Ongoing pandemic woes weigh on airline industry’s recovery
BTG Advisory’s Mark Fry illustrates how, despite pent-up demand suggesting improvements for the airline industry are imminent, the sector's recovery remains fragile, “and the embattled global airline industry may still face a harsh winter if a new virus wave emerges.” He says the global vaccine roll-out needs to broaden out and testing regimes removed for international and business travel to recover. Uncertainty over government travel policies, combined with new virus waves and variants leaves passenger demand difficult to predict, so airlines must stimulate demand to increase revenues amid fierce competition, says Fry. One bright spot is that the air cargo business is now operating at 8% above pre-crisis levels. But overall, Fry concludes that, “the airline industry is desperate to put COVID-19 behind it, but it does not look like that will happen soon.”
Banks accused of failing on fraud refunds
An investigation by consumer group Which? has found that banks are getting decisions about certain customer scams and reimbursement wrong in around eight in 10 cases. Many major UK banks have signed up to a voluntary reimbursement code on bank transfer scams and the number of new authorised fraud complaints – the vast majority of which relate to authorised push payment scams – made to the Financial Ombudsman Service (FOS) more than doubled in 2020-21, from 3,600 to 7,770. Some 73% of complaints were upheld in favour of the customer and Which? found the figure reached as high as 86% of cases for NatWest and Royal Bank of Scotland. Close behind were Santander (82%) and Bank of Scotland (81%). Jenny Ross, Which? Money editor, said: “Fraud can have a devastating financial and emotional impact on victims, so it’s shocking that so many banks are failing to handle cases correctly, often wrongly and unfairly denying victims reimbursement.”
NatWest’s money laundering case should serve as a warning
Sara George and Katie Chin of the US law firm Sidley Austin say in a piece for the Times that the Financial Conduct Authority’s prosecution of NatWest for money laundering offences “is a wake-up call for the financial services industry.” It was the regulator’s first criminal prosecution under the UK’s money laundering regulations and “the shift from imposing regulatory sanctions in the NatWest case to criminal prosecution demonstrates its commitment to using its wide powers of enforcement to tackle money laundering offences.” Businesses need to take note and ensure they “comply with requirements and stay ahead of regulatory developments.”
Brussels extends euro clearing rights
London's lucrative euro clearing rights have been extended by Brussels after the European Commission determined that cutting Continental banks off from the market would damage financial stability. Access was granted until June 2022 and this has now been extended, but it is not known for how long. Michael McKee, a partner at the law firm DLA Piper, said: “The European Union has at last accepted how vital UK-located clearing services were to the EU."
Gensler seeks to scrutinize private fund fee arrangements
The chair of the U.S. Securities and Exchange Commission has called for increased transparency of the fees charged by private equity companies and the reporting of fund performance metrics. “It is time that we take stock of the rapid growth and changes in [private funds],” said Gary Gensler, speaking at a conference in Washington on Wednesday arranged by the Institutional Limited Partners Association, a trade body representing investors. “I wonder whether limited partners have the consistent, comparable information they need to make informed investment decisions,” he added. “I think we can promote additional transparency around fees and expenses to fund investors.”
Credit Agricole beats profit expectations
Credit Agricole SA's third-quarter profit beat expectations on Wednesday with France's second-biggest listed lender reporting net income rose 43.5% in the third quarter to €1.40bn – up on a mean forecast for €1.23bn in a poll of analysts compiled by Refinitiv. Lower pandemic-related provisions for bad loans and higher revenue in retail banking offset weaker revenue in capital markets and insurance.
ABN Amro considers share buyback following surprise profits
ABN Amro reported an unexpected 14% increase in third-quarter net profit on Wednesday, driven by the economic recovery and the easing of COVID-19 lockdowns. Net profit was €343m – far higher than the €147m predicted by analysts. The Dutch bank said it was looking to start buying back shares after the first quarter of next year.
