Confidence in banking sector remains, for now
Former RBS chairman Sir Philip Hampton warned yesterday that the banking system is facing a strain that has never been modelled before, despite "coming into this crisis in good shape". The Telegraph says the financial markets are again starting to show signs of stress with analysts voicing some concern about the level of capital buffers at US banks. Italian banks are also a cause for worry, with City investors warning of a domino effect on French then German banks if they crash. But Paul Lynam, the chief executive of Secure Trust Bank and a board member of UK Finance, says: “The coordinated efforts of regulators and government is much more decisive and impactful than last time. Banks are awash with liquidity and hold dramatically more capital than last time. I’m not worried about banks.”
COVID-19 loan scheme welcomed, but criteria questioned
The government’s support scheme for small businesses launched yesterday but there was dismay over rules permitting banks to refuse emergency lending to businesses that were loss-making. The Coronavirus Business Interruption Loan Scheme (CBILS) is designed to help smaller companies hit by the COVID-19 outbreak and loans of up to £5m are available to companies with a turnover of £45m or less. But a provision that means lenders must assess whether businesses are viable means that banks are likely to turn down loss-making firms. Simon Menashy, a partner at MMC Ventures, said the criteria needs to change urgently. Loan terms will be up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years. Enterprise Nation welcomed the measures but voiced concern over how funds can reach small businesses in time.
Lloyds postpones 780 planned job cuts
Lloyds is suspending 780 job cuts across its branches as demand for loans surges and uncertainty over how many of its staff may need to self-isolate grows. A Lloyds spokesperson said: “At this uncertain time, we have made the decision to stop the structural changes that were due to take place for some of our teams. Our focus is on supporting our customers and colleagues during this unprecedented time.”
Santander cuts executive pay amid crisis
Santander is reviewing its interim dividend and cutting pay for senior managers due to the coronavirus pandemic. Santander executive chair Ana Botin and CEO Jose Antonio Alvarez will both see a reduction of 50% as they donate half their pay to a medical equipment fund. “The scale of the task before us demands a huge collective effort, with governments, central banks and other authorities, the private sector, charities and individuals, working together to limit the spread and provide care for those affected,” Botin said.
BoE will ‘closely’ monitor credit to economy
The Bank of England’s Financial Policy Committee (FPC) says it will “monitor closely” the credit conditions facing the UK economy amid the coronavirus pandemic, and “stands ready to take any further actions deemed appropriate to support UK financial stability.” The FPC said it “judges that major UK banks are well able to withstand severe market and economic disruption”, having “built up the resilience of the UK financial system over recent years.”
Revolut launches in the US
London headquartered fintech Revolut has launched in the US, and said it has “tens of thousands” of US customers already signed up to its digital banking services platform. US residents will now be able to open a Revolut bank account on their smartphone and receive a debit card in the post. The accounts will be opened in a partnership with Metropolitan Commercial Bank, and deposits are FDIC-insured up to $250,000. Revolut's early salary feature is also to be made available in the US, allowing users to get their salary up to two days early via direct deposits.
ECB is to be major buyer of commercial debt
The European Central Bank (ECB) says it intends to be a ‘significant’ buyer in the commercial debt market. ECB policymaker Francois Villeroy de Galhau said the central bank will enter the market for commercial paper, or short-term unsecured debt issued by corporations, this week. Meanwhile, Eurogroup president Mário Centeno has said finance ministers across the euro area support using the European Stability Mechanism to fight the economic turmoil caused by coronavirus.
China’s $13tn bond market shines as Treasuries turn treacherous
China’s $13tn bond market has become a relative safe haven for fund managers as the coronavirus pandemic destabilises traditional sanctuaries such as US government debt, gold and the Japanese yen.
Carmakers shift gear to make medical supplies
Automakers across the globe are responding to pleas from governments to help make ventilators for coronavirus patients. Fiat on Monday began converting one of its car plants in China while in the US General Motors, Ford and Tesla all pledged resources. In the UK, Nissan and Formula 1 teams have also promised help. However, some experts are warning that due to their complexity, it could take carmakers or aerospace factories a year to start making the ventilators.
Global airline industry faces $250bn coronavirus hit
The latest forecast from airline industry trade body Iata warns that over $250bn in revenues could be lost as a result of the coronavirus pandemic, with Ryanair grounding its fleet. Elsewhere, Norwegian Air has temporarily laid off about 9,000 employees and qualified for a £230m government bailout as the firm cut back its services to operate only in Scandinavia. Meanwhile, Qantas Airways has raised A$1.05bn ($627m) in debt funding to help it ride out the crisis. Separately, Qantas has been accused by rival Virgin Australia of briefing the media that it is not financially viable and should be excluded from any state bailout of the struggling sector.
