BoE cuts rates and offers cheap credit
The Bank of England cut interest rates from 0.75% to 0.25% yesterday in an attempt to bolster the economy amid the coronavirus outbreak. Governor Mark Carney said the action would provide relief "at a difficult time". The BoE also told banks they could cut their capital buffer to zero, freeing up £190bn in cash to support customers. Lenders will also be able to borrow funds amounting to 5% of their loan books via four-year loans using the central bank’s Term Funding Scheme (TFS) at interest rates close to the new 0.25% base rate. The BoE expects they could end up taking more than £100bn of funds. Borrowing will be cheaper and more funds made available the more banks lend to businesses. However, analysts warned the cut in rates would hurt high-street banks as it would reduce their revenues. Incoming governor Andrew Bailey said there were "no excuses" for banks not passing on the huge stimulus package to households and businesses. Additionally, the PRA said it “expects firms not to increase dividends and other distributions in response to this policy action and will monitor firms' distributions against this expectation.”
Money laundering campaigners hail £100m ‘economic crime’ levy
Groups that are subject to UK Money Laundering Regulations, such as banks, accountants, estate agents and solicitors, will have to pay a levy towards fighting money laundering, the Chancellor has said. Rishi Sunak said the tax would “will help safeguard the UK’s global reputation as a safe and transparent place to conduct business.” Former SFO general counsel Alun Milford, now at Kingsley Napley, commented: “Only with investment across the system will the authorities really be able to boast about a significant ramping up of the war on dirty money and financial crime and to meet the objectives set out in the economic crime plan.” The Government will consult on the levy later this year.
Millions of homeowners to get mortgage relief
Homeowners with variable-rate mortgages - around 2.2m - are to see their interest rate cut by 0.5 percentage points from April 1 after Lloyds Bank, Halifax, Bank of Scotland and Barclays all confirmed that they will pass on savings. Lloyds' variable rate will fall from 4.24% to 3.74% and its standard variable rate would decrease by 0.5% to 2.25%, while Halifax and Bank of Scotland will reduce their variable-rate mortgages by 0.5% to 3.74%. Barclays' existing tracker and variable-rate mortgage customers will see their mortgage rates reduced by 0.5%, while other providers, including Nationwide, NatWest and Santander, are now reviewing their rates.
Sunak offers lifeline to businesses affected by virus
The Chancellor announced a series of measures to help businesses cope with the fallout from the coronavirus outbreak. These include a loan guarantee scheme for banks lending to small businesses on amounts of up to £1.2m. Mr Sunak said that the "coronavirus business interruption loan scheme" would help "banks lend with confidence" and could unlock £1bn worth of credit. It will be operated by the state-owned British Business Bank.
Quinn scores £1.3m salary
HSBC’s interim CEO Noel Quinn will receive a 2.5% pay rise this year, bringing his total salary to £1.3m, the bank announced. Ewen Stevenson, HSBC’s finance chief, will also receive a pay rise, bringing his salary to £741,000. The bank's annual report shows that almost 420 executives in Europe were paid more than €1m (£880,000) last year, compared with fewer than 400 in 2018.
Sale of stake in RBS put off again
The sale of the 62% stake in RBS still owned by the Treasury will be postponed for another year, the Government has confirmed. The OBR now expects the Treasury to sell £3.8bn worth of shares in 2020-21, £3.6bn the following year, £4.2bn in 2022-23 and £3.3bn for the following two years - a total of £18.2bn.
LDC promotions come ahead of £1.2bn investment
LDC, the private equity arm of Lloyds Banking Group, has promoted Andy Grove, its head of new business, to a newly formed role of chief investment officer. Other promotions have also been announced as the firm commits to invest £1.2bn in UK mid-market firms in the next three years.
BlackRock rebels over executive pay at Qualcomm
The decision to award a $3.6m bonus to the CEO of Qualcomm has been criticised by asset manager Blackrock which said the chipmaker had failed to provide “sufficient justification” for the payment.
Solus closes flagship fund after ill-fated bets
The distressed investment specialist Solus Alternative Asset Management is closing its flagship fund after heavy redemptions and sub-par performance.
Swedbank probe uncovers $4.8m of suspicious activity
A probe into money laundering at Swedbank by Clifford Chance has found 586 transactions totalling $4.8m that could have broken US sanctions.
Lookers delays results after ‘potential fraud’ uncovered
Car dealership Lookers has postponed publishing its full-year results after discovering a potential fraud inside the business. The firm is already facing a sales probe by the FCA. Lookers claims the fraud is “non-material” and will be “appointing an external adviser to lead a full investigation into the matter”.
JLR China sales slump 85%
Jaguar Land Rover's sales in China fell by 85% last month due to the ongoing coronavirus outbreak. JLR’s factory in China reopened on February 24th and the company said it expects demand in China to gradually increase.
