BANKING
HSBC set to accelerate job cuts as profits slide
HSBC is set to accelerate a plan that will deliver job cuts on the back of a hit to profits delivered by the coronavirus crisis. The bank has announced that pre-tax profits fell over 80% to $1.1bn in the second quarter, down from $6.2bn in Q2 2019. Over the first half of the year, pre-tax profits slipped 65% to $4.3bn. It also revealed that it has increased its bad debt provision by $3.8bn to $6.9bn, adding that it expects loan loss charges linked to the pandemic to reach $8bn-$13bn by the end of 2020. Chief executive Noel Quinn said that the crisis will speed up the previously announced restructuring plan which includes cutting 35,000 roles. Noting the impact of the pandemic, he said: “Our operating environment has changed significantly since the start of the year.” Mr Quinn also pointed to geopolitical uncertainty, saying: “Current tensions between China and the US inevitably create challenging situations for an organisation with HSBC’s footprint.” Chief financial officer Ewen Stevenson said HSBC is expecting a “much sharper” V-shaped recession, with any recovery coming deeper into 2021.
Watchdog calls for end of mortgage payment holidays
The Financial Conduct Authority (FCA) has suggested that homeowners struggling with mortgage repayments should not be offered payment holidays, saying that that further breaks are “unlikely to be the appropriate solution” for borrowers. While lenders have been offering three month repayment breaks on mortgages, credit cards and personal loans amid the coronavirus crisis, the FCA says new measures may be more appropriate, such as extending the term of the loan or allowing borrowers to resume payments at a lower level than they were before the crisis. Analysis shows that while one in every five mortgages in Britain went unpaid at the peak of the crisis, far fewer borrowers applied for a second three-month pause on payments.
Metro Bank agrees deal for RateSetter
Peer-to-peer lender RateSetter is to be acquired by Metro Bank as part of a £12m deal, with Metro chief executive Dan Frumkin saying the move was part of “an important strategic ambition” for the lender. Metro is paying £2.5m, with an extra £500,000 payout after completion of the deal if targets are hit, along with up to £9m more on the third anniversary of completion. Rhydian Lewis, CEO of RateSetter, said: "RateSetter and Metro Bank share a focus on delivering something better for the customer and the strategic logic of pairing Metro Bank's strong deposit base with our lending capability is compelling."
PRIVATE EQUITY
AA attracts PE bids
Private equity firms Towerbrook Capital Partners and Warburg Pincus are said to be eyeing deals for AA, reports the Times. Sources suggest that one potential bidder has proposed a deal for the insurance and roadside assistance firm that equates to a market value of about £250m, or around £2.9bn including £2.6bn of debt.
INTERNATIONAL
SocGen sees €1.26bn loss
Societe Generale posted a €1.26bn loss in the second quarter. The bank, which set aside €1.28bn to cover expected losses on loan defaults, saw revenues slip 15.7% year-on-year to €5.3bn.
Natixis replaces chief executive as bank posts second-quarter loss
Natixis has announced a second-quarter loss of €57m. It also revealed that CEO François Riahi is leaving due to “strategic differences” over Natixis’s future plan.
Commerzbank appoints chairman
Commerzbank has named Hans-Joerg Vetter as supervisory board chairman. Cerberus Capital Management, the bank’s second-largest shareholder, had tried to block the move.
AUTOMOTIVE
Auto start-up secures backing from Future Fund
Connected car start-up Wejo has secured £10m in funding, with backing from the Treasury’s start-up investment fund the Future Fund. Richard Barlow, chief executive of the company, in which General Motors has a 35% stake, remarked: “Focused on harnessing data for good, we are working with multiple car manufacturers and end users to deliver better journeys for all.”
FINANCIAL SERVICES
FCA proposes property fund refund delay
The Financial Conduct Authority (FCA) has proposed that investors in property funds should wait up to six months before they can be refunded to avoid a rush to exit such funds during periods of market volatility. The City watchdog said there was a “liquidity mismatch” between the underlying property held in such funds and the frequency with which investors bought and sold units. It says a notice period of up to 180 days would allow fund managers to plan sales of property assets to better meet redemptions that are requested. The FCA noted that while a period of 90 days was likely to be acceptable for consumers, a notice period of double that could provide more time to maximise the sale price.
NSF in FCA spotlight
The City watchdog has raised concerns over Non-Standard Finance and its guarantor loans division. The firm is carrying out a review after the Financial Conduct Authority (FCA) flagged issues following an investigation in March that saw the regulator examine a selection of customer files. It said the FCA had "raised a number of concerns regarding certain aspects of the operating procedures and processes at the division". Non-Standard Finance said it is “now conducting an in-depth review” and “working closely with the FCA to clarify the scope and scale of its concerns and to develop a possible redress methodology.”
