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Daily News Roundup: Wednesday, 28th October 2020

Posted: 28th October 2020

BANKING

HSBC considers charging for current accounts

HSBC has told customers that it could start charging for basic banking services in some markets because it was losing money on a "large number" of accounts. The warning came after the bank reported a 36% drop in third quarter profits. An HSBC spokesman said it was "committed" to basic fee-free bank accounts, but added that it kept "under review the pricing for our standard current accounts and associated services". Gareth Shaw, head of money at consumer group Which?, said: "The danger for consumers is that if one of the big banks opens the door to charging fees, the others may follow."

Shift to bank debt could pay off

The Telegraph’s Richard Evans suggests that with bank shares so unrewarding for investors at the moment, perhaps they should buy their bonds instead. Last week TwentyFour Asset Management, a bond specialist, said in a note: "We believe bank equity remains highly cyclical, but post-2008 bank debt has been less so, and consequently should be a lot more stable for investors."

PRIVATE EQUITY

Jon Moulton warns of Brexit impact on private equity

Private equity veteran Jon Moulton says he fears an acrimonious split with the EU will “seriously hurt financial services businesses” with non-equivalence and barriers to trade a real risk to the sector. Moulton was a supporter of leaving the EU but thinks the financial services industry has not been robust enough in lobbying the Government to be included in trade negotiations with the EU. If deal-making is forced to shift to centres in the EU then lawyers and accountants in the UK could lose as much as £250m a year for the services they provide to the private equity industry, Moulton warns.

Europe’s direct lending market shrinks in first half of 2020

The number of direct lending deals completed in Europe fell by 29% in the first six months of 2020 as raising money on public debt markets became cheaper.

INTERNATIONAL

HSBC to accelerate restructuring plan to cut costs

HSBC is to accelerate a restructuring plan and cut costs further than previously suggested. The bank made the announcement this morning as it reported a quarterly pre-tax profit of $3.1bn (£2.3bn) - down 35% from the same period last year. The bank's revenues were also down 11% to $11.9bn. HSBC says it will provide a detailed plan about its restructuring with its full-year results in February next year. Plans to cut 35,000 jobs were first announced in February, but put on hold amid the pandemic. But after a 65% decline in pre-tax profits for the first half of the year, the bank said in August that it would accelerate the plan. Meanwhile, HSBC anticipates total loan losses to be closer to the lower end of the $8bn-$13bn range it had earlier forecast for the whole year. “This latest guidance, which continues to be subject to a high degree of uncertainty due to COVID-19 and geopolitical tensions, assumes that the likelihood of further significant deterioration in the current economic outlook is low,” the bank said.

Santander rebounds after Q2 loss

Spain's largest bank bounced back in the third quarter from a record second-quarter loss and signalled that the worst of the pandemic may be over as loan repayment rates improved and cost cuts took effect. Santander expects a profit of around €5bn (£4.5bn) for 2020. The group reported a net profit of €1.75bn for the three months to September, more than triple the same quarter last year when it took a large write-down on its UK business.

Eurozone banks rein in lending due to pandemic worries

The ECB's quarterly survey of banks shows lenders are reducing lending to European businesses and households as they prepare for a rise in bad loans due to the economic impact of the pandemic.

ANZ reveals £288m profit hit

ANZ bank has announced an A$528m (£288m) hit to cash profits ahead of its second-half results this week due to a growing remediation bill, accelerated software costs and write-downs.

AUTOMOTIVE

JLR returns to profit

Jaguar Land Rover recorded a pre-tax profit of £65m for the three months to the end of September. However, the profit is just over a third of the £156m JLR posted a year ago, but better than the £413m and £501m losses for the two preceding quarters. Revenue increased 52% to £4.4bn compared with the previous three months, but was down 28.5% on pre-coronavirus levels a year ago. Car sales were up 53.3% to 113,569 compared with the previous three months as buyers returned, but still almost 12% down on the same point last year.

