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Daily News Roundup: Tuesday, 8th August 2023

Posted: 8th August 2023

BANKING

HSBC executive suggests Britain is too tough on China

MPs and peers have hit out at HSBC after the bank’s head of public affairs, Sir Sherard Cowper-Coles, claimed the UK Government was too tough on China. The former British diplomat said Britain had been weak in caving to US demands to limit the reach of the Chinese Communist Party into the UK. Lord David Alton, vice chairman of the All Party Parliamentary Group (APPG) on Hong Kong, said: “HSBC continues to put profits before human rights and is determined to keep the Chinese regime on side, no matter the brutal disregard that the CCP has for human rights, democracy and the rule of law.” Sir Sherard, who is also chairman of the China-Britain Business Council lobby group, made the comments at an event in London under Chatham House rules and apologised for any offence caused.

UK charity bank raises fresh debt after steep paper losses on bonds

CAF Bank said on Monday it had struck a deal with the Charities Aid Foundation for £15m in fresh debt funding to help cover the £33.4m paper loss on its bond holdings. Neil Heslop, chief executive of the Charities Aid Foundation, said the bank had "a strong capital surplus" and had made positive financial returns last year. He played down the bond losses, which were theoretical only, because the bank intended to hold the bonds to maturity.

PRIVATE EQUITY

KKR reports milder-than-expected fall in earnings

Private equity firm KKR reported a 23% year-on-year decline in its Q2 after-tax distributable earnings, which fell to $652.6m. The drop was attributed to a slump in asset sales, which fell by nearly 80% to $146.2m due to higher interest rates, inflation, and volatility. However, fee-related earnings rose by nearly 31% to $602.3m, driven by increased management and transaction fees. KKR's net profit increased to $844.4m from a net loss of $734.6m in the previous year. KKR's total assets under management reached $519bn, with unspent capital at $100bn. Blackstone and Carlyle Group also reported a slump in asset sales that resulted in a drop in their second quarter distributable earnings.

Private equity firms offer sweeteners to lure reluctant investors

As the environment for private equity becomes tougher, blue-chip firms are offering investors sweeteners such as a discount on management fees or a larger slice of co-investment.

INTERNATIONAL

Credit Suisse to cut 80% of Hong Kong investment bank jobs

Around 80% of Hong Kong-based investment banking staff at Credit Suisse will be made redundant starting this week, as part of the bank's integration with UBS Group. Only about 20 bankers will be spared the cuts that will impact Credit Suisse's 100-strong investment banking team in the territory. Hong Kong accounts for Credit Suisse's biggest share of investment bankers in Asia. UBS closed a Swiss government-backed deal to buy its troubled peer in June after a series of soured deals sparked an exodus of clients. UBS has also decided to close Credit Suisse's office in Houston. Meanwhile, UBS has announced an overhaul of its investment banking division, including naming the unit's M&A chiefs, as part of its efforts to better compete against Wall Street firms. The shake-up will result in hundreds of staff leaving, with UBS hiring top bankers from competitors and promoting staff from within its ranks and Credit Suisse.

Goldman’s top commodities analyst joins high-profile exit list

The global head of commodities research at Goldman Sachs, Jeff Currie, is leaving the Wall Street bank after 27 years in the latest senior departure from the firm.

AUTOMOTIVE

Tesla CFO Zach Kirkhorn quits

Zach Kirkhorn, the chief financial officer of Tesla, has stepped down after 13 years at the electric car company. He was replaced by Vaibhav Taneja, who had been chief accounting officer since 2019. “During his tenure, Tesla has seen tremendous expansion and growth,” the company acknowledged in a stock market filing. “Tesla thanks Mr Kirkhorn for his significant contributions. Mr Kirkhorn will continue to serve Tesla through the end of the year to support a seamless transition.”

FINANCIAL SERVICES

PayPal pushes deeper into crypto payments with stablecoin launch

PayPal has launched a dollar-denominated stablecoin called PayPal USD, marking a further expansion into its services for digital currencies. The move should allow customers to end and receive money with lower fees.

UK ministers accused of inaction over ‘buy now, pay later’ lenders

Labour has accused the Government of kicking regulation of the “buy now, pay later” sector into the long grass, putting hard-up Britons at risk of being exploited by unethical operators.

LEISURE & HOSPITALITY

UK's top restaurants see profits soar

The combined profit of the top 100 restaurants in the UK rose from £19.9m in September 2022 to £241.8m in March 2023, according to a new survey. This marks a significant increase in the average profit margin, from 0.5% in September of last year to 3%. The recovery of the hospitality sector is well underway, the report said, with extensive closures, write-downs, and staff redundancy programs contributing to the improved profitability.

