UK lenders well positioned to deal with shocks
In its bi-annual Financial Stability Report, the Bank of England said UK lenders were well capitalised against shocks to the economy. It said the banking sector “has the capacity to support households and businesses even if economic and financial conditions were to be substantially worse than expected.” External factors such as high public debt levels in major economies and vulnerabilities in the Chinese property market were cited as having the potential to amplify shocks in the UK economy. The Bank also said it will study more closely the growing use of artificial intelligence by financial firms.
HSBC in world's first trial of quantum computer protection tool
HSBC has completed the world's first trial of a tool designed to protect highly sensitive financial data from cyber criminals using quantum computers. The British bank used the tool to safeguard a trade on its proprietary platform, HSBC AI Markets, exchanging €30m for U.S. dollars. The test demonstrates how banks are trying to stay ahead of cyber criminals who could use advances in computing to access trading data in global financial systems. HSBC's test ran on a network created by BT and using devices developed by Toshiba, with support from Amazon Web Services.
Low-earning first-time buyers needing higher deposits
A report from UK Finance reveals that first-time buyers with lower earnings are now needing to find deposits averaging nearly double their annual income to meet affordability requirements. The report said that in 2021 57% of first-time buyers had household incomes of less than £50,000. By 2023 this proportion had fallen to 46%. The review said: “These customers are now having to put down deposits equal to twice their annual earnings, significantly more than in recent years. However, borrowers with higher incomes have not seen the same shift in increased deposit requirements.”
Paragon Bank reports 25% increase in pre-tax profit
Specialist lender Paragon Bank has reported a 25.4% increase in underlying pre-tax profit before fair value items, reaching £277.6m. The bank's loan book also grew by 4.7% to £14.9bn. Despite a darkening outlook for the buy-to-let sector, Paragon Bank has continued to pick up business. The bank completed a £100m share buyback program over the 2023 financial year and has announced a further £50m for the 2024 financial year. Nigel Terrington, Paragon's CEO, stated that the bank remains well-placed to support its customers and deliver strong returns for shareholders.
Nationwide withdraws ‘work from anywhere’ policy
Nationwide CEO Debbie Crosbie is partially reversing a post-pandemic policy introduced by her predecessor which allowed 13,000 staff to work from anywhere all week. Ms Crosbie on Tuesday unveiled a new policy that will require most staff to be in an office for at least 40% of their contract – two days a week for a full-time employee. The change will not be enforced until April next year to accommodate those who made major lifestyle changes.
Coventry BS launches bid for Co-op Bank
Coventry Building Society has put forward a takeover offer for the Co-operative Bank, according to Sky News. A deal that would effectively remutualise the Co-operative Bank and create a financial services powerhouse with nearly £90bn in assets.
Société Générale launches stablecoin on Bitstamp
Société Générale has become the first big bank to launch its own stablecoin. EUR CoinVertible will debut on Luxembourg-based cryptocurrency exchange Bitstamp. Stablecoins are digital tokens that track the price of hard currencies, making it easier for traders to buy and sell in the market. SocGen's stablecoin will be fully backed by euros and the bank hopes to use it for settling trades in digital bonds, funds, and other assets. Société Générale's stablecoin launch aligns with the upcoming EU regulation Mica, and it aims to tap into the growing interest in tokenising assets. The UK has also given fund managers permission to tokenise their funds. "It is a step for a traditional financial institution into a part of trading dominated by digital asset specialists," said Jean-Marc Stenger, CEO of SocGen Forge.
Eurozone banks accused of masking lending to polluters with PR greenwash
Eurozone banks are accused of talking about climate change while secretly lending to polluting industries. A blog post by four economists published by the European Central Bank (ECB) claims that banks that portray themselves as environmentally conscious actually lend more to brown industries. The post argues that there are insufficient incentives for banks to change their lending policies.
Four-day week introduced for Lamborghini factory staff
Lamborghini staff in Italy will switch to a four-day week in a move that will bring the workers reduced hours and higher pay. Under the terms of a deal with unions, shift workers at Lamborghini’s flagship factory near Bologna will benefit from at least two four-day weeks a month depending on their shift pattern. Employees will also be paid larger bonuses
Tui mulls ditching UK stock market
The travel company Tui is considering plans to scrap its listing on the London Stock Exchange after shareholders raised questions over whether its dual listing structure across London and the Frankfurt Stock Exchange was “optimal and advantageous”. A vote at its AGM in February will determine whether the business should switch to a sole listing to Germany. Mathias Kiep, the Tui chief financial officer, said that with 75% of shares now held in Germany or on the German share register it was pertinent to ask “whether we should have this double structure”.
