Treasury faces £6.5bn bill from Bounce Back loan scheme
Around 43% of those borrowing from the Treasury’s Bounce Back loan programme do not intend to repay the cash, according to a survey by the Business Banking Resolution Service (BBRS). The scheme gives cheap bank loans of up to £50,000 to the country's smallest businesses with minimal checks. A spokesman for UKFinance said: "Is important to remember that any financing provided under the government-backed schemes is a debt not a grant and will need to be repaid in full by the borrower over the term of the loan.” However, the survey raises the prospect that thousands of firms could have to be pursued through the courts for what they owe.
Lloyds can withstand loan defaults - CEO
Antonio Horta-Osorio, chief executive of Lloyds Banking Group has said the bank is in a position to absorb an increase in loan defaults resulting from the coronavirus pandemic. This comes as profit before tax fell to £74m from £1.6bn the previous year. Meanwhile, more than a third of shareholders voted against a pay plan centred on the lender’s switch to a restricted share incentive scheme for top bosses. Finally, Lloyds chairman Lord Blackwell says in the Times that banks stand ready to do their duty and help Britain through the COVID-19 crisis.
British banks warn BoE of pain of negative rates
UK lenders have said a move to negative interest rates would hit profits and hamper banks’ ability to cope with an expected wave of coronavirus-related loan losses. The FT’s Chris Giles explores the pros and cons of negative rates and cites Adrian Paul, UK economist at Goldman Sachs, who says “BoE asset purchases are more likely to be the next instruments deployed by the MPC”.
Three quarters of RBS’ workforce to work from home for the next four months
Over 50,000 of RBS’ staff will continue to work from home until at least the end of September, an internal memo has revealed. The bank said it would ensure strict social distancing and safety measures were put in place to protect those heading back to the office.
Western firms look to rescue Imagination from Beijing
A group of Western private equity firms are reportedly circling Imagination Technologies with a view to wrest control of the British microchip designer from the control of China-backed investor Canyon Bridge. The move comes amid concerns Chinese state-owned business China Reform, which is responsible for about 99% of Canyon Bridge's fund, is looking to redomicile the company in China and move its intellectual property to the country.
Letter: Private equity deserves to benefit from crisis support
In a letter to the FT, Michael Moore, DG of the BVCA, makes the case for private equity-backed businesses to be included in COVID-19 rescue schemes.
KKR and Abu Dhabi fund tipped to take stakes in Jio
KKR is in advanced talks to buy a $1.5bn stake in Jio Platforms, part of Reliance Industries. Abu Dhabi's sovereign wealth fund, Mubadala, is also considering a stake.
Kristalina Georgieva: halt bank dividends and buybacks now
The managing director of the IMF, Kristalina Georgieva, explains in the FT on why it is vital that banks halt dividends to further strengthen their capital base amid the COVID-19 pandemic.
How coronavirus turned the business of trading at banks on its head
The FT looks at how bank executives are reconfiguring trading activities amid COVID-19; and how demand has spiked for specialist trading technology.
Italy raises record €22bn in bond sale as sentiment brightens
Italy has raised a record €22.3bn for a five-year inflation-linked bond with €14bn bought by retail investors and €8.3bn by institutional investors.
Haji-Ioannou seeks to oust easyJet directors
EasyJet’s founder, Sir Stelios Haji-Ioannou, is seeking the removal of the chairman and chief executive of the airline along with two other directors. Haji-Ioannou wants to oust chief executive, Johan Lundgren, chairman, John Barton, finance chief, Andrew Findlay, and non-executive director Andreas Bierwirth because they have refused to cancel a £4.5bn order for more than 100 new aircraft, placed with Airbus.
Capital markets tapped for £30bn by UK firms during pandemic
Research from think tank New Financial and BNP Paribas has found that some £30bn was raised by UK firms in the corporate bond and equity markets during the worst phase of the coronavirus crisis. John Glen MP, economic secretary to the Treasury, remarked: “As the report demonstrates, capital markets provide long-term funding for businesses across all regions of the UK, allowing them to invest and grow. This is particularly important now as we deal with and recover from the impacts of the COVID-19 pandemic.” Anne Marie Verstraeten, UK country head at BNP Paribas, added: “This report underscores just how vital access to capital markets is when it comes to supporting our UK companies, providing them with access to liquidity, investors, and to markets across the world.”
