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Daily News Roundup: Wednesday, 23rd February 2022

Posted: 23rd February 2022

BANKING

HSBC boosts bonus pool to $3.5bn after annual profits double

HSBC increased its staff bonus pool to $3.5bn last year - its highest level since 2014 - in a move it said was justified due to its strong financial performance and the need to compete for bankers in an “extraordinarily competitive labour market”. The boost to bonuses came as the bank said it had paid 451 of its bankers €1m (£832,000) or more last year, marking a 40% increase on the number of staff with such payouts. Meanwhile, HSBC has published emissions targets that it claims will make it a “net-zero bank” by the middle of this century at the latest.

Staley’s share awards frozen over Epstein probe

Barclays is to withhold millions of shares awarded to its former chief executive, Jes Staley, as he contests the findings of inquiries by the Financial Conduct Authority and Prudential Regulation Authority into how he characterised his relationship with Jeffrey Epstein to the bank. The shares frozen by the bank's board are understood to include an award made in 2019 that was subject to its performance during the period between 2019 and 2021.

PRIVATE EQUITY

KKR to buy stake in bottling firm

KKR has agreed to buy a majority stake in bottling company Refresco from PAI Partners and British Columbia Investment Management. The deal values the bottler at about €7bn (£5.8bn).

INTERNATIONAL

West imposes wave of sanctions on Russia

The US has announced new sanctions on Russia after Vladimir Putin moved troops into the breakaway Ukrainian provinces of Donetsk and Luhansk. President Joe Biden announced measures targeting two of Russia’s largest financial institutions, VEB and Promsvyazbank, as well as Russian elites and their family members. Biden said the sanctions would also block the Russian government from using Western financial markets to raise money. The EU was also expected to announce a formal ban on the trading on Russian debt while the UK said it would bring forward legislation to follow suit. Germany moved to halt certification of the Nord Stream 2 gas pipeline from Russia. In the UK, Boris Johnson announced a series of limited initial moves against five Russian banks: Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank, and three billionaires close to the Russian president. Liz Truss, the Foreign Secretary, said the Government would go further if Russia refused to pull back its forces.

America’s global financial leadership is in jeopardy

Sultan Meghji explains in a Bloomberg opinion piece why he quit as the first chief innovation officer at the Federal Deposit Insurance Corporation on Friday. He says his work touched on artificial intelligence, quantum computing, cryptocurrency, ransomware, foreign hacking and more. “On virtually every front, I found barriers to innovation.” Meghji explains that the UK and Singapore have made significantly more headway in these areas. Failure by the US to embrace technology and a modern regulatory strategy could give China the space to build a more advanced financial system, he says, “while letting it and other hostile regimes increasingly undermine our own.”

HSBC probed over use of WhatsApp at work

HSBC faces investigation by US regulators over alleged misuse of WhatsApp, the bank revealed in its annual report on Tuesday. Ewen Stevenson, HSBC's finance chief, said the probe is not specific to HSBC and is part of a broader US investigation into the use of non-work approved messaging platforms to discuss business.

Canadian banks set for Q1 profit growth

Canada's Big Six banks - Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada – are expected to post an average 6% increase in adjusted earnings per share in the three months through January.

Oaktree looks to offload Banca Progetto

Oaktree has hired Morgan Stanley to sell a stake in Banca Progetto in a deal that could value the challenger bank at up to $565m.

AUTOMOTIVE

Volkswagen in advanced talks over €20bn listing of Porsche brand

Volkswagen is in talks with its billionaire owners about a €20bn initial public offering of the Porsche brand, which it expects to be valued at between €80bn and €90bn. The move would allow the Porsche family, which controls Volkswagen and the Porsche brand, to raise billions to help finance its challenge to Tesla and become the world’s biggest electric car maker by 2025.

AVIATION

Airbus to test hydrogen-powered engine on A380 superjumbo

Airbus is to test hydrogen-powered jet engines on an A380 super jumbo as part of a push to cut the amount of greenhouse gases produced by passenger planes.

FINANCIAL SERVICES

FCA slaps down Bitpanda’s regulation claims

The Financial Conduct Authority has responded to claims by crypto exchange Bitpanda that its acquisition of Trustology, a digital asset custody platform regulated by the watchdog, allows it to perform regulated services in Britain. The regulator said that while Trustology was registered with its Anti Money Laundering regime the FCA can take steps to suspend or cancel the registration of a cryptoasset business if it is not satisfied the firm or its beneficial owner is fit and proper.

