More than £1bn in COVID-19 loans handed out
UK Finance has announced that a total of £1.1bn in coronavirus support funding has been loaned to 6,020 SMEs as of April 14. The total proportion of firms receiving payouts is less than one in four of those who made a claim, with 28,460 applications submitted. Analysis shows that just 2.6% of the money available has actually been loaned by banks. The average value of loans made through the coronavirus business interruption loans scheme has risen to over £185,000. UK Finance chief executive Stephen Jones said he was “grateful that so many colleagues worked through the bank holiday so that over £1bn of support has now been delivered,” adding that he expects the figure to “continue to grow rapidly.”
BoE: Banks well placed despite recession warnings
Bank of England (BoE) deputy governor Sam Woods says Britain’s banks have enough funds to keep lending to the economy, despite a bleak recession warning from the Office for Budget Responsibility (OBR). He told a meeting of parliament’s Treasury Select Committee that the Bank has allowed banks to tap £23bn of their capital buffers to support up to £190bn of lending – far exceeding the £16bn net lending to firms seen in 2019. With a scenario mapped out by the OBR saying the economy could shrink 35% in Q2 and 13% over the year, Mr Woods said it is “not at all obvious” that this would be worse for banks overall than last year’s BoE stress test for lenders. “We go into this with a well-capitalised banking sector,” Mr Woods insisted, telling the committee: “Banks have ample capacity from a capital point of view.”
IMF cautions on damage to banks from recession
The International Monetary Fund (IMF) has cautioned that a lending crunch similar to that seen in 2008 could result from a recession caused by the coronavirus pandemic. The organisation’s global financial stability report stated: “A widespread distress of banks and other financial institutions could lead to a permanent scarring of balance sheets, which may further delay the recovery,” advising that lenders’ resilience “may be tested in some countries in the face of large market and credit losses, and this may cause them to cut back their lending to the economy, amplifying the slowdown in activity.”
Zoom and Google Hangouts banned by Standard Chartered
Amid growing concern about security flaws in video conferencing app Zoom, Standard Chartered has become the first major lender to ban staff from using the software during the coronavirus pandemic. Chief executive Bill Winters also cautioned against the use of Google Hangouts for virtual meetings.
Lloyds in tablet pledge
Lloyds Banking Group is handing out 2,000 tablets to elderly customers who are isolated due to COVID-19, with vulnerable customers who bank with Lloyds Bank, Halifax and Bank of Scotland set to benefit.
Oaktree Capital looks to raise $15bn
Asset manager Oaktree Capital Management is reportedly looking to raise $15bn for a distressed fund. The Mail says this comes at a time when coronavirus-related disruption has driven a dip in company valuations, allowing big distressed debt funds to potentially snap up assets cheaply.
Bank of America prepares loan losses as profits fall
Bank of America set aside some $5bn for loan losses in the January to March period, nearly five times as much as in the year earlier period, with profits for the quarter almost halved. Chief executive Brian Moynihan noted: “Despite increasing our loan loss reserves, we earned $4bn this quarter, maintained a significant buffer against our most stringent capital requirement, and ended the quarter with more liquidity than when we began,” as the lender posted revenues of $22.8bn, down $200m year-on-year but beating the $22.7bn expected by analysts.
Goldman Sachs reports profit fall for first quarter
Goldman Sachs has reported net earnings for the January to March period of $1.21bn (£970m), a decline of 46% from the $2.25bn posted for the same period a year earlier. Chairman and chief executive David Solomon remarked: “As public policy measures to stem the pandemic take root, I am firmly convinced that our firm will emerge well-positioned to help our clients and communities recover.”
Citi joins increases loan reserves
Citigroup has increased its loan reserves by $4.9bn in the first quarter, with net income down by 46% to $2.5bn, or $1.05 per share as a result.
Former VTB executive to head Vostochny
Dmitry Olyunin, a former executive with state bank VTB, has joined Russia's Vostochny Bank as its president.
US agrees airline aid
The Trump administration has approved an aid deal for US airlines that will see carriers including American, United and Delta handed grants covering 70% of payroll costs. This will see handouts worth a total of $25bn.