Waymo strikes self-driving lorry deal with Daimler Trucks

Alphabet’s driverless technology unit Waymo is partnering with commercial vehicle group Daimler Trucks to power big-rig lorries. The partnership will work together to build an autonomous version of Daimler’s Freightliner Cascadia.

Mercedes raises Aston Martin stake

Mercedes-Benz is set to increase its stake in Aston Martin to 20% as part of an investment partnership aiming to turn the company around.

AVIATION

Shareholders approve Rolls-Royce rights issue

Shareholders in Rolls-Royce have approved the engine maker’s £2bn rights issue as it seeks to bolster its finances. As a result, the group’s liquidity will rise by £5bn, as the capital raise opens up new options including a £2bn bond issue and the extension of a two-year loan by £1bn.

Aircraft sale and leaseback eases pressure on EasyJet

A sale and leaseback deal on its aircraft has enabled EasyJet to raise a further £305m on top of £2.4bn of cash and access to funds that the company has secured during a pandemic.

FINANCIAL SERVICES

Pension reforms could cost companies an extra £40bn

Figures from LCP indicate that new rules designed to protect company pension schemes could cost UK employers an extra £40bn over the next decade. The firm found that proposals in The Pension Regulator's new defined benefit (DB) funding code would require the sponsoring companies that sit behind the UK’s largest DB pensions to put £100bn into these schemes over the next 10 years. This compares to a cost of between £60bn and £65bn under current rules. LCP partner Steve Webb comments: “If businesses are forced to move tens of billions of pounds away from productive investment in the economy and instead have to lock the money up in their pension fund, there is a risk that this damages the long-term health not just of the companies concerned but of the UK economy as a whole.”

St James’s Place suffers drop in net inflows

St. James’s Place has reported record funds under management of £118.7bn at the end of the third quarter. However, the pace of net inflows slowed, falling to £1.44bn from £2.11bn. Andrew Croft, CEO of St. James’s Place, said that while uncertainty over major world events including the US election and Brexit talks is making investors jittery, it is also creating a greater need for professional financial advice.

LEISURE & HOSPITALITY

Revolution Bars to close six venues

Revolution Bars is to close six venues that could result in around 130 job losses. The chain, which is also seeking rent reductions at seven venues as part of its CVA, employs around 2500 people and has 73 venues. It is proposing to close two sites in London and venues in Birmingham, Sunderland, Bath and Solihull.

Whitbread shakes off £725m loss to press on with expansion

Whitbread has posted a £725m pre-tax loss for the six months to the end of August, down from a £220m profit during the same period of 2019. Revenues declined from slightly over £1bn last year to £251m. Shares fell 2% after the results were posted.

Brewdog eyes £50m investment

Brewdog is seeking to raise £50m by January in its last equity crowdfunding bid, after reaching its initial target of £7.5m in just six weeks.

MANUFACTURING

Unilever to press ahead with unification

Unilever is to proceed with combining its UK and Dutch entities into a single London-based company despite the threat from Dutch politicians of an "exit tax" in the Netherlands that could cost the consumer goods group €11bn.

MEDIA & ENTERTAINMENT

Lockdown boost for Bloomsbury

Bloomsbury said pre-tax profit excluding the cost of acquisitions jumped 60% to £4m in the six months to the end of August, as the coronavirus lockdown sparked a steep rise in online book sales. Revenue also increased 10% to £78.3m over the period, spurred on by strong growth in its consumer division. Bloomsbury said it had benefited from significantly higher online book sales and e-book revenue.

TikTok moves into social ecommerce with Shopify deal

A new deal between Shopify and TikTok will allow TikTok users to shop as they scroll through its short-form videos. TikTok’s Blake Chandlee said the partnership would help merchants “reach new audiences and drive sales on TikTok”.

RETAIL

Retail sales hit by second wave

The CBI’s latest survey of retailers and wholesalers shows retail sales declined in October as the second wave of coronavirus saw a fall in the demand for clothes shops and department stores. The business group’s monthly gauge of retail sales fell to -23 in October, its lowest level since June, after hitting an 18-month high of +11 in September.

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