Mortgage arrears at record low
UK Finance figures show that mortgage arrears remained at record lows in the second quarter of 2021, with 1,370 fewer mortgages in arrears at the end of June compared to the end of March. Overall, 76,270 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance. The low rate of arrears is largely down to the Financial Conduct Authority’s mortgage payment holiday, which was introduced in March 2020 and enabled borrowers to defer mortgage payments by up to six months during the pandemic. The payment holiday, which granted 2.9m mortgage payment deferrals, came to an end last month. Steve Seal, chief executive of Bluestone Mortgages, said: “While it’s encouraging to see mortgage arrears remain close to historic lows, the picture could look very different in the coming months”, noting that payment support has finished and the furlough and the self-employment income support schemes are set to end in September. Vikki Jefferies at Primis Mortgage Network hopes lenders “will continue to be proactive in order to avoid a sudden jump in arrears as we move into the second half of the year”, while Tony Hall at Saffron Building Society said "it is inevitable that the situation will worsen as support tails off".
Banks look to reduce cloud computing risks
Banks are taking steps to mitigate risks from their increasing use of external cloud computing services. A poll of 1,300 leaders in financial services from the UK, US, Canada, France, Germany, Hong Kong, Japan, Singapore and Australia has found that 83% were using the cloud as part of their primary computing infrastructure. Many of these are considering adopting a multi-cloud strategy, the Harris Poll and Google Cloud survey found, with this allowing a bank to switch to an alternative provider in the event of an outage, avoiding an interruption of services for customers. The Bank of England and the Bank of France have expressed concern over banks relying on a "concentrated" number of cloud computing providers, with fears that with many banks reliant on the same providers, there could be systemic risk if one of the cloud companies were to go down.
Economic recovery boosts Rabobank
Rabobank has reported a net profit of €2.16bn ($2.54bn) over the first half of 2021, as economic recovery helped the Dutch lender to release previous provisions for bad loans. Net profit was almost 10 times higher than a year before, when the coronavirus pandemic led the cooperative bank to set aside over €1.4bn for souring loans. In the first six months of this year €274m in provisions were released again as the Dutch economy recovered from its Covid-19 slump.
Former senior ICBC banker sentenced to life for bribery
Gu Guoming, a former senior banker at Industrial and Commercial Bank of China (ICBC), has been sentenced to life in jail after being found guilty of bribery, according to reports. Gu, previously the head of ICBC's Shanghai branch, was also stripped of his political rights for life, after being convicted of taking about $21m in bribes from 2005 to 2019.
Aviva to hand back £4bn to shareholders
Shareholders in Aviva are to receive £4bn by next June following an overhaul under the insurer's new CEO, in which it agreed to sell eight businesses in eight months. The announcement was made alongside Aviva's half year results which saw an operating profit of £1.1bn, compared to £1.2bn a year ago. Profit from continuing operations rose 17% to £725m. Within the life division, the value of new business premiums rose 13% to £16.9bn but the business was partly held back by a weak bulk annuity market. Aviva said it recorded “the best start to the year in a decade” in general insurance, with premiums up 6% to £4.4bn. While Aviva is set to buy back shares for up to £750m as it looks to award shareholders £4bn, activist investor Cevian Capital, which holds an almost 5% stake, has urged the firm to go further and deliver £5bn. The insurance group has entered a deal with Citigroup Global Markets for a share buyback.
M&A volumes hit new record
Research by Refinitiv shows that global merger and acquisition activity has hit record highs, with the value of pending and completed deals announced in 2021 hitting $3.6trn in the year-to-date, surpassing the full-year tally of $3.59trn recorded in 2020. The figures show that 35,128 deals have been announced so far this year, a 24% jump over last year.
GSK returns to prompt payment code
GlaxoSmithKline (GSK) has been reinstated on the Government-backed prompt payment code list, with this coming almost two years after it was removed for failing to pay invoices in a timely manner. New rules introduced in June say large firms must pay 95% of smaller suppliers within 30 days, down from 60 days previously. GSK is now in line with the new rules, having previously only paid 28% of suppliers within 60 days via its consumer healthcare division and just 12% via its overall UK business.
