BANKING
Metro Bank suffers £241m first-half loss
Metro Bank yesterday revealed that it had put aside £112m for potential loan losses in the first half, leading to a £241m loss for the first six months of the year. The bank warned that it may have to raise more cash to prevent it breaching capital requirements but Dan Frumkin, Metro’s new chief executive, said management was happy with the 8% growth in deposits in the six-month period to £15.6bn. Mr Frumkin also said the lender’s 1,400 head office and back-office employees will not be required to return to the office before 2021 after an internal survey found only 4% wanted to return to previous working arrangements.
Banks struggle to cope with surge in mortgage applications
Banks and building societies have been overwhelmed with a deluge in mortgage applications following the stamp duty tax giveaway, leaving homebuyers waiting weeks for their applications to be processed. Many banks are operating with reduced staffing levels because of the COVID-19 pandemic. Chris Sykes of Private Finance, a mortgage broker, said banks offering 90% mortgages in particular were struggling to process applications in a timely manner, given the demand for such loans.
More pain for banks is yet to come
The Yorkshire Post considers how the UK’s largest banks have underperformed their European rivals, with Barclays, Standard Chartered, Lloyds, NatWest and HSBC setting aside £17bn between them for loan losses. BNP Paribas and Credit Suisse beat analyst forecasts, benefiting from bumper trading volumes as well as relatively modest provisions. The FT also contrasts the fates of UK, European and US lenders with key observations including predictions of major longer-term cost-cutting strategies and warnings that the revenue boost from trading will prove temporary.
PRIVATE EQUITY
Blackstone snaps up Ancestry.com in $4.7bn deal
Blackstone has agreed to buy a 75% stake in genealogy website Ancestry.com in a deal valued at $4.7bn including debt. The company also offers DNA testing and has branched out into genomics in recent years. It claimed last month that its scientists had identified a DNA link that could explain why coronavirus “seems to take a greater toll on men than women”. Blackstone will now have access to the DNA data of 18m members.
Fast-growing smaller UK companies face £15bn funding shortfall
New research from the ScaleUp Institute and Innovate Finance estimates that fast-growing SMEs in the UK face a £15bn funding deficit this year.
INTERNATIONAL
Commerzbank profit slumps by a fifth amid COVID and Wirecard losses
Commerzbank has reported a 21% fall in second-quarter net profit to €220m on the back of a sharp increase in loan loss provisions. The German lender wrote off €175m of loans it made to Wirecard, which filed for insolvency in June, and made €131m in loan-loss provisions relating to the pandemic. CFO Bettina Orlopp said the bank would have to set between €1.3bn and €1.5bn for loan losses in the full year. The FT’s Lex contends that Commerzbank is” stuck in a purgatory of being too cheap to sell and too problematic to acquire.”
Bank of Ireland takes €937m impairment after coronavirus
Bank of Ireland has cited the effects of coronavirus as it took a €937m impairment charge to cover loan losses, with the lender confirming plans to cut about 1,400 jobs.
Wells Fargo to dramatically cut consultancy spend after internal backlash
Wells Fargo is to slash the “extraordinary” $1bn-$1.5bn paid annually to consultants following an internal backlash.
AUTOMOTIVE
Sales of new cars rebound in July
An 11.3% rise in new car registrations was reported last month, with nearly 175,000 new vehicles purchased in July. Mike Hawes, Society of Motor Manufacturers and Traders chief executive, commented: “July’s figures are positive, with a boost from demand pent up from earlier in the year and some attractive offers meaning there are some very good deals to be had. By the end of September we should have a clearer picture of whether or not this is a long-term trend.”
Honda and BMW second quarter profits fall
Honda and BMW have reported second quarter losses of 113.7bn yen (£820m) and €666m (£601.4m) respectively. BMW chief executive Oliver Zipse remarked: “We are now looking ahead to the second six-month period with cautious optimism and continue to target an EBIT margin between 0% and 3% for the automotive segment in 2020.” This follows similar loss announcements at rivals Nissan, Mitsubishi and Mazda.
AVIATION
Virgin Atlantic rescue deal proposed
Virgin Atlantic creditors are being asked to approve a £1.2bn rescue deal, with lawyers for the airline arguing that it is "fundamentally sound" but requires a restructuring and fresh injection of funds. Virgin Atlantic stated: "With support already secured from the majority of stakeholders, it's expected that the Restructuring Plan and recapitalisation will come into effect in September. We remain confident in the plan."
