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What to watch: Metro Banks' losses widen, Reckitt buoyed by disinfectant sales, and property stocks boosted by budget speculation

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Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·6-min read
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Closed businesses in Sheffield city centre as the UK continues in lockdown to help curb the spread of the coronavirus.
A Metro Bank branch in Sheffield. Photo: PA

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Metro Banks' £311m loss

Struggling lender Metro Bank (MTRO.L) saw its losses widen last year as the COVID-19 pandemic hit the business hard.

The bank made a pre-tax loss of £311.4m, more than double the £130m loss made in 2019. 2019's performance came after a torrid year for the bank after an accounting error plunged it into regulatory crisis.

Deposits grew by 11% last year but revenue fell by 15% to £340m.

Chief executive Daniel Frumkin is trying to pilot a turnaround but the pandemic knocked plans off track. The bank took a £100m charge to cover expected losses linked to COVID-19 and Metro Bank said the pandemic overall cost it an estimated £124m.

"The pandemic has clearly impacted performance, leading to significant expected credit losses, but our transformation strategy is firmly on track and we have accelerated initiatives to shift our asset mix, bringing higher yield and improving net interest margin, as evidenced in the second half," he said.

“2020 marked Metro Bank’s 10th anniversary and whilst challenging, the strategic actions we have taken, supported by our incredible team of dedicated colleagues, means we remain on track to achieve our transformation plan as the UK's best community bank.”

Shares in the bank slumped by 6.8%.

Reckitt buoyed by disinfectant sales

Demand for disinfectants and hygiene products helped boost sales at consumer goods giant Reckitt Benckiser (RB.L) last year.

The company reported sales growth of 8.9% last year, buoyed by growth of 15.6% in the hygiene products division. Reckiit Benckiser makes products like Lysol and Dettol disinfectants and Cillit Bang kitchen cleaner.

Reckitt Benckiser reported a profit of £1.8bn on income of £14bn, recovering from a loss in 2019.

"The rate of sales growth in its latest results will be tough to beat and Reckitt is fully aware of the challenges ahead," said Russ Mould, investment director at AJ Bell.

"Coming off the back of such strong sales momentum, now is the time for the business to sharpen its focus and get rid of the weaker components. Its China baby formula business is now under strategic review and its footcare brand Scholl is being sold."

Shares were 0.6% higher in London.

Property stocks boosted by budget speculation

UK housebuilding stocks soared Wednesday morning amid reports that chancellor Rishi Sunak may extend a stamp duty holiday until the end of June to give the property market a boost.

The Times reported on Wednesday that Sunak would use his budget on March 3 extend a stamp duty until the end of June. The policy is currently set to end on 31 March.

"The chancellor has faced pressure to extend the deadline amid concerns that it would create a 'cliff-edge', jeopardising hundreds of thousands of sales," the Times said.

House builder were among the FTSE 100's (^FTSE) ) top 20 risers. Barratt Developments (BDEV.L) was up roughly 2%, Taylor Wimpey (TW.L) gained 1.5%, Persimmon (PSN.L) was up about 1.4% and Redrow (RDW.L) gained 3%. Property developer British Land (BLND.L) rose 1.8% and Land Securities (LAND.L) ticked up 2%.

Estate agents also saw a boost. Foxtons (FOXT.L) was up about 4% and LSL Property Services (LSL.L) was also up about the same.

Lloyds reinstated dividend

Lloyds has reported a pre-tax profit of £1.2bn ($1.7bn) on income of £14.4bn for 2020.

Analysts had predicted a profit of £905m on income of £14.2bn. Despite beating City forecasts, profits were down more than 70% year-over-year. The bank was hit by provisions for credit losses, linked to the COVID-19 pandemic. Lloyds set aside £4.2bn in 2020 to cover an expected spike in bad loans, including a £128m charge in the fourth quarter. Analysts expected £4.7bn in impairments for the year.

While provisions dented profits, the bank was boosted by strong mortgage and deposit growth. A temporary stamp duty holiday spurred a boom in the UK property market and Lloyds grew its house lending business by over £7bn.

Lloyds announced a final dividend of 57p, the maximum allowed under current Bank of England rules. City analysts had forecast a payout of 53p per share, following the Bank of England's decision to lift a COVID-era dividend ban in December.

Analysts at Barclays called it an "encouraging update" from Lloyds. Jefferies said Lloyds had "delivered a strong finish to 2020" and said 2021 guidance suggested the bank could outperform expectations.

Shares in the bank rose as much as 2.5% in early trade in London, topping the FTSE 100 (^FTSE).

Heathrow suffers £2bn loss

Heathrow suffered an annual loss of £2bn ($2.8bn) in 2020, as passenger numbers were hit and the pandemic took a major toll on the travel industry.

Heathrow Airport Holdings, which runs the airport, said this highlighted “the devastating impact of COVID-19 on aviation” as passenger numbers collapsed to 22.1 million, levels not seen since the 1970s.

Overall revenue fell 62% to £1.2bn and adjusted EBITDA fell to £270m.

Pound hits three-year high

The FTSE 100 (^FTSE) underperformed on Wednesday as a runaway pound sterling hit share prices on the index.

Sterling continues to gain against the dollar (GBPUSD=X) and euro (GBPEUR=X), rising 0.4% to hit $1.4175 on Wednesday morning. Earlier in the session the pound had hit $1.42, marking a fresh three year high for the currency.

The pound is now the best performing G10 currency against the dollar so far this year. Analyst at Bank of America said the currency was being buoyed by a "perfect storm" of factors: a resolution to Brexit; an impressive rollout of COVID-19 vaccines; and inflation fears in the US, which are denting the dollar.

A strong pound is bad for companies that make their earnings in dollars or other overseas currencies, which covers the majority of the FTSE 100. The index was down 0.4%.

European markets were mostly falt, unencumbered by the currency woes of the FTSE. Germany's DAX (^GDAXI) rose 0.6%, while the CAC 40 (^FCHI) was flat in France, as was Spain's IBEX (^IBEX) and Italy's FTSE MIB (FTSEMIB.MI).

Bitcoin recovers to $50,000

Bitcoin (BTC-USD) has stabilised near $50,000 (£35,276) after news broke that Square (SQ), the payments business run by Twitter cofounder Jack Dorsey, had invested another $170m in the cryptocurrency.

Square disclosed in fourth quarter earnings on Tuesday that it had bought 3,318 bitcoins for a combined $170m. The investment follows a $50m purchased disclosed last October and means Square now has 5% of its total assets invested in the world's biggest cryptocurrency.

"Square believes that cryptocurrency is an instrument of economic empowerment, providing a way for individuals to participate in a global monetary system and secure their own financial future," the company said in a statement.

"The investment is part of Square’s ongoing commitment to bitcoin, and the company plans to assess its aggregate investment in bitcoin relative to its other investments on an ongoing basis."

The news helped to stabilise the price of bitcoin and reverse earlier losses. Bitcoin had fallen over 10% earlier on Tuesday, leading a broader cryptocurrency market sell-off. Bitcoin was trading around the $45,000 mark at its worst point.

By 9am in London on Wednesday, bitcoin had recovered to trade at $50,671.83.

Additional reporting by Saleha Riaz.

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