MEDIA & ENTERTAINMENT

Simon & Schuster sold to KKR for $1.62bn

Paramount Global has sold Simon & Schuster to US private equity firm KKR for $1.62bn in cash. The sale comes after a federal judge blocked rival publisher Penguin Random House from buying Simon & Schuster due to concerns about competition in the book market. Simon & Schuster, one of the big five publishers in New York, boasts authors such as Stephen King and Bob Woodward. The sale to Penguin Random House for $2.2bn was initially announced in 2020 but was blocked by the Department of Justice. Paramount declined to appeal the decision and decided to sell to KKR instead.

KKR to buy stake in German satellite maker OHB

US private equity group KKR has agreed to buy a stake in German satellite maker OHB for €338m. OHB, known for its work on the EU's Galileo navigation satellite programme, will receive €77m to support its growth in the space industry. KKR's investment will help OHB expand its satellite building capabilities and compete with Elon Musk's SpaceX in space launches. The remaining stake in OHB will be retained by the founding Fuchs family.

REAL ESTATE

Average house price falls for fourth month in a row

The average cost of a property declined by 2.4% in the 12 months to July, according to the Halifax house price index. This comes after a 2.6% drop in June, meaning prices have now fallen by nearly £9,000 since their peak last summer. A typical home is now worth £285,044, down from £293,992 last August. Demand from first-time buyers is holding back further falls, Halifax said. Kim Kinnard of the lender said: “We’re seeing activity amongst first-time buyers hold up relatively well, with indications some are now searching for smaller homes, to offset higher borrowing costs.” She went on to say that strong wage growth and only a modest increase in unemployment led her to expect “a gradual rather than a precipitous decline.”

RETAIL

July's downpours dampen High Street sales

New data reveals that July's downpours saw very few shoppers venturing out and in turn High Street shops faced dented sales for summer clothes. Takings grew just 1.5% last month, down from a 2.3% increase a year ago and below the 3.5% average over the past three months. Online non-food sales fell again, down 6.9% year-on-year, while spending on takeaways rose 9.2% and on digital content and subscriptions by 9.9%. Overall card spending rose 4% last month. Helen Dickinson, chief executive of the British Retail Consortium, said: “While consumer confidence is generally improving, it remains below longer term levels.”

Jigsaw boss calls for action on VAT shopping

The CEO of the high street women’s fashion chain Jigsaw has joined widespread calls for the UK to end its ban on tax-free shopping as tourists flock to Paris, Madrid and Milan to shop. “From left-wing governments in Spain to Conservatives in Italy, European countries have put competitive financial incentives in place to lure international shoppers.” Beth Butterwick said. “The UK is the black sheep.”

Higher food prices ‘may be here to stay’

Higher food prices may be here to stay, according to the Bank of England's chief economist. Huw Pill told MPs that the rate at which food prices are rising was expected to slow to "about 10% by the end of the year". But he warned a return to cheaper food was "something we may not be seeing for a while yet, if in the future at all".

ECONOMY

Rising wages expected to ease cost of living pain

Inflation figures due to be released next week are expected to show a fall in the consumer price index (CPI) from 7.9% in June to about 6.8% last month. Meanwhile, average earnings data, due to be released the following day, is likely to show a rise in wages of slightly more than 7%. The figures would represent the first time in 14 months that earnings have grown faster than inflation. “We are moving in the right direction and we have now reached an inflection point where incomes are going to start rising higher than prices,” Ashley Webb, UK economist for Capital Economics, a consultancy, said. “There isn’t a perfect way to define the cost of living crisis but a good proxy is when CPI inflation is above average earnings growth. So, based on this measure that uses growth rates, the cost of living crisis appears to be coming to an end.”

Permanent staff hiring at three-year low

Recruitment for permanent staff has fallen at the fastest rate in three years, with businesses holding back on hiring due to economic uncertainty. According to the Recruitment and Employment Confederation, recruitment agencies have reported frequent redundancies and hiring freezes, resulting in an increase in people becoming available to work. However, the construction and hospitality sectors continue to suffer from significant labour shortages, leading to higher pay. Salaries for newly-placed permanent workers rose sharply, despite a decrease in the rate of inflation. Temporary pay also increased, but at a slower pace.

OTHER

Amazon's new payment policy could force small firms to go bust

Amazon has informed thousands of marketplace sellers in the UK and Europe that it will now hold on to sale proceeds for more than a week, which could potentially lead to small firms going bankrupt. Previously, sellers had to wait up to three days for funds to be released, but now they will have to wait 10 days after delivery.

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