Among a fairly busy corporate diary for Thursday, two of the larger names are in the financials sector but with quite diverse customer bases, Prudential PLC (LON:PRU) and Hargreaves Lansdown PLC (LON:HL.).
Life company Prudential, which will publish a trading update at 9.30am London time as shareholders will not be able to attend its annual general meeting, is now fully focused on Asia and after spinning off its European arm in March bowed to activist pressure and unveiled plans to demerge its US business, Jackson, though it later said an initial public offering might not be appropriate in the current market.
Thursday’s update will provide an insight into how the coronavirus pandemic and economic shutdowns have affected demand in Asia, and possibly how Europe or the US may come out of their own lockdown.
“Lower stock market valuations will certainly have a negative impact on fee income on assets it manages while the disruptions are likely to have put other things on consumers’ minds rather than making retirement plans and policies,” according to analysts at the Share Centre.
Analysts at JPMorgan Cazenove recently suggested it was best to remain cautious on life insurers due to asset risk concerns.
Number crunchers at Deutsche Bank, meanwhile, highlighted two different outlook scenarios for the UK life assurers and the ‘asset gatherers’, such as Hargreaves Lansdown, with their base case being a “relatively benign outcome in which western economies gradually re-open from May”.
But investment platform operator Hargreaves Lansdown had its shares downgraded by Deutsche as its analysts said they “show downside even on our benign scenario”.
For broker Liberum, Hargreaves has a strong brand, service levels, technology platform and pricing strategy that will mean it remains “the clear market leader” in the direct-to-consumer platform market, though analysts downgraded their recommendation due to the fund supermarket’s valuation after a recent flight to quality.
And if that wasn’t enough, the flurry of recent broker comments saw Berenberg also warn of a potential £1.8bn bill for the financial sector as a whole from potentially mis-selling claims for final-salary pensions transfers.
Even firms with strong processes are likely to be affected, due to the design of the UK’s Financial Services Compensation Scheme (FSCS), which implies additional cost pressure that will be “particularly unhelpful” for some, including Hargreaves.
Is WH Smith reopening more stores?
Among news from other sectors, WH Smith PLC (LON:SMWH) is due to release interim results on Thursday, just over a month after raising £166mln in an emergency share placing to get through the coronavirus crisis.
The newsagents’ chain has been battered by closures of its stores in airports and train stations as governments implemented travel restrictions.
On April 6, the retailer announced that it was continuing to serve in 140 located in hospitals and in 203 post offices, so the market is wondering if more re-openings will be announced.
The results cover the period to March 31, though investors will want to know whether the estimated 90% plunge in revenue for the month of April did in fact happen.
Announcements expected on Thursday 14 May:
Trading announcements: Balfour Beatty plc (LON:BBY), Beazley PLC (LON:BEZ), Hargreaves Lansdown PLC (LON:HL.), Gresham Technologies plc (LON:GHT), Arrow Global Group PLC (LON:ARW), Helios Towers PLC (LON:HTWS), Indivior PLC (LON:INDV)
Economic data: US jobless claims