HSBC and StanChart could lose custom over Hong Kong
The decision by HSBC and Standard Chartered to back Beijing’s new security law for Hong Kong has elicited unease among large shareholders. Investors say they understand the position the London-based lenders were in but expressed discomfort at the move to “fully back and support” the legislation. HSBC is now facing a consumer backlash in Britain. The Times’ Kate Palmer provides some alternative accounts for savers with the bank, as well as its subsidiaries First Direct and M&S Bank, to consider. The paper’s Alistair Osborne wonders how HSBC or Standard Chartered will react if China asks them to move their HQ to Hong Kong: “Once you start kowtowing, it’s hard to stop.” Senior MPs have added their criticism too, urging the banks to revoke their support for China’s new law or face a boycott. Meanwhile, HSBC chairman Mark Tucker has reportedly warned the British government that a ban on Huawei supplying technology to the UK’s 5G network would result in the bank suffering reprisals from Beijing.
BoE offered ideas for easing the debt burden on companies
The Bank of England has been warned that between £32bn and £36bn of coronavirus support lending will prove “unsustainable” for businesses, which will find the debt hampers their growth. A report by the Recapitalisation Group, overseen by Aviva chairman Sir Adrian Montague under the auspices of TheCityUK, predicts the government’s three lending schemes will see borrowing boom from the current £27bn to £123bn by Q2 next year. The study proposes several ways the debt burden could be reduced, including exchanging troubled debt at larger businesses for preference shares, or swapping small businesses loans for contingent tax instruments. The Sunday Times notes that Treasury officials are also considering plans to get more pension fund money into private businesses by changing the rules on allocation of defined contribution scheme funds. Finally, Lloyds chairman Norman Blackwell is urging the government to set up a vehicle that will take on debts from some companies unable to repay their state-backed coronavirus loans. The Conservative peer fears “private finance won't take on refinancing the debt at the value the government has guaranteed it."
Treasury working on plan for alternative lenders to access lending programme
Treasury officials are working on a plan to allow some alternative lenders to offer state-backed loans to struggling small businesses. Mainstream banks would provide funding to challenger banks and specialist lenders through a special purpose vehicle which would be linked to the British Business Bank (BBB), according to an email sent to lenders from UK Finance. Separately, the BBB has given approval for fintech business lender MarketFinance to start business loans and invoice finance as a lender under the UK government-backed Coronavirus Business Interruption Loan Scheme.
Fintechs can overcome slump in payments volume
The Sunday Telegraph reports on how the slump in consumer activity is hurting UK fintechs. A report from McKinsey predicts that global payments revenues could drop by up to 10%, compared with its pre-pandemic prediction of a growth of 6%. Growing uncertainty over future revenues has led many of the sector's largest stars to have their valuations slashed. But Hiroki Takeuchi, GoCardless's chief executive, is upbeat: "Fintechs will need to tighten their finances and cut costs to survive the drop," he says, "clearly this is a bump in the road, but it is not a fatal wound".
Lenders vie for new mortgage business
The Times reports on how lenders are dropping rates for equity release and buy-to-let mortgages as they compete for businesses as the country comes out of the coronavirus lockdown. Nationwide Building Society has a 1% buy-to-let mortgage, but this is only available through its broker-only arm the Mortgage Works. Elsewhere, Responsible Lending has released a record low 2.45% fixed-term equity release loan with a minimum amount of £10,000.
Monzo's co-founder to become chairman of bank start-up
Monzo co-founder Paul Rippon is to become chairman of a Newcastle-based lender called GBB, short for Great British Bank, which plans to offer loans of up to £5m to property developers in the North. Rippon left Monzo earlier this year to spend time on his alpaca farm. GBB has so far raised £10m from investors.
Banks start hiring debt collectors
Recruitment firms have said they have seen a rise in demand for debt collectors as banks anticipate a wave of loan defaults once payment holidays and coronavirus state aid schemes come to an end in the autumn.
Banks in talks over credit card holiday extension for borrowers
Banks are in discussions with the FCA about extending coronavirus relief measures for customers struggling to repay credit cards and other unsecured debts until the end of September.
Abu Dhabi’s Mubadala picks up $1.2bn stake in Reliance’s Jio
Abu Dhabi’s sovereign wealth fund Mubadala is joining Facebook and a number of US private equity groups in taking a stake in Jio Platforms, the Indian telecom and digital services business led by Mukesh Ambani. Mubadala is joined by the Abu Dhabi Investment Authority, which is acquiring a 1.16% equity stake for $752m.
Goldman Sachs employee urges white colleagues to do more
An email from Goldman Sachs employee Frederick Baba has gone viral after he claimed a commitment on equality from the bank’s senior management was not reflected on lower rungs. Mr Baba, a managing director at Goldmans in New York, said he appreciated that his colleagues “have reached out and expressed solidarity” since the killing of George Floyd but urged them to do more to support non-white employees and minority-owned businesses.
Brighter outlook prompts banks to move mountains of ‘hung’ loans
Improving markets have meant banks can start trying to shift some of the loans they hold from private equity buyouts that have failed or been postponed due to COVID-19. Separately, US banks expect fewer borrowers to default on loans once their forbearance deals expire later this month.
Threat from climate change to financial stability bigger than COVID-19
Sustainable finance expert Thierry Philipponnat has argued for tighter rules on bank lending to fossil fuel groups to help address the threat of climate change to financial stability.
Fidelity chief warns of global corporate solvency crisis
Anne Richards, the CEO of Fidelity International, has warned that the asset management industry could not alone provide businesses with the capital they need as they come debt-laden out of the COVID-19 pandemic.
