BANKING
Truss: Sanctions must be extended to all Russian banks
Foreign Secretary Liz Truss has said that western sanctions must be extended to include all Russian banks, ending the carve-out for energy-related Russian institutions. A group of energy-dependent countries within the EU have successfully argued that that some major Russian banks - including Gazprombank and Sberbank - should not be kicked out of the Swift international payments system, citing concerns that gas and oil imports from Russia into Europe would become increasingly difficult, forcing up prices even higher. Ms Truss, who said the UK “was trying to make sure the Russian economy is crippled so that it can no longer be able to fund its war machine," insisted: “We need to make sure no Russian bank has access to Swift.” Meanwhile, the EU is reportedly considering excluding banks in Belarus from the Swift messaging system. Ms Truss will today attend an EU meeting of foreign ministers, despite Britain having left the bloc, where she will raise the issue of further sanctions on Belarus.
INTERNATIONAL
AIB to return €213m to investors
Allied Irish Banks (AIB) has announced that it plans to return €213m to shareholders, including a €91m directed buyback, after reporting significant profit recovery last year. AIB reported a full-year pretax profit of €629m from a €930m loss in 2020, when it set aside almost €1.5bn to cover possible loan defaults owing to COVID-19 disruption. The Irish lender wrote back €238m of those provisions, helping to push profit towards the €1.1bn pre-exceptional pretax profit it made in 2019, before the pandemic struck.
SocGen looking to reduce Russia risks
Société Générale has said it is working to reduce its risks as European banks review their operations in Russia after its invasion of Ukraine. The French lender warned its exposure to Russia stood at €18.6bn, and that it could cope if stripped of Russian assets. SG said its exposure consisted of €15.4bn within its Russian unit SG Russia, and €3.2bn outside Russia.
Japan set to freeze assets of four more Russian banks
Japan's finance minister Shunichi Suzuki has said that the country will freeze the assets of four additional Russian banks. The Ministry of Finance said that Prime Minister Fumio Kishida's cabinet approved the decision to freeze the assets of VTB Bank, Sovcombank, Novikombank and Otkritie.
CONSTRUCTION
Galliford Try swings into red
Galliford Try has reported a pre-tax loss of £2.6m. This was compared to a £3.9m profit last year. However, revenue soared 10% to £594m in the six months ended December 31. This was compared to £542m in the first half of 2021. Bill Hocking, chief executive, said: “The group has continued to perform well in the first half of the financial year, successfully managing industry-wide material shortages and inflation.”
Taylor Wimpey revenue more than doubles
Taylor Wimpey has seen revenue double, with the reporting a 47% increase in UK house completions. Revenue surged over 53% in the year to 31 December to £4.2bn, up from the £2.7bn it secured in 2020. It marks a strong sign of recovery for the housebuilder, as it inches closes to its pre-pandemic revenue of £4.3bn. Operating profit has also closed in on its pre-Covid figure, soaring 175% in the 12-month period to £828m.
FINANCIAL SERVICES
FCA rejects licence applicants as fraud rises
The Financial Conduct Authority (FCA) has stopped a quarter of all licence applications from companies wanting to offer investment services to consumers in the past year. The proportion of licence applicants rejected was up from one in five, year-on-year. The FCA received 16,400 enquiries about possible scams between April and September 2021, with the total up nearly a third from the same period in 2020. The watchdog has 50 live investigations into unauthorised businesses and is preparing for several trials, both criminal and civil, which will take place in the next 15 months. The regulator has also revealed it conducted 300 inquiries involving unauthorised cryptocurrency businesses in the six month period, with consumers flagging 4,300 potential scams. The FCA, which has asked for more powers to combat online financial scams, is under pressure from lawmakers to be more assertive in tackling fraud. Sarah Pritchard, executive director for markets at the FCA, said it is “drawing on all the tools at its disposal, including more assertive supervision and enforcement action, and being tougher with firms who want to operate here.”
LSE suspends trading in Russian companies
The London Stock Exchange (LSE) has frozen trading in 28 Russian companies, banning investors from buying or selling shares in Russian entities including energy giants Gazprom and Rosneft, as well as the country’s biggest lender, Sberbank, and VTB Bank, Russia’s second-largest lender. The LSE’s FTSE Russell arm – which runs indexes such as the FTSE 100 and FTSE 250 – said it will exclude Russian businesses whose shares are still trading in London from Monday. The Mail notes that the measures are not as strict as those being sought by MPs and business leaders who want Russian companies kicked off the stock exchange entirely.
