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Daily News Roundup: Thursday, 17th January 2019

Posted: 17th January 2019

BANKING

Carney concerned over leveraged loans

The governor of the Bank of England, Mark Carney, has warned that sub-prime style lending is re-emerging and has raised fears about the state of financial markets only 11 years after the crash. Mr Carney said that developments in covenant-lite lending and leveraged loans “have all the hallmarks” of the mortgage crisis that caused the great recession back in 2008. He added that regulators were on top of the issue but the risk remained widespread. Richard Sharp, a member of the Bank’s financial policy committee, added: “The issue is not that leveraged lending should not take place. It’s a source of major employment and profitability here. The issue is it should be carefully managed.” Mr Carney also revealed that the Bank has launched a review into how rising student debt might affect financial stability.

Lloyds to lend businesses £18bn

Lloyds Banking Group says it will lend £18bn to British businesses this year, with the cash set to support entrepreneurs looking to start new companies, micro-businesses seeking to grow and small firms planning to trade internationally for the first time. Lloyds says it has increased net lending to SMEs by 34% since 2011. The lending commitment builds on the £500m growth fund Lloyds announced last year to help companies invest in equipment to improve productivity and £5m to help fund 3,500 manufacturing apprenticeships.

Banks primed for £250bn lending spree if UK crashes out

Mark Carney has suggested that Britain’s banks would be allowed to lend an extra £250bn to flush the economy with credit in the event of a sharp Brexit-induced slowdown. The Bank of England governor said that a "buffer" held by high street lenders to absorb losses could be released, giving them "about £11bn more capital to support lending". That would create an additional "£250bn capacity ... four times as much lending as took place in 2018", he said.

New UK investment banking head at SocGen

Société Générale Corporate & Investment Banking (SG CIB) has announced the appointment of Peter McGahan as UK head of coverage and investment banking. He replaces Sadia Ricke, who will focus on her role as UK chief country officer.

INTERNATIONAL

Goldman Sachs posts rise in revenue

Goldman Sachs has posted revenue of $8.1bn (£6.3bn) in the three months to the end of December, higher than forecasts of $7.5bn and slightly up on the same period in 2017. The bank posted equity trading revenue of $1.6bn, 17% higher than the end of 2017, although its fixed income trading division suffered from an 18% revenue drop when compared with the fourth quarter of 2018. During the update, CEO David Solomon issued an apology to the people of Malaysia over the role of Tim Leissner, a former Goldman Sachs employee, in the 1MDB scandal. Solomon said: “It’s very clear that the people of Malaysia were defrauded by many individuals including the highest members of the prior government.”

Orcel offered bonus cut to remain in Santander role

Andrea Orcel reportedly offered concessions to Santander as a way of resolving the impasse over his €40m to €50m bonus. Mr Orcel was expected to become CEO of Santander, but the Spanish bank announced a U-turn over the hiring. Mr Orcel, the former boss of UBS’s investment banking division, is understood to have offered to accept a reduction of as much as 20% of the money owed. However, this was not enough for Santander and he was given no further chance to reduce his demands before the job offer was scrapped. The Times notes that Mr Orcel may now have a claim against both UBS and Santander. The FT adds that Mr Orcel has been left devastated by the turn of events, with his career now in a “shambles”.

Male Citigroup staff earn 29% more

Citigroup has declared an aim to close its gender pay gap, having revealed that the median pay for its female staff is 71% of that of male employees globally. The bank, which employs more than 200,000 people in more than 100 countries, says narrowing the gap will involve boosting the number of women in senior and higher-paying roles. The bank also reported that among U.S.-based employees, people of colour earn 7% less than their white colleagues.

Bank of America results top estimates despite sluggish loan growth

Bank of America has surpassed Wall Street’s expectations by posting solid fourth-quarter revenue growth driven by its consumer bank, with revenue for the quarter at $22.7bn, up 11% from 2018.

AUTOMOTIVE

Car makers and sellers appeal for Brexit clarity

After MPs dismissed the Prime Minister’s Brexit deal in parliament on Tuesday, car makers and dealers have called for clarity on how Britain will leave the EU, with Society of Motor Manufacturers and Traders chief executive Mike Hawes commenting: “The vote against the Brexit deal on the table brings us closer to the ‘no deal’ cliff edge that would be catastrophic for the automotive industry.”

