Telecommunications giant BT has bumped up its interim dividend after a solid second quarter which saw profits before tax grow.
Adjusted revenue in the three months to the end of September was down 9% at £4,474m from £4,894m a year earlier, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were virtually unchanged year-on-year at £1,497m.
Adjusted profit before tax climbed 7% to £608m from £570m in the second quarter of the previous fiscal year, as costs fell and margins rose, compensating the hit to revenues from new regulation. Adjusted earnings per share also rose 7%, to 6.0p from 5.6p a year earlier.
Net debt at the end of September was 9% larger at £9,037m compared to £8,317m at the end of September 2011. Despite this, the group felt confident enough to whack up the interim dividend by 15% to 3p from 2.6p at the halfway stage last year.
BT Retail was the star performer, with second quarter EBITDA of £474m, up 7% from £445m the year before. This was despite revenue easing 3% to £1,791m from £1,853m the year before.
BT Global Services, BT's offering to corporate customers, saw EBITDA slide 18% to £130m (2011 second quarter: £159m) on revenue that fell 13% to £1,757m (2011 Q2: £2,014m).
BT Wholesale's EBITDA tumbled 8% to £280m from £305m the year before on revenue that retreated 12% to £861m (2011 Q2: £982m).
The broadband part of BT's business, Openreach, saw EBITDA harden 3% to £582m from £567m the year before, despite revenue slipping 1% to £1,269m from £1,280m in the second quarter of 2011.
"We have delivered another solid quarter of growth in profit before tax despite the economic conditions and regulatory impacts. We continue to make significant investments in the future of our business and we are again accelerating our fibre roll-out. We now expect fibre to be available to two-thirds of UK premises during spring 2014, more than 18 months ahead of our original schedule, and we are recruiting more than 1,000 engineers in 2012 to help deliver this," declared Ian Livingston, Chief Executive of BT.
In a third quarter update, Lloyds Bank said it is making progress despite delivering a statutory loss before tax of 583m pounds for the first nine months of the year, including a further Payment Protection Insurance (PPI) provision of 1bn pounds in the third quarter.
Legacy issues continue to affect its results and a provision of £2.08bn relating to its PPI business, of which £1bn was in the third quarter, was the primary driver behind the statutory loss of £583m for the first nine months of 2012, against a loss of £3.86bn in the same period in 2011.
However, the lender has reaffirmed previous guidance and says that for the full year 2012 group net interest margin is expected to be around 1.93%. The cost base will be close to £10bn by the end of the year, two years ahead of its original plan. It has lowered guidance for 2012 impairment charges to £6bn.
It also expects to reach its long-term loan-to-deposit ratio target of 100% for the core business in the first quarter of 2013, at the same time that it expects to reach a 120% loan-to-deposit ratio for the group.
Furthermore, in the nine months ending on September 30th, underlying profit increased by 148% to £1,904m. This was mainly driven by a further decrease in the impairment charge (down 40%) and a continuing improvement in cost efficiency. This increased profit was achieved in spite of the fall in income of 14%, which mainly reflected a smaller balance sheet as well as a lower net interest margin of 1.93%.
During the period in question Lloyds made further progress on strengthening its balance sheet and reducing risk, including improving its core tier 1 capital ratio to 11.5%, and continuing with its reduction of non-core assets, to the tune of £30.7bn in the first nine months of the year, to reach £110.0bn. That decrease in non-core assets than it had previously targetted for the whole of 2012 and represents substantial progress towards one of its main objectives, to reduce non-core assets to less than £70bn by the end of 2014.
This is what analysts at Credit Suisse are saying: "Underlying results were better than expected, driven by lower impairments. Results are supportive but the stock has come a long way, so trading at 0.7 times the estimated 2013 tangible net asset value (TNAV) for a 5-7% return on tangible equity (RoTE), we remain Neutral.
"Lower impairment guidance for fiscal year 2012 of £6.0bn from previous guidance of less than £7.2bn. We and consensus were already at £6.3bn. The group commented to us that they are comfortable with consensus at £4.8bn for 2013 (estimate) - we are at £4.9bn. In terms of fourth quarter implied impairment this guidance actually suggests a significant increase again in the fourth quarter, to £1.6bn."