Cathay Pacific digs in for 'unprecedented' virus hit
Hong Kong’s Cathay Pacific has warned that the “unprecedented challenge” of coronavirus will take it to a substantial loss this year. The hit would follow a near 30% plunge in earnings in the second half of last year due to the ongoing anti-government protests. Cathay, which carried 82% fewer passengers in February, is expecting capacity to fall by 65% in March and April.
Boeing moves to preserve cash and draws down $13.8bn loan
Shares in Boeing fell by 15% yesterday after the aircraft manufacturer drew down the full amount of a $13.8bn loan arranged in January and restricted spending.
Heathrow seeing millions of fewer passengers
Heathrow Airport saw 5.4m fewer passengers in February, a near 5% year-on-year decline, largely down to falling demand on Asian and European routes amid the escalating coronavirus outbreak. The airport is expecting a further decrease in March.
Balfour Beatty’s order book healthy amid coronavirus concerns
Balfour Beatty is anticipating its order book will surge after the decision to proceed with HS2, which the construction group said, “gives the entire industry and its associated supply chain much-needed certainty.” Pre-tax profits in 2019 rose to £138m from £123m, revenues were up 7.7.% to £8.4bn, and Balfour will get around £3bn of work from HS2 for the first half of 2020. The firm shelved its £200m planned share buyback, however, as it braces for the impact of the coronavirus outbreak.
New regulatory forum will help financial services plan ahead
The Treasury has announced that a new forum of regulators will be set up in order to better implement policy initiatives. The Financial Conduct Authority, Bank of England, Prudential Regulation Authority, Payment Systems Regulator and the Competition and Markets Authority will team up to form the Financial Services Regulatory Initiatives Forum which will also be attended by the Information Commissioner’s Office, the Pensions Regulator and the Financial Reporting Council when required. “The financial crisis showed how a fragmented regime can lead to significant risks being underestimated or missed altogether. Joined-up regulators are therefore essential to deliver financial stability, competition and effective consumer protection,” the Treasury said. The move will see financial services companies given a two-year heads-up on forthcoming changes.
Strategic review of fintech to be launched
The Chancellor yesterday announced a review into the UK’s fintech sector would take place to explore the support the Government can provide to ensure "growth and competitiveness" in the sector. Ron Kalifa, chairman of payments firm Network International, will lead the review. Charlotte Crosswell, chief of industry body Innovate Finance, said: "We are at a crucial moment in fintech's development. UK companies are now entering a phase of maturity that requires action to ensure that entrepreneurs can not only establish and scale their businesses in their home market, but also export their products and services internationally." Measures to ensure data is more easily available so small businesses find it faster and easier to shop around for credit will also be explored, Rishi Sunak said.
Prudential will spin off US pensions outfit
In response to pressure from activist hedge fund Third Point, Prudential has indicated that - amid close scrutiny of the coronavirus outbreak - preparations are underway for a minority float of Jackson in the US. Third Point has been calling for the insurance giant to spin-off its US pensions outfit to instead focus on Asia. Prudential's group adjusted operating profit from continuing operations increased 20% to $5.31bn, driven by a 14% rise in the Asian business.
Quilter braced for virus hit
Quilter has revealed a drop in profit for last year. Amid a "tough market backdrop," the wealth management firm also warned that the coronavirus could have an “adverse impact.” Quilter posted profit after tax of £146m for 2019, down from £488m the year prior, while gross sales dipped from £14.2bn to £12.3bn, though assets under management increased 13% to £110.4bn.
MEDIA & ENTERTAINMENT
E-books and digital subscriptions to be VAT exempt
Digital editions of books, newspapers and magazines will not attract a 20% VAT charge from December, the Chancellor has said. Stephen Lotinga, chief executive of the Publishers Association, welcomed the move saying: "The decision to axe the reading tax will bring to an end the illogical and unfair tax on those who need or prefer to read digitally."
Kantar buys digital adviser Mavens
Kantar has acquired digital consultancy Mavens of London which provides research services for marketers. The acquisition marks the first major move by Bain Capital, which acquired a majority stake in Kantar from WPP last year in a deal worth $4bn.
G4S swings to annual loss
Private security giant G4S has swung to an annual loss, taking its share price down over 25% on Wednesday. After writing down the value of its UK cash-handling business by £291m, the outsourcing firm, which now services over 90 countries, posted a £91m loss for 2019 compared with a profit of £81m the year before.
OBR forecasts reduced growth
The Office for Budget Responsibility has reduced its forecast for GDP growth from 1.4% to 1.1% for this year. It expects growth to be 1.8% in 2021 and then 1.5%, 1.3%, and 1.4% in the following years. Inflation is expected to be 1.4% this year, increasing to 1.8% next year. The OBR predicts that borrowing will increase from 2.1% of GDP in 2019/20 to 2.4% in 2020/21 and 2.8% in 2021/22. Headline debt will fall from 79.5% this year to 75.2% in at the end of this parliament.
Budget 2020: Future of cash protected
The Chancellor has pledged to bring forward legislation to protect access to cash for people that still rely on it. Consumer group Which? urged the government to act quickly.