BANKING
UK banks told not to assume losses on longer loan holidays
The Bank of England is asking UK lenders to give details on their expected losses on loans due to the coronavirus crisis as the sector is braced for a wave of borrower defaults. Sam Woods, deputy governor at the Bank and chief executive of the Prudential Regulation Authority (PRA), said the PRA plans to gather together the information from firms ahead of their half-year results this summer. The PRA does not want banks to automatically classify deferred loans as higher risk or impaired forcing them to book higher loss provisions and subsequently reducing their capacity to lend. Instead, they have been told they must use “other indicators” to determine whether risk has really increased.
Banks guilty of ‘serious organised crime’ claims police commissioner
Anthony Stansfield, police and crime commissioner for Thames Valley, has accused the UK’s major high street banks of perpetrating “serious organised crime” against their customers, potentially causing billions of pounds of losses over at least a decade by forging signatures to win court cases and repossess homes. In a letter sent to alleged victims of bank fraud this week, Mr Stansfield said that the evidence of criminal activity was “clear and compelling”. He wrote: “Banks and others have systematically forged signatures, fabricated evidence and made false statements in court cases against customers.”
PRIVATE EQUITY
Intermediate funds fall in value
Shares in Intermediate Capital Group fell 7.6% yesterday after the FTSE-100 listed fund management group reported £152m was wiped from its investments in March. Losses during the month on collateralised loan obligations amounted to £57m, while ICG marked down its private equity portfolio by £51m. ICG manages €45.3bn of assets.
INTERNATIONAL
China accused of 'mafia'-style tactics to bully banks
HSBC and Standard Chartered have been criticised for backing Beijing’s new security law for Hong Kong which is widely viewed as an attack on the city’s autonomy. Chris Patten, the last British Governor of Hong Kong, said China was using "mafia"-style tactics to bully banks into lining up behind the legislation. Tory MP Tom Tugendhat questioned how the banks squared their decision with the commitment to corporate social responsibility. Bill Blain, market strategist at Shard Capital, said the banks had little choice but to kowtow, but added: “Banks that are run to appease regulators and flatter governments are unlikely to thrive.” The Telegraph’s Ben Marlow claims HSBC’s decision means the bank has “forfeited the moral authority to ever weigh in on British politics again.”
ECB increases bond-buying programme
The European Central Bank has said that it would increase the size of its crisis bond-buying programme by €600bn. The bank, which chose to leave interest rates unchanged, also said that it would expand the timeframe during which purchases can be made under the programme to the end of June 2021. The move brings the ECB’s total QE stimulus to offset the effects of the coronavirus pandemic to €1,350bn. It also risks escalating the battle with Germany’s top court which ruled in May that the ECB’s earlier bond purchase scheme violated Treaty law.
Bank of America to pay £7m for mutual fund overcharges
Bank of America has agreed to pay $7.23m in restitution and interest to settle accusations from the Financial Industry Regulatory Authority that it overcharged customers on mutual funds.
Banco Sabadell to close branches
Banco Sabadell has revealed it is planning to close 235 branches in Spain this year, around 13% of its network, as it speeds up cost cutting and digital transformation following the COVID-19 pandemic.
AUTOMOTIVE
Thousands of jobs lost in car industry
Car dealership Lookers has announced it will cut up to 1,500 jobs with the closure of more showrooms in the UK. The company reopened its showrooms on Monday after the government lifted coronavirus lockdown restrictions. Meanwhile, Aston Martin plans to make 500 workers redundant as it looks to cut costs under new chief executive, Tobias Moers, because of the slump in sales due to the coronavirus pandemic. Additionally, Volkswagen-owned Bentley is to cut 1,000 jobs in the UK, about a quarter of its workforce. A formal announcement is expected today. The cuts come as the Society of Motor Manufacturers and Traders (SMMT) suggest that new car sales fell 89% in May.
