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Daily News Roundup: Thursday, 4th May 2023

Posted: 4th May 2023


Lloyds profits jump amid higher interest rate charges

Lloyds Banking Group reported a 46% jump in pre-tax profit to £2.3bn for Q1 2023, up from £1.5bn a year earlier, beating analysts' forecasts. The bank benefited from higher interest rates, which have climbed to 4.25% in the UK over the past year, resulting in a 20% rise in net interest income to £3.5bn. However, Lloyds expects margins to drop over the rest of the year due to increased competition for mortgage and savings customers. Its net interest margin is now likely to drop, averaging at about 3.05% for the rest of the year. Lloyds' strong quarterly performance came despite having to put aside £243m for a potential rise in customer defaults. While higher prices were affecting customer finances, Lloyds said it had only seen a “modest increase” in the number of customers falling behind on loans and mortgage payments but that overall, “levels remain at or below pre-pandemic experience”.

Barclays AGM disrupted by climate activists

Climate activists disrupted Barclays’ annual general meeting on Wednesday in protest at the bank’s funding of fossil fuel activities. After the disruptive elements were removed, Barclays chair Nigel Higgins attempted to defend the bank’s position, but shareholders and climate activists said the bank’s plans were “too little too late” and accused Barclays of “lagging” rather than leading on climate. Higgins went on to say that the bank had “significantly enhanced” its climate disclosures, and had listened to shareholder feedback, adding that, given the state of energy provision today, Barclays would not simply abandon the fossil fuel sector. Higgins also had to defend the bank’s persistently poor stock market performance, insisting the board “are absolutely focused on improving the share price and capital returns.”


US private funds face more disclosures under new SEC rule

The US Securities and Exchange Commission on Wednesday approved a new rule requiring hedge funds and private equity groups to disclose more about potentially risky events. Under the new rules, regulators will need to be informed within 72 hours of events such as significant margin calls or counterparty defaults. The disclosures companies make around share buybacks will also be enhanced to provide investors with more information to assess the purposes and effects of share repurchases.


PacWest weighs options, sending bank shares down

Shares in PacWest Bancorp and other regional banks plummeted on Wednesday after PacWest said it was exploring strategic options including a sale or capital raising. PacWest stock has lost almost 90% of its value since the regional banking crisis started in early March. Other regional lenders, whose shares have been under pressure this week, also fell, giving up gains from earlier in the day.

UniCredit raises financial targets

UniCredit has raised its financial targets for the year after posting a stronger than expected Q1 income. The bank now forecasts a 2023 profit above €6.5bn, improving the guidance it had given in February about broadly matching its 2022 result of €5.2bn. Net profit in the first three months came in at €2.06bn, above an average analyst forecast of €1.3bn, boosted by a bigger than expected 18% yearly jump in revenues.

BNP Paribas profits boosted after windfall from Bank of the West

Higher income from rates and bond trading boosted underlying revenues and profits at BNP Paribas in the first quarter. The bank was also bolstered by gains from the much-anticipated sale of its US retail division, Bank of the West. Aside from one-off factors, BNP’s net profit more than doubled from a year earlier to €4.4bn.

Commonwealth Bank cuts over 200 jobs

The Commonwealth Bank of Australia has cut 224 jobs, leading to accusation that the lender was putting profits before people seeing as net interest income rose by 19%. The Finance Sector Union called for job guarantees for staff in the upcoming Enterprise Agreement negotiations and urged the bank to stop offshoring Australian jobs to India.


Electric cars depreciate at twice the rate of petrol vehicles

Popular electric car models have fallen in price at twice the rate of their petrol equivalent, according to Choose My Car. The used car comparison website said electric cars had lost £15,000 of their value on average over a three-year period, from an average purchase price of £38,600. This compared with £9,900 for petrol vehicles, from an initial £32,700 purchase price. The study said the fall in electric car prices had effectively wiped out any savings from government grants. Stuart Masson, of advice website The Car Expert, said: “Every month electric car prices fall it is good news for everyone who wants to switch, but early adopters are subsidising that by essentially funding manufacturers’ research and development costs.”


Barratt’s profits rise as buyers return

Barratt Developments is set to report an annual profit of almost £900m this year after demand for its houses almost returned to pre-pandemic levels.


LSE boss rails against high pay complaints

Julia Hoggett, the chief executive officer of London Stock Exchange, has called for a “constructive discussion” on how Britain approaches executive pay to stop companies moving to US. In a statement on the LSE’s website, Ms Hoggett said: “We should be encouraging and supporting UK companies to compete for talent on a global basis, so we remain an attractive place for companies to base themselves, stay and grow. The alternative is we continue standing idly by as our biggest exports become skills, talent, tax revenue and the companies that generate it.” She added: “Often the same proxy agencies and asset managers that oppose compensation levels in the UK support much higher compensation packages in different jurisdictions, notably in the US.” Ms Hoggett went on to say that the LSE was looking to bring together the chairs of listed companies, founders of private companies, asset managers, the Financial Reporting Council, the Investment Association and proxy agencies for talks.