UBS CEO calls for global sustainability reporting standards
Echoing comments made by BlackRock CEO Larry Fink during the COP 26 climate conference, Ralph Hamers, the CEO of UBS, on Wednesday called for minimum global sustainability reporting standards that apply not just to public companies but to private assets. "We have to establish a global framework for sustainability reporting that truly encourages innovation," he said during a panel on sustainable finance hosted by the bank.
Rivian shares soar on debut
Shares in electric car company Rivian soared 37% on its New York debut to $106.75, valued the company at about $105bn. The float values Rivian, which had sold just 156 cars by the end of October, at more than both General Motors and Ford.
Zilch scores $2bn valuation and plans US rollout
London-headquartered buy now, pay later fintech Zilch has quadrupled its valuation to $2bn, after raising $110bn in a Series C funding round led by Ventura Capital and Gauss Ventures, with existing investor Goldman Sachs also participating. Zilch announced the acquisition of the US company NepFin earlier this year, and has opened a Miami office as it gets ready to launch in the US. It now plans to hire around 150 US staff to help boost the US rollout.
LV members join buyout backlash
Members have added their dissent to attempts by LV’s bosses to sell the insurer to US private equity firm Bain Capital. Critics of the deal, including :Labour and Conservative MPs have asked regulators to act amid fears that those voting on the deal were given “one-sided” information about the proposed buyout.
Catherine McGuinness to step down next year
Catherine McGuinness is to step down as chair of the City of London Corporation's policy and resources committee next year triggering a succession race that deputy chair Chris Hayward is expected to win following an election next May.
LEISURE & HOSPITALITY
Cocktail sales up but ales out at Wetherspoons
Cocktail sales have soared in comparison with traditional ales as more young people venture out post-lockdown, says Wetherspoons. In the 15 weeks to 7 November, sales of drinks such as mojitos and cosmopolitans were up 45% on the year before, along with vodka and rum. Draught products have suffered, however, with sales of ale down by 30%. Overall, like-for-like sales - which strip out the effect of new pubs opening - were 8.9% lower for the first 15 weeks of the financial year than the record sales it saw in 2019.
MEDIA & ENTERTAINMENT
S4 Capital reports 42% rise in gross profits
Sir Martin Sorrell's digital advertising firm S4 Capital has reported a 56% rise in like-for-like revenues in the third quarter, to £178m. Gross profits were up 42% to £144m. Trading was above previous guidance of revenue growth of 40%. Operational earnings margin, S4 preferred metric, is now forecast to be 18.6% for the full year, down from prior guidance of 20% before and 21.1% last year.
ITV on track for highest-ever ad revenues
ITV is on track for the highest advertising revenues in its 66-year history, as businesses pour money into marketing to drive a post-pandemic recovery. The broadcaster said advertising sales are up 30% so far this year to £1.3bn, helping revenue at its media and entertainment business climb 28% to £1.6bn. Total external revenue is up 28% to £2.38bn so far this year, which is 8% above pre-pandemic levels.
Gatemore builds stake in DFS
Activist investor Gatemore Capital Management has begun building a stake in furniture retailer DFS, according to Sky News, with a letter to investors in September adding that it expects to expand its position “in the coming months”. The letter goes on to say that DFS is likely undervalued and could make an attractive target for private equity.
Czech billionaire Daniel Kretinsky buys 27% stake in West Ham
Czech investor Daniel Kretinsky has acquired more than a quarter of West Ham United for £160m, valuing the club at roughly £600m, or £700m including debt.
US consumer prices rise at fastest pace in three decades
Research by the Bureau of Labor Statistics revealed on Wednesday that US consumer prices rose 6.2% in October from a year ago — the fastest annual pace since 1990. The news triggered a sharp sell-off in US government bonds with yields on two-year Treasury notes rising by the most since the coronavirus outbreak in March 2020. The data led analysts to declare claims from the Federal Reserve that inflation was transitory were “dead and buried” with Tom Graff, head of fixed income at Brown Advisory, saying the central bank might be forced to end QE this winter. The Telegraph reports that the surge in US inflation has sent Bitcoin to a new all-time high of over $68,000 per coin.