Banks urged to cut bonuses and dividends
The Bank for International Settlements, the European Central Bank, and former Bank of England officials Sir John Vickers and Robert Jenkins have all called for banks to cut shareholder payouts. With CEOs of the UK’s eight largest High Street banks joining a call with the Bank of England and the Financial Conduct Authority to address the disruption caused by the COVID-19 pandemic, MP Kevin Hollinrake, who chairs the All Party Parliamentary Group on Fair Business Banking, said: “I don't think anyone who's sensible should be paying bonuses and dividends right now.” He added that shareholders “will understand the seriousness of the situation – lenders would be far better being cautious now and paying the dividend in six months' time.” The conference call also saw regulators address how banks may be able to help those struggling due to COVID-19, with issues related to overdraft charges, credit card debt and unsecured personal loans discussed. The Mail notes that Barclays and Metro Bank have already agreed to temporarily waive new increased fees on overdrafts. Meanwhile, the Telegraph says some investors have urged banks to press ahead with massive dividend payments, noting that Barclays, Lloyds, RBS and HSBC have about £7.5bn of payouts due. The FT and Telegraph also suggest that the Bank of England could follow intervention from the European Central Bank, which has ordered eurozone banks to freeze dividend payments and share buybacks.
Mortgage approvals hit six-year high in February
Recent figures have revealed the strength of the housing market before the Coronavirus crisis took hold in Britain. Mortgage approvals for house purchase achieved a six-year high in February, reaching 73,500, according to the Bank of England. Approvals for remortgages also rose to 53,400 last month. Net mortgage borrowing by households was £4.0bn in February, close to the average seen over the past six months. Andrew Montlake, managing director of the mortgage broker Coreco, commented: "Never before has such strong mortgage approvals data rung so hollow. It feels like it came from another time.”
Banks face losses on loans
British banks could face losses of more than £15bn on loans that backed highly geared transactions such as leveraged buyouts, according to a report from finance consultancy Fideres. It said insurers, hedge funds and small investors in corporate bond funds are also at risk and said it expects direct worldwide losses from leveraged loans to exceed $100bn - with losses in collateralised loan obligations accounting for another $100bn. Alberto Thomas, co-founder of Fideres, said UK bank losses from leveraged loans alone could come in at between £15bn and £20bn.
Barclays in new climate policy announcement
Following investor criticism of its climate policy ahead of its annual general meeting last year, Barclays has announced that it will reduce its own carbon emissions and those of the activities it finances in the next three decades to become a net zero bank. The lender announced that it would table a resolution on the issue and expected responsible investment lobby organisation ShareAction and other investors to support the board’s resolution.
Nationwide withdraws high LTV mortgages
Nationwide is temporarily suspending all mortgages over 75% loan-to-value as it focuses on supporting existing members and processing ongoing applications through the coronavirus outbreak. Existing members moving home, taking further borrowing or switching product will not be impacted by the changes. Nationwide is still offering mortgage appointments via Nationwide Now – the society’s high-definition video service in-branch.
Moment of truth for Japan’s relationship with private equity
Kana Inagaki considers the opportunities the coronavirus outbreak could bring in Japan for buyout groups such as KKR and Carlyle, saying Japanese firms could look to private equity to survive.
Lenders told to abandon dividends as coronavirus spreads
Eurozone regulators have urged banks to abandon dividends, with reserves being stored up ahead of an expected recession caused by the coronavirus pandemic. Lenders were ordered last week by the European Central Bank to hold off on dividends and share buybacks until at least October, with estimated savings of €30bn. UniCredit, ABN Amro, ING, Rabobank and KBC have complied, while UBS said its 2019 dividend would continue despite guidance on limiting payouts from both markets supervisor FINMA and the Swiss government. Meanwhile, Credit Suisse CEO Thomas Gottstein says the bank could restrain 2020 bonuses to “show solidarity” with those hit by the coronavirus outbreak.
Swiss National Bank's sight deposits increase to bolster economy
Total sight deposits at the Swiss National Bank last week increased to 620.455bn Swiss francs from 608.826bn francs a week earlier, after chairman Thomas Jordan said earlier this month that he was committed to holding the rise of the safe-haven franc in check by increasing interventions.
Nubank shakes up Brazil’s banking bureaucracy
The FT profiles Brazilian lender Nubank, which offers credit cards, personal loans and savings accounts by smartphone in a bid to challenge the country’s bureaucratic banking system.
