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Daily News Roundup: Thursday, 29th April 2021

Posted: 29th April 2021

BANKING

Lloyds announces £1.4bn profit

Lloyds has posted a £1.4bn after tax profit for the first quarter, representing a rise of almost 200% on the year earlier period. Statutory profit after tax for the three months to March 31 was £1.39bn, with pre-tax profit for the period of £1.9bn – up from less than £100m in the same period last year. Lloyds' profits were driven higher by a surge in mortgage lending, which hit its highest level since 2008. Lloyds said its mortgage book expanded by £6bn over the first quarter, with £4bn of this going to first-time buyers. The bank also announced that it released £323m of the cash it set aside last year to cover bad loans. Lloyds has increased its full-year net interest margin forecast from 240 basis points to 245. The results come in the week that CEO Antonio Horta-Osorio stands down to become chair of Credit Suisse.

Co-op bank in Q1 profit

Co-op Bank has reported an underlying profit in the first quarter of £2.6m, while statutory profit before tax was £7.2m. CEO Nick Slape said the bank delivered “a resilient performance” by maintaining a focus on income generation, simplification and by reducing operating costs. He added that the retail business continues to grow, with net residential lending increasing by 6% in the quarter. He also highlighted that Co-op’s SME banking proposition is “developing well.” Separately, private equity firms JC Flowers and Bain Capital have agreed to buy the shareholding in Co-op Bank owned by hedge fund Blue Mountain.

Santander UK pre-tax profit increases 61%

Santander UK has reported pre-tax profit up 61% from £114m to £184m for the first quarter, with chief executive Nathan Bostock commenting: “This is a strong set of results which demonstrates the progress we are making in transforming the bank for the future and reflects the strategic decisions we have taken. As the UK begins to emerge from the pandemic, our priority continues to be to support customers, colleagues and communities at what remains a difficult time for many.” Meanwhile, the bank is looking for a new UK boss, with CEO Mr Bostock moving to a newly created role in the wider Santander operation later in the year.

Metro Bank reports results

Metro Bank has reported a 17% fall in lending during the first quarter, with total net loans at £12.05bn, compared with £14.51bn a year earlier. Deposits were up 13% to £16.41bn. The bank said it is beginning to see progress across its loan book, with strong growth in consumer lending and specialist mortgages as its focuses on assets delivering higher risk-adjusted returns.

Post Office BankHubs scheme to be rolled out

The Post Office has announced a new pilot scheme, with its BankHubs service aimed at helping people to access cash and banking services as closures continue across the sector. Nick Read, CEO at Post Office, said it sees BankHubs as “an exciting expansion of our role in safeguarding a secure and sustainable future for cash”. “Access to vital banking and cash services are imperative in ensuring financial inclusion”, he added.

Hampden reports increase in deposits

Private bank Hampden & Co has reported strong full-year results, with total income for the year to the end of December up by 18% to £10.2m, from £8.7m in 2019, and deposits up 22% to £501.2m, from £409.4m.

Danske Bank announces £16m pre-tax profit

Danske Bank in Northern Ireland has announced a pre-tax profit of nearly £16m on turnover of £47m in the first quarter of the year. Deposits rose by 28% year-on-year from £7.6bn to £9.8bn, with deposit growth rates slowing afterward.

Brexit hit to British banks ‘still not fully felt’

Katharine Braddick, head of financial services at Britain's finance ministry, says that while the hit to the City of London from Brexit has been less severe than initially predicted “there is still a lot in play”. Banks in London continue to face pressure from the European Central Bank to relocate staff and activities to the EU. "There is quite a lot of pressure to move quite a lot quite quickly. That is very much at the sharp end of where we are seeing the new border arise," said Ms Braddick.

Barclays tops LinkedIn companies list

Professional network LinkedIn has released a ranking of the top 25 firms to build and sustain a long-term career, with Barclays identified as the best place to work for those keen to progress up the ladder. The Top Companies List identifies the organisations that offer growth, skills development opportunities and job stability. Tesco came second in the rankings, with NatWest third.

PRIVATE EQUITY

Private equity firms in £10bn of carve-out deals

Analysis by Mayer Brown shows that private equity firms made £10.1bn of corporate carve-out acquisitions in the UK last year, a significant increase on the £765m recorded in 2019. The law firm says economic disruption driven by the pandemic has seen many large businesses focus on their core operations and increasingly open to sales of less strategically-important units. There were 14 UK corporate carve-out deals undertaken by PE funds in 2020, compared to just six in 2019 and seven in 2018, Large US private equity houses were involved in all four of the UK corporate carve-out deals worth more than £1bn concluded by PE buyers in 2020.

US private equity firm raises bid for Equiniti

US private equity investor Siris Capital has offered to buy Equiniti Group for some £661m in cash, with the Siris bid revised to 180 pence per share. Rothschild & Co and Citi are acting as advisers to Equiniti on the deal.

INTERNATIONAL

Deutsche Bank reports better-than-expected net profit

Deutsche Bank has reported a better-than-expected net profit for the first quarter of €908m ($1.1bn) compared with a year-earlier loss of €43m. Chief Executive Christian Sewing noted: "Even though we undoubtedly benefited from a favourable market environment, this result shows once again that we are on the right track with our strategy.” Moody's analyst Michael Rohr noted that the lender’s results "propel its profitability to a new level."