UK insurer Hiscox ups Covid claim estimate by 50%
Hiscox’s estimate of the cost of claims related to coronavirus has been raised by over 50% to $232m, after premium income fell by 4% to $2.2bn.
HEALTHCARE
Government urges post-Brexit drug stockpiles
The Government has advised pharmaceutical firms to have six weeks' worth of drugs stockpiled ahead of the conclusion of the Brexit transition period, reiterating that this will not be extended beyond December 31. Acknowledging that global supply chains were under “significant pressure” that has been exacerbated by the coronavirus crisis, the Department of Health and Social Care (DHSC) has written to medical suppliers to advise that having reserve stocks would provide a buffer against disruption. The DHSC is asking suppliers to confirm their contingency plans for the end of the transition period so as to “build upon past work and ensure a co-ordinated approach”.
Firm to deliver coronavirus test
IP Group has announced that one of the firms in its portfolio, Oxford Nanopore Technologies, is working with the Department of Health on introducing its LamPORE test for coronavirus.
LEISURE AND HOSPITALITY
Hays to cut jobs
Hays Travel, the UK's largest independent travel agent, is to cut up to 878 jobs - nearly 20% of the company's 4,500 workforce. Owners John and Irene Hays said the government’s decision to ban nonessential travel to Spain has hit the firm, especially as it comes at the same time as changes in furlough conditions. They added that they had no choice but to make the difficult decision and had “made every possible effort' to avoid job losses”.
Tui agrees sale and leaseback aircraft deal
A sale and leaseback for five new Boeing 737 Max-8 aircraft has been agreed between Tui and BOC Aviation, which will raise $226m (£173m) for Tui’s finances as part of a strategy under which it will sell existing assets to finance the purchase of new ones. This comes as all the firm’s holidays to Spain are cancelled until 10 August at the earliest.
MANUFACTURING
Manufacturing output climbs in July
The IHS Markit/Cips UK manufacturing PMI for July has revealed that manufacturing output grew at its fastest rate in nearly three years last month. The index scored 53.3, up from 50.1 in June, on a scale where anything above 50 points to expansion. IHS Markit hailed “a positive start to the recovery,” while warning that “it will take several months of growth to fully recoup the output lost since the start of the pandemic.”
MEDIA AND ENTERTAINMENT
Zoom announces changes for Chinese users
Chinese customers of Zoom will no longer be directly sold new or upgraded products as the firm moves towards a partner-only model in certain regions. Third-party suppliers will now take care of Zoom sales and certain operations in China, as the US firm continues to distance itself from operating in the country.
Activist investor increases Pearson stake
Swedish activist investor Cevian Europe has taken a larger stake in education publisher Pearson, now holding 8.5% as the third-largest investor in the firm.
Former Ofcom board member rejoins Chinese state broadcaster
A former board member of Ofcom, Nick Pollard, has been rehired by Chinese state broadcaster CGTN as it seeks to address increasing regulatory scrutiny of its news broadcasting.
PROFESSIONAL SERVICES
Ince Group reports increased revenue
Ince Group has reported that revenue increased 87% to £98.5m this year, nearly double the £52.6m it booked last year, despite disruption from the coronavirus pandemic. Operating profit was up 72%, rising to £26.2m from £15.2m in the year earlier period, with adjusted profit at £8m.
REAL ESTATE
Purplebricks revenue dips
Purplebricks has reported that group revenue declined 2% to £111.1m for the year ending April 30, down from £113.8m last year. UK revenue was flat during the first 10 months and 11% down for the full year. Chief executive Vic Darvey noted that more than 90% of the homes sold through the platform are worth under £500,000, meaning that most users have benefited from the government’s stamp duty holiday.
Hammerson considering rights issue
Hammerson is seeking to boost its finances amid the coronavirus pandemic, with the retail landlord considering tapping investors for as much as £600m. This comes as the company confirms it is in advanced negotiations for a 50% stake in Via Outlets to be sold to joint venture partner APG. The landlord could reportedly raise up to £800m from a rights issue in combination with the proceeds of the Via Outlets sale.
RETAIL
DW Sports administration puts 1,700 jobs at risk
Sports retailer and gym group DW Sports has fallen into administration, with 1,700 jobs at risk. The company, which operated 73 gyms and 75 retail sites, announced plans to shut 25 of its stores last month. The rest are expected to trade under administration for as long as stock is available in the hope of finding a buyer.