Banks poised to report huge hit in results for first half
City analysts predict HSBC, Barclays, Lloyds Banking Group, NatWest Group and Standard Chartered will book £14bn of impairment charges against their loan books when they post results for the first half of 2020 in the next two weeks. Joseph Dickerson, an analyst at Jefferies, said: “We expect some very elevated charges in the second quarter, but they may not be as bad as people think.” The Sunday Times reports that NatWest's top managers will today be presented with plans to slash up to £3bn of costs over the next five years, a claim NatWest has since denied, while the FT reports that the Treasury is in talks with banks about an industry-wide plan to help tackle the bad debts expected from the “bounce back” loans scheme. The paper also cites analysis from Citigroup which estimates that the largest UK, Swiss and eurozone lenders are expected to provision at least €23bn for the second quarter as they report earnings in coming days. Finally, the Mail on Sunday reports that Lloyds is redeploying 1,000 branch staff to the bank's Customer Financial Assistance team to help customers at risk of debt.
City watchdog tells banks they can reject loans for break-takers
The Financial Conduct Authority has reportedly given banks permission to deny mortgages to customers who took loan holidays during the coronavirus pandemic, according to the Mail on Sunday. More than 1.8m people who took payment breaks were told by the Government that it would not affect their credit records. But the paper has obtained evidence from customers that banks are giving “mortgage holiday” as a reason for rejecting customers. The Sunday Times also runs a story on landlords being denied mortgages because they took out bounce back loans to keep their businesses afloat during lockdown. Finally, the Guardian claims several small business customers who applied for government-backed loans to help them get through the pandemic have had their accounts suspended or closed by NatWest.
Access to Covid support funding remains a struggle
The Telegraph’s Marianna Hunt reports on the difficulties small businesses have had accessing Covid support loans. High street banks are refusing to sign up new business accounts, leaving SMEs unable to access funding as they bank with smaller lenders that are not able to offer the bounce back loans. Kevin Hollinrake, a Conservative MP and co-chairman of the All Party Parliamentary Group on Fair Business Banking, said: "We've been encouraging small firms to shop around and use start-up lenders, and many have done so. But now they are being punished for it. It's not right."
HSBC forced to deny claims it ‘framed’ Huawei
The Sunday Times examines the prospects for HSBC as it gets pulled in a tug of war between the US and China. The bank was forced to deny claims in China's official People's Daily newspaper that it had worked with the US Department of Justice to investigate Huawei. The Times’ Katherine Griffiths claims HSBC is under pressure to sell its American retail bank to boost returns and address international tensions with China.
New FCA chief offers hope for mortgage prisoners
The Financial Conduct Authority’s incoming chief executive has said that mortgage prisoners should be able to switch to cheaper deals as soon as possible. Nikhil Rathi said he was aware that thousands were stuck on pricey rates with inactive lenders despite rules around affordability tests made by lenders being relaxed in October.
Moody’s says Lloyds’ ethnic diversity plan is ‘credit positive’
Moody’s linked a company’s stability to ethnic diversity measures for the first time after describing Lloyds Banking Group’s programme to promote more black employees to senior roles as “credit positive”.
UK Treasury draws up plans for infrastructure bank
The FT reports that Chancellor Rishi Sunak is drawing up plans for a new state-owned lender to provide billions of pounds in new funding for capital projects across the country.
Army scraps plans for VC fund
Plans for the Army to launch a £50m venture capital fund to invest in promising defence technology start-ups have been abandoned with generals instead directed to work more closely with the National Security Strategic Investment Fund. NSSIF has already backed venture capital fund Amadeus Capital, the Telegraph points out; has invested in quantum computing start-up Quantum Motion and held talks with Notion Capital, another existing fund.
Goldman Sachs settles 1MDB case with Malaysia for $3.9bn
Goldman Sachs is to make a cash payment of $2.5bn to the Malaysian government as part of a $3.9bn settlement relating to the losses the country suffered after its 1MDB state investment fund was plundered. As much as $4.5bn was allegedly siphoned out of the infrastructure fund by corrupt officials and Goldman blames rogue employees for the investment bank’s part in raising cash for the fund.
