U.K. stocks fell for a second day as HSBC Holdings Plc reported worse-than-estimated earnings, overshadowing the largest expansion in more than six years for Britain’s services industries.
HSBC tumbled the most in 20 months after posting first-half net income that missed analysts’ projections. Lloyds Banking Group Plc rallied to its highest price since October 2010 after a report that it aims to pay as much as 70 percent of its earnings in dividends by 2015.
The FTSE 100 Index slid 28.29 points, or 0.4 percent, to 6,619.58. The gauge has still rallied 9.8 percent from a low on June 24 as the Federal Reserve said it remains flexible on the pace of bond buying and as the Bank of England gave forward guidance on interest rates for the first time. The broader FTSE All-Share Index lost 0.3 percent today, while Ireland’s ISEQ Index was little changed.
“HSBC has reported half-year results to the end of June 2013 that are weaker than we and the market had expected at the pretax profit level,” Gary Greenwood, an analyst at Shore Capital Group Ltd., wrote in a note. “The outlook statement focuses mainly on the macroeconomic backdrop, with no real comment on the company-specific outlook.”
HSBC, which has a 7.9 percent weighting in the FTSE 100, shaved off 24 points from the index.
U.K. services grew in July at the fastest pace since December 2006, a report showed. An index of activity rose to 60.2 last month from 56.9 in June, according to Markit Economics and the Chartered Institute of Purchasing and Supply. The median forecast of economists in a Bloomberg survey had called for a reading of 57.4. Readings above 50 indicate expansion.
HSBC slid 4.4 percent to 721.7 pence, its biggest drop since November 2011, as Europe’s largest lender reported first-half net income of $10.28 billion, trailing the $10.57 billion median estimate of analysts surveyed by Bloomberg.
“There has been a slowdown in faster-growing markets in recent quarters,” Chief Executive Officer Stuart Gulliver said. “Even emerging markets go through business cycles, and this has impacted our revenue and our profit growth.”
A measure of London-listed banks posted the worst performance among industry groups on the FTSE 350.
Royal Bank of Scotland Group Plc lost 1.6 percent to 317.4 pence as Societe Generale SA downgraded the shares to sell from hold, citing disappointing results. Britain’s biggest publicly owned lender, which may shed some businesses under a government proposal, said last week first-half operating profit at the businesses it plans to retain fell 17 percent.
Lloyds advanced 2.7 percent to 75.69 pence. CEO Antonio Horta-Osorio said at an investor roadshow that he plans to pay between 60 percent and 70 percent of the lender’s earnings in dividends by 2015, the Financial Times reported yesterday, citing people familiar with the matter. Lloyds last week said it returned to half-yearly profit and that it will start talks with regulators to resume dividend payments.
Vedanta Resources Plc, the metals producer controlled by billionaire Anil Agarwal, rose 3.3 percent to 1,240 pence. Lonmin Plc added 2.4 percent to 322 pence and Anglo American Plc climbed 1.3 percent to 1,475.5 pence.