Bank of England urged to keep small company capital rule
Banking industry body UK Finance said on Monday that plans by the Bank of England to force banks to set aside more capital in case loans to small and medium-sized companies turn sour would hit Britain's economy. Under Basel II reforms, the preferential capital treatment for loans to small businesses, known as the SME supporting factor, should be withdrawn. But UK Finance says: "The SME support factor should not be completely and suddenly removed. Without it the cost of lending to a critical component of the UK economy will increase and lending appetite reduce." UK Finance also opposed a BoE proposal for preferential capital treatment on loans for infrastructure investments. This would make it harder for lenders to support Britain's climate objectives, the body argued.
UK extends timeline on plan to reduce public stake in NatWest
The deadline for the UK Government to reduce its stake in NatWest has been extended by two years, to August 11th, 2025, owing to a global slump in bank stocks in the wake of the collapse of Silicon Valley Bank and the forced rescue of Credit Suisse. However, UK Government Investments said: “The decision to extend the trading plan does not preclude HM Treasury from executing such other disposals that achieve value for money for taxpayers.” Victoria Scholar, head of investment at interactive investor, comments: “The recent banking sector turmoil has sent shares in NatWest down by more than 10% over the past month. This complicates the picture for the Government which is trying to offload its stake at a time when investors are feeling nervous towards the sector."
Numis warns float drought will continue
Investment bank Numis has warned that the drought in stock market flotations in London is likely to last until at least the autumn. It said that the “continued scarcity” of equities capital markets deals had knocked revenues at its investment banking division during the six months to the end of March. This dearth of transactions, combined with a weaker performance from its equities trading business, is forecast to have pushed overall first-half revenues down by about 14% to around £64m compared with the same period a year earlier.
HSBC forced to defend SVB UK deal to fractious Hong Kong shareholders
Mark Tucker, the chairman of HSBC, struggled to convince shareholders in Hong Kong that the bank acted independently from the UK Government when it bought SVB UK, and that it conducted thorough due diligence.
Credit Suisse AT1 bondholders formally instruct Quinn Emanuel
The law firm Quinn Emanuel confirmed on Monday that it had been instructed by a group of Credit Suisse bondholders to prepare for “possible litigation” to recover losses from the forced takeover of the Swiss bank by UBS. “We are extremely pleased to have been retained by a key AT1 bondholder group and now look forward to seeking compensation for our clients, drawing on our extensive experience in situations of this kind,” said Richard East, Quinn Emanuel’s senior partner in London.
US regional banks reduced cash buffers ahead of run on deposits
The largest US regional banks were ill-prepared for a rush of deposit withdrawals ahead of the collapse of SVB after having cut the percentage of their assets held in cash in half, the FT reports.
London must continue to fight for its competitive edge
The Policy Chairman of the City of London Corporation, Chris Hayward, writes in City AM on the importance of ensuring the success of the UK’s financial Services industry as global competitors strive to take business away from the City. “We need to continue to fight for our competitive edge. In the longer term, we need a sense of direction for financial and professional services,” he says, before adding: “The City Corporation, alongside influential figures in the industry such as Lloyd’s and Schroders, is putting together a roadmap for the future, which will contain recommendations for the Government and the broader sector to reinforce our position. Delivered successfully, it will ensure the UK remains a competitive, attractive, and leading place for financial and professional services for the end of the decade and beyond.”
Peel Hunt expects loss amid fall in dealmaking
Peel Hunt expects to fall to a loss this year as the broker wrestles with a lack of stock market listings and other deals. The forecast is a blow to investors, who had expected the Aim-listed group to break even in the face of tough industry-wide conditions. However, Peel Hunt cautioned that despite efforts to cut costs to offset the impact of inflation on its overheads, it would be “marginally loss-making” in the 12 months to the end of March. It added that turmoil in the global banking industry meant the outlook for dealmaking remained uncertain.
UK watchdog orders publication of ‘synthetic’ dollar Libor rate
The Financial Conduct Authority has said synthetic versions of the one, three and six-month US dollar Libor rates would continue to be published beyond the original June 30th deadline in an effort to “help market participants to transition”. Their use will come to an end as of 30th September 2024, unless "unforeseen and material events were to happen" the regulator said.
ECB calls for clampdown on commercial property funds
The European Central Bank has called for new rules requiring commercial property funds to address liquidity vulnerabilities, which could put wider financial stability at risk if investors rush to withdraw their money.
LEISURE & HOSPITALITY
M&G leads opposition to private equity bid for Hyve
The takeover of London-listed events organiser Hyve Group by US-based Providence Equity Partners is being opposed by key shareholders. M&G, Redwheel, and Blackmoor Investment Partners have spoken out against the £481m deal arguing that it severely undervalues Hyve.
Factories record eighth consecutive fall in activity
UK manufacturers recorded their eighth consecutive monthly drop in activity last month, despite a welcome decline in inflationary pressures. Final survey results from S&P Global and the Chartered Institute of Procurement and Supply showed the manufacturing PMI declined to 47.9 in March, lower than expected and down from the 49.3 registered in February. The flash estimate was 48.0. A strong improvement in supplier delivery times was more than offset by deteriorating new orders and production, which shrank for the eighth time in the past nine months.
Blackstone fund hit by $4.5bn in withdrawal requests despite property pitch
Investors asked to redeem $4.5bn from Blackstone Real Estate Income Trust, or Breit, in March, up from the $3.9bn in February, but a cap on redemptions meant only $666m was paid out. Separately, the US private equity group has struck a £700m deal to buy British commercial property company Industrials Reit with what analysts called a “fair” offer.
Deutsche Bank revises UK outlook
Analysts at Deutsche Bank no longer expect the UK economy to contract this year after last week’s upgrade to GDP for the final quarter of last year. The ONS revised its initial GDP reading for Q4 2022 last week, upgrading it by 0.1% on the back of strong household consumption. Deutsche Bank now expects the economy to flatline over the course of 2023, a more optimistic outlook than markets, which predict a 0.4% contraction. But Deutsche Bank‘s senior economist Sanjay Raja remains cautious, particularly with respect to rate rises feeding through more fully into the economy.