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Daily News Roundup: Wednesday, 4th August 2021

Posted: 4th August 2021


Standard Chartered profits climb

Standard Chartered has recorded a 57% spike in first-half pre-tax profit, with it hitting $2.55bn. This far exceeds the $1.63bn seen in the same period last year and outdoes estimates from analysts that forecast a $2.23bn profit. The bank’s loan-loss provisions fell by $841m over the last year, with the UK’s economic rebound helping avert a wave of defaults. Chief executive Bill Winters said: “I am encouraged by our positive performance in the first half of 2021 despite an uneven recovery from COVID-19”. “We grew profit before tax 37% year-on-year, helped by improved loan impairments, strong underlying business momentum and good progress across our strategic priorities”, he added.

Bank of Ireland profit returns to 2019 levels

Bank of Ireland saw profit hit €465m in H1, marking a return to pre-pandemic levels. The figure compares to a €669m loss in H1 2020. Its retail UK division, which includes its Northern Ireland business, had an underlying profit of £139m. Chief executive Francesca McDonagh said the results and the bank's outlook for the future "are radically different to 12 months ago”. With the Irish government planning to sell down part of its 13.9% shareholding in the bank by the end of the year, CFO Myles O'Grady said there is also scope to write back some provisions on pandemic-related bad loans.

People between 21 and 30 most likely to be scam victims

Research from Barclays shows that people aged between 21 and 30 are the most likely to have reported being scammed in recent months. The poll of 2,000 people also found that while people tend to perceive those aged 71-plus as being most at risk of fraud, over-70s were the victim in just 4.1% cases. Those in the 21-30 bracket accounted for 29% of scam reports, while people aged 31 to 40 were the next most targeted group for scammers, representing 24% of cases. Ross Martin, head of digital safety at Barclays, said: “Unfortunately, fraudsters don’t discriminate when it comes to scams and everyone, irrespective of age, is susceptible to them.”

Banks target students with perks

Moneyfacts says a "battle for new business" has emerged among high street banks, with banks offering perks designed to attract student savers as the new academic year approaches. Rachel Springall of Moneyfacts said: "Student account providers have not held back with tweaking perks this year, which are enticing and could save students some cash.” She noted that "unlike last year, two banks are offering a free cash incentive upon opening, "which was unheard of in 2020 for student accounts”. The Express details perks being offered by Barclays, HSBC, NatWest, Lloyds, Royal Bank of Scotland, Santander, TSB, Nationwide, Halifax and Bank of Scotland.


Private equity investment hits five year high

Private equity deal value and volumes in the first half of the year hit a five year high. Between January and June, 785 private equity deals were completed with a combined value of £73.7bn – an increase of 61% in volume and 48% in value compared to H1 2020. Across mid-market private equity dealmaking, the first six months of 2021 saw 377 deals at a combined value of £20.7bn. This represented the highest levels of activity since H1 2017 and marked a significant increase on the 260 deals at an overall value of £14.9bn recorded in H1 2020.


Societe Generale returns to profit

French bank Societe Generale swung back to profit in Q2, with net income of €1.4bn compared to a €1.2bn loss in the same period in 2020. Revenue climbed 18.2% to €6.2bn, while international retail banking and financial services registered a 17% increase in revenues on Q2 2020’s levels. The bank’s cost of risk fell to €142m, down from €1.2bn in Q2 last year. CEO Frédéric Oudéa said the bank “enjoyed an excellent quarter, with a solid commercial and financial performance by all its businesses.” “The results for H1 2021 are the best for five years, illustrating the strength of the business model and the Group’s capacity to rebound,” he added.

BPCE's profit rebounds

French co-operative bank BPCE has reported a tenfold increase in Q2 net income on increased revenue and lower pandemic-related charges against bad loans. Revenue climbed 22.3% while its cost of risk fell 66.2% on Q2 2020. Investment banking unit Natixis reported a 45.6% increase in revenue in global finance services activities, with revenue up 79.8% in corporate and investment banking and 21.5% in asset and wealth management.

Lazard raises pay for junior analysts

Lazard is raising pay for its junior financial-advisory analysts, with salaries going up to at least $100,000 in the first year, while second- and third-year analysts will earn $110,000. Citigroup, Morgan Stanley, UBS and Deutsche Bank have all increased pay for their first-year analysts to roughly $100,000 in recent weeks, while Goldman Sachs has reportedly raised salaries for its junior employees in the investment banking division.

Goldman Sachs mints billions through business it is looking to shrink

Goldman Sachs is aiming to trim its equity investments portfolio – which provided $3.7bn in revenues in Q2 - by almost 20%, with it turning focus to asset management revenue.

Credit Suisse faces trial over Mozambique debt scandal

Credit Suisse will face a trial over its role in a $2bn scandal, with the case set to go before courts in September 2023. It centres on a scandal that saw funds raised through debt issuance spent on purchasing military equipment instead of being used to invest in a tuna-fishing fleet in Mozambique. Credit Suisse’s former head of global financing pleaded guilty to charges brought in the US over receiving brides in connection to the bonds.


