BANKING
Banks told not to take material positions on sterling
The Governor of the Bank of England has instructed the UK’s biggest banks not to make big bets on the pound either way as Brexit talks enter the endgame. Mark Carney told MPs: "The major banks today in the UK are neutral. That ensures that when there is a sharp move, anticipated or not, the banks keep functioning." He added that banks would be able to cope with being shut out of currency markets for up to three weeks if Brexit developments trigger big swings in the value of the pound. Mr Carney also addressed climate change telling the Commons Treasury committee that banks should be forced to disclose their climate-linked risks within the next two years and that the BoE is drawing up a stress test for the UK's banks based on their climate exposures. The FT points out that over a third of the world's largest banks have still not declared their support for the Task Force on Climate-related Financial Disclosures (TCFD), an initiative backed by Mr Carney that encourages businesses to disclose the risks global warming poses to them.
Leeds Building Society jumps to the top of cash Isa best buy table
Leeds Building Society has launched a 1.46% easy-access Isa - the same rate as fellow mutual Coventry Building Society's offer. But because Leeds's tax-free offer has neither a bonus rate nor a limit on withdrawals, it is now the best instant-access cash Isa on the market, according to the Mail.
HSBC kicks off sale of French retail business
HSBC has hired Lazard Ltd to sell its French retail business as part of a plan by interim CEO Noel Quinn to reduce costs across the banking group. Analysts estimate the business to be worth about €1bn.
PRIVATE EQUITY
KKR mandates banks for Hensoldt's IPO
KKR is working with JP Morgan and Bank of America on preparations for a stock market flotation of German defence supplier Hensoldt. The buyout group is considering listing 20-30% of the company on the Frankfurt stock exchange.
BlackRock assets near $7tn as clients add money
BlackRock achieved a record 46% profit margin last quarter as lower costs and significant inflows swelled assets at the New York-based fund group to almost $7tn.
INTERNATIONAL
US banks’ consumer units shine as markets falter
JPMorgan Chase, Wells Fargo, Goldman Sachs and Citigroup posted mixed Q3 results yesterday. Their retail offerings performing well thanks to an ebullient US consumer but a fall in M&A and IPO work along with trade tensions contributed to slower business elsewhere. JPMorgan posted a profit of $9.08bn on revenue of $29.34bn, both up 8% from the prior year. Citigroup’s profit of $4.91bn was up 6%, helped by a lower tax rate as revenue rose just 1%. Goldman’s revenue of $8.32bn was down 6% from a year ago, but profit fell more sharply because the bank is spending heavily to build new businesses. JPMorgan reported an industry-leading 15% return on equity, an important measure of bank profitability. Goldman’s was 9% and Citigroup’s was 10.4%. Wells Fargo results saw profit slide 26% due to sinking mortgage income and legal costs.
Citi plans to take full ownership of Chinese securities business
Citigroup is looking to unwind its current joint venture with Orient Securities and form its own securities business in China following an easing of rules by Beijing.
Banks make $1bn profit in mortgage bond trades
Global banks earned $1bn (£780m) of profit from trading government-backed US mortgage securities in the first half of 2019, compared with $200m in the first half of 2018, according to data from research house Coalition.
European Investment Bank postpones decision on natural gas lending
The European Investment Bank has postponed a decision on whether to cease all fossil fuel lending from the end of 2020 following strong opposition from members, including Germany.
AUTOMOTIVE
One in three carmakers cutting jobs
One in three automotive businesses are cutting jobs due to Brexit fears, up from one in eight a year ago, according to research by the Society of Motor Manufacturers & Traders.
CONSTRUCTION
Bellway warns of slowing growth
Bellway saw revenue growth of 8.6% to £3.2bn for the year to July 31, while pre-tax profits rose 3.4% to £662.6m. The builder sold a record 10,892 homes in the period, up 5.7% on 2018, as buyers benefited from the Help to Buy scheme and low interest rates. However, shares in Bellway slumped more than 5% after chief executive Jason Honeyman cautioned of a slowdown in house price growth this year amid Brexit uncertainty and climbing building costs.
FINANCIAL SERVICES
Woodford closes crisis-hit investment firm
Neil Woodford is to close his remaining investment funds after he was sacked from his £3.1bn Equity Income fund by its administrators. The fund will be wound up and any cash returned to investors. Mr Woodford was initially angry with the decision to sack him, saying the move was something he “cannot accept, nor believe is in the long-term interests” of the business. However, he later said the remaining two funds in Woodford Investment Management – Income Focus and Woodford Patient Capital – would also close. Mr Woodford said: “I personally deeply regret the impact events have had on individuals who placed their faith in Woodford Investment Management and invested in our funds.” Ryan Hughes, head of active portfolios at investment firm AJ Bell, said there was “a feeling of inevitability” about the closure. Without any money coming in “it was difficult to see how the business could survive”, he said.
