BANKING
UK’s big banks told to publish ‘living wills’ from 2021
The Bank of England has confirmed that banks with more than £50bn in retail deposits will have to publish details of how they could be safely wound down in a crisis. The BoE said that banks would be required to release the wills to show that they could close without threatening customer deposits or the need for a taxpayer rescue. The Bank will also review the plans and issue a review every two years. All banks with deposits above the £50bn mark must publish a review of its resolvability from June 2021 and be resolvable by 2022. The move marks the latest in a series of protective measures for taxpayers against bank failure. "We have made major reforms since the financial crisis to make firms resolvable and ensure that those who profit from banks' success also pay when they fail," said Jon Cunliffe, the BoE's deputy governor for financial stability. "Increased transparency about the resolution regime is in the public's interest and also incentivises firms to make further progress on their resolvability."
Lloyds preferred bidder for Tesco Bank’s mortgages
Lloyds Banking Group is understood to have emerged as the preferred bidder for Tesco Bank’s £3.7bn mortgage book, seeing off both Santander and RBS. The supermarket group announced in May that it was selling its home loans business and was thought to be entering talks with Santander, already the third biggest mortgage provider in the UK. However, Lloyds is reported by Sky News to have emerged as the new favourite and could make an announcement today alongside its half year results.
CYBG knocked by ‘large volume’ of paid-off mortgages
Shares in Glasgow-based CYBG fell 8% yesterday after the bank said its net interest margin was 3 basis points lower than the previous year “due to the refinancing impact of a large volume of mortgage redemptions”. CEO David Duffy said, “net interest margin is tracking as expected” and “we remain on track to deliver full year performance in line with our guidance.”
Young people see 10-fold rise in bankruptcy
Rising self-employment and easily-obtainable credit has pushed Generation Z into debt with the number of young people going bankrupt increasing 10-fold in three years. Under-25s now make up 6.5% of all personal insolvencies, up from 1% three years ago, according to Insolvency Service data. Concerns have been raised about the rise in sub-prime credit cards being targeted at people with low credit scores. Overall, individual insolvencies are at the highest quarterly level since 2010, with 30,936 people filing for bankruptcy, debt relief orders or individual voluntary arrangements. Finally, corporate insolvencies have reached their highest level in more than five years, rising 11% in Q2 compared with the same period last year.
PRIVATE EQUITY
Profit is not guaranteed for private equity funds
Tim Hames defends private equity in the FT, pointing out that in order for it to be profitable, it must improve the state of the investee business before it can hope to see returns.
INTERNATIONAL
Japan central bank holds rates
The Bank of Japan has kept monetary policy on hold at minus 0.1% and promised to act "without hesitation" to battle any economic slump caused by the international trade war. The central bank also kept its pace of government bond-buying at ¥$80tn ($736bn) a year and maintained a cap on 10-year bond yields at roughly zero.
Capital One breach sends shares down 7%
Capital One Financial revealed on Monday that the personal information of more than 100m credit card holders and applicants had been stolen, sparking an investigation by the New York attorney-general and a 7% slump in its shares on Tuesday.
German court hears case against ECB bond-buying
Germany’s constitutional court has begun a fresh hearing on the legality of the European Central Bank's programme of asset purchases with complainants arguing it breaks EU law.
Bank of Ireland creates £1.8bn emergency Brexit fund
The Bank of Ireland has announced a £1.8bn emergency fund for businesses as the UK’s stance on Brexit hardens and the threat of a no-deal exit rises.
AUTOMOTIVE
Car production falls by a fifth
UK car production dropped by 20.1% in the first half of this year, amid falling demand in key global markets and fears over a no-deal Brexit. The Society of Motor Manufacturers and Traders (SMMT) said the sector had already spent £330m on no-deal preparations: stockpiling materials, securing warehouse capacity, additional insurance and training in new customs procedures. Investment in factories had dropped to “pitiful” levels, the SMMT added.
