HSBC sees quarterly profit almost double
HSBC says its quarterly profit has almost doubled, boosted by rising interest rates. The lender reported profit before tax of $5.2bn (£4.3bn) for the last three months of 2022, up 95% from the same time a year earlier. However, pre-tax profit for the year as a whole fell by $1.4bn to $17.5bn, as it absorbs the cost of selling its French retail banking operations. "2022 was another good year for HSBC," chief executive Noel Quinn said. "We are on track to deliver higher returns in 2023," he added.
Loan defaults expected to hold back profits at Lloyds
Analysts warned on Monday that Lloyds Bank's profits could be trimmed by it setting aside hundreds of millions to deal with an expected jump in defaults caused by the cost of living crunch. The bank is due to report its results on Wednesday. “Concerns over the economic outlook and its heavy reliance on the UK domestic market” has pegged back Lloyds's shares, according to Michael Hewson, chief market analyst at CMC Markets UK. “Despite these concerns the bank has consistently outperformed while increasing profits to the point its more profitable now that it was back in 2019 when the shares were much higher,” he added.
Cashless bank branches start springing up
Banks opening up branches that don’t accept cash are coming in for criticism from campaigners. Barclays and Santander both operate cashless branches, which they say are designed for customer meetings with bank staff. But Ron Delnevo, of the Payment Choice Alliance, says: “It is absolutely the direction of travel. What is the point of a bank branch that doesn’t handle cash?” However, cash use is dropping steeply. As many as 23m people in the UK used cash only once or not at all in 2021, according to the banking trade body UK Finance, an increase of 10m in just one year. Regardless, the Payment Choice Alliance is calling for a dedicated regulator to be responsible for guaranteeing the future of the cash network.
NatWest boss to co-chair energy taskforce
Dame Alison Rose, the chief executive of NatWest, has been appointed by the Government to lead efforts to reduce Britain's energy consumption. Lord Callanan will join Dame Alison in co-chairing a new taskforce that will aim to "accelerate household insulation, boiler upgrades and business energy efficiency measures". The Treasury said that £6 billion of government funding would be available from 2025 to support the plan to cut energy demand, with Chancellor Jeremy Hunt set to speak to representatives from green firms on Tuesday about plans to boost growth in the sector.
Reporting standards drop for private equity-owned companies
The Times’ Patrick Hosking reports that the British Private Equity & Venture Capital Association has flagged several major private equity-owned companies as being non-compliant with the so-called Walker rules. The standards, which were introduced in 2008, oblige the biggest UK private equity-owned companies to make disclosures equivalent to those of listed FTSE 250 companies. Of the seventy-three required to make the disclosures last year, eight failed to comply, including Punch Taverns, London City Airport and McCarthy & Stone. The private equity firms behind the non-compliant companies include Lone Star Funds, Siris Capital and Leonard Green & Partners. The proportion of private equity-owned companies producing a good standard of disclosure fell last year from 67% to 60%. Michael Moore, the association’s director-general, said some of the findings were disappointing, but added: “The level and quality of reporting is out-of-this-world better than it was five, ten or fifteen years ago.”
Private equity firms seek piece of the impact investment action
As the impact investment scene becomes more crowded, private equity firms are facing more questions about how they are defining and measuring the social impact they claim to produce alongside financial returns.
The appeal for executives of having private equity owners
Higher pay isn’t the only benefit from working for private equity owners, Sujeet Indap writes in the FT. Less scrutiny from investors, politicians and activists is also factored in more than ever.
BoE puts dampener on speedy Solvency II reforms
The deputy governor of the Bank of England and the chief executive of the Prudential Regulation Authority, Sam Woods, said on Monday that insurance sector reforms would take place gradually, rather than in the form of the Big Bang 2.0 implementation favoured by ministers. He said the PRA was expecting to issue two consultations on Solvency II, one in June and one in September. “Firms will have a very good sense well before the end of 2023 of how we expect the new regime to operate, so that they can begin to adapt their investment plans as soon as they wish,” he told delegates at the Association of British Insurers dinner. However, if parliament supports more immediate reforms “we need to move on from the debate and into implementation,” Woods said. The Telegraph suggests the PRA’s stance on reform could spark further tensions with the Conservative Party, which has been critical of the speed at which the central bank has taken advantage of post-Brexit opportunities.
FCA announces consultation on asset management reforms
The Financial Conduct Authority on Monday announced a consultation on how it could improve its current regime for regulating the asset management industry. A discussion paper published by the regulator pointed to the need to ensure any changes around liquidity management protected consumers but acknowledged that “the growth of the fund industry means that liquidity management in funds is also relevant to the good functioning of markets.” Chris Cummings, chief executive of industry body the Investment Association, said the need for more rules must be balanced against ensuring Britain remains globally competitive. The paper also considers how rules could be adapted for tokenised or digitised units in funds, meaning assets under management split into fractions to make it more affordable for small investors.
