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Daily News Roundup: Thursday, 2nd August 2018

Posted: 2nd August 2018

BANKING

Lloyds profits rise despite further PPI provision

Lloyds Banking Group has said it has put aside another £460m in costs for PPI mis-selling claims. The provision came as Lloyds said its profits for the first six months of the year rose by nearly a quarter. The lender made pre-tax profits of £3.1bn, 23% higher than the same time last year. CEO António Horta-Osório said: "We have delivered another strong and sustainable financial performance with increased statutory profits, higher returns and a strong capital build." Meanwhile, Lloyds said it was committed to maintaining the UK's largest network of branches, despite its announcement of 49 branch closures in April. It said it also had the largest digital bank in the UK, with active users increasing to almost 14m, including about 10m mobile banking users. Lloyds said its balance sheet remained strong, with its common equity tier one capital ratio increasing to 15.1% pre-dividend, adding that it would pay an interim dividend of 1.07 pence a share.

PRIVATE EQUITY

Carlyle beats expectations after mammoth fundraising

Carlyle is set to acquire $6bn of assets from AIG. The deal caps $52bn of new money raised by the private equity group over the past 12 months.

Axa enters private equity talks

Axa has announced that it has entered exclusive talks over a possible €1.2bn (£1.07bn) sale to private equity firm Cinven of its variable annuity products platform.

INTERNATIONAL

UBS not required to hand over client data

The Swiss Federal Administrative Court has ruled that UBS does not have to surrender client data following a French request for the identities of thousands of account holders suspected of dodging taxes.

BNP Paribas beats expectations despite sluggish trading

BNP Paribas said net income fell in the second quarter to €2.39m compared with the same quarter last year. Revenues came in at €11.2bn, up 2.5% over the second quarter in 2017.

SocGen could exit SA

Société Générale is reportedly in talks with South African lender Absa about selling its local unit. The deal would end SocGen's nearly three decades in South Africa as it looks to cut costs and focus on its key markets.

AUTOMOTIVE

VW reports profit increase

Volkswagen has reported an increase in second quarter net profit thanks to strong sales, but the German car manufacturer warned that strict new emissions tests and global trade tensions posed "great challenges" in the months ahead. VW said net profit jumped 6.8% year-on-year to €3.3bn (£2.9bn) between April and June, beating analyst expectations.

AVIATION

BAE Systems posts sales decline

BAE Systems posted an 8.5% decline in overall sales to £8.2bn in the six months to June 30, while operating profit was 10.5% lower at £792m. BAE’s combat aircraft division, which is responsible for about a third of total revenue, reported sales of £2.8bn, a 16.8% fall on the previous year, while operating profit dropped 5% to £438m.

CONSTRUCTION

Kier Group knuckles down with board shake-up

Construction firm Kier Group has revealed a board shake-up as it shores up to fill the gap left by Carillion’s collapse. Current strategy and corporate development director Claudio Veritiero has been appointed to the role of chief operating officer, while Nigel Brook and Nigel Turner will leave after 10 and 21 years at the firm respectively.

FINANCIAL SERVICES

Paul Geddes to step down from Direct Line

Paul Geddes, chief executive of Direct Line insurance, is to step down in 2019. Mr Geddes noted that a key challenge for his successor would be to "make sure you're on the right side of the technology train", stating that this is something all business leaders must focus on. Meanwhile, Direct Line is reportedly making over £2m a week from customers who pay in monthly instalments, with critics arguing that this system penalises less well-off drivers.

AI start-up Hazy receives funding from Nationwide

London start-up Hazy, which aims to help companies protect data privacy, has raised more than £2.5m this year in total from Nationwide and other backers. Harry Keen, the Hazy chief executive, commented: "It is fantastic Nationwide is joining Microsoft. In Nationwide we have a very collaborative customer who can find new use cases." Emma Huntington, Nationwide's investment lead, noted that the building society could develop new products and services for its members as a result of the backing.

Co-op considers insurance business sale

The Co-op Group has hired Fenchurch Advisory Partners to explore a potential £300m sale of its insurance business. The insurance division was last put on the market five years ago.

HEALTHCARE

Drugs firms stockpiling ahead of Brexit

French pharmaceuticals firm Sanofi, which employs 1,600 people in the UK, has revealed that it began stockpiling drugs last year ahead of a potential hard Brexit. AstraZeneca has already said it was increasing drug stockpiles by around 20% ahead of a potential EU stalemate.

MANUFACTURING

Manufacturers struggling amid Brexit uncertainty

IHS Markit's UK purchasing managers’ index (PMI) fell to a three-month low of 54.0 in July with output and new orders struggling to keep up. Though PMI remains above the long-run average of 51.8, Helena Sans, head of manufacturing at Barclays, said: "The industry is desperate for a degree of clarity and progress on the Brexit negotiations and a better understanding of what the final outcome will mean for manufacturers".

ThyssenKrupp’s profit warning underlines structural issues - activist

Activist investor Cevian Capital has said that Thyssen Krupp’s surprise profit warning has confirmed that German manufacturer’s existing structure is too unwieldy to manage.

REAL ESTATE

House prices accelerated in July

The year-on-year rise in UK house prices accelerated in July, according to Nationwide Building Society, which has said that the annual growth in house prices rose from 2% in June to 2.5% in July, taking the cost of the average home in July to £217,010, up 0.6% on June. Nationwide expects house prices to rise by 1% over the course of 2018 and its chief economist Robert Gardner said an expected interest rate hike by the Bank of England today would likely have a modest impact on the market, as most mortgages issued recently were on fixed interest rates.

Countrywide’s £250m bond issue fails

Countrywide is dependent on an emergency equity raising to bolster its balance sheet, after the estate agent suffered a failed bond issue this year.

RETAIL

Next basks in warm weather

Next says that the recent spell of hot weather in the UK helped boost full-price second-quarter sales by 2.8%. The company cautioned, however, that some of the sales “have been pulled forward from August”, and will therefore be maintaining its full-year guidance, of £717m in profits. Yesterday’s trading update showed that full-price sales online were up 12.5% in the 12 weeks to July 28, while retail - or in-store - sales were down almost 6%.

Chinese investor pulls out of House of Fraser rescue deal

C.banner, the Hong Kong-listed owner of Hamleys, has pulled out of a financial rescue deal for House of Fraser. The retail chain is struggling to pay its quarterly rent bill of almost £25m, while its suppliers are beginning to plan for House of Fraser's possible collapse.

ECONOMY

Interest rate rise widely anticipated

City AM’s shadow monetary policy committee (MPC) widely believes the time is right for the Bank of England to hike interest rates today. Jacob Nell, chief UK economist at Morgan Stanley, says a rise would be a good response to a robust second-quarter rebound in growth and new upside pressures on inflation from a weaker GBP and higher public sector pay settlements, while Jeavon Lolay, head of economics and strategy at Lloyds Bank Commercial Banking, says there is now clear evidence to show the economy is on a firmer footing. Tej Parikh, senior economist at the Institute of Directors, indicated a preference to hold however, suggesting that a hike now risks damaging business and household confidence just as Brexit uncertainties ramp up.

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