British energy giant BP yesterday reported a net loss of $450mn for the third quarter, down very sharply on the previous quarter’s mammoth losses due to the coronavirus pandemic.
The loss after tax for the July-September period compared with a net loss of $16.85bn in the second quarter.
BP was aided in the third quarter by an absence of huge write-downs coupled with a small recovery in oil demand and steadier prices.
“The underlying business performance in the (third) quarter remained resilient and we made substantial progress in strengthening our balance sheet,” BP chief financial officer Murray Auchincloss said in the earnings statement.
BP is axing 10,000 jobs, or 15% of its global workforce, after the pandemic caused huge asset writedowns.
After companies worldwide closed their doors and airlines grounded planes at the height of the Covid-19 outbreak towards the end of the first quarter, oil prices dropped off a cliff, even briefly turning negative.
Prices then rebounded sharply and have traded around $40 a barrel for some time. With the market stabilising, BP yesterday announced a quarterly dividend of 5.25 US cents per share.
This matched the second-quarter payout, which had been halved from the first quarter — the first cut since the Deepwater Horizon oil rig disaster in 2010 that damaged BP’s finances and reputation.
“Funding the dividend remains our first priority and we are confident in moving towards our $35bn net debt target, supported by value accretive divestments,” Auchincloss said.
The company earlier this year agreed the sale of its petrochemical business to privately-owned rival Ineos for $5.0bn. That has helped BP to reduce net debt to about $40bn, while it posted an underlying profit of $86mn in the third quarter.
“The ongoing impacts of the Covid-19 pandemic continue to create a volatile and challenging trading environment,” BP said yesterday.
“The gradual recovery in oil demand seen since the spring looks set to continue, led by strengthening demand in Asia,” it added.
BP’s share price rose 1.8% in morning deals on London’s FTSE 100 index, which was down 0.2% overall.
“Despite the challenges, BP has resisted making further cuts to its dividend, which would have been highly unpalatable to shareholders,” noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
The dividend cut, asset sales and job losses have been carried out by Bernard Looney, who became chief executive in February as the coronavirus began taking hold worldwide.
He wants BP to achieve “net zero” carbon emissions by 2050, helped by an expected drop in oil and gas production that is pushing energy majors worldwide to up their game regarding cleaner, sustainable energy sources such as electricity and wind power.
“Having set out our new strategy in detail, our priority is execution and, despite a challenging environment, we are doing just that – performing while transforming,” Looney said in yesterday’s statement.
“Major projects are coming online, our consumer-facing businesses are really delivering and we remain firmly focused on cost and capital discipline,” he added.
Pfizer
Pfizer reported lower third-quarter profits yesterday as Covid-19 dented demand for some medicines from patients whose regular health care patterns were disrupted.
The drugmaker, which is working on clinical trials for a coronavirus vaccine, reported a 71% drop in profit to $2.2bn.
The year-ago period included a large gain connected to a transaction.
Revenues dipped 4% to $12.1bn, missing analyst estimates.
Pfizer estimated a revenue hit of $500mn connected to Covid-19 due to lower pharma demand in China and fewer wellness visits from patients in the US.
The company saw an 11% drop in its hospital business in emerging markets, primarily due to fewer elective surgeries in China and shorter in-patient hospital stays in the country.
This effect was partially offset by increased demand for the Prevnar-13 vaccine for pneumonia “resulting from greater vaccine awareness for respiratory illnesses,” the company said.
Pfizer also cited strong performance in its biopharma business due to good sales for cancer drug Ibrance, anticoagulant Eliquis and other medications.
Pfizer said its Phase 3 Covid-19 trial had enrolled more than 40,000 participants, with nearly 36,000 having received their second vaccination as of Monday.
Banco Santander
Spanish banking giant Banco Santander said yesterday it had returned to profit in the third quarter after massive losses in the second of €11bn due to the coronavirus pandemic.
Third quarter net profit of €1.75bn was also better than analyst estimates for €1.0bn compiled by financial information service Factset. “Activity came back vigorously (after the second quarter lockdown) and as a result the third quarter was much better than the second,” bank head Ana Botin said in a statement.
The bank’s diversification into several markets “has been a key driver of our recovery, with South America performing well and the UK recovering strongly in the third quarter,” she added.
The company also benefited from cost savings worth €500mn compared with 200mn in 2019.
The massive second quarter loss was Banco Santander’s first ever three months in the red as it was forced to write down the value of several subsidiaries, most notably in the UK.
For full-year 2020, Botin said the bank hoped for earnings of around €5.0bn, without specifying if this was a net figure.
Despite the much improved third quarter performance, for the nine months to September Banco Santander still reported a net loss of €9.0bn.
