BANKING
HSBC annual pre-tax profit more than doubles
HSBC has reported pre-tax profits of $18.9bn for last year, up from the previous year’s $8.8bn. The figure is just below the $19.1bn predicted by analysts. The results were buoyed by a release of bad loans put aside at the height of the pandemic a year earlier. HSBC UK’s pre-tax profit rose by $4.5bn to $4.8bn, while its Asia operations increased by $12.2bn. Profits at HSBC's investment bank were up by 10% last year, as strong performance in equities and advisory was offset by a sharp decline in fixed income trading. HSBC said it would buy back up to $1bn of its own shares, after the conclusion of an existing $2bn buyback programme. Group chief executive Noel Quinn said: “We made good progress against our strategy in 2021, which contributed to a strong financial performance that was supported by the global economic recovery. All of our regions were profitable, and we saw growth in the fourth quarter of 2021 in many of our business lines. We have good momentum coming into 2022 and are confident that we can continue to execute against our strategy. We also remain cognisant of the potential impact that further COVID-19-related uncertainty and continued inflation might have on us and our clients.”
Atom Bank increases interest rates again
Atom Bank has upped its savings rates for the second time this year with the challenger now offering better rates than some of the Big Six high street lenders. Atom’s Instant Saver “now offers 75 times more reward than Lloyds, HSBC and Barclays' equivalent products” after rising from 0.65% to 0.75%. The one, two and three year fixed savers from Atom bank are each increasing by 0.10% to 1.6%, 1.7% and 1.85% respectively. Mark Mullen, CEO at Atom, said: “In contrast to most banks, who continue to offer rock bottom rates to savers, we have increased the rates across our savings range for the second time this year. Savers have had it rough for a long time, and traditional high street banks have done very little to support them for many years.”
Barclays lines up first female finance chief
Barclays is preparing to name Anna Cross as group chief financial officer, marking further progress for gender diversity at the top of UK banking. Ms Cross will replace Tushar Morzaria, who has held the role for more than eight years. Her appointment will make Cross the first woman to hold any of the top three roles at Barclays.
INTERNATIONAL
Credit Suisse leak could put Switzerland on EU ‘blacklist'
The European parliament’s largest political grouping, the European People's party (EPP), has called for the EU to review its relationship with Switzerland following the recent leak of Credit Suisse banking data, which critics say reveal widespread failures of due diligence by the bank. “When Swiss banks fail to apply international anti-money-laundering standards properly, Switzerland itself becomes a high-risk jurisdiction,” said Markus Ferber, the coordinator on economic affairs for the EPP, which represents Europe's centre-right political parties. “When the list of high-risk third countries in the area of money laundering is up for revision the next time, the European Commission needs to consider adding Switzerland to that list.”
Russian banks could face sanctions in the event of Ukraine invasion
A package of sanctions has been lined up by the US to be imposed on Russian financial institutions in the event of an attack on Ukraine, including barring US financial firms from processing transactions for major Russian banks. It is understood that President Biden is readying the measures to effectively sever “correspondent” banking relationships that enable international payments between US and Russian banks. The US is also reportedly ready to wield its most powerful sanctioning tool by putting Russian individuals on the Specially Designated Nationals (SDN) list, effectively expelling them from the US banking system, banning their trade with Americans and freezing their US assets, according to reports.
China's four biggest banks lower mortgage rates
China's four biggest banks, Bank of China, ICBC, China Construction Bank and Agricultural Bank of China, lowered mortgage rates in Guangzhou city by 20 basis points on Monday, according to reports, which Reuters says is a fresh move aimed at lending support to a property sector reeling from a severe cash crunch. The southern city of Guangzhou, the capital of Guangdong province, is home to the country's most indebted property developer China Evergrande Group.
Goldman Sachs to review FAB takeover offer
Goldman Sachs has been appointed by Egypt's largest investment bank EFG Hermes to advise on First Abu Dhabi Bank's (FAB) offer to acquire a majority stake. The Cairo-listed bank said its board also agreed to allow the United Arab Emirates' biggest lender to conduct due diligence, according to a bourse filing.
AVIATION
Menzies board recommends takeover proposal
The Times reports that the board of John Menzies is to recommend an improved all-cash takeover offer from Kuwait’s National Aviation Services (NAS) worth £559m. NAS has made a “final” approach worth 608p per share, which looks set to be enough to get the deal done, according to the paper.
FINANCIAL SERVICES
UK rewrite of insurance rules to ‘free up billions for investment’
The UK’s City minister John Glen has announced plans to unlock more than £10bn of UK infrastructure investment through an overhaul of rules governing the insurance industry. In a major post-Brexit shakeup, the Government will embark on a radical overhaul of the Solvency II rules with the Treasury set to publish a full consultation in April, while the Prudential Regulation Authority will carry out a more detailed consultation later in the year. Unveiling the shake-up at the Association of British Insurers’ annual dinner, Mr Glen said: “EU regulation doesn’t work for us anymore and the Government is determined to fix that by tailoring the prudential regulation of insurers to our unique circumstances. We have a genuine opportunity to maintain and grow an innovative and vibrant insurance sector while protecting policyholders and making it easier for insurance firms to use long-term capital to unlock growth.” Changes are expected to include a reduction in the reporting and administration burden on businesses, an increase in their flexibility to invest in long-term assets including infrastructure, and the freeing up of funds by reducing the risk margin insurers face.
