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Dividend Surprise is on the Cards for HSBC Investors

Mar 4, 2007

The London market's fragile confidence will be tested this week as another clutch of major companies are due to post results. HSBC will be the last of the 'big five' banks to post results this week, with analysts expecting the company to add pounds 11.56bn in profits to pounds 25bn-plus already posted by Barclays, HBOS, Lloyds TSB and Royal Bank of Scotland over the past fortnight.

But HSBC has given investors a rocky ride in recent times with February's shock news that the group's bad debt provisions had been increased by 20% - pounds 887m - to cover US borrowers defaulting on their mortgages.

The news led to the chief executive of the bank's US operation, Bobby Mehta, departing last week.

Citigroup analyst Simon Samuels said, that the firm's Hong Kong and Asia Pacific divisions, which account for more than a third of group profits, could help to offset the deterioration in the US.

Mr Samuels said the company could surprise investors tomorrow with a bigger than expected dividend to compensate for the bank's sluggish share performance over the past year.

Investors will be keen to hear new ITV executive chairman Michael Grade's plans to turn around the struggling broadcaster in a declining television advertising market at full-year figures on Wednesday.

Barclays analyst Amanda Purton said, 'We believe the chairman will put the focus firmly on improving programming and generating more hit series to win back market share.'

Consensus forecasts have marked ITV's expected pre-tax profits down to pounds 347m from pounds 452m last time. But the broadcaster received some cheer on Friday as Goldman Sachs upgraded the firm after a survey of media buyers suggested ITV is outperforming its expectations in the first quarter this year, although advertising revenues are still expected to fall 8%.

Satellite broadcaster BSkyB frustrated cable operator NTL's takeover bid for ITV last December after buying a 17.9% share in the company.

Investec Securities analyst Steve Liechti said that ITV's shares could drift with the blocking stake in place and the absence of upbeat trading news.

With its pounds 1.2bn takeover of RHM only days from completion, Premier Foods will have plenty on its plate when it presents full- year results tomorrow.

Premier, which is best known for making Branston Pickle and Loyd Grossman sauces, has already indicated that figures will be towards the bottom end of expectations because of warm winter weather and higher costs.

Graham Jones, an analyst at Panmure Gordon stockbrokers, said he still expected sales to rise by 21% to pounds 956.8m. He estimates profits will jump from pounds 72.9m to pounds 94.6m, but with the major growth coming through in the current year when the Campbell and RHM deals should leave a full-year figure of around pounds 256m.

Royal & Sun Alliance insurer More Than will highlight its new found strength when it posts higher full-year operating profits for 2006 on Thursday. Analysts have pencilled in a consensus figure of pounds 764m, up from pounds 698m a year earlier and despite pressure on UK commercial pricing.

Wales-based car insurer Admiral is expected to report profits of between pounds 141.6m and pounds 151.7m for the 12 months to December 31, 2006. The figure on Tuesday will compare with pounds 119.5m in 2005.

Like other sector peers, bus and rail operator Arriva has suffered from rising fuel costs in the past year but consensus forecasts estimate underlying pre-tax profits 8% higher at pounds 112m in the company's 2006 results on Thursday.

Arriva has continued to grow its bus business in the UK and overseas with recent acquisitions in Spain and the Czech Republic.

The company has added a 12-year rail deal in Germany for the Bavarian government and is also looking to increase UK share with bids in for the East Midlands and Cross Country rail franchises. Last week the company was also shortlisted for the lucrative East Coast Main Line franchise.

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