Foreign Office and airlines to fly Britons home
Britons stranded abroad by the coronavirus pandemic will be flown home under a new arrangement between the government and airlines including BA, Virgin and Easyjet. The Government has set aside £75m to charter special flights for British nationals in countries where commercial flights are unavailable. Foreign Secretary Dominic Raab said priority would be given to the most vulnerable - including the elderly or those with pressing medical needs. He added that airlines should offer alternative flights “at little to no cost where routes have been cancelled” and allow passengers to change tickets.
Easyjet in battle with founder over Airbus order
EasyJet founder Stelios Haji-Ioannou has threatened to call meetings to oust non-executive directors at the group as he demanded it cancel an order for 107 Airbus aircraft. The company responded by saying it is seeking “defer and reduce” payments for the aircraft. It released a statement saying: “EasyJet maintains a strong balance sheet, with no debt refinancing due until 2022 and we are in ongoing discussions with liquidity providers… We will respond privately to the letter shortly.”
Kier cuts wages and delays sell-off
Kier Group has announced that it will cut wages for about 6,500 employees, including executives and board members, by between 7.5% and 25% for the three months beginning April, it said on Monday. The construction firm has also said the process to dispose of its Kier Living arm and the evaluation of the options for its property business have been put on hold amid the current health crisis.
CMA questions FNZ and GBST merger
The Competition and Markets Authority (CMA) has raised competition concerns over Scotland-based fintech firm FNZ’s takeover of Australian rival GBST, which it acquired in November 2019 in a deal which valued GBST at £152m. The competition watchdog said the firms were “close competitors” in a “concentrated market” and merging the technology companies could lead to “higher prices, fewer options and less innovation” in the retail platform market. FNZ has been given five working days to address the CMA’s concerns. If it does not, the deal will be referred for a more in-depth investigation.
Blackmore in cash warning
Savings firm Blackmore Bond has warned investors that a property market crunch on the back of the COVID-19 crisis will hit cash flow.
LEISURE AND HOSPITALITY
Carluccio's enters administration
Carluccio's has fallen into administration, blaming "challenging trading conditions" exacerbated by the coronavirus. Its administrator is looking at options for the future of the Italian restaurant chain, including mothballing the business using government support, as well as trying to sell all or parts of it. It also confirmed that most of the company's 2,000 employees will be paid through the Government's job retention scheme while these options are explored.
Work on ventilators continues in fight against virus
Engineering firm Smiths is aiming to produce 10,000 ventilators for the UK government as the struggle to prevent coronavirus from spreading continues. With the Ventilator Challenge UK Consortium including firms such as BAE Systems, Airbus, Thales, Ford, Renishaw, and Rolls-Royce, chief executive Andrew Reynolds Smith remarked: “It is inspiring to work with the very best UK technology and engineering companies with a spirit of grit and determination to deliver these life saving devices to our incredible health service.” Meanwhile, mechanical engineers, medics and the Mercedes Formula One team have announced the development of a breathing aid known as continuous positive airway pressure (CPAP), that can help keep those suffering from COVID-19 out of intensive care by removing the need for invasive mechanical breathing assistance.
Hammerson rental income down as pandemic hurts retailers
Shopping centre owner Hammerson has revealed that only 37% of the rent that was billed in the UK for the second quarter of the financial year was received last week, while rival Intu received just 29% of the rent payments due on Wednesday. Hammerson stated: “We have received a variety of requests for rent deferrals, monthly payments and waivers, which we are reviewing on a case-by-case basis, taking into account the business model and risk profile of the occupier, alongside the aid made available by the relevant governments.”
52% of Britons expect recession within 12 months
A poll from YouGov shows that 52% of Britons expect the economy to fall into recession within a year due to the coronavirus outbreak. A fifth expect a depression, while just 1% expect the economy to be booming within 12 months. Oliver Rowe, director of reputation research at YouGov, comments: “With unprecedented Government measures to crackdown on the spread of COVID-19 shutting small and large businesses across the country and confining Britons to their homes, it’s unsurprising that consumer confidence has been knocked.” Meanwhile, YouGov’s tracker of consumer confidence has fallen 4.2 points to 103.3, the biggest monthly decline since that seen following the Brexit referendum in 2016. It said the gauge of how households feel about their finances over the coming year fell by more than any previous month on record, slipping 9.9 points to 93.
Business confidence falls
The Lloyds Bank Business Barometer shows that business confidence has dipped to its lowest level since October, falling 17 percentage points to 6% last month as the impact of the coronavirus started to gather pace. Economic optimism dropped from 23% to 3%, while trading prospects declined from 24% to 8%. Business confidence in the retail sector fell 21 percentage points to 9%, while the manufacturing sector saw a decline from 31% to 11% and confidence in the construction sector fell 15 points to 14%.