Germany to beef up financial regulation after Wirecard scandal
Germany’s financial regulator, BaFin, is to be equipped with “sovereign powers” to intervene “directly and immediately” in public companies following the Wirecard scandal, according to a draft action plan released by the country’s finance ministry.
Rolls considers ITP Aero spin out
Rolls Royce is exploring an emergency sale of its ITP Aero division, which makes parts for the Eurofighter Typhoon. Buyout firms including KKR, Blackstone and Carlyle have shown interest in a deal, which could include other parts of Rolls’ its jet engine business. Goldman Sachs is running the sale while Lazard is advising Rolls on its options.
BA parent IAG weighs €2.75bn rights issue to shore up balance sheet
IAG, the owner of British Airways, is mulling a rights issue of up to €2.75bn to strengthen its balance sheet amid the coronavirus emergency.
Link faces scrutiny after Woodford sale
The Times reports that Link Fund Solutions is facing further scrutiny of its handling of Neil Woodford’s investment fund after it emerged that it sold a stake in Evofem Biosciences to Acacia Research Corporation which immediately flipped it on for a £21m profit. Meanwhile, the FCA is probing Northern Trust, the depositary for Neil Woodford's flagship fund, which was responsible for ensuring that Link followed City rules.
UK fintech Revolut raises $80m despite pandemic fallout
Revolut has raised $80m in new funding from US private equity group TSG Consumer Partners, with the investment deemed an extension of the $500m “Series D” funding round it completed in February. The deal made Revolut the UK’s most valuable consumer fintech start-up, worth $5.5bn.
Inflows improve for Nucleus in Q2
Edinburgh-based fintech firm Nucleus Financial saw the value of the funds that people administer using its online platforms surge by 13.1% to £15.8bn in the second quarter as stock markets recovered following sharp falls earlier in the year as the coronavirus crisis intensified.
Bold tech bets transform Baillie Gifford into UK’s fastest-growing fund group
The FT profiles Baillie Gifford, which, the paper says, has transformed itself into the UK’s fastest-growing asset manager in less than 20 years; cultivating a reputation for making bold bets.
Passive funds batter active products during 2020 ‘wild ride’
Figures from Morningstar show investors fled well-known active investment houses this year in favour of passive funds run by asset managers such as BlackRock, Vanguard and State Street Global Advisors.
FCA to rein in crypto adverts
The Government is consulting on whether to give the Financial Conduct Authority the oversight of all cryptocurrency promotions to make sure they are not misleading.
LEISURE & HOSPITALITY
Travelodge facing landlord revolt
The landlords of around 80 Travelodge hotels are to sign new leases with budget hotel operator Goodnight following a mass revolt against the former’s demands for drastic rent cuts.
Manufacturing and services both exceed expectations in July
The IHS Markit/CIPS UK composite purchasing managers' index jumped to 57.1 in July from 47.7 in June. The manufacturing reading rose to 53.6, up from 50.1, and services rose from 47.1 to 56.6.
British battery 'gigafactory' eyes £1bn float
Britishvolt, the company behind the UK’s first “gigafactory”, is talking with investment banks about a possible £1bn flotation early next year. The company is targeting a total of £2.6bn of investment through a combination of debt and equity amid a rush across Europe to counter Chinese dominance in the sector.
Hammerson taps government support
Hammerson has had to use a government support scheme after most of its tenants skipped their rent payments last month. The retail landlord issued £75m of debt under the Government's COVID corporate financing facility (CCFF) this month, after collecting just 16% of the rent it was due in June.
Rishi Sunak mulls online sales tax
A new online sales tax is being considered by the Chancellor as a means to provide a “sustainable and meaningful revenue source for the Government” and avert a collapse of the high street, according to the Times. Meanwhile, new data from the ONS show sales volumes rose by 13.9% in June compared with the month before, bringing total sales across the country close to last year's levels.
UK recovery could take four years
It could take another four years for the UK economy to return to pre-pandemic levels, the EY Item Club says, pointing to evidence that consumers are sticking to habits learned during the lockdown period. The forecasters predict that output will shrink by 11.5% this year, well below previous expectations, while unemployment will more than double to hit 9% by the end of the year.