Coronavirus loan scheme failures risk mass defaults
Data from UK Finance show that banks have paid out just £291.9m to just over 2,000 businesses under the coronavirus business interruption loan scheme. This translates as an approval rate of just 0.65%. Alberto Thomas of Fideres Partners warns of an “immense wall of redundancies and defaults coming” if the pace of lending is not accelerated. A report from Fideres shows the monthly payroll of the UK’s 6m SMEs amounted to £41bn. Meanwhile, a survey by the British Chambers of Commerce found a fifth of small businesses still plan to apply for support. It also found that more than half of businesses have at most three months’ cash left, while 6% said that they had already run out of cash. Over a third said they were planning to furlough 75-100% of their workforce over the next week.
Banks increasing interest-free overdraft buffers
Several banks are increasing their interest-free overdraft buffers to £500 to help households offset the financial impact of coronavirus. Lloyds Banking Group said that, from Thursday April 9, it will increase its interest-free buffer to a maximum of £500 on all agreed overdrafts for three months. TSB has also announced that, from Wednesday April 8, a £500 interest-free buffer will be in place for its current account customers for three months. HSBC UK is introducing a three-month £500 interest-free buffer from April 9 for Bank Account and Advance Account customers and temporarily reducing the rate charged above its interest-free buffer to 19.9%, from 39.9%. Santander will waive the interest on the first £500 of any arranged overdraft used between April 6 and July 9. It previously announced it will be 39.9%.
IA pressures bank bosses to take pay cut
The Investment Association (IA) is warning banks that they should take action to cut bosses’ pay after they relented and slashed dividends as the coronavirus cripples the economy. The IA said: "If a company cancels dividend payments or makes changes to their workforce's pay, IA members support boards that demonstrate how this should be reflected in their approach to executive pay." TSB announced yesterday that CEO Debbie Crosbie would give up a £760,000 bonus while the rest of the bank’s executive committee would also give up bonuses. The Mail notes that most of Britain's biggest lenders - including Lloyds, HSBC, Santander UK and NatWest owner RBS - have yet to break their silence on executive pay.
Banks slash number of mortgage deals
High street banks have cut the number of residential mortgage products on offer from 5,239 before the Bank of England cut the base rate on 11th March to 2,768, with 424 deals axed in the last five days alone. Eleanor Williams, financial expert at Moneyfacts, says: “The recent withdrawal of many higher loan-to-value mortgages and home purchase products is expected to be a temporary measure while lenders reassess risk, their internal operational capacity, and work out what their range of mortgages may look like moving forward.”
Barclays Foundation will support virus aid package
Barclays has launched a new foundation to fund COVID-19 good causes and provided it with £100m to get started. CEO Jes Staley, Nigel Higgins, the bank’s chairman, and Tushar Morzaria, the finance director, will give 33% of their base pay for six months, with those donations being matched by the bank.
Co-founder rejoins Edinburgh-based private bank
Simon Miller, who co-founded Hampden & Co a decade ago, is returning to the private bank as chairman of the board.
Airbnb receives $1bn cash injection
US private equity firms Silver Lake and Sixth Street Partners have injected $1bn into Airbnb as the company struggles with heavy losses, exacerbated by the coronavirus pandemic.
Air Liquide sells hand sanitiser unit to EQT Partners
EQT Partners is in exclusive talks to buy Air Liquide's hand sanitiser and disinfectant business, Schülke, in what is thought to be a €900m deal.
ECB data show eurozone banks had weak profits before coronavirus
Data from the ECB show eurozone banks were suffering a fall in profitability before the COVID-19 crisis struck with the least profitable banks found in Germany, raising fears about their ability to recover from the pandemic. But writing in the FT, Michael Lever, Head of Prudential Regulation at AFME, says eurozone banks do have “high levels of quality resources” to draw on. Meanwhile, the ECB has loosened collateral requirements to make it easier for lenders to access credit, but Germany is expected to maintain its opposition to plans for the creation of shared debt dubbed "coronabonds". Eurozone finance ministers are still trying to thrash out a joint rescue package expected to be worth half a trillion euros, the Telegraph reports. The paper’s Ambrose Evans-Pritchard suggests that with the state global banks are in, public ownership may be the only way to “escape the self-induced economic coma”.
