BANKING
Barclays’ loan-loss reserves rise to £3.7bn as COVID-19 hits economy
Barclays has set aside £3.7bn for the first half of the year, as it braces itself for a spate of bad debts amid the coronavirus pandemic, a £1.6bn increase on its prior reserve. The bank's pre-tax profit for the first half came in at £1.3bn, against the £3bn achieved by the same point a year ago. The lender said it had granted more than 600,000 payment holidays for consumers and businesses during the COVID-19 crisis. This included 121,000 holidays for UK-based mortgage customers, around 157,000 holidays for credit card consumers and 106,000 breaks for personal loans and point of sale finance. A large chunk of the payment holidays were granted for US credit cards, the bank said. Meanwhile, CEO Jes Staley has suggested he wants employees currently working from home to start returning to the office, saying: “It is important to get people back together in physical concentrations." He also moved to quash speculation he could axe the bank’s Canary Wharf headquarters.
Santander slumps to €11bn loss after writedowns
Santander has reported a record net loss of €11.1bn in the second quarter, taking the biggest hit yet for a European bank dealing with the coronavirus crisis which it tried to offset with lower costs. The first loss in the Spanish lender’s 163-year history came after it wrote off €6.1bn of goodwill left over from the purchases that created Santander UK in the 2000s. In total, the group wrote off more than €10bn in goodwill across its historic acquisitions, plus €2bn in deferred tax assets that it no longer expects to recover. Data shows that more than a fifth of Santander’s mortgage borrowers, a total of 239,000 customers, had asked for three-month breaks on home loans worth a collective £37.1bn amid the coronavirus crisis, while the proportion of borrowers still on payment holidays had fallen to 7% by July 15.
BoE: Record dip in debt while home loans bounce back
The Bank of England (BoE) says the amount consumers owed on credit cards and loans fell by a record amount over the last 12 months. A slump in borrowing and spending since March has seen the amount households owe on credit cards and loans fall from £225.3bn in February to £207.1bn in June, marking a 3.6% drop on the amount outstanding in June 2019. The reduction in outstanding debt is the largest year-on-year fall since records began in 1994. Alistair McQueen at Aviva said households “have repaid five years of credit card debt in just five months”. Meanwhile, BoE figures show mortgage approvals increased to 40,010 last month, a significant jump from the 9,300 recorded in May. The Bank's monthly money and credit report said: "The mortgage market showed some signs of recovery in June but remained relatively weak in comparison to pre-COVID," with figures showing that February saw 73,700 mortgage approvals.
Borrowers take advantage of cheap credit card and loan rates
Demand for credit cards and personal loans has rebounded since COVID-19 lockdown measures were eased, although more than a third of borrowers are still unable to access credit. Experian said that 38% of those searching for a loan in July were unable to find a deal that met their requirements, down from 60% in March. Personal loan rates are once again competitive for those who can be accepted for finance, according to price comparison website uSwitch. It said a borrower seeking a £10,000 personal loan over five years can currently borrow from TSB with an interest rate 2.8%, the cheapest on the market.
PRIVATE EQUITY
BC Partners buys stake in €3bn Italian machinery maker
BC Partners has agreed to buy a stake in Italian machinery maker IMA. The deal, which could see BC hold up to 45% of the business, values IMA at about €2.9bn.
KKR seeks stake in TIM's last-mile grid
KKR has made a binding offer for a minority stake of Telecom Italia's (TIM) last-mile grid – the assets which run cable from street cabinets to users' homes. A source says KRR has offered €1.8bn to buy 38% of TIM’s secondary copper and fibre network.
INTERNATIONAL
Deutsche Bank sees Q2 profit
Deutsche Bank has reported pre-tax second quarter profit of €158m compared to a pre-tax loss of €946m in the year-earlier period. It also reported net profit of €61m compared to a net loss of €3.1bn in the same period last year. Group net revenues rose 1% to €6.3bn, while core bank net revenues were up 6% to €6.4bn and investment bank revenues climbed 46%. Deutsche Bank said bond trading revenue saw its biggest surge in eight years, while non-interest expenses were down 23% year-on-year to €5.4bn. It also noted €761m of coronavirus-related loan loss provisions. CEO Christian Sewing said: “In a challenging environment we grew revenues and continued to reduce costs, and we’re fully on track to meet all our targets.”
AUTOMOTIVE
Aston Martin US errors see 2019 losses understated
Aston Martin understated the scale of last year’s losses, after its new owners identified discrepancies in payments to US dealers dating back to 2018. Pre-tax losses in 2019 were understated by £15.3m as a result, with the firm making a loss last year of £70.9m compared with an initial figure of £55.6m. Chief financial officer Kenneth Gregor blamed a “simple error or misunderstanding.” This comes as first-half revenues were down 64% to £146m, with total cars sold to customers declining 40% to 1,770 vehicles, with the company reporting a pre-tax loss of £227m during that period.
AVIATION
IATA adjusts recovery timetable
The International Air Transport Association (IATA) has revised its prediction that international air travel would return to normal by 2023, adding a year to that estimate. The body stated: “The return of global passenger traffic to pre-COVID-19 levels is now delayed by a year, to 2024. As international travel remains limited, the recovery for global passenger traffic has been slower than expected.” It added that corporate travel budgets are expected to be “very constrained” as companies face continued financial pressure even as the economy improves. However, the IATA expects a 62% increase in passenger numbers in 2021.