LEISURE & HOSPITALITY
Tui enjoys surge in bookings
Tui Group has said it has returned to generating positive cash flow for the first time in the pandemic thanks to an influx of customer deposits, bringing in €320m (£270m) in cash between April and June. However, the travel firm will run flights at only 60% of its 2019 level during the July-to-October quarter, a reduction from the 75% it had planned in May. Tui made a steep quarterly loss of €940m between April and June. Over the first nine months of its financial year from October to June Tui lost €2.4bn, €100m more than it did in the equivalent period for 2020. However, its financial position will improve during the July to September quarter as cash received from forward bookings is translated into confirmed revenues.
Cineworld mulls US listing
Cineworld has said it is mulling listing all or part of its business in the US as it warned that there could be “no certainty” over its recovery from the pandemic. The company, which is the second-largest cinema chain in the world behind AMC, said it was looking at the possibility of a group listing or an effective spin-off of its US Regal brand, bought in 2018, which accounts for the bulk of its business. Cineworld revealed the plan alongside its financial results for the first half of the year which showed net debt had almost reached £8.5bn and that it had cash of $436.5m available - aided by a recent $200m loan.
Adidas to offload Reebok
Adidas is to sell Reebok to Authentic Brands Group in a deal worth up to €2.1bn, as the sportswear firm concentrates on its core brand. Adidas said the majority of the acquisition price would be paid in cash when the deal closes early next year, adding that it would share the bulk of proceeds with shareholders. Adidas acquired Reebok for $3.8bn in 2006.
Boohoo to invest £500m to sustain rapid growth
Boohoo is planning to invest £500m in the UK over the next five years, creating up to 5,000 jobs, as part of efforts to sustain rapid growth. The retailer plans to add warehouse space and buy in "smart IT solutions" to improve efficiency.
La Liga clubs agree €2.1bn rights deal
Spanish football clubs have approved a €2.1bn deal that will see 10% of the league's commercial rights acquired by private equity firm CVC Capital. Real Madrid, Barcelona, Atletico Bilbao and an unnamed Second Division side were the only four of 42 clubs in Spain's top two divisions to reject it. La Liga president Javier Tebas said the deal is the "answer to the challenges" clubs face, adding that it will give them funds to spend on new infrastructure and increase how much they can spend on player salaries.
GDP climbs 4.8% in Q2
The British economy grew by 4.8% in the second quarter, data from the Office for National Statistics shows. Despite the climb in output, GDP remains 4.4% below the pre-pandemic level recorded in Q4 2019. Q2’s reading also fell short of a Bank of England estimate that the economy would grow by more than 5%. The ONS said the UK’s GDP growth for the second quarter was faster than those recorded by the US, France, Germany, and Spain, with the UK seeing the fastest quarterly growth rate among all G7 nations. Jonathan Athow, deputy national statistician for economic statistics at the ONS, said the UK economy “has continued to rebound strongly” while Chancellor Rishi Sunak said the figures show that the economy “is on the mend”. “I know there are still challenges to overcome, but I feel confident in the strength of the UK economy and the resilience of the British people,” Mr Sunak added. Capital Economics analyst Ruth Gregory said the main driver of growth in Q2 had been a 7.3% jump in consumer spending, but that the economy had also been boosted by an increase of 6.1% in government spending and 2.4% increase in investment. Looking ahead, ING economist James Smith commented: “In practice, we think the July and August GDP readings will average at roughly 0.2%-0.3%, which translates into overall third-quarter growth in the region of 1.5% – quite a bit lower than the 3% figure the Bank of England is pencilling in”.
Card spending nears pre-pandemic levels
Weekly economic activity indicators from the Office for National Statistics show that card purchases have risen to near pre-pandemic levels. Credit and debit card purchases have risen 4% in the last week, taking them to 99% of the levels recorded in the month before the coronavirus crisis.
SME profits fell in July
An index tracking the turnover of more than 2,000 SMEs shows that small businesses' profits dipped in July despite lockdown restrictions easing. This comes despite data showing profits climbed between May and June. The index, produced by Bibby Financial Services using five years of turnover data, dropped from 148 to 145. This compares with a pre-pandemic high of 154.