AVIATION
EU price war drives Lufthansa’s earnings down
Second quarter earnings dropped 25% from €1bn to €754m for Lufthansa amid a price war with rivals based in Germany and Austria and “persistent overcapacities” in the airline market.
BBA sells aircraft parts division
BBA Aviation is selling its aircraft parts business Ontic to CVC Capital for $1.4bn so the company can focus on airport services.
FINANCIAL SERVICES
FCA set to ban contingent charging by pensions advisers
The Financial Conduct Authority is to consult on a ban on pensions advisers operating a “contingent charging” model, under which they get paid only if their client follows their advice to transfer a “defined benefit” pension. Contingent charging is estimated to cost consumers £2bn a year. The FCA's Christopher Woolard said: "We want to ensure people receive suitable advice and drive down the number giving up defined pensions when it is not in their interests."
Provident reinstates half-year dividend
Provident Financial has reinstated its half-year dividend and revealed better-than-expected growth at credit card business Vanquis Bank. The sub-prime lender’s half-year results showed an 8.8% rise in pre-tax profits to £37.6m, but they would have jumped by 76.9% to £61.2m if not for the cost of fighting off the bid from Non-Standard Finance. Provident also announced finance chief Simon Thomas will leave the business in March 2020 for health reasons.
Hitachi Capital UK up on Brexit fears
Hitachi Capital UK has said uncertainty around Brexit has increased demand for its products, which allow businesses and consumers to spread the cost of assets, leading to a pre-tax profit of £123.2m in the year to March 31, up 6% compared with the previous year. Group revenues rose by 14% to £711.3m.
HEALTHCARE
Reckitt Benckiser suffers growth slowdown
Nurofen and Durex maker Reckitt Benckiser saw sales slow in the first half of the year with declining birth rates in China and fewer flu cases in Europe leading to a downgrading of revenue targets for the rest of 2019. Outgoing boss Rakesh Kapoor said there was “work to do to deliver consistent financial performance”.
Merck raises forecasts as cancer drug sales soar
US pharmaceutical company Merck has reported a 12% rise in sales to $11.8bn, driven by a 58% rise in revenue from its cancer drug Keytruda.
Blockbusters lined up for AstraZeneca
AstraZeneca has said five of its new medicines are set to become "blockbuster" drugs – those which achieve $1bn in sales in the first year.
MANUFACTURING
Britain world's second-biggest arms exporter, again
The UK has returned to second place in the rankings of the world’s biggest defence exporters. British companies secured £14bn of export orders last year, up from £9bn in 2017, second only to the US.
MEDIA & ENTERTAINMENT
Giffgaff fined £1.4m for overcharging mobile customers
Ofcom has fined Telefonica UK-owned mobile phone company Giffgaff £1.4m after identifying an error in its billing system that led to around 2.6m customers being overcharged a total of almost £2.9m.
REAL ESTATE
Average earners priced out of home ownership
A study by Santander indicates that 70% of young people now believe that the homeownership dream is over for their generation. Although 91% still aspire to owning their own home, only 25% of 18- to 34-year-olds would be in a position to buy a home by the year 2026. Those earning between £20,000 and £30,000 suffered the sharpest fall in first-time buyer homeownership.
ECONOMY
Households remain upbeat as wages continue to rise
Consumers remain optimistic about their financial situation despite worries about the economy, according to GfK's latest survey, with a sustained rise in real wages countering concerns over Brexit. However, households’ confidence did not extend to the wider economy, with the overall index for July standing at minus 11, albeit up from minus 13 last month.
Pound falls again on no-deal fears
The pound has continued to fall on currency markets amid fears of a no-deal Brexit, hitting a fresh two-year low of $1.2120 against the dollar on Tuesday before recovering some ground. Sterling also slid against the euro, falling to €1.0881 at one point.
OTHER
Profoundly low interest rates are here to stay
Robin Harding considers the consequences of permanently low global interest rates in the FT, suggesting it is “time to stop waiting for rates to recover and face the world as we find it.”