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Lloyds and Shell in the spotlight for Thursday

October 28, 2021

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Thursday’s City schedule is for the portfolio stalwarts, with Lloyds Banking Group PLC (LSE:LLOY) and Royal Dutch Shell PLC (LSE:RDSB) among the notable names with updates due.

Lloyds may be set up to disappoint, particularly as it is lacking an investment banking operation that has powered Barclays and the US banks forward over the third quarter.

Worries over the impact of rising living costs and how that affects bad debts and the prospect of an interest rise have hurt the share price, but net income is tipped to be well up in these numbers helped by growth in mortgage and unsecured loans.

It is also new Lloyds chief executive Charlie Nunn’s first outing, so brokers expect a conservative view on dividends with the strategy going forward to be outlined with the full year results.

Shell is still an oil company – and profiting nicely

Shell shares are up about 80% in the year to date, and it is not down to the company’s ESG and ‘net zero’ strategy – it is because of soaring oil and gas prices. It’s third-quarter results, among the many on Thursday, will no doubt be full of commentary and quotes about the energy transition, not least with the COP26 summit only around the corner.

Cashflow, profits and dividends will be the what the investors will be looking at – though a lot of those details were given in an unscheduled update earlier this month. Trading results are expected to be better than in the second quarter, particularly for the integrated gas business.

Shell said it expects cash flow from operations to be “significantly impacted by large variation margin inflows on the back of the prevailing gas and electricity price environment” – which is a convoluted way to say that Shell is making a lot of money by selling its product at a higher price.

The sentiments were echoed by UBS: “Integrated Gas should benefit from better trading and optimisation earnings than 2Q (we see this as the absence of a negative rather than obvious upside benefit from the current LNG market given various production shortfalls).”

The Swiss bank’s analysts added: “Upstream earnings are held back by the impact of Hurricane Ida, especially on GoM production with the Mars complex shut in through Sept (production impact 90,000 boed and adjusted earnings hit by US$200-$300mln).”