Capita clients warned of data breach fallout

The Financial Conduct Authority (FCA) has contacted Capita's corporate clients, including Aviva and Phoenix Group, urging them to assess whether their customers' data has been compromised after a cyber-attack on the outsourcer in March. The FCA has also contacted insurance companies which use Capita for administration, as well as annuity providers Pension Insurance Corporation, Rothesay and Just Group. Capita is still handling the fallout from the cyber hack, which saw staff abruptly locked out of their systems in late March. The FCA said companies had a responsibility to alert affected consumers if their data had been affected, and notify regulators including the Information Commissioner's Office. Aviva told the FT that there was “no evidence” that its customer data had been accessed.

FCA promises to listen to whistleblowers

The Financial Conduct Authority’s approach to whistleblowers will change, the regulator said, after a survey revealed widespread dissatisfaction among those who alert the regulator to wrongdoing. A majority said there was a lack of dialogue and a sense of inaction from the FCA. Georgina Halford-Hall, chief executive of WhistleblowersUK, said: “Financial services whistleblowers are turning to the United States and other countries with a record of taking whistleblowers seriously and treating them with respect and professionalism.”

UK investors sound alarm over London exchange rule changes

Investment managers have signalled their alarm over the erosion of shareholder rights proposed by the Financial Conduct Authority, as part of its planned overhaul of British listing rules.

DWS partners with Galaxy Digital to develop crypto ETPs

Frankfurt-based investment firm DWS has inked a partnership with US-based digital assets manager Galaxy Digital to launch a range of cryptocurrency-focused exchange traded products for investors in Europe.


Alzheimer’s drug can slow disease by a third

The best ever drug for Alzheimer's disease has been found to slow decline by a third, in a breakthrough that ushers in a new era of treatment for dementia. US pharmaceutical giant Eli Lilly announced that its drug donanemab delays the worsening of symptoms by 35%. In half of patients, the drug completely halted mental decline for more than a year. Experts described the results as “remarkable”.


Dyson unveils next generation battery technology

Dyson is to invest hundreds of millions of pounds in its first battery factory. The company’s new plant in Singapore will build “next generation” batteries using technology that it says will make devices such as its cordless vacuums and hair care products lighter with improved battery life. Sir James Dyson, founder of the engineering group, said: “Just like our long-term investments in pioneering digital electric motor technology, Dyson’s next generation battery technology will drive a major revolution in the performance and sustainability of Dyson’s machines.”


FTC seeks to ban Meta from monetising children’s data

Following a series of privacy violations, the Federal Trade Commission said on Wednesday that it would look to ban Meta from monetising children’s data and further limit its use of facial recognition technology.

UK opens probe into $20bn bid by Adobe for Figma

The Competition and Markets Authority has opened a probe into Adobe’s $20bn proposed acquisition of design software company Figma, with similar action expected by the US and Brussels.


Fed implements quarter-point rate rise, signals potential pause

The US Federal Reserve increased its benchmark interest rate for the tenth time in a row on Wednesday, hiking it a quarter of a percentage point to a new target range of 5% to 5.25%. However, the central bank also dropped from its policy statement language saying that it "anticipates" further rate increases would be needed raising hopes that it may be coming to the end of its tightening cycle. But Fed Chair Jerome Powell said policymakers were prepared to do more to curb inflation and cast doubt on speculation that rates could be cut this year. "We on the committee have a view that inflation is going to come down not so quickly, it will take some time," he told reporters, and "in that world, if that forecast is broadly right, it would not be appropriate to cut rates" this year.

BoE expected to hike rates again

A survey of economists by Bloomberg shows most expect the Bank of England will increase rates again this month to 4.5% and then keep them on hold. Markets, however, are betting on further hikes bring rates up to 5% by September. But rate rises beyond next week’s meeting will be “highly data dependent” says UBS economist Anna Titareva, while the BoE’s quantitative tightening is expected to help stimulate the economy.

ECB to raise interest rates for a seventh time

The European Central Bank will today raise interest rates for the seventh meeting in a row. A 25 basis point move, a slowdown after three straight 50 basis point hikes, appears the most likely outcome, as the central bank battles to get inflation down. Markets see an 80% chance of a 25 basis point move while the vast majority of economists polled by Reuters were also betting on the smaller hike.

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