BANKING
Lloyds sees profit fall
Lloyds has reported a 26% drop in pre-tax profit, which fell to £4.39bn from £5.95bn in 2018 as it paid out PPI compensation to customers. The bank said PPI claims in 2019 would total about £2.5bn – taking its total PPI bill to £21.9bn – but noted that no further provisions were needed as it had already set aside enough money. Lloyds’ underlying profits were £7.5bn, down 7% against the prior year’s £8.07bn. CEO António Horta-Osório lowered Lloyds’ 2020 targets for return on tangible equity from 14-15% to 12-13%. Meanwhile, Mr Horta-Osório has taken a 28% cut to his £6.5m pay package. Jim Armitage at the Evening Standard says that with the impact of PPI stripped out, the figures “aren’t at all bad” in a “nightmarishly tough time for banks”. Armitage also questions whether Mr Horta-Osório may jump ship “while the going’s good,” leaving the board with the task of finding a replacement for both Horta-Osório and chairman Lord Blackwell, whose term ends next year.
Barclays scraps employee-tracking software trial
Barclays has announced that it is scrapping new technology, introduced in a trial last week, that allowed bosses at the bank to track how long employees were spending away from their desks, and how long it took them to complete different tasks on their computers. The technology, provided by external provider Sapience, sends warnings to staff if they spend too long on a single task or are not active enough. Charity campaign group Privacy International said workers’ rights were being violated by the system: “Data protection rules are very clear, strict and do not allow employers to carry out such monitoring unless they are able to prove that this is strictly necessary and proportionate and it does not severely impact employees' rights.” After the technology’s use was first reported by City AM, Barclays said it would only allow managers to see anonymised data, and the firm has now ditched the software completely.
HSBC chief executive race narrows
The Financial Times reports that HSBC has identified Jean Pierre Mustier, head of Italian lender UniCredit, as the top external contender to replace John Flint as chief executive after his ouster last August. The race to succeed Mr Flint is now understood to be between Mr Mustier and interim chief executive Noel Quinn. Meanwhile, Charlie Nunn, chief executive of the bank’s recently-merged retail and private banking division, which has $1.4trn (£1.1trn) of client assets, has revealed plans to invest heavily, targeting growth in three major markets – the UK, Hong Kong and Mexico, focusing respectively on mortgages, wealth and insurance products, and unsecured lending.
Dormant assets scheme may expand
The government plans to expand the dormant assets scheme, which allows banks to donate funds from accounts that have been untouched for 15 years or more, in a move that could unlock hundreds of millions of pounds for good causes across the UK.
PRIVATE EQUITY
PE deal for Victoria’s Secret
US private equity firm Sycamore Partners is buying 55% of the Victoria's Secret lingerie chain for $525m.
INTERNATIONAL
Ralph Hamers named as next UBS CEO
ING chief executive Ralph Hamers has been named as the next chief executive of UBS, in a move that blindsided ING directors, with Mr Hamers to join the UBS board on September 1 and start as chief executive on November 1. UBS chairman Axel Weber called Hamers “a seasoned and well-respected banker with proven expertise in digital transformation.” The appointment will mark the first time UBS has had both a non-Swiss chairman and chief executive.
Brexit puts pressure on EU’s CMU
A report from a European Commission taskforce has warned that Brexit has created a vital need for “full and unwavering” political backing for the completion of the EU’s capital markets union (CMU) project, which aims to integrate the bloc’s capital market. The report said that while the capital markets of the EU’s 27 countries have become more integrated than in the past, “they still do not function as one, and their main centre, London, is now outside the EU”.
Julius Baer rebuked over anti-money laundering shortcomings
Switzerland’s Financial Market Supervisory Authority has reprimanded Julius Baer for falling short in efforts to tackle money laundering, banning it from large acquisitions until it “fully complies with the law”.
AVIATION
Airline profits hit by coronavirus
Airlines stand to lose $29.3bn (£23.7bn) of revenue this year due to the coronavirus outbreak, the International Air Transport Association has warned. Air France-KLM has warned that the coronavirus outbreak has had a severe effect on traveller numbers and could knock profits by as much as €200m. It is expected to feel the impact of parts of China being on lockdown, with the country having accounted for more than 5% of the firm's flights last year. Elsewhere, Qantas has predicted the virus will wipe up to A$150m off annual profits after it cut flights to Asia by 15% until at least the end of May.