Carney: Libra could shake up slow payments systems
Mark Carney has insisted Facebook’s Libra cryptocurrency could work if it was able to meet the same regulatory standards of other finance firms. The Bank of England Governor also said payments in the UK are expensive for businesses and “in this day and age should be instantaneous”. He said: "Britain needs to face up to its payment problems and bring its system up to a standard that is found in a number of major emerging economies and a few advanced economies." Separately, Sulabh Agarwal, managing director of payments at Accenture, writes in the Telegraph that “British banks are at risk of falling behind as digital transformation intensifies in payments, losing out on £8bn of revenues by 2025 unless they do more to offer services that are instant, invisible and free.”
FCA to ban interest-linked car commission
The Financial Conduct Authority (FCA) has said car dealers would be banned from taking commission linked to the interest rates on loans used to pay for vehicles, in a move which it says would save consumers £165m. Christopher Woolard, executive director of strategy and competition at the FCA, remarked: “We have seen evidence that customers are losing out due to the way in which some lenders are rewarding those who sell motor finance.” He suggested that banning this type of commission would ultimately save customers money.
Wirecard shares slide following FT report on accounting practices
Shares in German payments firm Wirecard fell up to 22% in early trading on Tuesday, after documents concerning suspicions of fraudulent accounting were uncovered.
Peer-to-peer forex services aim to bypass Wall St banks
The FT reports that two separate groups of investors are backing forex platforms Siege and HedgePool in a move to cut out banks from trades and save hundreds of millions of dollars in charges.
HEALTHCARE
Indivior shares rise as it boosts guidance for a second time
Indivior expects net income for this year in the range of $160m to $190m, based on the strong performance of Suboxone, used to treat opioid addiction, with shares up 10%.
LEISURE & HOSPITALITY
Marston's lowers profit forecasts
Marston’s has announced that it expects a fall in profit this year as lower food sales sent its share price down as much as 11% on Tuesday morning. The pub and brewing group forecast an underlying pre-tax profit of about £101m for the year to September, a decrease from £104m in 2018. Marston’s chief executive Ralph Findlay commented: “Our principal focus is on reducing our net debt by £200m and creating a high quality business that is cash generative after dividends and capital expenditure.”
Former Thomas Cook CEO apologises
Thomas Cook bosses have been criticised by MPs on the Business, Energy and Industrial Strategy (BEIS) Committee for their executive pay and accounting practices in the lead up to the collapse of the travel business. Ex- CEO Peter Fankhauser apologised for the company’s collapse, telling MPs he was “deeply sorry about this failure”. He explained that the summer heatwave last year precipitated the firm’s problems, noting that it had not been fast enough in dealing with setbacks.
MANUFACTURING
Renishaw shares down as profit slumps
Renishaw shares were down 6.4% after the engineering firm revealed that profit before tax was £4.3m in the three months to the end of September, down from a £32.6m profit a year earlier. Revenue in the three months to the end of September was £124.6m, a decrease from £154m in 2018, while in the company’s measurement product business, revenue was £119.7m in the latest quarter, down from £147.7m a year earlier. The firm stated: “Trading conditions are expected to remain challenging through the remainder of this financial year driven by the global macroeconomic environment.”
MEDIA & ENTERTAINMENT
DNEG eyes £150m London listing
Digital effects and animation company DNEG is considering a London float to raise £150m. The company said it would use the proceeds from the float to finance further growth plans and reduce net debt. DNEG has asked JPMorgan Securities to act as its global co-ordinator, while Deutsche Bank, Numis Securities, Santander and BNP Paribas will act as joint bookrunners should the offer proceed.
REAL ESTATE
First-time buyers at highest levels since 2007
The number of first-time buyers in August reached the highest level since just before the financial crisis, according to the latest mortgage trends data by UK Finance, with 35,010 mortgage completions for new buyers – an increase of 0.7% on August last year. During the month there were 18,640 new remortgages with additional borrowing, down 2.9% on 2018, while the number of remortgages without additional lending slumped 2.3% to 18,100. There were also 5,900 new buy-to-let mortgages completed, down 2.2%. Andrew Montlake, managing director of mortgage broker Coreco, said: “First time buyers are absolutely flying. They are being driven on by a combination of reduced competition from landlords, once-in-a-lifetime mortgage rates, high employment and the buyer’s market we’re in.”
RETAIL
Sainsburys leads UK sales growth
Sainsbury’s has beaten its rivals to become the only major UK supermarket to report sales growth in the last quarter. The grocer's sales increased 0.6%, its fastest rate since October last year, while Tesco, Asda and Morrisons saw sales decline 0.2%, 0.9% and 1.8% respectively.
ECONOMY
UK jobs market slows
Office for National Statistics figures show that the unemployment rate unexpectedly increased to an estimated 3.9% in the June-to-August period, as the number of people working declined by 56,000 to 32.69m. The ONS's deputy head of labour market statistics, Matt Hughes, noted: "The employment rate is still rising year-on-year, but this growth has cooled noticeably in recent months.”
IMF expects slowdown in growth
The International Monetary Fund (IMF) has predicted that global economic growth will be just 3% this year, its lowest level since the financial crisis and a downgrade from the organisation's April prediction. IMF chief economist Gita Gopinath also warned that central bankers have limited room to tackle policy mistakes.