Banks braced for crisis ahead
The Times’ Katherine Griffiths comments on the possible financial crisis looming as banks start to weigh their losses from bad debts. Lenders in the UK could provision £100bn for the first half of the year, but the true picture for Britain and the rest of the world will only become clear when the post-lockdown recession starts to bite, Griffiths says. She points to arguments from NatWest chairman Sir Howard Davies and Lloyds chairman Lord Blackwell for a state-owned “bad bank” and suggest this could be a sign “they know they are not going to be able to manage.” Elsewhere, the FT reports on analysis by Accenture which predicts that, in a worse-case scenario, more than $880bn in loan loss charges by US and European banks over the next two years, with US banks hit twice as hard due to differences in risk taking and accounting rules.
Bank of England considers restart to dividend payments
Investors could enjoy a return to dividend payouts from banks after the Bank of England said it was considering permitting distributions from January onwards providing an economic recovery in underway. Iain Pyle, a fund manager at Aberdeen Standard Investments, said a return to dividend payments would also be dependent on whether or not banks’ provisioning levels have been sufficient. Britain's lenders agreed in March to suspend payouts this year in order to preserve capital and help companies and households hit by COVID-19 lockdowns. Bonuses to senior staff were also scrapped.
Virgin Money adds further funds to toxic loans pot
An additional £42m has been set aside by Virgin Money to cover potentially toxic loans, as the lender said it had "not yet seen any significant credit losses" resulting from coronavirus. The top-up includes a 62% increase in provisions for defaults on mortgages, citing "more cautious assumptions in relation to the outlook for unemployment" and house prices. The company’s total amount set aside for credit loss provisions now stands at £584m, with chief executive David Duffy noting that he "knows things may yet get more difficult for many." Meanwhile, Virgin customer deposits are up 5% to £67.7bn after reduced spending during the pandemic.
Total of £49bn lent to SMEs during pandemic
Newly released Treasury data shows that banks have now lent some £49.4bn through the three main loan schemes backed by the Government. The bounce back loan scheme (BBLS) has seen £33.7bn distributed, while the coronavirus business interruption loan scheme (CBILS) has seen £12.7bn given to small and medium-sized firms. A further £3.1bn has been issued through the coronavirus large business interruption loan scheme (CLBILS) for larger businesses.
The cyber-banking converts
Holly Thomas in the Daily Mail profiles how more elderly people are turning to internet banking after being forced online because of the coronavirus pandemic. According to research by Nucoro, an estimated six million people downloaded their bank's digital app onto a smartphone or tablet for the first time between March 14 and April 14. Nationwide said registrations for its online banking services rose by 38% in March, while TSB says the average number of customers registering for its mobile app nearly trebled in lockdown; from just over 1,270 to almost 3,480 every day.
European banks told to freeze dividend payments until 2021
The European Central Bank has told lenders to freeze dividend payments until January 2021, with the Standard quoting one City analyst as saying: “Dividends are an important part of the attraction for bank stocks. It is not just about keeping investors fed and watered, you want banks to be valued by the market because at some point if they need to raise capital, investors have to think there is a reason to get involved.” The FT’s Lex says the ECB ban on dividends or share buybacks could mean that banks “setting aside capital to cover non-performing loans may therefore stand as a counter-intuitive proxy for dividends to come.”
European banking needs a Big Bang
Axel Weber, chairman of UBS, says a regulatory Big Bang would “provide the nucleus of a proper single European market in financial services, a decisive advantage for consumers, banks and the economy as a whole.”
Intesa wins majority support for hostile takeover of UBI Banca
Italian lender Intesa Sanpaolo has achieved majority support for a hostile takeover bid for UBI Banca, which values it at €4.2bn, lower than a €4.9bn valuation before the COVID-19 pandemic.
Jaguar Land Rover appoints new chief executive
Thierry Bolloré has been named new chief executive of Jaguar Land Rover, to replace Ralf Speth in September. This comes as the firm faces problems such as its selling around half a million vehicles in the 12 months to March, compared with direct competitors BMW and Daimler both selling over 2m, and an overlapping portfolio under which many of its Land Rover models directly compete with Jaguar vehicles.
Possible Help to Buy extension boost housebuilders’ shares
Barratt Developments’ share price increased 5.07% and Berkeley Group’s 4.07% in response to reports that the Government is preparing for an extension to the Help to Buy scheme beyond its December deadline. Taylor Wimpey was up 3.29% and Persimmon 4.06%.