CONSTRUCTION

Persimmon in trading update

Housebuilder Persimmon has released a trading update showing an increase in year-on-year sales of 23% in the four months since the start of the year, compared with the year earlier period. Steve Clayton, a fund manager at Hargreaves Lansdown, commented: “Persimmon’s current run-rate of sales suggests the full-year outlook could be significantly better than previous expectations. That explains the bounce in the shares in early trading.”

FINANCIAL SERVICES

FCA eyes exemptions to Mifid research rules

The Financial Conduct Authority (FCA) has outlined potential changes to the Mifid regulations in the UK, with a consultation paper proposing that research on SMEs with a market cap of below £200m is exempt due to investors being impacted by poor levels of coverage on these smaller firms. The FCA said 79% of public companies with a market cap of below £250m either had no research coverage or were covered by a sole analyst. This, it said, constituted “levels of coverage which may be insufficient to provide a fully informed view for investors”. The City watchdog will also look to unbundle fixed income, currency and commodities (FICC) research from Mifid regulations. It also plans to exempt research provided by independent research providers where the provider is not engaged in execution services and is not part of a financial services group that includes an investment firm with execution or brokerage services. The FCA said its proposals “aim to reduce burdens on investment firms while having regard to growth and the competitiveness of UK financial services”.

LSEG investors revolt against CEO’s pay rise

The London Stock Exchange Group (LSEG) has been hit by a shareholder revolt driven by a 25% increase in chief executive David Schwimmer’s base pay. Investors representing 103m shares, or 24% of the company, voted against a remuneration report which set out how Mr Schwimmer’s base pay was being lifted by £200,000 to £1m. Advisory ISS had urged investors to oppose the remuneration report, arguing the pay rise was “not considered sufficiently merited”. LSEG acknowledged the shareholder rebellion and pledged to engage further with investors in the next six months, saying: “Although shareholders were broadly supportive of the underlying principle of the CEO’s increase in base salary … we recognise that certain shareholders would have preferred the increase to have been phased”.

Pensioners owed thousands after 'scandalous' IT disaster at Prudential

An IT meltdown at Prudential has left some savers locked out of their savings for months. The pensions firm shifted its 5m customers to a new IT system in November 2020 as part of a software upgrade. However, the switch has created severe delays in customer service response times, with staff struggling to process paperwork. Hundreds of people have now lodged complaints against Prudential with the Financial Ombudsman Service. Prudential has said there will be no “financial detriment” to a member’s claim or investment as a result of the delays.

HEALTHCARE

GSK sales slide as Covid vaccination delays other treatments

Pharmaceutical firm GlaxoSmithKline has reported a fall in revenue of 18% in the first quarter, with sales of £7.4bn for the three months to March.

LEISURE AND HOSPITALITY

Indian food delivery group Zomato looks to raise $1.1bn in IPO

Indian food delivery firm Zomato has announced plans to raise as much as $1.1bn in an initial public offering, with Neil Shah, an analyst at Counterpoint noting “unparalleled demand.”

REAL ESTATE

Prices could climb £23k

Research from estate and lettings agent Barrows and Forrester suggests the extended stamp duty holiday could see the average house price climb by more than £20,000 this year. The analysis shows that since the Chancellor announced the tax break in July 2020, house prices across England have increased by an average of 0.84% each month, hitting £268,291. If this rate of growth continues, the average price could be £23,376 higher by the end of 2021. The South East of England, where typical prices have risen 0.87% month since the introduction of the stamp duty holiday, could see the biggest jump, with £31,176 added to the average if the current rate of increase is maintained.

RETAIL

Dixons Carphone to close airport stores

Dixons Carphone is to permanently close all of its outlets in airports, pointing to the impact of the Government’s decision to scrap tax-free shopping, with the retail scheme which enabled non-EU visitors to reclaim VAT paid on their purchases having been withdrawn on January 1. Dixons Carphone says it took the “difficult decision” to close the stores as it does not expect passenger numbers to recover sufficiently to compensate for the removal of airside tax-free shopping. The firm said staff employed at the stores will be offered roles elsewhere. Meanwhile, Dixons Carphone also revealed that strong recent sales mean it will repay £73m in furlough support.

Wickes counts on kitchens and bathrooms in London market return

Home improvement retailer Wickes is to return to the stock market after 20 years, with chief executive David Wood noting that “Local traders are feeling buoyant.”

ECONOMY

BoE forecast likely to be upgraded

The Bank of England is expected to upgrade its GDP growth forecast for the UK to 7% next week amid signs that the economy is recovering far more rapidly than expected. A previous forecast published in February showed expected growth of 5% this year, but analysis of weekly real-time data by investment Jefferies shows that economic activity is back at levels last seen when the pandemic started. David Owen, chief European economist at Jefferies, said that 7% is likely “even if the autumn brings with it the imposition of some additional restrictions” because the economy shrank much less than expected in the first quarter.

Business leaders set out recovery plan

A group of leading executives have set out a plan for a post-pandemic economic recovery, with the Covid Recovery Commission calling for the creation of at least one new globally competitive industry hub in every part of the UK by 2030. The commission is also calling for a radical overhaul of the Apprenticeship Levy, with the establishment of £10,000 lifelong training allowance for all over-25s. Tesco chair John Allan said the commission’s report goes beyond "purely economic measures", arguing that there is a need for growth to be used to remedy widening social inequality.

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