BANKING
TheCityUK says British firms could be holding billions in unsustainable debt
Analysis from TheCityUK reveals that British firms could hold as much as £105bn in unsustainable debt by March next year. The financial services industry body has set up a recapitalisation group to agree on a collective response to the coronavirus pandemic from industry and government. Chief executive Miles Celic remarked: “Our industry is determined to play its part in getting the country back on its feet. Working at a pace and with real determination, firms across the industry are collaborating to identify a financially viable pathway to recovery and a return to long-term growth for UK businesses.”
Mortgage rates hit record low
The cheapest mortgages on record are currently on offer as rates tumble during the COVID-19 crisis. Although the property market has been frozen by the lockdown, analysis from Moneyfacts shows the average rate on a two-year fixed-rate deal has fallen to 2.09% from 2.43% on March 20. However, the number of mortgage products on the market has more than halved since lockdown. There were 5,222 in early March and just 2,566 at the start of May. The number available to those with a 5% or 10% deposit has dropped by 770, leaving just 72 deals available.
Small firms stressed as Barclays delays payments
Hundreds of small businesses have been waiting a week for cash approved through the government's Bounce Back Loan Scheme by Barclays to come through, the Mail reports. A Barclays spokesman said: “We apologise to the small group of customers from last week whose payments were delayed and are working hard to have the money with them later today.”
More over-65s sign up for online banking
Data from Halifax show that although online payments have increased across all age groups during the lockdown, record numbers of over-65s have signed up for online banking, doubling the proportion of payments made by the group from 20% to 40%.
Barclays announces new climate lead
Barclays has appointed Sasha Wiggins to head its public policy and corporate responsibility arm. She will lead the bank's efforts to tackle climate change, and implement its new climate policy.
PRIVATE EQUITY
KKR buys majority stake in Coty brands
KKR is to buy a majority stake in the professional beauty and retail hair businesses of cosmetics maker Coty, which include the Wella and Clairol brands, in a deal valued at some $4.3bn. With shares up around 11% in premarket trading on the news, Coty is to receive about $3bn in cash under the terms of the deal. KKR will also invest another $1bn and receive two seats on Coty’s board as part of the arrangement.
Impact investing in unflashy causes gains ground in the pandemic era
Impact investing, which measures the social and environmental impacts of funds, is on the rise as a result of the economic effects of the coronavirus pandemic.
INTERNATIONAL
EU banking agency criticised over director’s move to lobby group
The European Banking Authority should have blocked Adam Farkas from becoming CEO of the lobbying group the Association for Financial Markets in Europe, the European Ombudsman has said. “The ombudsman finds that the EBA’s decision not to forbid its executive director from becoming the CEO of a financial industry lobby was maladministration. Forbidding the job move would have been a necessary and proportionate measure in this particular case,” the ombudsman Emily O’Reilly said. She added that safeguards to protect confidential information were inadequate.
Bond yields up across eurozone as lockdowns ease
With world economies restarting as coronavirus lockdown restrictions are lifted around the globe, borrowing costs across the eurozone area have increased. Italian bond yields were up ratings agency Moody’s left its rating on the country unchanged last week, at one notch above junk territory. Commerzbank rates strategist Rainer Guntermann remarked: “The focus is on the restarting economies and risk sentiment has a chance to recover further despite the dreadfully weak economic data for April.”
Bank of Ireland announces €241m Q1 loss
Bank of Ireland has announced a first-quarter loss of €241m ($261m) before tax after it put aside €266m, with 86,000 loan repayment breaks granted to customers in Ireland and Britain. Shares were down 11.1% at €1.45, with main competitor Allied Irish Banks down 10.8%. Bank of Ireland reduced costs by 3% year-on-year as it announced it was maintaining a target introduced earlier this year for more aggressive cost cuts by next year.
Norway’s central bank risks undermining trust in $1tn oil fund
The supervisory council of Norway’s sovereign wealth fund has warned that the country’s central bank risks undermining confidence in the fund through its recruitment of billionaire hedge fund manager Nicolai Tangen as the fund’s next head.
BlackRock’s largest shareholder sells 22% stake
Pittsburgh-based PNC Financial is to sell its $17bn stake in BlackRock leaving the bank “well-positioned to take advantage of potential investment opportunities”.
Turkey ends ban on three foreign banks in currency spat
Turkey’s financial regulator has ended a ban on Citigroup, UBS and BNP Paribas from the country’s currency market just days after it was introduced.
AUTOMOTIVE
Car components supplier enters administration
Arlington Automotive Group, which employs nearly 600 people at sites across the UK, has appointed administrators to handle an insolvency process. The appointment makes it the first sizeable British car industry supplier to succumb to the COVID-19 crisis. Arlington supplies components to carmakers including Ford and Jaguar Land Rover.
