Sector movers: HBOS results cause banking tremors

27.02.2008

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After the earth tremors in Lincolnshire last night the banking sector is experiencing tremors of its own this morning following the release of results from HBOS.

The mortgage lender posted slightly better than expected full year profits but was slowed by margin pressure and lower profits in retail and treasury.

Underlying profits for 2007 came in at £5.71bn, up 3% on last year's £5.54bn. Net profits were 4% higher at £4.1bn, though pre-tax profit dipped by 4% to £5.47bn.

Its Corporate, Insurance & Investment and International arms all achieved double digit underlying profit growth, more than offsetting the reduced profit in Retail and Treasury, HBOS said.

The group's net interest margin fell to 1.63% (2006 1.72%) with retail margins down by 12 basis points reflecting the competitive pressure on mortgages in the first half and increased costs of wholesale funding in the second half. In Corporate, margins declined by 19 basis points as a result of competitive pressures in the first half and changes to the asset mix.

Impairment losses increased by 15% to £2.01bn (2006 £1.74bn) representing 0.5% of average advances (2006 0.48%), with corporate bad debts rising.

Bright features are hard to find in the market this morning but mining and energy related stocks provide some isolated areas of cheer.

Brinkley Mining's share continues its recent recovery, inspired by consistent support from Deutsche Bank, which has now increased its stake in the company to 19.15%, up from 14.02% nine days ago. UBS is another big fan of the stock, having accumulated a 7.52% shareholding in the company.

Despite the consistent buying by these two banks the share price remains at less than half the level it was a year ago, though it has gained almost 60% in the last month.

Midway through the month Brinkley published an update on its uranium projects with a resource calculation for the Waterval Project.

Based on its current interest of 49% in associate company Western Uranium, Brinkley's share of the mineral resources at the Waterval Project amount to an indicated and inferred resource of 457,562 tonnes at a grade of 0.35kg/tonne U3O8, equivalent to 353,633 lbs U3O8.

Brinkley has the option of increasing its stake in Western Uranium to 75%.