Quick work from Bernard Looney. It’s only a year since the BP boss came up with his great green “reset”, that exciting combo of “reimagining energy” and halving the $8 billion-a-year dividend. And look at this: he’s already seeing “an improving outlook for the environment”.
What, really? What about all those floods in Germany, or Canada’s record scorcher? Or the summer monsoon here? There still seems to be a bit of global warming about. So, anyway, ask Looney what sort of environment he’s referring to and here’s his response: “The oil price.” You don’t say. Fancy running BP based on that.
Still, that’s what he’s up to. Oil’s risen from $40 to more than $70 a barrel in 12 months. And, with it, BP’s half-year figures have rebounded from a $21.2 billion loss to a $7.78 billion profit — boosted by reversing $3 billion of last time’s asset writedowns (report, page 34). The upshot? Looney’s taken off his hairshirt and turned on the shareholder distribution taps. The dividend, which last year he said was “intended to remain fixed at 5.25 cents”, has been upped by 4 per cent: the forecast annual rise to come. To boot, he’s promising share “buybacks of around $1 billion per quarter” as long as oil averages $60.
Or, to put it another way, he’s limbering up to return the same sum that was previously paid out in dividends. Yes, BP shares rose 6 per cent to 306¼p. And UBS analysts called the increase in the payout “a surprise given the fixed divi policy, but a welcome addressing of a misstep”. Exactly. Doesn’t it show that Looney went too far last year?
Naturally, he isn’t having that. He points out that a year ago oil had fleetingly turned negative, “we didn’t have a vaccine” and “uncertainty” was running amok. Net debt, now cut from $40.9 billion to $32.7 billion, was threatening to swamp the business, too. And neither, he insists, did shareholders order him to lift returns. He says “investors want different things”, with the US ones largely preferring buybacks, the UK lot wanting dividends and some asking why, if he’s so set on greening up BP, he’s not spending the money on renewable assets.
Advertisement
And, in fairness to Looney, he’s been clear on the juggling act that goes with “generating value for our shareholders today while we transition the company for the future”. Indeed, he’s brought much more clarity to the task than the make-it-up-as-they-go-along brigade from Royal Dutch Shell: the crew that last week made their third increase to investor payouts since slicing the dividend by 66 per cent.
Switching away from fossil fuels is crucial, too. Yet BP shares sank to sub-£2 after the dividend cut. And, only now, are they back to where they were a year ago. A yo-yoing investor returns policy hardly helps.
Standard fare
Standard Chartered is going into the stadium business. “It’s time to take a stand,” declares the bank’s boss Bill Winters. “Our stands represent our aspiration — the difference we want to make.” Really? They don’t even go round the pitch, given there’s only three of them: “accelerating [net] zero”, “resetting globalisation” and “lifting participation” for “one billion people” by “unleashing the full potential of women and small businesses”. Has Winters asked them if they want to be unleashed by him?
Yes, it’s the sort of meaningless do-goodery companies trot out nowadays to make them feel better about gouging the customers. But isn’t there also another question for Winters: wouldn’t his time be better spent improving the performance of the emerging markets bank?
It’s six years now since Standard Chartered lured him off the beach, or at least hedge fund Renshaw Bay. And, given his impact on the share price so far, you wonder if the local lifeguard wouldn’t have done a similar job. The shares were 960p when he pitched up. Today? 441p, up 1 per cent on broadly in-line half-year profits of $2.7 billion, the return of the dividend and a $250 million share buyback (report, page 36).
Advertisement
True, he inherited a clean-up job after years of dodgy lending. But the shares are still below the bombed-out 465p price of November 2015’s £3.3 billion rights issue. And since Winters took charge the shares have underperformed all UK-listed peers, including nearest rival HSBC: not helped by three years of zero dividends. Pre-Covid, emerging markets were the fastest-growing bit of the global economy. But critics point to a lack of income growth and missed return-on-equity targets: the key reason the bank trades at a pitiful 0.48 times book value.
Winters says he’s now “more confident” of achieving the medium-term return on tangible equity target of 10 per cent. And he got to 9.3 per cent last half after a 3.3 percentage-point jump. But the man paid £32 million so far for his efforts needs to deliver — before shareholders take a stand on him.
Don’t panic — yet
Rarely has the London Stock Exchange seen a takeover frenzy like it. The value of deals for British companies has hit a 14-year high in the first seven months of 2021: $198 billion, or £142 billion. And bids for the likes of Morrisons and Meggitt have stoked fears over a Brexit-hit cheap market, with the FTSE 100 on a price-earnings multiple of 15.6, against 26.9 for the S&P 500.
Yet the figures also include National Grid paying £7.8 billion for Western Power Distribution: a UK company that was owned by a US one. And the takeover trend’s been partly mitigated by something else: floats of companies valued at £44.2 billion, including tech outfits Wise and DarkTrace. They’re up since IPO by an average 15 per cent, too. Besides, the value of companies in the stock exchange’s FTSE All Share Index tots up to £2.44 trillion. There’s no need for panic — yet.