Treasury the last resort, Sunak tells airlines
UK Chancellor Rishi Sunak has warned airlines and airport operators that further taxpayer support for the aviation industry would only be forthcoming after all other options had been exhausted, including raising money from shareholders, investors and banks. Sunak’s comments come after EasyJet was criticised for paying a £174m dividend last week and Virgin boss Sir Richard Branson told staff to take eight weeks unpaid leave.
UK housebuilders close sites despite lockdown exemption
Taylor Wimpey and Barratt are among UK housebuilders to shut their construction sites despite the government exempting them from a COVID-19 lockdown as they prioritised health and safety. Additionally, Taylor Wimpey has cancelled its dividends for the year and drawn down £550m in credit to protect its balance sheet against the impact of the coronavirus pandemic while Redrow is cancelling its interim dividend, anticipating a sharp drop in sales.
Specialist mortgage lender halts new borrowing
Together Financial Services has halted new borrowing in response to the escalating coronavirus crisis. The specialist mortgage lender told investors it would focus on “supporting our existing customers”.
UK investment trusts at steepest discounts since financial crisis
Shares in UK investment trusts have fallen to an average of 22% below the value of their underlying assets, trading at their steepest discount since the financial crisis.
Gilead criticised as potential virus treatment gains ‘orphan status’
Gilead Sciences’ new drug Remdesivir, which is being seen as a potential treatment for coronavirus, has secured ‘orphan status’ from the US Food and Drug Administration (FDA), granting the firm a seven-year market exclusivity period as well as tax breaks. Campaigners described the news as “the most blatant abuse of the orphan drug act” ever seen. Gilead said in a statement: “If Remdesivir is proven to be safe and effective to treat COVID-19, we are committed to making Remdesivir both accessible and affordable to governments and patients around the world”.
NMC Health says debt is higher than estimated
NMC Health says its debt is $1.6bn higher than previously estimated. The company said on March 10th that its debt position was materially above the last reported number at June 30th and was estimated at around $5bn. An update received by the company’s board yesterday advised that the group’s debt position is estimated to be $6.6bn. “Work on verifying the outstanding debt obligations is continuing,” the company said in its statement.
Ineos to supply free hand sanitiser for NHS
Sir Jim Ratcliffe, the boss of chemicals giant Ineos, has said a new hand sanitiser plant near Middlesbrough will be operational by the end of the week and making a million bottles per month which will be provided to the NHS for free.
MEDIA & ENTERTAINMENT
Broadband users face switching barriers under UK lockdown
Broadband users in the UK face restrictions on switching serve providers after BT said its Openreach engineers would cut down on home visits to prioritise essential fault repairs.
More Reits warn they are unable to meet cash calls
Invesco Mortgage Capital and MFA Financial warned on Tuesday that they could not meet margin calls from their lenders, sending shares in funds invested in the residential mortgage-backed securities market tumbling.
Stockpiling sends UK grocery sales up £470m
UK grocery chains have seen sales soar by £467m as customers stockpiled amid escalating fears over the spread of coronavirus. Food sales jumped 22% year-on-year in the week ending 14 March while ambient groceries – such as dried pasta and tinned food – saw sales increase 62%.
Wall Street has best day in over a decade as stimulus deal nears
US stocks had their best day for ten years yesterday with the S&P 500 closing up 9.4% on rumours that Congress was closing in on an agreement for a potent fiscal stimulus package. The Dow was up 11.4% - its highest rise since 1933. Germany's Dax increased almost 11%, while France's CAC 40 rose 8.4% following rises in Asian stocks earlier in the day. The FTSE 100 soared 9.1% in its biggest one-day jump since the financial crisis on hopes the US stimulus package would be approved.
IHS Markit index reveals UK businesses badly affected by virus
The recently-announced shutdown measures in the UK are sending businesses into the biggest slump in recent times, with IHS Markit’s monthly measure of manufacturing and services activity falling to the lowest level in some 22 years and chief business economist Chris Williamson noting: “Any growth was confined to small pockets of the economy such as food manufacturing, pharmaceuticals and healthcare.” Meanwhile, academics claim that if GDP falls by more than 6.4% then the loss of life from a recession would be greater than life gained through fighting the coronavirus.