Barclays unveils rise in pre-tax profits
Barclays has reported a 10% rise in pre-tax profits to £3.54bn for 2017, up from £3.23bn in 2016; however, the bank was hit by a one-off tax charge from the US and restructuring costs which including the sale of most of its African business. These costs meant the bank swung to a £1.9bn attributable loss in the year compared with a £1.6bn profit in 2016. The bank’s income fell by 2% to £21bn. The collapse of Carillion cost the bank £127m, while it made a £2.5bn loss on the sale of its African unit and has had to set aside £1.2bn for litigation and conduct payments. The bank has also taken a £901m hit from President Donald Trump's corporate tax changes in the US. Chief executive Jes Staley said he was “pleased” with how this year had started and said the bank had made "considerable strategic progress" in 2017. Meanwhile, the bank has faced criticism for its dramatic average gender pay gap of 43.5%, following the publication of its annual report. For international business including large-scale UK and US operations, the bank reported a 48% gender pay gap. This rose to a 79% difference between male and female pay when bonuses were factored in. Chairman of the Treasury select committee Nicky Morgan suggested Barclays may be called upon to give evidence to the committee in its inquiry into women in finance. Barclays have attributed the gap to a disproportionate concentration of women in more junior roles, stating: “We are very focused on diversity at Barclays across the board and that includes gender equality”. The bank also pledged to more than double its dividend to 6.5p for 2018 and said that share buybacks would be “on the table” at some point.
New HSBC chair shakes up board
New HSBC chairman Mark Tucker is planning to make dramatic cuts to the bank’s executive board, with a third of directors likely to leave and just 14 directors expected to remain. Sky News reports that three non-executive directors will not stand for re-election at the firm’s next AGM, including Deutsche Boerse chairman Joachim Faber. Regulators and key investors are said to be behind the decision.
Deutsche Bank staff concerns despite extra holiday
The Daily Mail’s City Diary notes that London staff of Deutsche Bank have been given an extra week's holiday, which increases their annual leave allowance to 30 days, up from 25. Staff are concerned, the column claims, that the increase in holiday allowance is being used to soften the blow of cuts to bonuses at the end of the year.
Basel bank capital requirements confusion
Simon Samuels is critical of the Basel Committee on Banking Supervision's inability to raise a new, settled framework on bank capital requirements, 11 years after the start of the financial crisis.
Santander’s global strategy praised
Santander’s pioneering strategy of “creating a global retail bank with a deep presence in many economies, allowing true economies of scale” has been praised in an article in The Economist. Instead of either spreading services thinly across many countries or concentrating on key investment banking hubs, Santander’s “third way”, developed in the 1990s, is said to have positioned it well to handle the 2007 financial crisis and absorb losses. Shares have outperformed the European industry, albeit with low equity returns, and diversification into other markets has allowed the bank to weather recent challenges to the economy in Spain.
EU presidency calls to relax proposed foreign bank restrictions
The EU presidency has called for the bloc to relax new regulations on foreign banks in order to assimilate them with those of the US. Under the proposed Intermediate Parent Undertaking (IPU), non-EU banks, including British banks post-Brexit, would have to unify all EU operations into one holding company. The proposal follows new US rules that require non-American banks to form holding companies in the States. Bulgaria has proposed that the new IPU requirement should only affect banks over a certain size, just as US rules only affect foreign banks with $50bn or more.
Flybe shares rise 36% after Stobart Southend announcement
Stobart Group is in discussions to buy Flybe, with shares in the airline rising by 36% following the announcement. The company was valued at around £102m at the closing share price of 47p yesterday. A Flybe spokesperson commented: “Flybe shareholders are strongly advised to take no action at this stage. There can be no certainty that any firm offer will be made nor as to the terms on which any firm offer might be made”.
Heathrow risks losing customers to France and Germany
Heathrow boss John Holland-Kaye has warned that the airport is at risk of losing customers to France and Germany, as he urged the government to green light a new runway before the summer. “We have over 30 airlines that want to open or expand at Heathrow, but we are already at full capacity, so many of them, as well as passengers, are choosing to go to Paris or Frankfurt,” said Mr Holland-Kaye. However, his comments came as it was revealed that the number of passengers passing through the airport’s terminals jumped 3.1% to 78m.
Shareholders plan Persimmon revolt
City investors are planning to vote against the reappointment of Persimmon directors, including CEO Jeff Fairburn, amid anger over the company’s “preposterous” bonus scheme. Mr Fairburn was awarded £131m as part of a scheme designed in 2012 which could see 150 managers handed shares worth £742m. Mr Fairburn has said he is willing to make a substantial payment to charity in an attempt to placate critics but has not disclosed how much.
RSA hikes dividend as it grows premiums and profits
RSA share prices rose more than 3%, after the insurance firm reported an increase in premiums, profit and earnings for 2017, despite going through a “tough period”. Underwriting profit increased to £394m from £380m and overall profit after tax grew to £322m from £320m. "In a tough period for insurance markets, we are delighted to produce another year of growing profits, dividends and return on equity for shareholders. Higher premium income also highlights the positive customer response to what we are offering," said RSA boss, Stephen Hester.
Standard Life Aberdeen to quit insurance in £3bn deal
Phoenix Group is poised to buy Standard Life Aberdeen’s insurance business for £3bn. The move comes after SLA lost a Scottish Widows investment contract worth £109bn.
LEISURE AND HOSPITALITY
AirBnB to focus on luxury travel market
Seeking to enter the luxury travel market, AirBnB is to offer new services targeted at wealthier travellers. The site will feature a dedicated section for boutique hotels, as well as unusual locations. Another new feature will be ‘AirBnB Plus’, which is an approval stamp for those locations which have been officially inspected. As the company focuses on a stock market flotation amid concerns that its core business could be threatened, it is attempting to diversify in order to reassure potential investors.
MEDIA AND ENTERTAINMENT
Playtech shares take 10% dive
Shares in gaming software firm Playtech fell 10% after it announced revenues this year were down 11%, mainly due to efforts by the Malaysian government to prevent people going online to gamble. Chief executive Mor Weizer said he expects losses to ease and stressed “people should follow the fundamentals” of the company. Underlying profits were up 7% to €322.1m.
Retailers report renewed optimism despite sluggish growth
Retail firms are reporting signs of renewed optimism for the first time in over a year, despite sales growth continuing to slow, according to a CBI Quarterly Distributive Trades Survey. Sales were up 4% in February – slightly above average for the time of year, while average selling prices growth slowed compared to the previous quarter. However, retailers said they expected the business situation to improve over the next three months. “While trading conditions remain tough, it’s encouraging to see retailers’ investment intentions improving to their highest since August 2015, in addition to signs of renewed business optimism for the first time in more than a year,” said Anna Leech, the CBI’s head of economic intelligence.
Intu records 20% profit rise
Shopping centre landlord Intu Properties has reported a 20% rise in full-year profits, making £227m in the year to the end of December 2017, although like-for-like net rental income growth slowed to 0.5%, from 3.6% 12 months earlier. The group estimated sales from retailers in its centres had fallen by just over 2% over the year.
UK growth lagging behind France and Germany
The Office for National Statistics has revised down its estimate for UK growth in the fourth quarter from 0.5% to 0.4%. Darren Morgan, a statistician at the ONS, commented: "A number of very small revisions to mining, energy generation and services were enough to see a slight downward revision to quarterly growth overall… Services continued to drive growth at the end of 2017, but with a number of consumer-facing industries slowing as price rises led to household budgets being squeezed." Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted: "The latest GDP data suggest that the economy remains in a fragile state and does not need to be cooled with another rate rise as soon as May".