CONSTRUCTION
Johnson hopes planning shake-up will trigger construction boom
Small builders are set to benefit from a cut in planning regulations in England with ministers looking at exempting small sites from taxes paid to fund local infrastructure and affordable housing. Robert Jenrick, the housing secretary, said: “These once-in-a-generation reforms will lay the foundations for a brighter future […] We will cut red tape, but not standards, placing a higher regard on quality, design and the environment than before. Planning decisions will be simple and transparent, with local democracy at the heart of the process.”
FINANCIAL SERVICES
Hastings takeover boosts M&A hopes
Insurance firm Hastings has agreed a £1.66bn takeover by Finland’s Sampo and South Africa’s Rand Merchant Investment, spurring hopes of a wave of M&A activity in the UK. Dwayne Lysaght, co-head of M&A for EMEA at JP Morgan, commented: “The number and volume of European deals valued at over a billion dollars in June and July were back at levels we saw pre-COVID. In the UK, we’ve seen just a handful of larger deals in recent months, but the trend is upwards, and we expect it to continue that way.” Hastings chief executive Toby van der Meer said the deal represented a “great sign of confidence in the UK.”
Hargreaves Lansdown’s role in Neil Woodford scandal leads to second legal claim
Hargreaves Lansdown is facing another legal claim in relation to its role in promoting Neil Woodford's defunct Woodford Equity Income fund. Gareth Pope, of law firm Slater and Gordon, commented: “We have very carefully considered the facts which have led to investors losing millions of pounds as Mr Woodford's funds featured on Hargreaves Lansdown’s best buy list. Having done so, we now believe there’s a case for Hargreaves to answer."
Allianz becomes latest insurer to feel brunt of COVID-19
Munich-based insurer Allianz on Wednesday announced a 19% year-on-year fall in operating profit for the second quarter to €2.6bn, with the coronavirus pandemic leading to rising insurance payouts and falling asset management fees during the first half of the year. Allianz CEO Oliver Baete said the company has shown resilience in the first half and expects “a solid financial performance also in the second half of 2020.”
Legal & General holds dividend flat as crisis hits profits
Legal & General yesterday went ahead with its first-half dividend paying out 4.93p per share, despite a 73% drop in first-half pre-tax profits to £285m due to the coronavirus crisis. CEO Nigel Wilson said the payout had been cleared with the Bank of England. COVID costs reduced L&G's profits by an estimated £129m, including £21m spent on remote working.
CMA blocks platform tech merger over fee fears
The Competition and Markets Authority has blocked the merger of FNZ and GBST, two of the largest platform technology operators in the UK, amid fears that the deal could lead to millions of UK consumers facing higher fees and lower quality services.
LEISURE & HOSPITALITY
William Hill to shut 119 shops permanently
William Hill is to keep 119 of its High Street betting shops closed, with around 300 staff affected, even as trading recovers well, allowing the firm to repay £24.5m of UK furlough funds. The company reported pre-tax profits of £141m for the first half, compared with a loss of £63m in the year earlier period.
Loungers sees shares rise on ‘encouraging’ trading
Loungers has announced that it is “encouraged” by trading levels since its July reopening, with the owner of the Cosy Club and Lounge brands seeing its share price increase 13.49% to 122p. Sales were down 1.7% in the period from 4 July to 2 August, compared to the year earlier period.
REAL ESTATE
Segro boosted by rise in online shopping
Segro has seen the value of its portfolio of warehousing and logistics assets in the UK and in continental Europe rise by 0.7% to £11.2bn in the six months to the end of June following a rise in demand for warehouse space from online retailers and data centre operators. The company reported a 6.5% rise in profit before tax to £140.4m and raised its interim dividend by 9.5% to 6.9p a share.
RETAIL
WH Smith announces job losses affecting 1,500 positions
Some 11% of WH Smith’s workforce, representing 1,500 jobs, will be cut as the firm’s travel sites at airports and railway stations take the brunt of coronavirus damage to the company. The company said a fall in sales meant it was now likely to suffer an underlying loss of between £70m and £75m for its financial year to the end of August – nearly double the loss predicted back in March and a far cry from the £155m of profit last year.
ECONOMY
Service sector rebound raises hopes of V-shaped recovery
The UK’s services sector rebounded at its fastest rate in five years last month rising from 47.1 in June to a five-year high of 56.5, according to the latest IHS Markit/Cips composite purchasing managers’ index (PMI). However, demand for permanent and temporary jobs fell again in July as businesses adjusted their staffing requirements.