BANKING
HSBC earnings boosted by higher interest rates
HSBC reported strong results for the first quarter with pre-tax profits jumping to $12.9bn, more than triple the figure from a year earlier and beating analysts’ expectations for $8.6bn. HSBC’s revenues rose 64% to $20.2bn, fuelled by higher interest rates. Income from trading rose 13% to $2.4bn and provisions for potential bad loans were reduced due to “improved economic assumptions” in Hong Kong. The bank booked a provisional $1.5bn profit from its government-engineered rescue of SVB UK and said it would buy back up to $2bn of its stock in an effort to shore up investor support amid ongoing criticism from its biggest shareholder Ping An. CEO Noel Quinn said the results showed that HSBC was “delivering on our promises” adding that HSBC and Ping An had a shared “desire to improve the performance of the bank” but a “difference of opinion” about restructuring it. Ping An wants HSBC to spin off its Asia unit to boost shareholder returns. Quinn went on to play down the impact of American regional bank failures, stating: “We do not believe there is a global banking crisis on the horizon.”
UK launches new anti-fraud initiative
The UK Government is to launch a new National Fraud Squad and expand a 2019 ban on pensions cold-calling to all financial products. As part of the crackdown, Britain’s intelligence agencies will work with new regional squads of police officers to find and stop scammers targeting Britons from abroad while the technology enabling criminals to mass spam people with phishing emails will be banned. Fraud is now the most common crime in the UK costing nearly £7bn a year with 70% of frauds originating from abroad or linked to overseas gangs. Rishi Sunak, the Prime Minister, backed the new fraud strategy, which is set to be announced by the Home Secretary Suella Braverman in the House of Commons today.
Third of UK over-65s ‘uncomfortable’ with online banking
Shared banking hubs should be opened more quickly to help those who feel uncomfortable managing their finances online, according to Age UK. A survey by the charity found nearly a third of over-65s in Britain are “uncomfortable” using online banking, leaving them at risk of financial exclusion. Those who were most likely to feel uncomfortable using online banking were aged over 85, female, on a low income, or more disadvantaged than their counterparts. John Howells, chief executive of cash machine and cash access network Link, said: "It is vital to protect face-to-face banking services for the millions of consumers who rely on cash.”
PRIVATE EQUITY
Icahn group’s shares tumble 20% after attack by short seller Hindenburg
A report from US short seller Hindenburg Research claimed on Tuesday that Icahn Enterprises, a fund run by activist Carl Icahn, was overvalued and held some of its private assets at an inflated worth. Hindenburg Research accused the hedge fund manager of operating a "Ponzi-like economic structure" through his $15bn fund, Icahn Enterprises, and claimed its value had been inflated by at least 75%. The short seller added: "We think Icahn, a legend of Wall Street, has made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well."
INTERNATIONAL
First Republic rescue fails to arrest slide in US regional bank shares
Shares in regional US banks plunged on Tuesday after JPMorgan’s takeover of First Republic failed to arrest fears over the vulnerability of mid-sized banks. California-based PacWest Bancorp, which has been under scrutiny for its lending to firms backed by venture capital, saw shares plunge 28%, while shares in Western Alliance, headquartered in Arizona, dropped 15%. Michael Metcalfe, head of macro strategy at State Street Global Markets, was sanguine about the situation, saying “market skittishness is understandable” following the failure of First Republic. However, he noted long-term investors had been buying more shares of banks in recent weeks, suggesting “neither panic nor broader contagion”.
Credit Suisse AT1 bondholders sue Swiss regulator in new lawsuit
Another group of Credit Suisse bondholders has filed legal action against Switzerland’s banking regulator after the $1.7bn of debt they held was written down during the bank’s forced takeover by UBS.
FINANCIAL SERVICES
Regulator proposes sweeping changes to UK listing regime
The Financial Conduct Authority will today publish a package of proposals to make it easier for companies seeking new listings in London. The FCA's proposals include replacing the two classes of listings and create a single category. Currently there are standard and premium listing segments. The watchdog says this move would "remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions". Removing some mandatory votes would "reduce frictions to companies pursuing their business strategies", the watchdog says. But concerns have been raised about the impact of the changes on investor rights. Richard Wilson, the CEO of Interactive Investor, said: "We strongly support the principles behind listing rule reform to make the UK more competitive, but eroding shareholder rights risks undermining market standards, and this is not the right answer.” Lord Hill, who began a review of the listing regime in 2020, said: "I very much welcome these proposals from the FCA, which build on the direction of travel we tried to set out in our listing review. If implemented, London would be able to stand toe to toe with our international competitors."
HEALTHCARE
NHS staff in England to receive a 5% pay rise
Health unions have backed a deal that will give more than a million NHS staff in England a 5% pay rise. Staff including ambulance workers, nurses, physios and porters will also get a one-off sum of at least £1,655. Despite some of the unions rejecting the offer, the deal was agreed after a majority backed it. The Royal College of Nursing (RCN), one of the unions that rejected the offer, has warned it will continue to pursue strike action.
