Must read: UK banks, IAG, Remy Cointreau

European markets have opened mostly flat with the CAC 40 underperforming as risk appetite continues to remain subdued. 

Rounding up UK banks’ earnings this week, NatWest Group (LSE:NWG) has plunged to the bottom of the FTSE 100 shedding around 10% on a profit outlook downgrade and an FCA probe into the Farage de-banking scandal. Its results have dragged other lenders such as Lloyds Banking Group (LSE:LLOY) and Barclays (LSE:BARC) down with it. British Airways’ parent company IAG is also under pressure despite record quarterly earnings after it flagged the geopolitical uncertainties this year.

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Brent crude is trading higher this morning but remains below $90 a barrel and is on track to log a weekly loss amid the recent bout of volatility. Investors are trying to weigh up the soft global demand outlook against the extent to which the Israel-Hamas war could negatively impact supplies from the Middle East as well as oil output cuts from OPEC+ members.

• NatWest Q3 results: investor disappointment in full view
• Barclays: bank narrowly beats Q3 profit forecasts
• Lloyds Bank shares: what the analysts think plus latest price targets

IAG

International Consolidated Airlines Group SA (LSE:IAG) reported third-quarter operating profit up 39% to 1.75 billion euros, beating expectations for 1.55 billion euros. Its operating margin increased to 20.2% versus 16.6% last year. The company says it expects 2023 to be a year of strong recovery in margins, operating profit, and its balance sheet, heading back towards pre-Covid levels. However, it warned of “wider macroeconomic and geopolitical uncertainties that might affect the remainder of the year”.

British Airways’ parent company enjoyed record quarterly earnings thanks to strong demand for leisure travel during the busy summer holiday season. There was particular strength across European holiday destinations. Over the summer, it reported a rebound in passenger revenue thanks to a recovery in long-haul travel after China’s Covid restrictions ended. IAG has been focusing on bringing down its debts after concerns about its debt levels sparked a sell-off in February.

However there is nervousness about weaker consumer demand ahead, particularly over the quieter winter months and the risk of rising energy prices that could push up its costs. IAG said it has 73% of its fuel cost hedging in place for the fourth quarter. The airline group also said it is well-hedged on jet fuel into the first and second quarter next year.

Shares initially opened higher but have since turned lower with the stock now down around 6% in the past month weighed down by the threat of rising oil prices on the back of the Israel-Hamas war.

REMY COINTREAU 

Remy Cointreau (EURONEXT:RCO) reported first-half revenue down 22.2% to 636.7 million euros, below estimates for 640.2 million. The spirits maker also cut its profit and sales guidance for the year amid slowing growth in the US and China. It expects 2023-24 full-year organic sales to slump by 15-20% versus its previous guidance for flat sales. Remy Cointreau is also planning a “major cost-cutting plan” in a bid to support margins amid the macro downturn.

Cognac sales were hit particularly hard down 30.1% in the first half of the year as rising interest rates and stiff competition weighed on demand particularly in North America. After a surge in pent-up consumer spending from China post-Covid at the start of the year, demand from the world’s second-largest economy is also slowing amid its bumpier than expected recovery this year.

Shares in Remy Cointreau have fallen sharply today, extending recent declines with the stock shedding around a third in the past six months.