Heathrow reports record loss for first half
Heathrow airport has reported a record £1.06bn pre-tax half-year loss as a result of the coronavirus pandemic. Chief executive John Holland-Kaye said the results “should serve as a clarion call for the Government – the UK needs a passenger testing regime and fast. Without it, Britain is just playing a game of quarantine roulette.” He continued: "Our European competitors are racing ahead with passenger testing – if the UK doesn't act soon global Britain will be nothing more than a campaign slogan.” Meanwhile opening of a third runway at the hub will now be delayed by at least two years and is now not expected to be completed for a decade at the earliest.
Wizz Air CEO bonus rejected by shareholders
More than half of Wizz Air shareholders have voted against the directors’ remuneration report at the budget carrier’s AGM, with CEO Jozsef Varadi originally set to receive a £485,000 bonus despite the airline missing profit targets for the year to March 31. The company said the board, through its remuneration committee, intends to re-engage with shareholders on remuneration “and wider governance matters.”
CONSTRUCTION
Taylor Wimpey reports first-half loss
Home completions will be down 40% this year, Taylor Wimpey has predicted, citing the disruption resulting from coronavirus. Chief executive Pete Redfern said he expected production capacity to increase by the autumn, remarking: “Demand has been very resilient. A significant number of people just want to move on to the next stage of their lives and that includes buying a house.” First-half revenue more than halved to £755m, with the firm reporting a £40m loss.
FINANCIAL SERVICES
City watchdog orders firms to protect vulnerable customers
The Financial Conduct Authority (FCA) has ordered financial firms to do more to protect vulnerable customers, warning some are being "exploited for gain". Guidance published as part of the FCA’s ongoing consultation on the fair treatment of vulnerable customers said that while the watchdog had found "many examples of good practice" in the industry, with firms "thinking carefully about their customers and potential vulnerability", it was also aware of cases where vulnerability was either "not considered by firms or positively exploited for gain". The FCA review found that 24m people have displayed at least one characteristic of vulnerability in the last year, with this increasing by 1.5m since the start of the coronavirus crisis. Christopher Woolard, interim CEO at the FCA, said: “Supporting vulnerable consumers is a key focus for the FCA, and the coronavirus crisis has only highlighted its importance.” He added: “While many firms do excellent work to support their vulnerable customers, we will not hesitate to step in where others do not."
FCA raps brokers over ‘inappropriate’ use of clients’ assets
The Financial Conduct Authority says some brokers are making “inappropriate” use of clients’ assets through legal loopholes and given brokerages three weeks to confirm they are abiding by rules.
Jupiter Fund Management sees profits down 50% in first half
Jupiter Fund Management has reported a 50% fall in pre-tax first-half profit to £40.8m, with assets under management down 8% to £39.2bn and net fund outflows increasing £2bn from £1.1bn year-on-year. Chief executive Andrew Formica commented: “For the first half of the year, in common with the wider asset management industry, Jupiter has faced challenging market conditions, largely brought about by the global coronavirus pandemic.”
Insurer Hastings receives takeover approach from top shareholder
Hastings’ biggest shareholder has made a takeover approach, with South Africa’s Rand Merchant Holdings, which holds a 30% stake, making a joint approach with Finnish insurer Sampo Oyj.
HEALTHCARE
Fall in Smith and Nephew lockdown sales hits profits
Smith and Nephew has reported a H1 loss of $5bn (£3.86bn) from a profit of $419m (£323m) in the year earlier period, while revenue was down 18.7% in the first half of the year. The medical device maker cited the effects of the coronavirus pandemic, with chief executive Roland Diggelmann commenting: “We have taken measures to ensure the Group emerges from this crisis as strongly as possible. These include maintaining our R&D investment, launching new products, protecting jobs, and managing our cost base.”
MANUFACTURING
Fall in oil prices weighs on Weir Group profits
Engineering company Weir Group has reported a 41% fall in pre-tax profit in the first half to £63m. Orders were down 19% to £1.14bn, with revenue falling 18% to £1.1bn.
MEDIA AND ENTERTAINMENT
Openreach announces extension to fibre service
BT’s infrastructure division Openreach has said it will extend its fibre service to 3.2m “hard to reach” homes in the next five years, aiming to improve internet access in rural areas of the UK. Chief executive Clive Selley called on the Government to agree a £5bn manifesto pledge to extend gigabit broadband to the whole of the country by 2025, commenting: “They have got to go fast because we're running out of time, even with five years to go.” Meanwhile, he noted that the firm had a “very high level of Huawei dependency” in its fibre network, but said “most” of the fibre equipment installed in 2020 came from Nokia.
RETAIL
Discounting eases as lockdown restrictions end
Data from the British Retail Consortium reveals that retailers in the UK discounted goods less in July than in June, reflecting an increase in consumer demand in many sectors as lockdown measures were eased. Average shop prices this month were 1.3% lower than a year before, compared with 1.6% lower in June and 2.4% in May.