Ford sees profit improving this year despite flat global auto sales

Ford has predicted that earnings this year could improve despite projected flat global car sales, as it said last year’s adjusted earnings per share would be $1.30.

CONSTRUCTION

Improving profits at Bovis

An increase in new homes and a wider margin have led Bovis to say it expects profits to beat market expectations. The number of new homes delivered rose 3% on last year to 3,759, while average selling price ticked up marginally to roughly £273,000. Shares in the firm increased nearly 5% following the update, with chief executive Greg Fitzgerald saying: “The significant improvement in operational performance across all areas of the business is expected to deliver a record year of profits for the group.”

FINANCIAL SERVICES

Saga to meet profit expectations

Saga, the financial services group for the over-50s, has reported overall profitability in line with expectations, despite what it described as a “challenging” market. Its ship the Spirit of Discovery, which is to take to the seas in June, reached 69% of the sales target for 2019/20 departures and Spirit of Adventure, due to launch next year, reached 34% of its sales target for 2020/21 trips. Chief executive Lance Batchelor noted: “We are making progress with our strategy to invest in attracting new customers across the business.”

Scots hiring boosted by finance

New research from the Association of Professional Staffing Companies has found that Scotland is experiencing impressive levels of hiring activity, due to the financial services and tech sectors. According to the research, professional recruitment activity was up by 7% last year, with vacancies in banking up 23% and demand for IT analysts showing a 46% year-on-year jump in December.

BlackRock’s growth goes into reverse

BlackRock suffered a 5% fall in assets under management last year, with total assets under management falling below $6tn. This comes after it last week announced 500 job cuts globally.

LEISURE AND HOSPITALITY

Reuben brothers sell out of Belmond

The Reuben brothers have disposed of their stake in Belmond, the New York-listed operator of the Venice-Simplon-Orient-Express train, for $300m (£233m). This comes a month after luxury goods group LVMH was announced as the winner of an auction to buy Belmond, agreeing the deal for $3.2bn.

MANUFACTURING

Clarks set to abandon UK manufacturing

Shoe manufacturer Clarks is expected to close an advanced factory in Street, Somerset, less than two years after opening the plant. The prototype plant was expected to create about 80 jobs when it was announced, with plans for it to produce 300,000 pairs of desert boots a year. However, it has failed to hit targets and the 49 staff employed in the facility are now in a 30-day consultation period that is likely to result in closure.

MEDIA AND ENTERTAINMENT

Cineworld sees UK sales slip

Like-for-like revenue at Cineworld grew 6.2% year-on-year in the 12 months to the end of 2018, boosted by U.S. growth of 8.6%, with a record figure of 308m people visiting its cinemas during the year. UK & Ireland revenue decreased by 0.6% on a constant currency basis, as the firm said it was set to deliver its performance in line with expectations. The company’s share price fell 5% to 262p in mid-morning trading.

REAL ESTATE

House price growth flat

House price growth remained relatively flat in the year to November, according to official figures from the Land Registry and the ONS. Average house prices across the UK climbed by 2.8%, rising from 2.7% annual growth in October 2018. The ONS said the average UK house price was £230,630 in October, falling by 0.1% month-on-month. Kevin Roberts, director of the Legal & General Mortgage Club, said: “The ongoing political uncertainty is clearly causing some buyers and sellers to take a wait-and-see approach when it comes to the property market.”

ECONOMY

Inflation falls to lowest level in nearly two years

The ONS has said that the UK inflation rate fell to 2.1% in December, down from 2.3% the previous month. The CPI figure was the lowest in nearly two years, pushed down by petrol price falls. Mike Hardie, head of inflation at the ONS, said: “Inflation eased mainly due to a big fall in petrol, with oil prices tumbling in recent months. Air fares also helped push down the rate, with seasonal prices rising less than they did last year. These were partially offset by small rises in hotel prices and mobile phone charges. House price growth was little changed in the year to November, with buoyant growth across much of the UK held back by London and the South East.”

OTHER

PM: MPs must work together to deliver Brexit

Speaking after winning a no confidence vote in her Government, Theresa May has called on MPs to put aside their own self-interest and work constructively together to find a way forward for Brexit. Last night, she met with the SNP, Lib Dem and Plaid Cymru leaders but not Labour leader Jeremy Corbyn. Mrs May said the meetings she had held so far had been "constructive" and that she - along with other senior government representatives - would be meeting with other MPs in the coming days to get the "widest possible views across parliament" on Brexit.

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