9th Oct 2024. 9.00am

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Barclays shifts focus to boost investment banking returns

Barclays (BARC) is set to revamp its investment banking division, aiming to enhance profitability by reducing its reliance on debt underwriting. Co-heads Taylor Wright and Cathal Deasy are leading the charge to focus more on advisory services and equity capital markets.

The bank has outlined a goal to generate an additional £700 million in income by 2026. Wright noted that while Barclays operates in the same markets as U.S. competitors, it earns a larger share of revenues from the more capital-intensive debt markets. This leads to less efficient capital use compared to rivals.

Barclays is also aiming to reduce the investment bank’s share of the group’s risk-weighted assets from 58% to 50% by 2026. The bank’s share of global fees dropped by over 1% between 2019 and 2023, with its debt capital markets division contributing to the decline.

Wright and Deasy plan to shift resources toward more profitable areas, including corporate lending and transaction banking in the U.S., where the bank’s footprint is smaller despite having many priority clients.

Additionally, they want to improve engagement with clients who currently borrow from Barclays but don’t use its other services. This would help deliver higher returns by better utilising risk-weighted assets.

BARC Daily Candle Chart

BARC Daily Candle Chart

BP changes tact on plans to cut oil output

BP (BP.) has abandoned its target to reduce oil and gas production by 25% by 2030 as CEO Murray Auchincloss seeks to realign the company’s strategy towards profitability.

This marks a significant shift from BP’s original 2020 energy transition plan, which aimed for a 40% reduction in output while expanding its renewable energy portfolio. Auchincloss is now focusing on more profitable areas, targeting new investments in Iraq, Kuwait, and the Gulf of Mexico.

This re-calibration comes as BP faces increased scrutiny from investors concerned about the company’s ability to generate near-term profits. Auchincloss, formerly BP’s finance chief, aims to distance the company from the more aggressive strategies of his predecessor, Bernard Looney, emphasising returns and investor priorities instead.

In recent weeks, BP’s share price has rallied, buoyed by rising oil prices due to the escalating conflict between Israel and Iran. The geopolitical tensions have created uncertainty around energy supplies, benefiting oil producers like BP.

The company is set to unveil its updated strategy at an investor day in February 2025, which will officially remove the 2030 oil production cut target. While the specifics of the new plan remain under wraps, BP is likely to continue emphasising its commitment to oil and gas investments while balancing its long-term goal of achieving net zero emissions by 2050.

BP. Daily Candle Chart

BP. Daily Candle Chart

Experian to acquire ClearSale in Brazil

Experian (EXPN) recently announced its agreement to acquire ClearSale, Brazil’s leading digital fraud prevention provider.

CEO Brian Cassin highlighted that this acquisition will enhance Experian’s identity and fraud (ID&F) capabilities in Brazil, a key growth market for the company. By integrating ClearSale’s transaction fraud detection services with its existing account fraud prevention offerings, Experian aims to provide comprehensive ID&F and credit risk solutions through its integrated platform.

ClearSale specialises in end-to-end digital fraud prevention solutions, utilising data, analytics, AI, and machine learning to detect fraud in card-not-present transactions. With over 7,400 active clients, including major online retailers and banks, ClearSale’s technology enables quick and accurate consumer identity verification during transactions, leading to improved automated approvals and enhanced fraud prevention.

Experian plans to fund the acquisition, valued at approximately R$1,905 million (about US$350 million), through a mix of cash resources and the issuance of Brazilian Depositary Receipts (BDRs). The deal is contingent on regulatory approval from the Brazilian Administrative Council for Economic Defense (CADE), expected to conclude in the first half of 2025. In its first full fiscal year post-acquisition, Experian anticipates ClearSale will contribute approximately R$490 million in revenue and R$130 million in earnings.

EXPN Daily Candle Chart

EXPN Daily Candle Chart

Halma maintains full year guidance

Halma (HLMA) recently released a solid trading update that maintained its full-year guidance…

The update highlighted the first half of the financial year ending September 30, 2024, during which Halma experienced good organic constant currency revenue growth. Halma said this performance reflected the benefits of its Sustainable Growth Model.

In the update, Halma confirmed its expectations for the full year ending March 2025, projecting strong organic revenue growth and an Adjusted EBIT margin of around 21%. The Group’s order intake has reportedly outpaced both its revenue and the comparable period from the previous year, indicating a robust demand for Halma’s offerings.

Furthermore, the company expressed optimism about delivering a strong cash performance, which will enable it to invest substantially in both organic growth and acquisitions. Halma has already made significant strides in its mergers and acquisitions (M&A) activities, having completed four acquisitions in the Safety sector during the first half of the year.

Despite facing challenges such as the negative impact of currency translation due to the appreciation of Sterling, Halma said it remains focused on leveraging its strengths and enhancing its market position. The upcoming half-year results, scheduled for release on November 21, 2024, will provide further insights into the company’s performance and strategic direction moving forward.

HLMA Daily Candle Chart

HLMA Daily Candle Chart

Saga’s shares set sail on Ageas partnership talks

Saga’s (SAGA) share price has rallied last week after the company announced that it is in discussions with Belgian insurer Ageas regarding a potential partnership. The news sent Saga’s shares higher by more than 14%, reflecting investor optimism about the strategic implications of this collaboration.

The potential partnership comes at a critical time for Saga, which specialises in products and services for individuals over 50. The company has been grappling with challenges in its insurance business, prompting it to implement measures such as price increases and staff reductions to manage costs. By aligning with Ageas, Saga aims to strengthen its insurance offerings and capitalise on the growing demand for pension and savings products from aging populations in Europe and Asia.

The backdrop of these discussions includes Saga’s previous attempt to sell its insurance underwriting arm, a process that was put on hold earlier this year after an acquisition by Australia’s Open fell through.

Despite the recent gains, Saga’s shares remain down 18% year-to-date, highlighting the challenges the company has faced. However, the news of the potential partnership has reinvigorated investor interest and confidence in Saga’s ability to navigate its current challenges and drive future growth.

SAGA Daily Candle Chart

SAGA Daily Candle Chart

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