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Daily News Roundup: Thursday, 29th July 2021

Posted: 29th July 2021

BANKING

Barclays sees profits soar in H1

Barclays’ first-half profits have nearly quadrupled compared to a year ago, with the bank’s strong performance seeing it reinstate an interim dividend at 2p – with this worth around £340m to investors - and announce another £500m buyback programme. Group profit before tax in the six months to June was £5bn, up from £1.3bn in the first half of 2020 and well above the £4.1bn consensus expectation among City analysts. The performance was led by its investment banking unit, where first half fees surged 27% to £1.7bn. Equities income increased 38% to £1.7bn, helping offset a 37% fall in revenues from trading bonds, currencies and commodities. Barclays has announced the release of £742m of cash previously set aside in anticipation of borrower defaults. The bank’s assets under management have hit £219bn in the past six months, the report shows. Chief executive Jes Staley commented: “This has been a strong first half, clearly demonstrating the benefits of our resilient and diversified universal bank in supporting the growth of capital markets, our corporate clients and retail customers”.

Santander profit climbs

Santander UK says first half profit from continuing operations before tax rose 407% to £751m, with strong mortgage lending boosting profits. CEO Nathan Bostock said: “We have delivered good growth in net interest income and strong mortgage lending. Looking ahead, while we are encouraged by the UK's strong economic recovery, uncertainty remains as we enter a new phase in the pandemic.” Meanwhile, Banco Santander reported a net profit of €2.07bn for the three months to June, compared with a loss of more than €11bn in the same period last year. Separately, Santander has closed around 25 branches in the UK, out of a total of 465, for a week due to staff shortages caused by the so-called pingdemic.

Metro losses narrow

Metro Bank recorded a pre-tax loss of £138m for the six months to June, compared to a loss of £240m a year earlier. Metro's total loans at the end of June were £12.3bn, 17% lower than a year earlier, although consumer lending tripled. Assets under management have grown 2% since the end of December at £23bn in total, and 4% since June last year. Meanwhile, Metro chief executive Dan Frumkin has criticised the Financial Conduct Authority over the time it is taking to complete an investigation of a 2019 accounting error that triggered a share price collapse. The regulator has been investigating the challenger bank since it admitted to miscalculating the riskiness of property loans.

Starling leads on switches

Figures from the Current Account Switching Service show that Starling Bank secured the most switchers in the opening three months of the year, adding 17,769 new savers. For the first quarter of Q1 2021, only seven banks managed to make gains: Starling, Triodos, Virgin Money, Monzo, Bank of Scotland, Nationwide, and Lloyds. Anne Boden, Starling Bank's CEO, said it “is once again the most popular bank for switches, despite offering no signing-on bonuses”, saying savers are attracted by Starling’s banking app and customer service.

Lloyds set for £400m takeover of Embark

Lloyds Banking Group is reportedly set to unveil its biggest corporate acquisition since it returned to full private ownership four years ago, with the bank set to confirm the takeover of Embark Group, a privately owned provider of savings and retirement products.

INTERNATIONAL

Morgan Stanley boosts pay for junior bankers

Morgan Stanley has raised base salaries for entry-level bankers in its investment banking and global capital markets division, increasing base pay to $100,000 for first-year bankers and a minimum of $105,000 for second years. With Morgan Stanley following rivals in upping pay, it means that Goldman Sachs is the only Wall Street bank that has yet to raise pay for junior bankers. Citigroup, JPMorgan Chase, Bank of America, Barclays, Nomura and UBS have all increased incentives after analysis found that up to 70% of junior bankers quit their roles due to burnout from severe workloads since the onset of the pandemic.

Deutsche Bank profit beats estimates

Deutsche Bank has announced better-than-expected quarterly results despite a decline in its investment banking revenue. The net profit attributable to shareholders in Q2 came in at €692m, almost double analyst expectations of a profit of €372m. This compares to a loss of €77m a year earlier.  

Unicaja's 2Q net profit rises 87%

Spain's Unicaja, which has bought Liberbank to create Spain's fifth-largest bank in terms of assets, says net profit rose 87% in Q2 from the same period last year. The lender reported a net profit of €28m in the April to June period.

ECB to overhaul payment system

The European Central Bank will overhaul its payment system to address deficiencies that have led to a string of crashes. The Target system, which handles payments worth nearly €2trn day, is run by the ECB and the central banks of Germany, France, Italy and Spain. A review into the crashes and the operation of the system found six major issues in how Target is run, saying these “either directly or indirectly contributed to the occurrence of the incidents or had an impact on the incidents' severity during their resolution”.