FCA boss admits more can be done to address ‘poverty premium’
The director of consumers and competition at the Financial Conduct Authority told MPs that more could be done to analyse the effects of the “poverty premium” that people pay for some financial services. Sheldon Mills told the Treasury Committee the regulator recognised that many people were struggling in areas like insurance and access to banking, and that the FCA was keen to work with industry “to try and get a will to tackle some of those issues”. Mr Mills added: “I'll be very open and honest – I come from a community where actually people get very high car insurance quotes because within that community the risk is much higher. From a commercial perspective, that makes sense. From a poverty premium perspective it's an issue that one needs to consider. I think we have to start to consider those issues whilst being sure that ultimately the financial soundness of the system is paramount as well.”
Morses Club CEO quits role
Paul Smith, CEO of Morses Club, has stepped down from his role after the subprime lender announced a drop in expected profits following a surge in customer claims. Current COO Gary Marshall is to take his place, pending regulatory approval. Filings show Mr Smith offloaded a significant amount of his shares in Morses last Friday. The company said it had “no prior notification” of the sale, worth around £194,000. In the same statement, Morses Club said profits for the current year are set to be 20% to 30% lower than expectations following increased costs associated with handling compensation claims. Morses blamed a “rapid” increase in the volume of claims submitted recently. Claims are made in batches by companies on behalf of customers who argue they have been treated unfairly.
Think-tank calls for regulated ESG ratings in Britain
The International Regulatory Strategy Group (IRSG) said in a report on Monday that Britain should regulate sustainability ratings on companies to improve transparency, reduce the risk of greenwashing and protect investors. "The IRSG believes that regulation of ESG ratings is now desirable, to provide more transparency around the basis for ESG ratings and mitigate against potential conduct risk," it said. It is noted that Britain's Financial Conduct Authority consulted last year on whether there should be voluntary "best practice" guidance for ESG raters or binding regulation, with the outcome due this year.
FCA on recruitment drive ahead of supervision expansion
The Financial Services Authority is planning to recruit around 200 new staff members this quarter, according to reports. The watchdog is recruiting for a number of senior roles including a lead supervisor for credit and debt as well as a director for consumer finance. The move comes ahead of a push by the FCA to expand its oversight and supervision of the City's credit space.
MANUFACTURING
Finsbury warns of increasing prices
Finsbury Food Group, the manufacturer behind Weight Watchers and Mary Berry cakes, recorded sales in the last six months of the year with revenue hitting £166.5m, up 9% on the year before. However, the company warned that rising costs would mean price rises for customers. Pre-tax profits were down from £7.4m in the six months to the end of 2020, to £ 5.7m. "We have not been immune to the challenges arising from sudden and unexpected input cost inflation over the period," said chief executive John Duffy.
MEDIA & ENTERTAINMENT
Donald Trump launches Truth Social app
Donald Trump's new social media venture, Truth Social, launched on Apple's App Store on Monday as the former US president tries to build a conservative rival to Twitter and Facebook. Parent company Trump Media & Technology Group announced a merger with Digital World Acquisition Corp in October and later raised $1bn in private investment and public equity financing.
REAL ESTATE
House prices see biggest monthly rise for 20 years
The average property price has soared by nearly £8,000 in the space of a month, according to Rightmove. The £7,785 jump this February is the biggest month-on-month increase in cash terms recorded by the online property portal in more than 20 years of its reporting. It means the average asking price across Britain now stands at a record £348,804 - a rise of nearly £40,000 in the two years since the pandemic started, compared with just over £9,000 in the previous two years. The average asking price for a home is 9.5% higher than a year ago, marking the highest annual rate of growth since September 2014.
Hammerson confirms Leeds sale
Hammerson has confirmed that it is in talks to sell its two shopping centres in Leeds for £120m. There has been growing speculation that the firm was looking to offload Victoria Gate and Victoria Quarter, anchored by John Lewis and Harvey Nichols, respectively. The retail landlord has now confirmed that a £120m bid is under discussion with Redical Holdings, a new investment vehicle set up by the two founders of Aalto Invest. Redical made its first acquisition last September, paying £21m for Clayton Square shopping centre in Liverpool.
ECONOMY
PMIs show UK economic recovery accelerating
UK business activity expanded in February as business fought off rising costs and the Omicron wave retreated. The flash IHS Markit/CIPS composite Purchasing Managers' Index (PMI) found private sector output picked up at the fastest pace since June with spending on travel, leisure and entertainment cited as the key driver. Output growth in the services sector exceeded that seen in the manufacturing industry, but supply disruption was easing leading to a swift rise in output volumes. Price pressures continue, however, cutting into profits and leading analysts to suspect this could prompt the Bank of England to raise interest rates next month to 0.75%. IHS Markit added that exports continue to struggle with Brexit reportedly adding to UK trading headwinds. "The UK economy is rebounding from Omicron at a fair clip," says Gabriella Dickens, Senior UK Economist at Pantheon Macroeconomics. "The forward-looking components of Markit’s survey suggest growth will remain brisk over the coming months."