The world’s banks face $2.1trn of defaults
Standard & Poor’s predicts that global banks are set to write off $2.1trn over the next two years as customers default on loans. The credit ratings agency said $1.3trn in losses this year alone would send some banks into loss-making territory. As much as 75% of their profits could be wiped out this year and 40% next year, S&P warned. In a separate report, S&P estimated that credit losses for UK banks would rise to £18.5bn in 2020, four times higher than in 2019. Western Europe as a whole would suffer $228bn of credit losses over two years. The transparent reporting of losses would be key to a swift recovery, said Osman Sattar, of S&P: “In our view, and as the aftermath of the 2008-09 financial crisis showed, delays in the recognition of credit losses by banks, or a lack of transparency in reporting such losses, could undermine investor confidence in banks and may delay the path to recovery for some countries.”
Andrew Bailey sets new date to meet 1922 Committee
The Bank of England’s Governor Andrew Bailey has rescheduled a meeting with backbench Conservative MPs for next Wednesday amid claims the Bank’s independence has been eroded by its coordinated response to the COVID-19 crisis with the Treasury.
Donohoe wins vote to become head of Eurogroup
Paschal Donohoe has been appointed head of the Eurogroup for the next two-and-a-half years, taking over from Portugal’s Mario Centeno. Donohoe has been Ireland’s finance minister for three years. The Spanish favourite for the role, Nadia Calvino, was backed by Germany, France, Italy and naturally Spain, who were angered by a loss that they failed to see coming, said one official with knowledge of the process. The eurozone’s smallest nations were said to have backed Donohoe as they felt he would be sympathetic to their plight.
China lenders make ready for US sanctions over Hong Kong
Chinese state banks are preparing contingency plans ahead of expected US legislation that could see lenders penalised for serving officials involved in implementing Hong Kong’s new national security law. Bank of China and Industrial and Commercial Bank of China (ICBC) are both considering the possibility of losing access to US dollar settlements if the sanctions are put into practice, according to reports.
Wells Fargo eyes thousands of job losses
Wells Fargo is to conduct a strategic review which could result in thousands of job losses. The bank is America’s third largest and employs 263,000 staff globally.
Rolls-Royce sees demand for engines reduced by half
With demand for Rolls-Royce jet engines falling by 50% so far this year, chief executive Warren East has warned that the effects of the coronavirus could present a "historic shock to civil aviation." The firm has seen £1.1bn wiped off the firm’s revenues in the first half, with management implementing a large-scale restructuring of the business as a result.
Persimmon raises rebound hopes with strong forward sales
Persimmon has reported a decline in revenues to £1.19bn in the first half, compared with the year earlier period, while forward sales are up 15% at £1.86bn. Rival Vistry meanwhile, previously known as Bovis Homes, reported a week-on-week increase in sales rates over the past 10 weeks, with its average private sales rate per site per week at 0.62 over the last four weeks.
Brussels recognises need for access to London clearing houses
Brussels is to adopt emergency measures to ensure European companies can still access UK-based clearing houses after the end of this year amid concern agreement on equivalence will not be reached by the end of the transition period. European Commission vice-president Valdis Dombrovskis said the bloc will introduce “time limited” provisions from January next year. The UK dominates the continent’s £658trn annual clearing market and Brussels feared European firms could be denied access to crucial finance and face serious stability risks if frozen out. Michael McKee, partner at London-based law firm DLA Piper, said: “This is a very positive development and important for financial stability against the backdrop of the pandemic. However, it is important to recognise that derivatives clearing is one of the few financial services areas where the EU considers such certainty to be important for EU located businesses, so it is not necessarily an indicator that agreement can be found on other financial services issues.”
FCA demands safeguards at payments businesses
The Financial Conduct Authority has told payment service providers and electronic money businesses that they must strengthen the way in which they safeguard customers' money after Wirecard’s catastrophic failure brought greater scrutiny to the industry. New guidance issued by the regulator said it had found “material issues” in a number of areas including the failure to properly manage financial crime risks and misleading claims about service and pricing. The regulator indicated that its intervention had been hastened by fears that the COVID-19 pandemic may pose a risk to the viability of payments firms. A spokesman for the FCA said that its work "makes very clear our expectations of what payments firms must do to protect customers' money robustly".
Pharma industry commits $1bn to fight drug-resistant superbugs
A $1bn fund called the AMR Action Fund has been formed by 23 drug companies to develop new antibiotics amid a global increase in antimicrobial-resistant superbugs.
LEISURE & HOSPITALITY
Cruise lines warn of ‘severe blow’ from social-distancing measures
Royal Caribbean and Norwegian Cruise Line have warned that the industry faces a “severe blow” if social-distancing measures are enforced onboard ships, with fewer passengers as a result.
UK manufacturing seeking government assistance
Manufacturing industry trade body Make UK has welcomed moves to encourage apprenticeships in the sector, but called for more to be done, with chief executive Stephen Phipson remarking: “There are sectors of manufacturing which employ large numbers of highly skilled people who are sitting on a knife-edge. It is now imperative as part of the third phase the Chancellor promised that Government takes stock ahead of the Autumn Budget of what further action may be required, and signals its intentions to act."
Recruiters post falls in Q2 gross profits
Recruiter Robert Walters saw a 33% fall in gross profit during the second quarter to £71.1m. The firm also reported net cash of £119.3m, up from £54.4m in the year earlier period. Meanwhile, Page Group’s gross profit was down 47.6% overall, with CEO Steve Ingham stating that the company has “chosen not to make wholesale changes and to retain our proven fee earners” rather than implementing sweeping redundancies.
British high street loses a further 5,300 jobs
The British high street took a double hit yesterday after Boots announced 4,000 job cuts while John Lewis said it would close eight of its 50 department stores putting 1,300 jobs at risk. Separately, Burger King said it could close up to 10% of its 530 UK restaurants, putting 1,600 jobs at risk.
IFS advises against tax rises and spending cuts
The Institute for Fiscal Studies (IFS) has said the country’s budget deficit could reach £350bn this year and £150bn in 2021. This comes as the latest figures from the Treasury show that public spending during the pandemic rose to almost £190bn.