UK banks pressured to relax bailout loans rules
The government has chided banks for requiring borrowers to provide personal guarantees in order to access new emergency loans backed by the state, with Downing Street declaring that no lender was allowed to "take a guarantee against the borrower's home ... We will take all action necessary to ensure that the benefits of the measures are passed on." But one banker said, “the scheme design obliges us to follow normal credit procedures. They need to rethink it.” Yesterday, Barclays, Royal Bank of Scotland, Lloyds Banking Group, Virgin Money and HSBC said they would not ask customers for personal guarantees on loans up to £250,000, but larger loans could require security which may include personal guarantees. Meanwhile, the Chancellor has promised a “workaround” for businesses too small to have an investment grade rating and too big to qualify for the SME-focused scheme.
Banks call for freeze on UK housing market
Government ministers are in talks with banks about instituting a full suspension of the housing market after ministers told buyers and sellers to delay transactions because of the coronavirus outbreak. Industry group UK Finance said it had been seeking “urgent clarification from the Government about whether home purchases should continue at the current time, particularly as physical property valuations are no longer possible.” Additionally, UK Finance announced that banks would grant homebuyers who have exchanged contracts the option of the three-month extension to their mortgage offer.
Coronavirus sees banks withdraw hundreds of mortgages from sale
Britain’s biggest banks have pulled hundreds of mortgages from the market, as experts warn that homeowners are overwhelming banks with unnecessary requests for mortgage payment holidays. Data published by Moneyfacts, the financial analyst, show that 552 mortgages have been withdrawn in the last two weeks, equivalent to 10% of the total mortgage market. Halifax will no longer offer any mortgages with an LTV of more than 60%; Barclays, NatWest and TSB have also withdrawn large numbers of mortgages, while Together, Vida Homeloans and West Bromwich Building Society have pulled their entire ranges. Mark Harris of SPF Private Clients, another mortgage broker, said: “Lenders are throwing all their resources into dealing with payment holiday requests,” he said. “But in the same way that people are stockpiling food they don’t need, there are selfish borrowers who are asking for payment holidays when they don’t need them. This is blocking the phone lines for those who do.”
Regulators issue COVID-19 guidance
The Financial Conduct Authority (FCA), Financial Reporting Council (FRC) and Prudential Regulation Authority (PRA) have announced a series of actions to ensure that information continues to flow to investors and to support the continued functioning of the UK’s capital markets. London-listed companies will now be permitted an extra two months to publish their audited annual reports, giving them six months from their financial year end, rather than the usual four. The FRC has published guidance for companies preparing financial statements and a bulletin for auditors covering factors to be taken into account when carrying out audits during the current COVID-19 crisis. The FCA called on investors and other market participants not to draw “undue adverse inferences” from companies that chose to take advantage of the new rules and delay reporting while the PRA told banks to take "well-balanced decisions" when assessing covenant breaches on loans by businesses.
Digital banks await authorisation on virus loan scheme
Digital banks in the UK such as OakNorth, Tide and Starling are awaiting authorisation to offer government-backed loans to small firms damaged by the COVID-19 pandemic. Many so-called challenger banks had applied to participate in the Coronavirus Business Interruption Loan Scheme (CBILS) but have not yet been informed of whether they can take part. This comes as the government-backed British Business Bank (BBB) implemented the scheme earlier this week, with a spokesman stating: “The number one priority was to get it up and running. Now that we have done that, our priority is to get more lenders signed up. We have allocated extra resources to processing applications.”
HSBC to delay ‘vast majority’ of redundancies
Noel Quinn, the new chief executive of HSBC, has said that the majority of redundancies related to an overhaul of the lender would be postponed because of the COVID-19 pandemic.
Vickers wants divis blocked
Sir John Vickers, the former chairman of the Independent Commission on Banking, has urged the Bank of England to block more than £7.5bn of dividends due to be paid out by banks.
Blackstone promises arches firms rent holiday
Private equity giant Blackstone has agreed to give small businesses renting properties in railway arches a three-month rent holiday, rather than a deferral for three months – a position the firm had been criticised for. The Arch Company, which manages the portfolio on behalf of Blackstone and another investor, Telereal Trillium, said a £10m hardship fund would be used to cover the cost.
Better Capital mulls delisting
Better Capital is considering delisting its shares because the coronavirus outbreak has had a “serious effect upon the trading companies” in its private equity portfolio. A spokesman said: “The considerable costs of maintaining a listed company status are increasingly disproportionate to the value of the portfolio.”