AVIATION
Airlines handed bailouts
British Airways, easyJet, Ryanair and Wizz Air have all received hundreds of millions of pounds from the Bank's Coronavirus Corporate Financing Facility, which issues debt in the form of commercial paper, a short-term facility repayable at rates of between 0.2 and 0.6%. Figures from the Bank showed that Ryanair and easyJet have both received £600m while BA and Wizz got £300m. Separately, Citibank predicts that demand in the private jet sector is set to continue to rise “as executives and corporates now flock to an offering that has privacy and cleanliness at its core."
Air Partner says business has continued to perform well
Air Partner has announced that April was a record month for the company and that it expects to make an underlying pre-tax profit £7.5m for the first four months of the year.
CONSTRUCTION
Construction sector slump continues
The "unprecedented" contraction in the UK construction sector slowed somewhat in May thanks to the gradual reopening of building sites, but firms remained pessimistic as the industry was battered by coronavirus. The IHS Markit/Cips construction purchasing managers’ index (PMI) rose to 28.9 in May from a record low of 8.2 in April.
FINANCIAL SERVICES
Savers pour billions into equity funds
Savers put more than £4bn into investment funds in April as financial markets began to shake off concerns about the COVID-19 crisis. Retail funds attracted a net £4.2bn from investors, staging a partial recovery from the record £9.7bn outflows they suffered in March, according to latest data from the Investment Association. In-demand funds included so-called responsible investment funds, which attracted a record £969m in April.
Government announces £10bn trade credit insurance scheme
The government has said it will guarantee up to £10bn of trade credit insurance transactions as it seeks to relieve some pressure on British manufacturers and construction firms amid the coronavirus pandemic.
Hedge funds braced for second stock market plunge
Some hedge fund managers believe the current stability in equity markets is borne from complacency and surging prices do not reflect the economic problems ahead.
Wirecard forecasts no damage to business from pandemic
German payments firm Wirecard has said a strong additional surge in online transactions in Asia and Europe has offset the negative effects of coronavirus on its payments processing business.
HEALTHCARE
Avacta to raise £48m for COVID-19 testing
Wetherby-based drug developer Avacta is to raise £48m through a share placing to fund its COVID-19 rapid-testing programme and its cancer therapy pipeline. Avacta recently signed a distribution agreement with Boohoo billionaire Mahmud Kamani to supply a test for coronavirus.
LEISURE & HOSPITALITY
Azzurri Group in sale talks
Azzurri Group, the owner of the ASK Italian and Zizzi restaurant chains, is exploring a sale of the company as Britain’s hospitality industry battles to survive the effects of the coronavirus pandemic. Separately, The Restaurant Group, which owns Frankie and Benny's and Wagamama, is set to permanently close between 100 and 120 restaurants.
MANUFACTURING
Manufacturers call for more state help to save jobs
MPs have been told that manufacturing sectors will need more government support to prevent extensive job losses and a decline in competitiveness because of the coronavirus pandemic.
AstraZeneca to increase supply of vaccine to 2bn doses
AstraZeneca said it will able to supply 2bn doses of a potential coronavirus vaccine as early as September after striking new deals to manufacture the vaccine. The figure is double the previous amount it had planned to deliver. The drug is being developed by scientists at the University of Oxford.
RETAIL
Rise in online sales offsets massive high street slump
Like-for-like online sales jumped by 129.5% in May as the pace of shoppers shifting online continued to accelerate during lockdown. However, overall sales were down 18.3% - the second worst result after April's historic low.
SPORT
Spurs to tap BoE for £175m
Tottenham Hotspur will become the first football club to use the government’s Covid corporate financing facility when it borrows £175m from the state to boost liquidity.
ECONOMY
Central bank’s money printing heading for £1trn
Capital Economics is predicting a further £350bn in QE from the Bank of England over the next twelve months, on top of the £200bn announced in March. This would bring the total value of bonds purchased to £995bn. The consultancy’s chief economist Paul Dales says it will be at least ten years before the Bank even thinks about unwinding QE and five years before the base rate rises above 0.1%.