FINANCIAL SERVICES
Morgan Stanley to buy E-Trade
Morgan Stanley has agreed to buy online trading platform E-Trade for $13bn. The deal, which is set to close in Q4, brings together $3.1trn of client assets in the largest Wall Street deal since the 2008 financial crisis. The deal will help Morgan Stanley boost its wealth management division, which chief executive James Gorman is attempting to grow in order to help the lender better ride out weak periods in trading and investment banking.
Rathbone Brothers annual funds hit £50bn
Rathbone Brothers has reached £50.4bn in total funds under management and administration – a 14% increase on the £44.1bn seen at the end of 2018. Total funds in its management unit are up 12%, reaching £43bn, while its unit trusts unit’s £7.4bn marks a 32% increase. A rise in expenses saw underlying pre-tax profit fall to £88.7m from £91.6m.
JPMorgan and Goldman throw weight behind exchange start-up
JPMorgan, Goldman Sachs and Jane Street Capital are backing stock-trading marketplace Members Exchange, taking part in a funding round. Existing backers of the marketplace, known as MEMX, include Morgan Stanley.
Moneysupermarket profit grows
Moneysupermarket.com has reported strong profit growth for 2019, with profit before tax climbing 8.5% to £116m. Revenue was up 9% from £355.6m in 2018 to £388.4m, with operating cash flow up 7% to £113.7m.
Elliott Management reveals stake in Dutch insurer NN Group
Activist hedge fund Elliott Management has built a 3% position in NN, the largest listed insurance company in the Netherlands.
MANUFACTURING
BAE to halve pension deficit with £1bn injection
BAE Systems is looking to cut the £1.9bn deficit of its £20bn pension fund with a £1bn injection, saying it will borrow to clear the deficit five years early.
MEDIA AND ENTERTAINMENT
O2 revenue rises
O2 has posted its third consecutive year of revenue and profit growth. Revenue rose 3.8% to hit £6.2bn in the year to the end of December, while operating income climbed 2.3% to £1.9bn. Customer numbers rose 5.7% year-on-year, reaching 34.5m, while capital expenditure was up 3.4% to £801m.
PROFESSIONAL SERVICES
Hays profit falls as fee income dips
Recruitment firm Hays has seen operating profit dip 18% to £100.1m and profit before tax drop 22% to £95.6m. The firm saw net fees slip 2% to £553.1m. A slowdown in the German economy contributed to the slowdown, with Hays’ net fees in the country down 5% and operating profit down 20%. In the UK, “pre-election uncertainties” played a part, with private sector fees dropping 8%.
REAL ESTATE
Cost of renting closes gap to mortgages
The gap between monthly rental costs and mortgage payments is at its smallest in a decade, but renters are still paying almost 20% more of their income on housing costs in parts of the country. Nationwide, rents are now just 3% more expensive than mortgage repayments, which save homeowners £227 a year, according to a report by Halifax. This compares to December 2018, when renting was 10%, or £893 a year, more expensive than owning a home. The narrowing of the gap is being driven by first-time buyers requiring smaller deposits, combined with house price growth.
RETAIL
Sales rally in January
Figures from the Office for National Statistics show retail spending rose in January, with the volume of retail sales up 0.9% following 0.5% contraction in December. Retail sales excluding fuel rose 1.6% in January compared to the month before. Fashion retailers saw the biggest month-on-month rise between December and January, with a 3.9% increase, while supermarket sales were up 1.7% and department stores saw sales climbed 1.6%.
ECONOMY
OBR casts doubt on growth
Robert Chote, head of the Office for Budget Responsibility (OBR), says ministers’ hopes of doubling economic growth to around 2.75% are hugely ambitious. Speaking to BBC Radio 4’s Today programme, Mr Chote said getting growth “up to those sorts of 2%-plus numbers would be quite an achievement.” The Telegraph notes that the growth target was suggested by former Chancellor Sajid Javid, with it not known if successor Rishi Sunak will seek to match the figure.