ECB ditches rules limiting €750bn coronavirus bond purchases
The European Central Bank (ECB) has scrapped nearly all limits to its bond-buying programme, widening the scope of the €750bn (£700bn) of asset purchases it announced last week. In a legal decision published last night, the ECB said the 33% limit will not apply to its pandemic emergency purchase programme (PEPP) of bond-buying. Bank of America analyst Sophia Salim said the decision “suggests there is no limit to the PEPP support, and the €750bn can theoretically be increased if needed even if most of it goes into public sector bonds”.
Moody's downgrades outlook for Europe's biggest banking systems
Ratings agency Moody’s has downgraded the outlook for the banking systems of France, Italy, Spain, Denmark, the Netherlands and Belgium to “negative”, as coronavirus threatens lenders’ profitability and asset quality. It maintained its “negative” outlook for the banking systems of the UK and Germany. The ratings agency said it “projects cumulative contraction over the first and second quarters of 2020”. It added that it thinks “the output loss in the second quarter is unlikely to be recovered”.
European banks back suspension of dividends and buybacks
Eurozone lenders should stop holding back capital for dividend payouts and refrain from share buybacks this year so they can lend more to businesses and consumers hit by coronavirus, the European Banking Federation has said.
Volkswagen calls on ECB to accelerate emergency lending
German auto group VW has urged the European Central Bank to accelerate plans to buy short-term debt directly from the world’s largest companies to support them through the coronavirus crisis.
New York and London ratings fall in financial centres ranking
New York and London have kept their top two positions in the Global Financial Centres Index list, which measures the competitiveness of the world’s financial centres. However, their ratings declined a respective 21 and 31 points over the coronavirus outbreak. London’s fall of 31 points left it just ahead of Tokyo in the ranking, suffering the second worst fall of all financial centres, second only to Hong Kong’s 34-point drop. Geneva, Edinburgh, Luxembourg and China’s Guangzhou region were the only financial centres in the top 20 to improve their ratings.
Lloyd’s boss predicts surge in claims after outbreak
John Neal, chief executive of Lloyd’s of London, has said the coronavirus pandemic would cause an increase in claims, with the firm having “activated our normal response to any form of catastrophic loss”. With the firm announcing a pre-tax profit of £2.5bn for 2019, Mr Neal remarked: “I’m keen to represent that the balance sheet is in really good state… so we can leave everyone happy and we can fulfil our obligations to pay claims to our policyholders.”
LEISURE & HOSPITALITY
Over 1,000 employees laid off by P&O Ferries
Over 1,000 employees are being temporarily let go by P&O Ferries as the Government announces moves to bankroll wages as the coronavirus pandemic spreads.
Car production faces record fall
British car manufacturing fell by 0.8% in February, according to figures released by the Society of Motor Manufacturers and Traders. The SMMT warns that the number of cars coming off UK production lines this year will drop by 200,000 to just below 1.1m because of shutdowns caused by the pandemic.
MEDIA & ENTERTAINMENT
DMGT announces outbreak hit to business
DMGT has warned that circulation was down last year as it cautioned that the COVID-19 outbreak will affect business. The Daily Mail owner has suspended guidance, advising that financial performance for the full-year is likely to fall below existing guidance.
Property companies need debt holiday to survive
Landlords are calling on the government to waive their debt commitments to help them navigate the three-month rent moratorium given to tenants. All commercial property tenants have been allowed to defer rent payments for a quarter without risk of eviction. Elsewhere, British Land is to defer rents of £40m this quarter in response to the COVID-19 pandemic, with repayment to be spread over the six quarters from September.
Number of homes sold in UK could plunge by 60% in next three months
The number of homes sold in the UK could fall by 60% in the next three months, according to Zoopla. The property website said that, in the week to March 22, there was a 40% drop in housing enquiries, while the previous week, new sales agreed fell by 15%.
Intu warns of breach in debt commitments as retail rents collapse
Intu Properties has said it will breach the terms on its debt commitments following a collapse in the rents received from its retail tenants, unless it can secure debt waivers from its lenders. The company said it has received only 29% of rents due this month, compared with 77% a year ago.
Bank of England warns of ‘very sharp’ economic downturn
The Bank of England warned on Thursday that the UK economy would suffer “a very sharp reduction in activity” as the coronavirus outbreak forces businesses to close and sharply reduces consumer spending. Leaving interest rates on hold at the lowest levels in its 325-year history, the Bank said long-term damage to employment and growth was likely as the government steps up its efforts to contain the disease. The Monetary Policy Committee pledged to take whatever steps necessary to prevent disorderly financial markets amplifying the downturn as it warned of longer-term damage to the economy. Meanwhile, new analysis from the Institute for Fiscal Studies (IFS) projects that the national deficit could rise to £200bn or more next year – far higher than the £158bn seen in 2009 and four times the amount forecast by the Office for Budget Responsibility (OBR) two weeks ago.