Digital bank Starling makes progress towards profitability
Starling Bank customers returned to using the challenger bank’s cards again following a steep fall in activity during lockdown, meaning the bank should break even by the end of the year. Revenues increased to £14.2m, a steep rise from the previous year's £750,000, while staff costs increased to £35m in 2019, up from £14m the year before. CEO Anne Boden said Starling’s ability to provide taxpayer-backed loans to help companies survive the fallout of the pandemic has resulted in lending growing from £100m to £1bn. Ms Boden said: “Starling is the fastest-growing SME bank in Europe and now holds a more than 3% share of the UK’s SME banking market”.
BoE warns lenders not to turn off credit taps
The Bank of England has argued that banks should keep lending or risk tipping the country into a worse slump. The warning comes amid concern the lenders could be tempted to turn off the credit taps this autumn in order to conserve capital. Threadneedle Street says businesses face a £200bn cash shortfall and require financial support. The BoE has also called for an inquiry into the resilience of markets and investors after they demonstrated a heavy reliance on extraordinary central bank support.
Bramson renews activist campaign against Barclays’ investment bank
Activist investor Ed Bramson has revived his controversial campaign to slash the size of Barclays’ investment bank despite a bumper first half, sparking fury from shareholders. In a letter to backers of his investment vehicle, Sherborne Investors, Bramson said the effects of the coronavirus crisis had “significantly distorted the first-half results of all the banks” and renewed his call for Barclays to follow the example of German lender Deutsche Bank and retreat from investment banking to boost profitability.
BoE hit Monzo with tougher capital demands during fundraising
Monzo’s capital requirements were lifted by the BoE earlier this year as it was in the middle of raising fresh investment, reflecting the central bank’s commitment to a recent pledge to strengthen capital planning and governance at smaller lenders. Regulatory filings show that the heavily loss-making Monzo was required to increase its capital to 13.65% of its risk-weighted assets to protect against potential losses, up from 8.5%, meaning it had to find £21m.
Banks may need to book an additional £25bn for bad loans
Experts are predicting that UK banks will have to set aside an additional £25bn for bad loans by 2022, bringing the total figure to nearly £45bn. Banking analyst Ian Gordon at Investec warned the surge in bad debt was likely as job cuts and business closures mount around the world.
Banks limiting branch use as pretext for closures
The Times’ Andrew Ellison claims UK banks are using the coronavirus crisis as an excuse to close more branches. He says reasons given for maintaining limited opening times don’t hold water and he suspects the real motive is a desire to shift more customers onto digital services.
Silicon Valley venture capital titan seeks London base
Sequoia Capital has been hunting for a new London office in preparation for a push on European investment. The venture capital firm last week hired George Robson, Revolut's product lead, as its second European partner.
ICE mortgage deal is largest in its 20-year history
NYSE-owner Intercontinental Exchange has agreed to pay $11bn for Ellie Mae, which provides non-bank lenders and credit unions with technology to originate residential mortgage loans.
UniCredit’s profits slump as Covid-19 restrictions weigh on fees
COVID-19 has taken a sharp bite out of UniCredit's second quarter profits, which were down 77% to €420m. Italy's largest lender's total revenue for the period came in at €4.2bn.
ING profits plunge almost 80% on virus-induced loan defaults
Amsterdam-based ING has set aside an additional €1.3bn to deal with coronavirus-induced loan defaults, in addition to the €661m provision made in the first quarter, driving second-quarter profits down 79%.
Allied Irish Banks takes €1.2bn coronavirus loan loss charge
Allied Irish Banks has taken a €1.2bn charge to cover coronavirus loan losses. CEO Colin Hunt said he expected the charge to “substantially cover the expected credit impact of COVID-19.”
China allows first commercial bank to go bankrupt in almost 20 years
Baoshang Bank will be liquidated after the People’s Bank of China seized control of the regional lender in June last year, making it the first bankruptcy of a commercial bank in nearly two decades.
Capital One fined $80m for data breach
US credit card issuer Capital One has been fined $80m after regulators identified a slew of failings that allowed hackers to obtain the personal data of more than 106m customers.
BNP Paribas pulls back from financing commodity traders
BNP Paribas is retreating from financing commodity traders in Europe, the Middle East and Africa following heavy losses in its specialist lending unit.