FCA tells firms to consider diversity in executive pay review

The Financial Conduct Authority (FCA) has urged financial services firms to review pay data in light of diversity and inclusion. In a letter to the chairmen of remuneration committees, the City watchdog said it recognises the steps firms have taken to embed diversity and inclusion, but said there is “much more that needs to be done”. It urged the firms to review pay data across all protected characteristics and to “act swiftly to address any disparities.” It also called on firms to review accountability and non-financial measures, calling on them to ensure high standards of conduct and culture and make sure there is a clear link between behaviours and remuneration outcomes.

Investment company purchases on adviser platforms up 22% in Q1

Purchases of investment companies on adviser platforms rose 22% in the three months to March to reach a new high of £368m, according to data compiled by Matric Financial Clarity for the Association of Investment Companies. The figure marked a 35% increase on the first quarter last year, when £273m was purchased. The number of firms buying investment companies between January and March this year was 1,882, including 1,730 financial advice firms and 51 wealth managers.


Output jumps but SME manufacturers concerned over shortages

A CBI survey shows that while output at SME manufacturers grew at the fastest rate on record in the three months to July, firms are increasingly concerned about inflation and shortages in staff and materials. The survey of 234 smaller manufacturers shows new orders jumped at the highest rate since the first survey in 1988, with those polled expecting strong export growth in Q3. Growth in business optimism slowed slightly compared with the previous three months, although sentiment about export trading stabilised after five consecutive quarters of decline. While employment numbers grew at a record pace in Q2, the proportion of businesses that said a shortage of skilled labour may limit output was at a joint-record high.

Brexit red tape hits UK manufacturing

Manufacturing is at risk from serious disruption from supply chain delays prompted by Brexit red tape, with UK officials failing to devise a suitable replacement for the EU’s safety standards system or secure an agreement with the EU to recognise one another’s safety standards. Without confirmation that standards are met, products and parts cannot be sold in the UK. William Bain, head of trade policy for the British Chambers of Commerce, said it has “serious concerns about the effect on business" and warned that without a long-term solution or an extension to the easement beyond January, manufacturing supply chains “could face serious disruption.”


Halifax launches 0.9% mortgage

Halifax has launched a market-beating mortgage, with a two-year deal available at just 0.9%, with this coming in cheaper than the previous lowest rate of 0.94% that was launched by HSBC last month. The offer is open to borrowers looking to remortgage with a 40% deposit. It carries a £1,499 fee – while taking the deal with a 0.91% interest reduces the fee to £999. Halifax has also launched a five-year deal at 0.98%, with this the lowest-ever over that time frame, outdoing the 0.99% deal recently launched by Nationwide.

NatWest pension fund joins L&G in retirement home investment

Legal & General has teamed up with NatWest’s pension fund to build a £4bn portfolio of retirement homes with net zero carbon emissions. They will invest £500m in a 50-50 venture to fund the development of 5,100 homes in 34 schemes around Britain. The deal is thought to be the UK’s largest investment in retirement homes.

Olympic borough price rises exceed London average

Nationwide analysis shows that London's Olympic host boroughs have seen house price increases exceeding the city's average since it hosted the Games. All six areas have seen prices rise by more than the average recorded across the capital since 2012, with Waltham Forest leading the way with a 106% jump. This compares with a 61% average increase across London over the same period and a 49% climb across the UK.


Home improvement drive boosts Travis Perkins

A surge in Britons carrying out home improvements has prompted Travis Perkins to lift its profit guidance for the year, despite warning about rising costs and availability issues. The builder's merchant recorded a 44.1% increase in like-for-like sales, while total sales were 37.7% higher at £2.29bn over the six months to the end of June, as the business recovered from last year's first lockdown.


BoE set to hold rates and back QE

With the Bank of England’s Monetary Policy Committee (MPC) making its latest policy announcements today, experts are expecting it to vote in favour of the Bank’s current bond buying programme and to keep rates at 0.1%. However, some analysts believe the quantitative easing (QE) measures may see some disagreement among members. Philip Shaw, an economist at Investec, said: “It is possible that the ongoing robust nature of the UK economic recovery triggers a significant debate of the design of the current QE programme.” Analysts at ING believe there is “an outside chance” that the Bank details its future balance sheet reduction plans in today’s update. The Bank will also publish its updated inflation outlook and many commentators expect the Q3 forecast to be much higher than May’s Q2 prediction. ING believes Consumer Price Index inflation will hit 3.5% this year, 1.5% higher than the Bank’s target.


Bidding for UK firms at highest since 2007

With private equity firms and overseas buyers increasingly targeting UK companies for acquisitions, analysis shows bids for British businesses have hit their highest level since 2007. Research from financial information provider Refinitiv shows that the total value of takeover attempts involving UK targets has reached $217bn in 2021 so far. This is up on the $58bn in the same period last year and the highest year-to-date total in 14 years. The number of bids for UK companies, including takeovers of private companies and bids for British groups by UK firms, has also risen. There have been 2,463 deals this year, the highest number since the late 1990s. They included 220 takeover proposals last month with a total value of about $35bn and 349 in June, with these worth a combined value of about $37bn.

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