LEISURE & HOSPITALITY
Hotels and restaurants back call to cut the tourist tax
A campaign by retailers urging the Government to bring back VAT-free shopping is being backed by the bosses of The Savoy hotel and Greene King pub chain, who say ensuring Britain is an attractive shopping destination is a key tool in the UK's ability to appeal to high-spending overseas tourists. Kate Nicholls, the CEO of UKHospitality, said an analysis cited by the Government to justify getting rid of the incentive was inadequate and did not consider the effect losing these visitors would have on the wider tourism economy, which contributes £139bn each year.
MANUFACTURING
Manufacturing downturn continues
The latest survey of the UK manufacturing sector by S&P Global and CIPS shows the industry’s downturn extended in April as global demand faltered. The purchasing managers’ index dropped to a three-month low of 47.8, a reading firmly below the 50 mark that separates growth from decline. However, manufacturers were the most optimistic they have been in 14 months with over 61% of the companies polled saying they expected output to rise in the coming year. Rob Dobson, director at S&P Global Market Intelligence, said: “The UK manufacturing sector remained in the doldrums at the start of the second quarter. Output and new orders contracted, as manufacturers felt the impacts of client uncertainty, destocking and tightening cost controls. There was no escape from the subdued mood of the market, with both domestic and export customers remaining reticent to commit to new contracts.”
Arm co-founder says ‘Brexit idiocy’ partly to blame for US flotation
Hermann Hauser, a co-founder of the Cambridge-based chip designer Arm has said Brexit was partly to blame for the decision to choose New York over London for its stock market listing. Explaining the rationale for the move, he told BBC Radio 4’s Today programme: “The problem is, to IPO on two stock exchanges at the same time is an enormous amount of work, so the administrative effort is double. The fact is that New York of course is a much deeper market than London, partially because of the Brexit idiocy the image of London has suffered a lot in the international community.” However, he went on to say that it would make a lot of sense for Arm to at least have a secondary listing on the London Stock Exchange eventually.
MEDIA & ENTERTAINMENT
Shares in education companies fall sharply after warning over ChatGPT
The California-based online study guide provider Chegg warned on Monday that a “significant spike in student interest” in AI chatbot ChatGPT was starting to hurt its sales, sending its shares and those of similar edtech companies down sharply on Tuesday. But Chegg CEO Dan Rosensweig called the 48% fall in its share price an overreaction, explaining to investors that Chegg was only providing guidance for the coming quarter and not for the full year because it’s “too early to tell how this will play out.”
PROFESSIONAL SERVICES
Co-founders of Google DeepMind and LinkedIn launch chatbot
Google DeepMind co-founder Mustafa Suleyman, LinkedIn founder Reid Hoffman and British scientist and DeepMind researcher Karén Simonyan, have launched an artificial intelligence chatbot called Pi, developed by their AI start-up Inflection AI. PI is touted as being more personal than OpenAI’s GPT-4, although it can also provide fact-based answers. “It’s really a new class of AI — it’s distinct in the sense that a personal AI is one that really works for you as the individual,” Suleyman said. Eventually, Inflection’s CEO added, Pi will help you organize your schedule, prep for meetings and learn new skills. The company was in discussions to raise up to $675m from investors earlier this year having raised $225m in seed money last May from venture capital firms including Greylock Partners, where Suleyman and Hoffman remain investors.
REAL ESTATE
House prices rise for the first time in eight months
House prices climbed back upwards for the first time in eight months in April, raising hopes of an upturn in the property market. The latest house price index from Nationwide revealed values increased by 0.5% last month following seven consecutive falls. However, over the year house prices had fallen by 2.7% and prices were still 4% below their August 2022 peak, Nationwide’s report showed. Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said: “The small month-to-month increase in Nationwide’s measure of house prices probably is just a blip away from its downward trend, rather than a sign of emerging stability in the market.” In the UK the average property price, according to Nationwide, is now £260,441.
ECONOMY
London can be a global leader in AI - Chris Hayward
Chris Hayward, the Policy Chairman of the City of London Corporation, writes in City AM on how artificial intelligence developments could help boost London as the capital’s competitiveness advantage comes under threat like never before. “One of the areas we need to show leadership is in artificial intelligence,” he says, citing a report which predicts UK GDP will be 10.3% higher in 2030 because of AI. “That’s the equivalent of an additional £232bn – greater than the annual cost of the NHS in England – making it one of the biggest economic opportunities in a generation.” Hayward also points to digital cross border payments and cyber security as major growth areas. “By striking the right balance of innovation and regulation, the City has a real opportunity to become the world’s leading tech capital.”
Scottish SMEs predict revenue increase
Some 55% of Scottish SMEs expect revenues to increase this quarter, when compared to the first three months of this year, according to the latest quarterly Barclays SME Barometer. Colin O'Flaherty, head of SME at Barclaycard, said: “It's unsurprising that in the immediate term, there are still wider concerns for businesses.”