Shell profits soar to eye-watering £8billion while Britons punished at pump

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Shell

Shell has announced profits of £8billion for the third quarter of 2022 (Image: Getty)

Energy giant Shell has announced profits of £8.2billion for the third quarter of this year. The business said it made adjusted earnings of $9.5billion US dollars over the three months down from $11.5bn (£9.9bn) the quarter before.

Shell Chief Executive Officer, Ben van Beurden, said in a statement: “We are delivering robust results at a time of ongoing volatility in global energy markets. We continue to strengthen Shell’s portfolio through disciplined investment and transform the company for a low-carbon future.”

“At the same time we are working closely with governments and customers to address their short and long-term energy needs.”

Shell also announced a new share buyback programme, resulting in an additional $4billion of distributions, which the energy giant expects to complete by its Q4 2022 results announcement.

The company plans to increase the dividend per share for the fourth quarter, to be paid in March 2023, by an expected 15 percent and subject to approval by Shell’s board.

Shells CEO Ben van Beurden speaks during a signing ceremony at QatarEnergy headquarters in Doha

Shells CEO Ben van Beurden speaks during a signing ceremony at QatarEnergy headquarters in Doha (Image: Getty)

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Shell posted record results in July with its £9.9bn second-quarter profit smashing the mark it set for the first quarter of the year as the company was lifted by strong trading and a tripling of refining profit.

The company’s bumper profits and those of some of the world’s biggest banks have led some to call for a windfall tax.

David Cumming, Head of Equities at Newton Investment Management, told the BBC: “People tend to focus on the quantitity of profit. Shell’s a pretty big company. I do think there are some parts of energy, particularly high electricity prices, where there might be a case for excess returns being taxed on a windfall basis, but overall the big oil companies are quite difficult to attack actually because most of the profits they earn are not in the UK. And they’ve already been hit earlier in the year.

“So I think it’s more the renewable energy comapnies which are benefitting from high electricity prices are a little bit more vulnerable in terms of windfall tax.”

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Rig

Shell’s Perdido offshore drilling and production platform (Image: Getty)

Shell

Fuel pump nozzles branded with the Shell logo at a petrol station (Image: Getty)

Asked if taxing share buy backs could work, Mr Cumming said: “I would argue you could encourage companies to reinvest rather than hand the money back. On Shell specifically, they’re still paying a dividend that’s a lot lower than it was in 2018 [when] the oil price collapsed… and they cut the dividends then and the dividends haven’t come back to that level yet so it’s important with investment you look at the long term, not just what’s happening in the short term.

“I think policy on business has to stay balanced and rational and, in Shell’s case, they are benefitting from high oil prices but I wouldn’t say they’re making significant excess returns.”

Jonathan Gant, Fossil Fuels Campaigner at Global Witness, said: “Life is becoming harder and harder for people in Britain. Pensioners are going cold, children are going to school hungry and people are scared for what winter will bring. There are no such concerns for Shell’s executives, who will be continuing to enjoy the high life while the rest of us suffer.

“What makes this disparity between people and polluters even more shocking is that it is companies like Shell that are both the architects and beneficiaries of our broken energy system, which has created this crisis.”

News of Shell’s profits comes as Lloyds Banking Group reported a fall in profits after revealing a £668million impairment charge as it gears up for heavier loan losses amid soaring mortgage rates.

The UK’s biggest lender said its statutory pre-tax profits were £1.5bn in the third quarter, a substantial drop from the £2bn reported last year and falling short of the market consensus of £1.88bn.

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iNFO

UK interest rater rises (Image: Express)

It revealed a £668mn impairment charge in the three months to September 30, a big swing from the £199mn it held onto in credit last year.

Lloyds said this reflects the worsening economy and higher interest rate environment, but assured investors there has been only “very modest” evidence of customers struggling with repayments to-date.

Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown, said: “Lloyds has seen its profits wiped out as it puts almost £700m aside in readiness for a weak economy. This non-cash charge is a buffer in case a high number of customers default on their loans.

“The best case scenario is that the group has over-egged its estimates and some of that hoard will be released, ultimately boosting profits. The more difficult scenario comes if the economic dive is steeper than predicted, which would see impairment charges swell.

“To a large extent, Lloyds can’t control the external forces that govern its customers’ behaviour, but its particular exposure to traditional lending, especially mortgages, puts it in the firing line when conditions sour.”

Oil

Workers on the Shell Vito offshore oil platform docked at Kiewit Offshore Services (Image: Getty)

Rival lender Barclays overtook market expectations and reported pre-tax profits of £2bn for the third quarter on Wednesday.

Its profits jumped six percent on last year’s £1.9bn and beat the consensus of £1.8bn for the period.

HSBC this week reported adjusted pre-tax profits for the three months to September 30 of £5.76bn, up from £4.87bn a year earlier and leaping ahead of market expectations.

Bank profits have led some to call for a windfall tax, including Lib Dem Treasury spokesperson and MP Sarah Olney. 

Mr Cumming said: “Banks, in particular, have been a political football… I think banks should be left alone. I know they are electorally unpopular but it’s 14 years since the [financial] crisis and they’re really just starting to benefit from getting higher rates coming through. But we are facing a recession and banks are very lowly rated so if the Government wants to promote a healthy, competitive, growth-orientated financial sector, I do think we should leave the banks alone this time.”

But Ms Olney has told Express.co.uk: “Hard pressed families will rightly feel short changed when they see that their spiralling mortgage bills are leading to even larger profits for big banks.

“The Conservatives have shown time and again that they’ve got their priorities wrong – putting the interests of big business ahead of families. Ministers must ensure that banks pay their fair share of tax during this crisis, starting by ruling out a cut to the Bank Surcharge.”

Michael Hewson, Chief Market Analyst at CMC Markets, told Express.co.uk banks have just had a decade of restoring their balance sheets to a more credible level with low interest rates resulting in low returns.

He said: “Banks have been in a very difficult economic environment while being encouraged to lend to consumers and businesses to grow the economy. Now interest rates are starting to go up and they are starting to benefit, politicians suddenly think it’s okay to make money from them.”

“A windfall tax does not incentivise banks to invest in the real economy. If you restrict banks’ ability to generate profits for share holders, you undermine that profit incentive.

“Why should banks or any other company have to be on the end of a windfall tax? Politicians think companies are a cash cow and they’re not. It just highlights the low calibre of politicians we have these days.

“If a company has a good year one year they pay more corporation tax. But do governments care if they make a loss another year? No, they don’t.”



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