BNP has Goldman in its sights after beefing up hedge fund business
Following BNP’s acquisition of Deutsche Bank’s prime finance unit last year the French bank has set its sights on displacing Goldman Sachs as one of the top three global prime brokers to hedge funds.
Singapore banks draw rising deposits from protest-hit Hong Kong
Banks in Singapore are reporting record inflows as deposit holders from multiple jurisdictions, but particularly Hong Kong, move funds there.
JLR China borrows £560m from Chinese banks
Jaguar Land Rover’s Chinese subsidiary has signed a three-year £560m revolving loan facility with a syndicate of five Chinese banks in order for JLR China to better “manage cashflow amid the coronavirus epidemic".
UK mulls £6k incentive to switch to electric cars
Boris Johnson is considering offering UK drivers £6,000 to scrap their diesel or petrol cars and replace them with electric ones. The government hopes the move would help to stimulate new car sales, which are down almost 90% because of the lockdown.
Bombardier to shed 2,500 aviation jobs
Hundreds of jobs are at risk at Bombardier’s manufacturing base in Northern Ireland with the aircraft maker citing the sharp fall in air travel caused by the worldwide restrictions. The group employs 60,000 people, with about 3,300 in Northern Ireland. Most of the job losses are expected to be made in Canada and Mexico.
Branson hopes for Delta help to rescue Virgin Atlantic
Virgin Atlantic is in talks with US airline Delta to adjust its joint-venture agreement so the UK airline can defer fees due to Delta.
Forward indicators improve for Taylor Wimpey
Taylor Wimpey, which restarted its marketing operation last month, has reported "a strong level of interest" from potential buyers of its new homes.
FCA announces ban on contingent charging
The Financial Conduct Authority has said it will ban contingent charging from October to “remove the conflicts of interest which arise where a financial adviser only gets paid if a (pension pot) transfer goes ahead.” The regulator said it has launched 30 enforcement investigations into firms that have given bad advice to customers about transferring out of their defined benefit pension schemes. The FCA also revealed that 745 pension transfer advice businesses, out of 3,000 operating in the market, have already given up their advice permissions after “feedback” from the regulator. The FCA action follows a 2018 parliamentary report which found British Steel pensioners had been pushed to transfer out of secure pensions by advisers who levied high charges when transfers went ahead. The FCA says it will contact 7,700 steelworkers outlining how to make a complaint, after a file review found that only about 20% of recommendations were suitable.
World’s richest banker weighs up bid for Travelex
Joseph Safra, who is ranked as the world's richest banker, is weighing a takeover bid for airport currency giant Travelex. Interest from the Safra family’s investment vehicle comes as Travelex wrestles with the impact of an apparent fraud at its parent company Finablr - a vehicle controlled by Indian tycoon Bavaguthu Raghuram Shetty.
Pandemic will accelerate digital change
Traditional wealth management is being forced to accelerate its adoption of digital communications due to the coronavirus pandemic, as opportunities abound for efficiencies through digitalisation.
UK delays pledge to follow EU green finance rules post-Brexit
The UK Treasury’s reticence to sign up to partially developed EU rules on sustainable finance could make the issue the first big financial services regulatory battleground following Brexit.
AstraZeneca nears breakthrough on antibody injection
AstraZeneca is developing an antibody treatment for COVID-19 that could stop the virus in the first stage of its attack. Separately, there are reports that AstraZeneca approached rival Gilead Sciences about a potential merger last month.
LEISURE & HOSPITALITY
Landlords furious as Travelodge hands customers CVA vote
Travelodge has asked customers with room bookings to vote on a CVA proposal in an effort to stop property owners voting down plans to cut rent payments. Under the plans, Travelodge's owners, Avenue Capital Group and GoldenTree Asset Management and Goldman Sachs, would inject £40m and make £100m of reserves available. But landlords say using the loophole to include customers in the vote drives "an oil tanker through centuries of property legislation" Travelodge said: "It is the requirement of any CVA that all unsecured creditors of the company ... have the chance to vote if they so wish."
Jump in manufacturing output offers hope
Output increased across Britain in May from its previous record low level as manufacturers benefited from an easing of lockdown measures, according to new figures.
Blackstone's property arm assets swell to €250bn
Blackstone has secured its position as the largest real estate manager for the fourth year running after property assets controlled by the firm surged to nearly €250bn.
Victoria’s Secret seeks buyer
Lingerie retailer Victoria's Secret has fallen into administration putting 800 jobs at risk. The retailer confirmed on Friday that it has hired administrators after being impacted by the coronavirus virus lockdown.
UK suffers record slump in output
The latest GDP figures from the Office for National Statistics are expected to reveal this week that the UK suffered a record 18% slump in output during April - three times the 5.8% decline seen in March.
Chancellor nominates ex-Treasury official as UK fiscal watchdog chair
Rishi Sunak has nominated Richard Hughes to take over from Robert Chote at the Office for Budget Responsibility. Torsten Bell, chief executive of the Resolution Foundation, where Mr Hughes currently works, said the chancellor had “made an excellent choice”.
Mark Fry: Capital Markets Q1 Review
Mark Fry provides an overview of the first quarter of 2020 and a glimpse of what may lie ahead as economies drag themselves out of coronavirus lockdowns. Bond issuance globally surged to all-time highs in Q1, but this was almost exclusively investment grade as corporates and financials rushed to shore up their finances; high yield issuance plummeted. As banks and asset managers eye the coming withdrawal of government support schemes, many are have started to use CLOs to clear increasingly risky debt. The default rate on European leveraged loans has increased from 3.4% in December 2019 to 5%, according to Fitch. With capital markets viewing the crisis as one of solvency rather than liquidity, Fry says CLO performance will likely be a chief concern, with the underlying collateral at risk of rising defaults, “putting the equity and lower-rated debt tranches at growing risk as well.”