Brexit threat to banks grows with gulf between UK and EU
Banks in Britain hoping to get easy access to European Union markets after Brexit are facing a setback after talks for a cross-border trade deal soured. “The two sides could not appear to be further apart,” said Rob Moulton at Latham and Watkins. “That is why the financial services world continues to plan on the basis that no deal will be done, rather than on the basis of the UK’s proposals.” Meanwhile, City of London Corporation policy chair Catherine McGuinness has called for the two sides to come together over equivalence to ensure continued access to each other’s markets for financial services firms.
London Capital & Finance compensation figure of £44m announced
Some £44m has been set aside by the Financial Services Compensation Scheme (FSCS) to pay claims from a small number of investors who lost money as a result of the collapse of investment company London Capital & Finance (LCF). FSCS chief executive Caroline Rainbird said in a statement: “The overall increase in the FSCS levy since the January forecast partly reflects the ongoing progress we are making in relation to the LCF failure,” continuing: “Whilst it is too early to say how many LCF customers will be eligible for compensation, for the purpose of the levy we have estimated an amount of £44m.”
AJ Bell sees revenue up 22% on market turmoil
AJ Bell has reported record numbers of new customers amid market disruption caused by the coronavirus pandemic, with a 22% increase in revenue to £60.9m. Profit before tax was up 28% to £22.7m in the six months to 31 March.
Pandemic impact of £160m estimated at Aviva
Aviva has announced estimated claims from business interruption of around £200m net of reinsurance. The firm said the total payout it expects to have to make as a result of coronavirus would be £160m net of reinsurance. The first quarter saw life new business sales up 28% to £12.3bn and value of new business up 18% to £311m.
Investec trading income down as result of virus
Investec has seen trading income fall 7.5%, citing impact of the coronavirus pandemic on adjusted operating profit of £105m. Adjusted operating profit from continuing operations of £419.2m was 24.1% lower than in the year earlier period, while the firm’s UK business reported a 44.3% fall in adjusting operating profit of £106.7m.
Fidelity International applies to launch China retail funds
Fidelity International has applied for regulatory permission to establish a public mutual fund business in China allowing it to target retail investors and institutional clients with investment products and services.
AstraZeneca vaccine to be ready in three months
AstraZeneca is to deliver the first 400m doses of a potential coronavirus vaccine from September in partnership with the University of Oxford. The firm claims to have secured capacity to manufacture 1bn doses over the next two years. The current batch will see 100m supplied to the UK, with 300m going to the US government, which has pledged $1.2bn to the company.
LEISURE & HOSPITALITY
Whitbread investors tapped for £1bn
Whitbread investors are to be tapped for £1bn as the Premier Inn owner seeks to survive the coronavirus crisis with its hotel and restaurant businesses shut down. The firm said it had cash liquidity of around £300m, and access to a £950m revolving credit facility, with £50m of that drawn down.
CBI survey shows Q1 manufacturing output down
The CBI’s industrial trends gauge has revealed that with 80% of UK factories affected by the coronavirus lockdown, manufacturing output in the first quarter was down at the fastest pace since at least 1975.
MEDIA & ENTERTAINMENT
Newspapers to hide crashing circulation figures
UK news publishers will be able to keep their circulation figures private after the Audit Bureau of Circulation (ABC) said it will no longer publish its public monthly report. The move is designed to halt the “negative narrative of circulation decline” during the coronavirus pandemic, the industry body said.
Residential sales down by nearly half
Data from HMRC show house sales in April were down 46% on a year earlier, at 46,440. The figure is below levels seen during the financial crisis. Hansen Lu, property economist at Capital Economics, said that current transaction levels were “probably close to their floor” and that transactions would remain well below where they were before the virus hit even at the end of the year.
UK economy is on course for a slow rebound
The UK economy is set for a slow rebound from the coronavirus outbreak in the wake of an unprecedented slump in April caused by lockdown measures, according to a preliminary reading of the IHS Markit/Cips purchasing managers’ index (PMI). The index came in at 28.9 in May compared to 13.8 in April. A score below 50 indicates contraction. IHS Markit also forecast GDP to fall by almost 12% in 2020.
TheCityUK head of public affairs and policy appointed
TheCityUK has appointed former Wolverhampton North East MP Emma Reynolds as new managing director of public affairs, policy and research. Miles Celic, chief executive of TheCityUK, commented: “We are delighted that Emma will be joining TheCityUK team. At such an extraordinary time in our industry’s history her considerable experience and political expertise will be a huge asset.”