FTSE 100 round-up: Lloyds Bank, NatWest, IMI, Hikma

Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG) today surged to fresh multi-year highs as the lenders joined a rejuvenated Marks & Spencer Group (LSE:MKS) and engineer IMI (LSE:IMI) at the top of the FTSE 100 index.

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Their performances contrasted with an abrupt end to the strong run for the shares of Smith & Nephew (LSE:SN.), alongside heavy selling of accessible medicines firm Hikma Pharmaceuticals (LSE:HIK).

The FTSE 100 index reached mid-afternoon below Wednesday’s record close, despite a rally for AstraZeneca (LSE:AZN) and Sainsbury (J) (LSE:SBRY) after an initially lukewarm reaction to their latest results.

NatWest shares traded as high as 606p and Lloyds at 92p after a report in the Financial Times allayed fears that Chancellor Rachel Reeves is planning to use her Budget on 26 November to increase banking industry taxes.

She is said to want the sector to remain competitive and able to support the country's growth, particularly as banks in Britain already pay high levels of tax by international standards.

As well as corporation tax at 25%, the industry currently pays a 3% surcharge on banking profit above £100 million and a levy of 0.10% on certain balance sheet liabilities.

In return, Shore Capital said Reeves is likely to press banks to demonstrate a willingness to grow even faster than they are doing in order to support the economy.

It said they may need to reinvest more into pricing in order to create additional demand for credit. Higher lending growth through greater risk taking could also add to future credit costs, which are currently benign.

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Shore Capital analyst Gary Greenwood said: “So, while there is a win here from the avoidance of an additional tax, it may not be the case that this benefit flows straight to the bottom line but instead gets gobbled up by keener pricing.

"That being said, the market is likely to breathe a sigh of relief at this news, and it is encouraging that the trend of bank bashing under former Government’s seems to have stopped, with the Chancellor rightly recognising the importance of the banking sector to growing the economy.

"In conclusion, we view this as a positive development at the margin but, let's be clear, this should not just be seen as a free lunch for banks and their shareholders."

Marks & Spencer shares rallied by 9.2p to 394.2p as the recovery from the 330p seen in early September resumed on the back of yesterday’s half-year results.

The upturn for shares reflected the impact of City upgrades as Goldman Sachs raised its price target to 470p and Bank of America moved from 415p to 440p.

With the cyber incident now largely in the rear view mirror, the latter said a current valuation of 11.5 times 2027 earnings was an attractive opportunity and “unjustifiably large discount” to food retail peers Tesco and Sainsbury’s and apparel peer Next.

IMI led the FTSE 100 index for much of the session after the global leader in fluid and motion control reported quarterly organic revenue 12% higher than the same period last year.

The consensus-beating result was driven by an “outstanding” performance in process automation, where IMI has benefited from rising global energy demand and a focus on high-margin aftermarket orders.

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IMI shares are up by more than 50% since mid-April, including today’s rise of 124p to 2526p.

In contrast, the shares of Smith & Nephew surrendered some of this year’s gains after organic revenues growth of 5% in the third quarter came in below market forecasts of 6.3%.

Unchanged 2025 guidance for around 5% organic revenue growth and 19%-20% trading profit margin also disappointed, according to UBS analysts.

They said: “First, we expect investors were hoping for a narrowing of the guide towards the upper end. Second, the very wide range with just a couple of months left to go in the year implies there remains a lack of visibility in the business, which is surprising to us.”

Hikma Pharmaceuticals shares also posted a double-digit percentage decline - down 426p to 1,588p - after it published medium-term guidance that included a forecast for a margin of 30% at its most profitable division of injectables.

This was lower than City expectations, reflecting the impact of global supply chain challenges on the start of commercial production at its new manufacturing facility in Bedford, Ohio.

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Hikma also expects compound revenues growth in 2024-27 at the lower end of its 6%-8% guidance range, with core operating profit 5%-7% higher rather than 7%-9% previously hoped.

Chief executive Riad Mishlawi reiterated 2025 expectations and said the significant expansion of Hikma’s manufacturing capacity will enable the company to meet growing demand and accelerate the delivery of increasingly complex products.

Peel Hunt placed its Buy recommendation and 2,175p target price under review following the update. However, the broker added: “We believe there is a lot to like in this agile and productive business, and ultimately investing more in R&D is the right strategy.”