The bank said it expects it will post an underlying profit for the year of around €5.0bn.
Bad loan provisions for the nine month period were up 42% from 2019 at €9.5bn.
Santander said it would seek approval for the payment of a €0.10 dividend ($0.11) in 2021.
Spain has been one of the countries worst affected by the coronavirus pandemic and while its tourism-dependent economy generally did better in the third quarter, a resurgence in cases has led to new restrictions which many fear will once again hit business hard.
The International Monetary Fund (IMF) sees Spain’s GDP slumping by 12.8% this year, in what would make it the hardest-hit country among the world’s advanced economies.
ANA Holdings
Japan’s ANA Holdings Inc yesterday said it swung to an operating loss of ¥280.95bn for the six months ended September 30 and a net loss of ¥188.49bn. Still, chief executive Shinya Katanozaka said his airline has enough money to see it through the industry crisis. He denied earlier media reports ANA planned to raise additional money through a share offer.
Forecasting a record operating loss of ¥505bn ($4.82bn) for the year to March 31, Japan’s biggest airline said it will also temporarily transfer more than 400 workers to other companies and ask those remaining to accept pay cuts or unpaid leave.
ANA said it would retire 35 planes, 28 of them early, including 22 Boeing 777 widebodies and delay delivery of one 777 and one Airbus SE A380 superjumbo. That will reduce its fleet by a net 33 aircraft to 276 planes.
To ensure it has enough cash to survive the downturn, the airline yesterday also confirmed it had secured $3.8bn in subordinated loans from state-backed and private lenders.
HSBC
HSBC said yesterday its third-quarter post-tax profits fell 46% on-year as the Asia-focused banking giant continued to take a hammering from the coronavirus pandemic and spiralling China-US tensions.
However, the profit falls were not as bad as some analysts had predicted and HSBC said it expected credit losses to be at the lower end of a previously announced $8bn to $13bn range.
The global economic slowdown caused by the virus has hit financial giants hard and there is limited optimism on the horizon as Europe and the United States head into the winter with infections soaring once more.
HSBC has a further headache – geopolitical tensions via its status as a major business conduit between China and the West.
As a result, the lender is in the midst of a worldwide overhaul, aiming to slash some 35,000 jobs by 2022, primarily in its less profitable European and American divisions.
“We are accelerating the transformation of the Group, moving our focus from interest-rate sensitive business lines towards fee-generating businesses, and further reducing our operating costs,” chief executive Noel Quinn said in a statement accompanying the results.
Reported post-tax profit for the third quarter came in at $2bn with revenue down 11% at $11.9bn, the statement said.
Adjusted pre-tax profit slid 21% to $4.3bn in the period, beating a $2.8bn estimate by Bloomberg analysts.
Quinn described the latest figures as “promising results against a backdrop of the continuing impacts of Covid-19 on the global economy” as well as low interest rates.
In the first six months of 2020, HSBC’s post-tax profits were down 69%, meaning the third-quarter results were something of an improvement as some major economies relaxed some of their coronavirus restrictions.
The bank said its board would consider whether to pay “a conservative dividend” for 2020 based on final end of year results and how the global economy looks in early 2021.
Earlier this year, UK regulators called on British banks to scrap dividends for the year to preserve capital during the pandemic crisis.
HSBC makes 90% of its profit in Asia, with China and Hong Kong being the major drivers of growth.
As a result, it has found itself more vulnerable than most to the crossfire caused by the increasingly bellicose relationship between Beijing and Washington.
The bank has tried to stay in Beijing’s good graces.
It vocally backed a tough national security law that Beijing imposed on Hong Kong in June to end a year of unrest and pro-democracy protests.
The move sparked criticism in Washington and London but analysts saw it as an attempt to protect its access to China, which has a track record of punishing businesses that do not toe Beijing’s line.
“Geopolitical risk, particularly relating to trade and other tensions between the US and China, remains heightened,” HSBC said in yesterday’s profit statement.
The US has sanctioned nearly a dozen key Hong Kong and Chinese officials over the national security law, telling international banks to stop doing business with them.
China’s national security law, however, forbids businesses in Hong Kong from adhering to foreign sanctions regimes, leaving many in an unclear regulatory tight spot.
“Investor and business sentiment in some sectors in Hong Kong remains dampened and ongoing tensions could result in an increasingly fragmented trade and regulatory environment,” HSBC said in its statement.
The bank also highlighted the uncertainty over Britain’s withdrawal from the European Union as another potential headwind.
Talks for a post-Brexit trade deal have made little headway with a 31 December deadline fast approaching.
“There is a risk of additional ECL (expected credit losses) charges, particularly in the UK in 4Q20, if the UK and the EU fail to reach a trade agreement,” the bank said.
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