FCA in ‘advanced' talks over £306m redress for Woodford investors
The Financial Conduct Authority has said it is in “advanced discussions” with Link Group and its UK arm Link Fund Solutions to secure compensation for investors into Neil Woodford's collapsed investment fund. Link Fund Solutions managed the fund until its collapse in June 2019. Link then froze withdrawals, trapping around £3.7bn of investors' cash. In September, the FCA said Link could face a potential £306.1m in redress payments over its management of the fund and a further possible £50m fine. Link’s UK Fund Solutions division is up for sale. The regulator said on Monday: “The FCA is focused on ensuring that consumers affected by the suspension of the Woodford Equity Income Fund (WEIF) obtain redress. To assist a potential resolution, the FCA has provided time for Link Group to realise assets, including Link Group held assets, to meet the FCA's concerns.”
Regulation key as institutional investors seek more exposure to crypto
Writing in City AM, Kok Kee Chong, the CEO of AsiaNext considers the evolution of crypto and the recent volatility in the industry – illustrating what can happen when regulation, compliance, and governance are not present in a financial market. Many institutional investors have been undeterred by the collapse of FTX or crypto hedge fund Three Arrows Capital, however, and are gearing toward increased crypto adoption. But in order for institutional investors to feel safe to invest in digital assets, the corporate governance, regulation, and high licensing standards found at traditional exchanges need to be replicated at crypto exchanges. Chong concludes: “In short, regulation is a powerful enabler, and there’s little doubt that it will play a seminal role in shaping and accelerating institutional adoption of crypto derivatives this year.”
Mastercard and Visa facing £7.5bn competition lawsuit
Harcus Parker is close to filing what it believes will be among the biggest competition lawsuit in UK history against Mastercard and Visa. The London-based law firm’s filing at the Competition Appeal Tribunal will allege that they overcharged for multilateral interchange fees paid by businesses to their banks to accept card payments. Harcus Parker declined to comment on the prospective size of the action against the two card giants, but one source told Sky News that £7.5bn was the minimum figure they expected, and that it could ultimately be worth close to double that sum. Thomas Ross, a partner at Harcus Parker, told Sky News: "We are standing up for UK businesses - big and small - and demanding that they be properly compensated."
FSB warns of increased market risks in commodities sector
A report from the Financial Stability Board has highlighted the risk to global commodity markets from debt-laden traders who had cut back on their hedging against future price rises. The report suggested banks may be unwilling to increase their lending to energy traders if prices soared again, raising the threat of collapse for some firms. “Continued geopolitical tensions and heightened macroeconomic uncertainty in an environment of tightening financial conditions raise the risk of further significant volatility in commodities markets” the FSB said.
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Frasers Group launching share repurchase programme
Frasers Group has launched a share buyback scheme of up to £80m, the fifth the company has announced in the past year. The retail group, whose roster of businesses includes Flannels, Jack Wills and House of Frasers, said the latest stock purchase programme would take place until 30 April and could see a maximum of 10m shares, equivalent to 2.2% of its outstanding share capital, removed from circulation. It means Mike Ashley's company has announced buyback schemes worth up to £325m since April 2022.
Long-term sick responsible for growth in economic inactivity
Experts say Government efforts to get early retirees back to work to boost the economy are misguided and ministers should be focussed instead on tackling long-term sickness to reduce economic inactivity. “There is a real risk of the government barking up the wrong tree when it comes to the growth in economic inactivity,” a report from the consultancy LCP says. The Chancellor, Jeremy Hunt, previously urged the over-50s to get off the golf course while the Work and Pensions Secretary, Mel Stride, is preparing an urgent review of options to boost workforce participation. Sir Steve Webb, the former pensions minister who co-authored the LCP report, said rising long-term sickness and NHS waiting lists were much more significant than early retirement. “We were gobsmacked by what we found,” Webb said. “It turns out there are fewer earlier retired today than at the start of the pandemic.” However, the number of “long-term sick” has risen by more than 350,000 since the start of the pandemic, accounting for more than half of the growth in inactivity over that period.
Quarter of UK households regularly run out of money for essentials
A group of charities has said that one in four households regularly run out of money for essentials and voters do not believe the government is doing enough to help. A survey for the charities found that 40% of people end the month with no money left, while 24% run out of money for essentials either most months or most days. The assessment adds to the growing welter of indicators that persistent double-digit inflation and soaring energy bills are having a widespread impact on UK households and may do so at the ballot box. Separately, Macmillan Cancer Support warned that cancer patients were resorting to selling possessions and using loan sharks to make ends meet. In findings it described as “heart-breaking”, the charity said a third of patients had been buying or eating less food, and 22% had been spending more time in bed to stay warm.