Government authorises HS2 work to begin
The UK government has issued formal notification to construction firms working on the HS2 line, with work to proceed according to coronavirus safety guidelines even as the national lockdown continues. HS2 minister, Andrew Stephenson, remarked: “This next step provides thousands of construction workers and businesses across the country with certainty at a time when they need it, and means that work can truly begin.”
Coronavirus hits Scottish construction
A new survey has revealed the impact COVID-19 has had on the Scottish construction industry. The study, carried out on behalf of the newly-established Construction Industry Coronavirus Forum, shows that cashflow has completely dried up for nearly 80% of firms. It has also revealed that more than half of firms who took part in the poll say they're owed vital monies from public and private sector clients, with invoices now overdue.
Insurers told to make quick COVID-19 payouts
The Financial Conduct Authority (FCA) has urged insurers to pay out to businesses affected by coronavirus as quickly as possible, telling heads of insurance firms that there a number of policies where “it is clear that the firm has an obligation to pay out.” In the letter to executives, the City watchdog added: “For these policies, it is important that the claims are assessed and settled quickly.” The FCA also confirmed that the majority of business interruption policies make no provision for the disruption caused by COVID-19, saying estimates based on discussions with the industry suggest “most policies have basic cover, do not cover pandemics and therefore would have no obligation to pay out in relation to the pandemic.”
Hedge funds urged to share coronavirus wealth
Fran Boait of campaign group Positive Money has called for regulators to “take a tougher line against financial profiteering during the pandemic,” after hedge funds such as Citadel, AQR Capital, Odey Asset Management and Marshall Wace made £1.5bn in profits by shorting UK shares during last month’s stock market rout.
Jupiter’s acquisition of Merian to go ahead
Jupiter Fund Management’s takeover of Merian Global Investors is to proceed, despite net outflows at Jupiter of £2.3bn and of £2.6bn at Merian in the first quarter. Jupiter issued a statement saying: “Despite the market volatility which both firms have experienced, the strategic and financial rationale of the acquisition remains compelling.”
LEISURE AND HOSPITALITY
CMA investigates Viagogo's acquisition of StubHub
The Competition and Markets Authority (CMA) is to investigate Viagogo’s $4bn (£3.2bn) purchase of ticket resale website StubHub, which it agreed to buy from owner eBay in November 2019. The CMA has launched a full investigation into the deal and concerns over competition, with the probe set to last until 11 June. It could ask the companies to sell parts of their UK operations, while a potential second inquiry could result in the UK element of the deal being blocked.
Spending slips at record rate
A study by the British Retail Consortium shows that overall consumer spending fell by 4.3% year-on-year in March - the steepest decline since the study began in 1995. The first two weeks of the month saw sales climb 12% but lockdown measures designed to slow the spread of COVID-19 drove a 27% fall over the next fortnight. On a like-for-like basis, retail sales in March decreased by 3.5% compared with March 2019.
Warehouse and Oasis fall into administration
Oasis and Warehouse have fallen into administration, with 202 jobs lost. Over 1,800 employees will be furloughed as the Oasis, Warehouse and Idle Man brands continue to trade online in the short-term. Administrators say they have seen “significant interest from potential buyers".
McLaren boss in F1 coronavirus warning
Andreas Seidl, the head of McLaren, has warned that teams will be forced out of Formula One because of the financial impact of COVID-19 if the sport does not take decisive action.
Tax rises may be needed to fix public finances
The International Monetary Fund (IMF) has warned that taxes will need to be raised or spending cut to rebalance public finances once the economy recovers from the coronavirus outbreak. Its biannual Fiscal Monitor report says: “Once the COVID-19 crisis is over, prudent fiscal policies call for appropriately paced, inclusive and credible adjustments to put debt ratios on a firm downward trajectory.” The IMF has forecast that Britain's national debt will climb from 85.4% of GDP to 95.8% by next year as borrowing quadruples to 8.3% of GDP.
Unemployment set to hit 10%
The Office for Budget Responsibility has warned that unemployment is likely to surge to 10% over the coming months, with more than 2m workers expected to lose their jobs in the second quarter. The COVID-19 pandemic is expected to trigger a record-breaking fall in growth, and for the deficit to reach a post-Second World War high.