Net cash inflows up at St James' Place
St James’ Place has reported a rise in net cash inflows of 2% to £4.5bn in the six months to the end of June. Pre-tax profit for the period was up from £57.3m to £221.9m, with the firm’s underlying cash result falling to £114.4m. Chief executive Andrew Croft remarked: “We began the year with renewed confidence and momentum in the business as we saw investor sentiment rise following the UK General Election in December 2019, but this gave way to a challenging external environment in the UK as COVID-19 related lockdown and associated social distancing measures impacted the way we and the Partnership conduct business.”
Curve appoints first chief financial officer
Former PayPal finance director Scott Weller has been hired by London fintech startup Curve as its first CFO. Shachar Bialick, founder and CEO of Curve, remarked: “Scott’s experience taking teams and businesses like ours to the next level, in addition to his unique knowledge of the payments landscape, make him the ideal candidate to lead our finance function and advance Curve’s mission to converge the fragmented world of money, leading our customers to a healthier financial life.”
British AI start-up in $50m fundraising
London-headquartered AI start-up ComplyAdvantage, which uses machine learning and natural language processing to help lenders carry out sanction screening checks and other measures designed to fight financial crime, has raised $50m (£38m) in new funding as it seeks to expand overseas.
TransferWise valued at $5bn in secondary share sale
TransferWise has undergone a $319m secondary share sale led by existing investor Lone Pine Capital. New investors included D1 Capital Partners and Vulcan Capital. The deal that values the money transfer company at $5bn.
Moneysupermarket reports fall in interim profit and revenue
A fall in interim profit and revenue has been reported by Moneysupermarket, with pre-tax profit down from £60.4m to £51.4m, on revenue of £183.2m. Adjusted Ebitda declined 14% to £62.8m with basic earnings per share down 19%.
Moderna pitches virus vaccine at about $50-$60 per course
Moderna is pitching its coronavirus vaccine at about $50 to $60 per course, according to people familiar with the matter. The cost is at least $11 more than another vaccine from Pfizer and BioNTech. Deals struck by AstraZeneca put the cost of its vaccine at between $3 and $4 per dose. Meanwhile, Pfizer has said mass vaccinations against coronavirus could be needed into 2022 and booster shots may be needed annually or every few years if the new coronavirus becomes a seasonal or long-term health concern.
MEDIA & ENTERTAINMENT
Government launches scheme to restart film and TV production
Culture Secretary Oliver Dowden has announced that the tax payer is to cover losses incurred by film and television production companies resulting from the coronavirus in an effort to restart the industry. Companies will be compensated for delays by up to 20% of the production budget, with those forced to abandon production due to COVID-19 covered up to 70%. Claims will be capped at £5m per production.
M&C Saatchi accounts for last year delayed
M&C Saatchi has cited "disruptions to working practices" resulting from the coronavirus pandemic as it delayed the publication of its 2019 accounts again. Shares were up 12.5% to 52.2p in morning trading, while Peel Hunt analyst Malcolm Morgan noted: "The market will be reassured on the tone of trading and financing but frustrated that the [full-year] 2019 audited figures will not be released until [August]."
Ofcom review to save broadband customers money
A new Ofcom review means that broadband customers who choose not to sign up to contract deals will make total savings of £270m annually from pricing changes, after it was found that broadband firms are failing to protect customers from excessive out-of-contract prices.
Foxtons hails recovery in UK property market
Foxtons has reported that lettings are almost back to pre-crisis levels and sales are well up on April and May. CEO Nic Budden says he is “cautiously optimistic” for the rest of the year.
Retail sales show signs of recovery
The monthly distributive trades survey from the CBI shows that the balance of retail sales balance had rebounded from -37 in June to +4 in July – the highest reading since April 2019. However, real-time data suggest sales have already dropped back considerably, says Samuel Tombs at Pantheon Macroeconomics, “now that pent-up demand for durable goods has been satiated.”
Pandemic brings split in fortunes
Capital Economics is predicting a K-shaped economic recovery in Britain, with the company’s chief UK economist Paul Dales explaining: “The upward leg is the 'haves' who have kept their jobs and the downward leg represents the 'have nots" who have lost theirs.” Dales continues: “I can't quite think of any recession which has had such a big difference on people's incomes. Some people are sitting there with piles of cash in the bank and others will be wondering how they are going to buy food. The aggregate picture disguises a massive difference."
Goldman Sachs boss under fire for DJ-ing at Hamptons party
David Solomon, the CEO of Goldman Sachs, has been criticised for DJ-ing at a charity concert that he opened in the Hamptons over the weekend. New York Governor Andrew Cuomo said videos of the event showed "egregious social distancing violations" which left him “appalled”. A Goldman spokesman said that Mr Solomon agreed to participate in the Hamptons event for charity "in which the organisers worked closely with the local government and put strict health protocols in place".