Weekly Outlook: Persimmon and challenger banks to report

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11 March 2024

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Christian Mayes

Monday 11 March

Japan Q4 GDP growth

Tuesday 12 March

Full-year results from Hill & Smith, Domino’s Pizza, Costain and TI Fluid Systems
UK unemployment data
German inflation
US inflation
US NFIB smaller companies survey
US federal monthly budget balance
In Europe, quarterly results from Porsche, Siltronic and Tod’s
Persimmon full-year results

UK housebuilding firm Persimmon is set to announce its full-year results on Tuesday.

Following a share price rally caused by hopes for interest rate cuts from the Bank of England and an improvement in UK mortgage approvals, shares in Persimmon have started to decline once more, falling 2% over the last month (as of 8 March).

Russ Mould, AJ Bell investment director, Danni Hewson, AJ Bell head of financial analysis, and Dan Coatsworth, AJ Bell investment analyst, say the recent drop is thanks in part to the absence of any incremental good news in recent reports from peers such as Taylor Wimpey.

Aarin Chiekrie, Hargreaves Lansdown equity analyst, added: “Persimmon’s already told investors that its full-year sales rates fell around 16% in 2023, as high interest rates and the removal of the Help-to-Buy scheme have weighed on affordability. As a result, total completions of new homes were reduced by around a third, to 9,922.

“These lower volumes, coupled with build-cost inflation, mean operating profit margins are set to roughly halve, to around 14%, when Persimmon reports full-year numbers on Tuesday.

“There was a ‘strong improvement’ in fourth-quarter sales rates and investors are keen to see if this uplift has carried over to the new year. Markets expect operating profits to grow at double-digit rates to around £398m in 2024. And with early signs that challenges for buyers are easing, there will be a focus on where Persimmon lays the marker for its 2024 guidance.”

Wednesday 13 March

Full-year results from Balfour Beatty, IP Group, Ferrexpo, 4imprint and Keywords Studios
UK GDP growth
UK manufacturing, industrial and construction output
US oil inventories
In Asia, quarterly results from Samsonite
In Europe, quarterly results from Inditex, Volkswagen, Adidas, E.On, Sandoz and Zalando
In the US, quarterly results from Lennar
Metro Bank full-year results

Two of the remaining listed, independent challenger banks are due to report this week in Metro Bank and OSB. The sector is back in the spotlight following Nationwide’s recent bid for Virgin Money.

“OSB’s shares are showing some signs of life but Metro Bank’s are still 99% down from their highs of 2018 before short sellers saw their bear case on the stock and concerns over how realistic its growth plans really were swamped founder and chair Vernon Hill, the management team and the share price,” said AJ Bell’s Mould, Hewson and Coatsworth.

“Metro Bank has moved to reassure as best it can, raising £325m fresh capital in autumn 2023, when it also unveiled a new cost-cutting plan, designed to save at least £30m a year, albeit at the cost of a £10m to £15m restructuring charge which will weigh on the 2023 results and a shift in business model – Metro Bank remains committed to its branches but it is reviewing its policy of seven-day opening and extended opening hours, with the result that headcount will drop by a fifth, even as the £250m cap company looks for suitable sites for branches in the north of England.

“Nevertheless, Metro Bank is expected to have made a small profit in 2023, to end a long streak of annual losses and no doubt boss Daniel Frumkin will seek to accentuate the positives alongside these results.”

Thursday 14 March

Full-year results from Endeavour Mining, Vistry, Savills, Restore and Bridgepoint
Trading statements from Halma, Trainline and Moonpig
US producer price (factory gate) inflation
US retail sales
US weekly initial unemployment claims
In Asia, quarterly results from AIA and Hon Hai Precision
In Europe, quarterly results from RWE, Hapag-Lloyd, Swatch, Bruno Cucinelli and RTL
In the US, quarterly results from Adobe, Dollar General and Jabil
OSB full-year results

Following on from Metro Bank, fellow challenger bank OSB will release its full-year results on Thursday.

OSB is also a mortgage lender in specialist niches including residential and commercial properties, while it also provides bridging and asset finance.

AJ Bell’s Mould, Hewson and Coatsworth said: “The shares collapsed over the after July’s acknowledgement that mortgage customers had not waited to refinance loans at the end of their term but instead moved early to try and get the best possible deal.

“As a result, the bank had to take a £181m impairment charge against the value of its loan book. That caused first-half pre-tax income to plunge to £77m from £268m in the first six months of 2022 and prompted analysts to slash earnings forecasts for the full-year. Pre-tax income is expected to drop to £361m from £532m.”

“The shares have started to claw their way back, despite the prevailing gloomy sentiment surrounding the UK economy, perhaps in the view that this is a blip, rather than a more fundamental challenge to the view that higher interest rates are good for banks’ net interest margins and overall profitability,” they added.

“It will also be interesting to see if OSB has suffered any deposit flight as customers pull cash from instant savings and non-interest-bearing accounts to more competitively priced fixed-term deposits.”