Ryanair increases services
Ryanair has successfully increased its flight schedule to over 60% of pre-Covid levels, flying 4.4m customers in total in July. EasyJet is working towards flying 40% of services through the third quarter, while fellow budget carrier Wizz Air, which is smaller than the other two, flew at 74% capacity in July.
UK construction sector reports sharpest rise in almost five years
The IHS Markit/CIPS construction purchasing managers’ index rose to 58.1 last month from 55.3 in June, slightly above economists’ forecasts. The figures indicate a sharp rebound from April’s record low of 8.2, but despite the optimism, construction companies are shedding jobs at one of the fastest rates since the global financial crisis. Tim Moore, economics director at IHS Markit, commented: “Concerns about the pipeline of new work across the construction sector and intense pressure on margins go a long way to explain the sharp and accelerated fall in employment numbers reported during July.”
FCA warns irresponsible high-cost lenders
The Financial Conduct Authority has warned high-cost credit firms that it will come down on poor practice after almost half of customers said they regretted borrowing money. In some cases, the FCA said, payday loan firms, doorstep lenders, store cards and rent-to-own providers have enticed customers into borrowing more by suggesting they could use additional cash to go on exotic holidays. Jonathan Davidson, of the FCA, called on firms to review their practices immediately and make changes to their systems.
Aviva’s new boss renewed focus to bring value to shareholders
Amanda Blanc, Aviva’s new CEO, has said a review of the business could see the insurer withdraw capital from areas deemed outside its strategic objectives. She said: “We are going to focus on those businesses where we have the necessary size, capability and brilliant customer service to generate superior shareholder returns. This is where we will invest and grow.” Ms Blanc also said the dividend will be reviewed in light of plans to cut Aviva’s £10.2bn debt mountain.
Phoenix chief expects COVID-19 to speed up insurance M&A
The CEO of Phoenix Group, Andy Briggs, predicts that the coronavirus crisis will speed up the pace of deal-making in UK life insurance as companies look to dump legacy products and raise cash.
Axa cancels special dividend as it suffers €1.5bn pandemic hit
COVID-19 related claims took a €1.5bn bite out of AXA in the first half of this year, dragging net profits down to €1.43bn, 39% lower than last year.
MEDIA & ENTERTAINMENT
Nintendo reveals five-fold profit boom
Nintendo has revealed a more than five-fold jump in quarterly profit as gamers acquired titles like Animal Crossing, which sold 10.6m units in the first quarter alone. Nintendo's digital games sales more than tripled, with 56% of sales made via digital download in the period, compared to 38% the year prior.
News Corp suffers heavy losses but digital surge cheers
News Corporation has reported a 22% fall in revenue to $1.92bn and a fourth quarter net loss of $401m, up from a loss of $42m in the same period last year. However, the group saw strong a performance in digital revenues, which rose 26%.
Hammerson unveils rental shake up
Hammerson is planning an overhaul of rent charges as the beleaguered shopping centre owner’s losses widen to £1bn. The group could tie rent to sales as part of a bid to help tenants cope with a catastrophic slump in footfall while ensuring it does not miss out financially. The move came as Hammerson posted poor half-year results, including an 8% slump in the value of its portfolio. The firm is also looking to raise £826m through the agreed sale of its stake in European shopping centre owner VIA Outlets and a rights issue.
BoE expects pandemic slump will be less severe than expected
The Bank of England has predicted the economic slump caused by COVID-19 will be less severe than expected, with a faster easing of lockdown measures and a "more rapid" pick-up in consumer spending helping the economy rebound faster than it had assumed in May. The Bank expects the UK economy to shrink by 9.5% this year – not as severe as its initial estimate of a 14% contraction. The UK economy is expected to grow by 9% in 2021, and 3.5% in 2022, and forecast to get back to its pre-Covid size at the end of 2021. The Bank held interest rates at 0.1%. Ruth Gregory, an economist at Capital Economics, expects the Bank to keep interest rates at 0.1% "or below" for "at least five years". Meanwhile, the Governor of the Bank of England, Andrew Bailey, has backed the Government's decision to end its furlough scheme in October telling the BBC that it was important that policymakers helped workers "move forward" and not keep them in unproductive jobs.