Building jobs fall after slump in demand
The housebuilding sector has contracted for a 12th month in a row as higher mortgage costs continue to subdue demand. This is now feeding through to a fall in employment in the sector, which has contracted for the first time since January. The S&P/CIPS PMI for construction came in at 45.5 in November, the second lowest reading since May 2020 when the country was still in lockdown. "We are just starting to see the impact now of falling activity hitting jobs," said Tim Moore, economics director at S&P Market Intelligence. "A slump in housebuilding has cast a long shadow over the UK construction sector and there were signs of weakness spreading to civil engineering and commercial work in November."
LEISURE & HOSPITALITY
Ten Entertainment agrees £287m US private equity takeover
American private equity firm Trive Capital Partners has made a recommended offer of £287m for Ten Entertainment Group, a tenpin bowling operator. The offer values the company at a premium of 33.1% to the closing price on Tuesday. Ten Entertainment Group, which was floated in 2017, has 52 venues across the country and employs over 1,800 people. The company reported total revenue of £126.7m and post-tax profit of £26.6m in the year to January 1. Shares in Ten Entertainment Group rose by 31.9% to close at 409p, just below the offer price.
Manufacturers still find trading with EU a challenge
A survey of more than 200 manufacturers found that customs paperwork and border delays are the biggest barriers for UK manufacturers trading with the EU. Logistics issues and difficulties in demonstrating rules of origin of goods were also cited as challenges. Despite these obstacles, three in four companies are still exporting to the EU. Make UK, the manufacturers' group, called on the Government to work closely with the EU to improve Britain's Trade and Co-operation Agreement (TCA) and make exporting easier.
MEDIA & ENTERTAINMENT
AMD rolls out new rival to Nvidia’s AI chip
Advanced Micro Devices (AMD) has launched a new range of chips designed to handle the massive workloads in AI applications. AMD unveiled the MI300 family of chips on Wednesday in its clearest challenge yet to the dominance of Nvidia. The company projected sales of more than $2bn in 2024 from the new chips with Microsoft, Oracle, and Meta Platforms already showing interest.
Google unveils Gemini AI system
Google on Wednesday released its new Gemini AI system, which will compete against systems such as ChatGPT and Open AI. The company said Gemini is the most flexible artificial intelligence (AI) model it has created with the ability to work on smartphones as well as large data centres.
Hedge fund Muddy Waters shorts Blackstone Mortgage Trust
Muddy Waters has revealed a short position against a real estate investment trust managed by private equity giant Blackstone, citing the vulnerability of many of the borrowers whose loans make up the trust’s holdings. Carson Block, chief executive of Muddy Waters, said souring commercial loans could trigger a “liquidity crisis” for Blackstone Mortgage Trust. The statement underscores growing concerns over the commercial property sector. Shares of the trust fell more than 8% following the claims.
Issa brothers sell off KFC restaurants
EG Group has agreed to sell more than 200 KFC restaurants to the fast-food chain’s Kentucky-based parent company Yum Brands. The company, owned by brothers Zuber and Mohsin Issa, who also own Asda, is struggling under a massive debt pile, currently standing at $5.7bn. financial pressures at Asda continue with the supermarket chain’s debt currently totalling around £4.6bn.
BoE: UK households yet to feel full impact of higher rates
UK households and businesses have been resilient in the face of rising interest rates, the Bank of England said in its latest Financial Stability Report. However, as the Bank has repeatedly warned in the past, the full effect of higher interest rates was yet to come through. The BoE said stronger-than-expected wage and income growth since its last review in July had reduced some of the strain on households which have been hit by high inflation and rise in taxes as well as higher borrowing costs. "Nevertheless, household finances remain stretched by increased living costs and higher interest rates, some of which has yet to be reflected in higher mortgage repayments," the BoE's Financial Policy Committee said. As for corporate borrowers, firms in wholesale trade, real estate and construction and those which were energy-intensive faced higher risks than their peers, the BoE said.
BoE: Private credit poses threat to financial stability
The Bank of England has raised the alarm over the vulnerability of the private credit market, which has tripled in size globally since 2015 to £1.8trn. The Bank’s Financial Policy Committee (FPC) warns that when leveraged loans and high-yield bonds are included, the total comes to more than $10trn, almost double that of with years ago. Sarah Breeden, the Bank’s deputy governor with responsibility for financial stability, said risky corporate lending “is a business model that has grown up in a low interest rate environment, and we might expect it therefore to be more challenged as we adjust to a higher interest rate environment.”