YP75: Bank results boost markets but investors see obstacles ahead

Good results were reported from all the major UK banks including the semi-nationalised banks, RBS and Lloyds and those that remained in the private sector, HSBC and Barclays. While RBS managed to swing to a 1.1bn pre-tax profit in the first half of the year, Lloyds reported a far better than expected pre-tax profit of 1.6bn over the same period. A fall in bad debt provisions helped HSBC double half year profits to 7bn while Barclays achieved a 44 per cent leap in pre-tax profits to 4bn over the same period. The results are definitely a boost for the markets and the sector however there is no doubt there will be a number of obstacles to overcome as regulators put pressure on capital requirements and the risks over European debt contagion persist.

Technology group Filtronic continue to feel the strain having a reported a 1m pre-tax loss for the year to the end of May compared with a 2.3m profit the year before. Revenue over the same period was almost half that of 2009 with a figure of 15.6m compared with 28.8m previously. The Shipley based company's results were in line with expectations after mobile phone operators and manufacturers cut spending on network upgrades. The group which is widely known for its point-to-point technology linking mobile phone base stations believes that, while the underlying market drivers for growth in its technology remain, the outlook for demand over the summer months appears subdued. The group continues to invest in research and development in an effort to position itself for the expected recovery in demand during 2011.

While there continues to be a good degree of uncertainty surrounding the UK property market at present, LSL Property Services saw strong trading having reported a substantial rise in first half pre-tax profit to 19.7m compared to 4.3m a year earlier. The York-based property group has seen good growth in its estate agency and surveying divisions and in addition its acquisition of the ex-Halifax Estate agency branches. Management are however wary of the continued shortfall of availability of mortgage finance and cuts in government spending which are likely to add further pressures in the short term. The group have declared an interim dividend of 2.5p a share following no payment last year.

Plans for investment in a biomass plant appear to be on hold for Drax Group, the operator of Britain's largest coal-fired power station. The Selby-based company announced that it was delaying an investment decision on building new biomass-fired generation plants until next year due to the uncertainty over Government support. Having recently announced that support levels would be fixed for biomass for 20 years once plants are "accredited", the Government is now set to review support rates in 2013 which could mean a change in support levels after Drax has financially committed to the project and when the plants begin operations in 2014.

Edward Marsden, Assistant Investment Manager at Brewin Dolphin, Leeds