AVIATION

Boeing profits take off

Boeing has seen its first quarterly profit in almost two years, with this driven by an increase in deliveries of its 737 Max jets to airlines. The aviation group’s core operating profit was $755m in the second quarter, reversing a loss of $3.32bn a year earlier. Revenue rose by 44% to about $17bn. Boeing’s commercial aircraft division reported a quarterly loss of $472m but its defence business earned $958m and its services division made $531m.

FINANCIAL SERVICES

FCA proposes new diversity rule for listed firms

The Financial Conduct Authority (FCA) has proposed changes to its listing rules in a bid to improve transparency on the diversity of listed company boards and their executive management teams. It is consulting on rules that would require companies to disclose annually whether they meet specific board diversity targets. Firms would also be obligated to publish diversity data. While the City watchdog will not set quotas as the diversity targets are not mandatory, it will provide a positive benchmark for issuers to report against. The FCA has mooted benchmarks of at least 40% female board representation, with at least one of the senior board positions - chair, CEO, CFO or senior independent director - to be a woman. It would also call for at least one member of the board to be from a non-white ethnic minority background. The FCA also wants to ensure that broader aspects of diversity are considered, such as sexual orientation, disability and socio-economic background. 

St James’s Place assets hit record level

St. James’s Place has increased its assets to more than £140bn after clients who built up bumper savings during lockdowns poured money into the business. The wealth manager reported better net inflows than expected of £5.5bn for the six months to the end of June, which, combined with favourable movements in financial markets, propelled its total funds under management to a record £143.8bn. Gross inflows amounted to £9.2bn of new client investments, a 27% increase from last year, and it is forecasting a rise of about 20% during the second half. 

LEISURE & HOSPITALITY

Pub group in tax plea

Pub group Marston's has called for taxes to be permanently cut to help operators which have been hit by the pandemic. Ministers have extended a cut to VAT on cafes, restaurants and hotels by six months until the end of September but some within the industry want the reduction to be made permanent. Marston’s chief executive Ralph Findlay warned that the outlook for the sector remained "uncertain" in the immediate short term and said a Government review of the business rates system is "long overdue". He added that the VAT reduction “should be permanent since the hospitality industry remains one of the most heavily taxed sectors”.

MANUFACTURING

Ministry of Defence to acquire steel firm

Steel company Sheffield Forgemasters is set to be nationalised in a £2.6m deal with the Ministry of Defence (MoD), with ministers saying the Government intends to invest up to £400m in the business. David Bond, chief executive officer at Sheffield Forgemasters, described it as an "important milestone" for the company and UK manufacturing. An MoD spokesperson said a 10-year investment will be used to modernise the plant and its equipment to support its role as a long-term supplier to UK defence.

REAL ESTATE

House price growth slows as tax break winds down

Property prices have continued to rise but at a slower pace since the stamp duty holiday started to taper, according to Nationwide. Annual house price growth slowed to 10.5% in July, having hit a 17-year high of 13.4% in June. Month-on-month, prices dipped 0.5% in July, having climbed 0.7% the month before. The report shows that the average UK house price hit £244,229 in July, down from the £245,432 recorded in June. Analysis shows that house prices increased by an average of 1.6% a month over the April to June period. This is more than six times the average monthly gain recorded in the five years before the pandemic. Nationwide’s chief economist, Robert Gardner, said: “The modest fall back in July was unsurprising given the significant gains recorded in recent months.” He added that the tapering of stamp duty relief is “likely to have taken some of the heat out of the market” but noted that “underlying demand is likely to remain solid in the near term”.

ECONOMY

PM predicts steady economic recovery, despite ‘bumps on the road’

While Boris Johnson believes the UK will see a "steady" economic recovery post-pandemic, he has warned there will be "bumps on the road". The Prime Minister told LBC that the vaccination programme has enabled England to “open up in the way that we said we would" as restrictions have eased, with this enabling the country to “make the economic progress that we are”. He added: “I think the rest of this year... there will still be bumps on the road, but I think you'll see a story of steady economic recovery and perhaps quite fast economic recovery as well." With the International Monetary Fund this week saying it expected the UK’s economic output to grow by 7% this year, having previously pointed to growth of 5.3%, Mr Johnson commented: “It's clear that... if we're sensible and we continue to take a cautious approach that we can see a very, very strong recovery."

OTHER

Pandemic hits self-employed women harder than men

Self-employed women lost around 20% of their income during the course of the pandemic, while self-employed men saw their income take an 11% hit, a survey by insurance provider Superscript has found. The poll of 2,015 sole-traders, freelancers and micro-business owners reveals that, for those whose income was affected by the pandemic, a drop in demand for products and services was the primary reason. Cameron Shearer, co-founder of SME insurer Superscript, said: “Self-employed women have been disproportionately impacted, which illustrates that society still has a way to go to encourage female entrepreneurship”.

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