Toyota and Bentley reopen factories
Employees at Toyota and Bentley factories in the UK are returning to work this week as the British economy tries to restart under the shadow of coronavirus restrictions. Toyota is restarting production for the petrol and hybrid engines produced at its plant in Deeside. Meanwhile, Bentley has halved the production rate at its Crewe factory as it reopened on Monday.
AVIATION
Airline industry set for permanent restructuring
The aviation industry is in “an acutely parlous state,” says Mark Fry, adding that a wave of airline insolvencies is imminent as global travel is decimated by attempts to contain the coronavirus pandemic. He cites Sir Tim Clark, President of Emirates Airline, who predicts that 85% of all airlines will be insolvent within two or three months without state support. The International Air Transport Association thinks airlines will need up to $200bn in liquidity support just to make it to the end of Q2, Fry notes. Looking forward, future passenger demand is still an unknown, dependent in part on what quarantine measures will be applied; and the time frame for a vaccine to be available globally remains 18 months. One ray of light, however, concludes Fry, is the increased demand for freighter flights to support global supply chains, supported by oil pricing at historic lows.
Heathrow CEO expresses concern over quarantine announcement
John Holland-Kaye, chief executive of Heathrow airport has urged the Government to agree on a common standard for safe travel with other countries, as proposed quarantine plans draw criticism. Meanwhile, Glyn Jones, chief executive at Southend airport operator Stobart Aviation, remarked: “International agreement on a clear and consistent approach to safe airport and airline operations is imperative, so that passengers can have the confidence they need to resume travel when the time is right.”
Quarantine rules should not be extended, advises budget airline
Easyjet has called on the government to implement quarantine requirements on air passengers for only “a short period,” after Prime Minister Boris Johnson announced mandatory quarantine for those entering the UK. Easyjet stated: “Requirements should be regularly reviewed to ensure they are targeted and proportionate and do not unnecessarily constrain the important role that air travel will have in the UK’s economic recovery.”
British Airways July restart plans under review after quarantine announcement
Willie Walsh, chief executive of IAG, has said British Airways is reviewing plans to resume half of all its flights in July in the wake of the government’s new quarantine announcement. He said IAG was awaiting “clarity” from government on the “finer details” of the proposals.
FINANCIAL SERVICES
EU threatens to block City access to EU
Brussels is threatening to withhold equivalence from the City of London if the UK does not submit to EU demands on other areas of trade, such as fishing and level playing field demands, City AM reports. A spokesperson for the UK negotiating team hit back at the EU’s tactics by saying the “politicisation of financial services” was “in no one’s interests and the EU knows that”. Elsewhere, trade expert Shanker Singham said he wasn’t convinced the EU’s tactic was a strong one. “Large firms from Europe need access to the City of London and if I was the UK, I would call their bluff,” he said. “Most [UK] firms have assumed no-deal anyway.”
Fund managers struggle to compare ESG apples with oranges
A column in the FT notes that calls are being made for more rigorous standards in the financial sector, to agree on common environmental, social and governance metrics.
MANUFACTURING
ArcelorMittal aims to raise $2bn to boost balance sheet
Luxembourg-based steelmaker ArcelorMittal is looking to raise $2bn to strengthen its balance sheet and reduce debt levels shortly after posting over $1bn in Q1 losses and suspending its dividend.
REAL ESTATE
Mortgage holidays could last for a year
The Financial Conduct Authority is considering emergency coronavirus measures that would see homeowners given a break from mortgage payments for up to a year. A long-lasting payment freeze is one of several measures that may be announced by the FCA to try to avoid thousands of people falling behind on mortgage payments and having their homes repossessed.
SPORT
Quarantine announcement worries F1 organisers
Recently-announced quarantine proposals in the UK could affect the Formula One 2020 world championship, which is scheduled for a delayed start in Austria on July 5. Stricter rules for returning air passengers as coronavirus lockdown restrictions are eased could jeopardise a proposal to hold two races at Silverstone in late July, with F1 exploring options to assure host countries of its ability to make the racing environment bio-secure.
BT Sport and Gfinity collaborate on esports programmes
A deal to broadcast a series of esports programmes has been agreed by BT Sport, as part of a FIFA Challenge partnership with Gfinity.
ECONOMY
Scars from virus will be permanent, warns Haldane
The Bank of England's chief economist Andy Haldane has warned that permanent scars could be left on Britain’s economy as consumers and businesses hold back spending even after the coronavirus is under control. Meanwhile, research by the London Business School indicates that household spending fell by over 40% in April, far above the 30% slump estimated by the Bank of England.