Hargreaves Lansdown profits fall as pandemic trading boom ends

Shares in Hargreaves Lansdown have slumped 15% after the investment platform reported lower profits. The company said weaker share trading volumes and low interest rates resulted in pre-tax profits falling by a fifth to £151m during the last six months of 2021. The Telegraph notes that Hargreaves has increasingly come under pressure from rivals such as AJ Bell and Freetrade.

AllianzGI to vote against companies that fail to link pay to ESG

Allianz Global Investors will vote against large UK and European companies that fail to link executive pay to ESG metrics from next year. The warning comes after Allianz said it voted against 20% of all executive remuneration policies put forward by UK companies last year, up from 12% in 2020.

Insurers face £350m storm clean-up bill

The havoc wreaked by Storm Eunice has triggered thousands of home insurance claims, with many more still to come. Insurers could face a £350m bill, with the average claim for storm damage around £3,500, according to CompareTheMarket.

HEALTHCARE

GSK reveals name of consumer health spin-off

GlaxoSmithKline has announced that its new consumer healthcare spin-off will be named Haleon. Brian McNamara, Haleon’s CEO Designate, said: "We are on track to launch Haleon in mid-2022 and our business momentum is strong.” GSK’s chief Emma Walmsley added : “Haleon brings to life years of hard work by many outstanding people to build this new company purely dedicated to everyday health. Haleon has enormous potential to improve health and wellbeing across the world with strong prospects for growth, and through listing will unlock significant value for GSK shareholders.”

AstraZeneca chairman to step down next year

Leif Johansson, the chairman of AstraZeneca, will stand down next April after 11 years in the role. Despite Johansson’s tenure exceeding the nine years that non-executive board members are supposed to serve under corporate governance guidelines, the company asked Johansson to stay another year to oversee the $39bn acquisition of Alexion.

Nimble UK regulator is a draw for drugmakers - Bingham

Kate Bingham, a managing partner at SV Health Investors, says the speed of the UK’s regulatory decision making during the pandemic has made the country an attractive target for life sciences investment.

MANUFACTURING

UK manufacturing price pressures highest since 1976

A survey by the Confederation of British Industry (CBI) reveals that more British manufacturers plan to raise prices in the next three months than at any point since 1976. The group said a net balance of +77% of manufacturers surveyed this month planned to raise prices, up from +66% in January. The survey showed a net balance of +20% of factories reporting rising orders, down from +24% in January. While this was the weakest reading for four months, the CBI said it was still well above the survey's long-run average. "Manufacturers will be buoyed by strong order books and output growth, but amid ongoing cost pressures, almost four in five firms expect to increase prices in the next three months," said CBI deputy chief economist Anna Leach. She urged Sunak to use his spring budget statement, due next month, to increase investment incentives to help manufacturers.

ECONOMY

UK public sector borrowing lower than forecast

UK public sector borrowing came in at £138.5bn for the financial year to January, about half that posted in the same period the previous year and £17.7bn less than that forecast by the Office for Budget Responsibility in October. However, it was still the second-highest total since records began in 1993. Treasury receipts came in £29.1bn above forecast, which the OBR said reflected “strong performance across taxes, led by income tax, corporation tax and value added tax”. However, interest payments on debt rose from £1.6bn a year ago to £6.1bn in January due to surging inflation, eating into the Chancellor’s first ever budget surplus. Figures from the Office for National Statistics show Government income exceeded spending by £2.9bn last month, smaller than the £3.5bn forecast by the OBR due to those interest payments. Debt interest payments in 2022-23 are set to be £25bn more than the OBR previously expected following the spike in inflation, according to Samuel Tombs, chief UK economist at Pantheon Macro.

Senior BoE official signals ‘modest tightening’ of monetary policy

Dave Ramsden, a deputy governor of the Bank of England, has asserted that inflation can be kept under control in the coming months with just a “modest tightening” of monetary policy.

OTHER

UK to lose at least £15bn on Covid support due to fraud and error

The UK Government could lose as much as £16bn to fraud and error across the COVID-19 emergency loan schemes, according to parliament’s spending watchdog. A report from the Public Accounts Committee described the losses as “unacceptable” and said the Treasury should outline exactly what it intends to recover. The furlough scheme is estimated to have suffered the largest fraud and error losses of £5.3bn, followed by the BBLS where £4.9bn is thought to have been lost. According to the National Audit Office’s COVID-19 cost tracker, the Government has spent £261bn on 374 measures. These are expected to cost a total of £370bn over at least the next 20 years. Dame Meg Hillier, the Labour MP who chairs the public accounts committee, said: “Lack of preparedness and planning, combined with weaknesses in existing systems across government, have led to an unacceptable level of mistakes, waste, loss and openings for fraudsters which will all end up robbing current and future taxpayers of billions of pounds.”

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