BlackRock back-tracks over Russia
BlackRock has barred its investors from buying any more Russian securities, after it was criticised by campaigners for its response to the invasion of Ukraine. Via its tracker funds, BlackRock is one of the biggest non-Russian investors in Gazprom, Lukoil, Rosneft and Sberbank. It said that it had been "moving as quickly as possible". Russian securities now account for less than 0.01% of its clients' assets.
Schroders posts strong rise in profit
Schroders has posted a 19% rise in annual profit to £836m, helped by stronger performance fees and growing client demand at its mutual funds division. Assets under management rose 10% to “a new high” of £731.6bn, the firm said, with net income up 18% at £2.6bn. The firm said it “saw strong demand” for its securitised credit, private equity and real estate offerings, which it expects to continue “over the coming years”.
LEISURE & HOSPITALITY
Bet365’s Coates sees £170m pay cut
Bet365 boss Denise Coates, who is thought to be Britain's highest individual tax payer, took home about £300m during its last financial year, pocketing £250m in salary and £97.5m in dividends. The total marks a £170m decline on the previous year. The firm’s latest accounts show revenues were broadly flat at £2.82bn in the first year of the pandemic, compared with £2.81bn in the previous year. Total directors’ remuneration fell from £529.4m to £353m and the amount paid to directors and key management was cut from £607.4m to £405.9m.
Macquarie to acquire Roadchef
Sky News reports that Australian investment bank Macquarie has agreed a deal to acquire motorway service station operator Roadchef from Antin Infrastructure Partners, in a deal understood to be worth £900m.
REAL ESTATE
Rates and inflation could dent property plans
A poll for Market Financial Solutions (MFS) shows that homeowners and renters fear rising rates and high inflation will hurt their homeownership ambitions. The poll of more than 2,000 people saw 28% of renters say rising interest rates were damaging their chances of getting onto the ladder, while 19% of homeowners said a higher base rate would damage their chances of affording their mortgage payments. While 18% intend to buy a property in 2022, 66% are worried that rising inflation will ruin their chances of doing so. It was also found that among existing homeowners, 14% plan to sell up and move home this year, while 6% hope to purchase an additional investment property. Reflecting on the findings, Paresh Raja, chief executive of MFS, said: “The dual threat of rising inflation and rising interest rates will, naturally, have serious ramifications on those looking to get onto or move up the property ladder. As the cost of borrowing increases, homebuyers will need to consider the budgets carefully and assess their options."
ECONOMY
Services sector growth at eight month high
Growth in Britain’s services sector rose at its fastest pace for eight months in February, despite record price rises. The IHS Markit/CIPS services PMI survey scored 60.5 in February, with this up from 54.1 in January on an index where a reading above 50 represents growth. February’s rate was the highest since June 2021, with the sector rebounding as the Omicron coronavirus wave eased and restrictions were lifted. Around one third of survey respondents raised their selling prices during February, with this coming in response to soaring inflation. Service firms saw input price inflation increase at the second fastest pace on record, with staff salaries climbing alongside fuel and energy bills. While the overall all-sector PMI reading rose from 54.2 in January to 59.9 in February, there are concerns that growth may come under pressure as the cost-of-living crisis and conflict in Ukraine have an impact on confidence. Pantheon Macroeconomics economist Gabriella Dickens said a recent surge in oil, natural gas and agricultural commodity prices will squeeze the amount of income households have left to spend on domestically produced goods and services over the next year. “So after brisk quarter-on-quarter growth in GDP of about 0.6% in the first quarter, we expect the economy to stagnate in the second quarter and to grow only slowly in the second half of this year,” she added. Andrew Harker, economics director at IHS Markit, commented: “Although the latest set of PMI data were encouraging, the inflationary picture still has the potential to limit growth.”
Firms set to hike prices as costs climb
Research by the Confederation of British Industry (CBI) suggests businesses are preparing to hike prices in an effort to combat increasing costs. A net 26% of British services firms intend to up prices over the next three months, with three in four expecting costs to increase further in the quarter. Charlotte Dendy, head of economic surveys at the CBI, said: “Rising inflation and cost pressures are hitting firms’ profitability and their bottom line. The spectre of further price increases is being felt across the board.” While Office for National Statistics data shows that inflation is running at a near 30 year high of 5.5%, economists expect price rises to continue in the coming months and possibly pass 8% in April when the energy price cap increases. While the CBI poll shows sales growth slowed over the previous quarter, hiring and investment intentions remain strong and firms expect business volumes to increase over the coming quarter.