in UK declined after metal prices weakened and HSBC reported a rise in bad debt provisions. Lonmin plunged 10% after it offered a right issue and reported operating loss. Centrica agreed to pay

[R]1:00PM New York, 6:00PM London – Stocks in UK declined after metal prices weakened and HSBC reported a rise in bad debt provisions. Lonmin plunged 10% after it offered a rights issue and reported operating loss. Centrica agreed to pay £2.3 billion for 20% stake in British Energy to EDF.[/R]

U.K stocks closed lower after HSBC warned of rising bad debts and weak metals prices. Lonmin Plc, Xstrata and Vedanta Resources fell as copper prices declined on a speculation that Chinese demand will not grow.

In London trading FTSE 100 index fell 0.6% or 26.59 to 4,435.50. Of the FTSE 100 index stocks, 31 rose, 68 dropped, and 3 were unchanged.

Gainers & Losers

Lonmin reported first half operating loss of $98 million and proposed 2 stocks for every 9 held in rights offering. Stock plunged 10% to 1,460 pence. Lonmin also offered weak outlook for platinum prices for the rest of the year.

Antofagasta fell 2.9% to 620 pence, Kazakhmys declined 13.6% 663 pence and Johnson Matthey dropped 4.3% to 1,220 pence.

Tullow Oil declined 3.3% to 896 pence and British Airways Plc fell 4.1% to 162.40 and BAA, the airports operator in the UK reported a fall of 2.3% to 11.5 million in traffic in April and traffic at Heathrow increased 2.6% on the account of Easter. Cargo tonnage declined 21.8% in the month across all airports.

Thomas Cook fell 4.9% to 263 pence after TUI in Germany reported weaker than expected earnings.

HSBC Bad Debts and Credit Risk Provisions Rise

HSBC reported today that the company’s pre-tax profits dropped in the first quarter ended March 31 on rising bad debts and credit risk provisions.

In the U.S., first quarter bad debt provisions rose to $3.95 billion from $3.19 billion in the same period a year ago.

Over half of the loan impairment charges and credit risk provisions were in the personal financial services business on continued weakness in the U.S.

However, the Global Banking and Markets reported record net income leveraged by foreign exchange and interest rate trading.

The lender received a $6.6 billion boost from the higher book value of its debt. HSBC’s net fee income dropped in the first quarter compared with the comparable year ago period.

Centrica to Pay £2.3 billion for 20% BE Stake

Centrica Plc said it will pay £2.3 billion to EDF for a 20% stake in British Energy instead of £3.05 billion for a 25% stake negotiated in September last year.

The deal consists of £1.1 billion in cash and Centrica''s 51% stake worth £1.2 billion in Belgian power generator Société de Production d''Electricité.

Under the agreement, Centrica will form an 80/20 joint venture to build four new nuclear power stations in the UK.

Centrica’s chairman Roger Carr said, “The attractive price secured for the sale of SPE will help preserve our balance sheet firepower as we focus the group on growth opportunities in the UK and North America.”

Earnings Review

Diploma PLC, engaged in the supply of specialized technical products and services said first- half revenues rose 3% to £88.0 million from £85.3 million a year ago. Net profit for the quarter fell 22% to £5.6 million or £5.0 per diluted share compared to net profit of £7.2 million or £6.4 per share a year ago.

Diploma PLC, in the last one year traded as high as 198.00 pence in May 2008 and as low as 90.00 pence in April 2009. Based on the yesterday’s closing price of 122.50 pence the company has market cap of £140.42 million.

HSBC Holdings plc, the banking and financial services organization said first quarter revenues rose 114% to £4.96 billion from £2.32 billion a year ago. Net profit for the quarter rose 242% to £872 million compared to net profit of £255 million a year ago.

HSBC Holdings plc, in the last one year traded as high as 938.00 pence in October 2008 and as low as 310.25 pence in March 2009. Based on the yesterday’s closing price of 570.75 pence the company has market cap of £97.77 billion.

RM Plc, a provider of educational products and services said first- half revenues rose 20.6% to £141.92 million from £117.66 million a year ago. Net profit for the quarter 33% to £192,000 or £0.2 per diluted share compared to net profit of £144,000 or £0.2 per share a year ago.

RM Plc, in the last one year traded as high as 218.00 pence in May 2008 and as low as 137.00 pence in May 2009. Based on the yesterday’s closing price of 150.00 pence the company has market cap of £139.65 million.

Southern Cross Healthcare Group PLC, engaged in the development and operation of care homes for the elderly said first-half revenues rose 7% to £460.8 million from £431.2 million a year ago. Net loss for was £15.3 million or £8.14 per diluted share compared to net loss of £6.3 million or £3.34 per share a year ago.

Southern Cross Healthcare Group PLC, in the last one year traded as high as 422.75 pence in June 2008 and as low as 47.75 pence in October 2008. Based on the yesterday’s closing price of 120.00 pence the company has market cap of £225.21 million.

FTSE 100 Index Movers

Of the stocks in the FTSE index, 31 increased, 68 declined and 3 were unchanged.

Kazakhmys PLC decliners in the index with a loss of 13.62% followed by losses in Lonmin Plc, of 9.99%, in Standard Chartered PLC, 6.83%, in Thomas Cook Group plc of 4.88% and in Eurasian Natural Resources Corporation PLC of 4.27%.

G4S plc led gainers in the FTSE 100 index with a rise of 6.34% followed by increase in Centrica plc of 6.04%, in AstraZeneca PLC of 5.51%, in BAE Systems plc of 3.72, in Drax Group plc of 3.52%, in Randgold Resources Limited of 3.37%.


Europe Markets Review

In London FTSE 100 Index closed lower 26.59 or 0.60% to 4,435.50, in Paris CAC 40 Index decreased 63.92 or 1.93% to close at 3,248.67 and in Frankfurt DAX index lower 46.99 or 0.96% to close at 4,866.91. In Zurich trading SMI decreased 32.07 or 0.59% to close at 5,358.94.