IAG, owner of British Airways, is raising more money in expectation of a lengthy travel downturn © REUTERS

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April was the cruellest month. Corporate earnings for the most crucial quarter in living memory surprised on the upside in July only because expectations were so low in April. In that locked-down month, European full-year profits were expected to slump 40 per cent. Enough businesses beat woeful second-quarter expectations for UBS analysts to now forecast an annual decline of 33 per cent.

As some governments reintroduce restrictions on travel and socialising, many businesses remain painfully exposed. That vulnerability has been reflected in news of a rights issue of up to €2.75bn from IAG, owner of British Airways, and a £2.1bn loan loss provision at NatWest, as Royal Bank of Scotland is now known. Both are financially robust, but some rivals of IAG must be in serious trouble. The same will be true for a swath of businesses that bank with NatWest.

The flipside of coronavirus has been an earnings surge for tech groups and for securities traders. The corporate and institutional bank of BNP Paribas increased quarterly pre-tax profits 50 per cent to €1.6bn. The comparable figure for the London Stock Exchange was 9 per cent higher at £674m.

The mood is grim in most other sectors. IAG is raising more money in expectation of a lengthy travel downturn. Net debt to ebitda, a key metric of financial strength, had spiked unacceptably to 4.2 times by the end of June. Natwest’s loan loss provision, equivalent to 1.7 per cent of its loan book, reflects a central expectation of a V-shaped dip, where UK GDP collapses by just over 14 per cent this year before recovering roughly the same amount in 2021.

Few businesses are prepared for worse outcomes, epitomised by NatWest’s gloomiest scenario of a 17 per cent UK output loss in 2020 that cannot be recouped before 2025. As Lex predicted, hefty state support has so far underpinned plentiful private finance, limiting financial collapses. Governments and central banks lack the resources to shield companies from further blanket lockdowns. From now on, choices over corporate and public health will be painfully counterpoised.

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