Car dealers give buyers some slack
The Finance and Leasing Association (FLA) has said car makers are introducing emergency measures to help customers struggling with their leasing deals amid the coronavirus pandemic. The FLA said forbearance measures include 60 days leeway for drivers unable to make payments, payment reductions or waiving interest.
Airlines gain £1bn in fees relief
The UK government has given airlines permission to delay £1bn in air traffic control fees to help them cope with the coronavirus pandemic. Transport minister Chris Heaton-Harris refused to rule out the state taking a stake in airlines that have been worst hit, as talks continue with Virgin Atlantic over a £500m bailout. Meanwhile, global airline trade body Iata has warned that if governments do not intervene 25m jobs in the industry are at risk.
CMA refers sale of SIG division to Phase 2 probe
The £37.5m sale of SIG’s building solutions division to Kingspan has been referred for a phase two investigation by the CMA after an initial probe found the deal could leave contractors with fewer suppliers to choose from.
FCA plan focuses on consumer protection
The Financial Conduct Authority has set out its business priorities for the next three years, but has warned that an update may be needed in the coming months due to the coronavirus pandemic. The regulator also said it will transform its own approach to regulation in response to the pandemic, with a focus on making faster and more effective decisions. The FCA set out four priorities which it plans to focus on, including: ensuring safe payments and access to cash; avoiding unaffordable debt; protecting people from risky or poor value products; and making sure prices and terms on online products are fair.
Halifax Share Dealing and iWeb stop accepting new investors
Halifax Share Dealing and iWeb have stopped accepting new investors after a surge in demand for Isas and accounts from novel investors overloaded the firms' staff following the lockdown. The brokers, both part of Lloyds Banking Group and using the same trading platform, said they would prioritise existing customers as demand dramatically rose in the past month.
St James’s Place boss has bonus cut
Andrew Croft, the CEO of St James's Place, has had his bonus cut by £188,000 due in part to "certain criticisms aimed at the business", according to the group’s pay committee. Overall pay for 2019 came in at £1.554m, down from £1.887m after his long-term bonus was also reduced.
Nucleus suspends dividend payment
Edinburgh-based fintech Nucleus Financial Group is to suspend its dividend payout amid the "significant uncertainty" caused by the global coronavirus crisis. David Ferguson, the group's founder and chief executive, said: "The outlook is impossible to predict, but I can say that we remain open for business, and cash generative each day.”
Slowdown in car insurance claims expected
Geoff Carter, chief executive of Sabre Insurance, has suggested that a fall in the number of motorists making insurance claims could be witnessed as coronavirus lockdown restrictions continue, noting: “Clearly, during the lockdown period there are less miles being driven and claims frequency for these weeks is going to be significantly down - we would estimate about 60%.”
Axa criticises regulatory confusion over dividend policy
Thomas Buberl, chief executive of Axa, has criticised regulatory inconsistencies regarding the paying of dividends, noting “there are very different applications across the different regulators” in Europe on the issue.
Alliance Pharma confident in supply chain
Alliance Pharma announced yesterday a 17% year-on-year rise in underlying profits to £32.9m in 2019. The group said its supply chain was "holding up well" amidst the coronavirus pandemic but demand was "harder to forecast".
LEISURE & HOSPITALITY
Cinema chain shares up as post-pandemic plan outlined
Cineworld shares were up over 40% on the firm’s announcement of its plans to survive the coronavirus pandemic. All of its 787 cinemas in ten countries have been closed and dividend payments have been halted. Further, its C$2.8bn (£1.6bn) acquisition of Cineplex, of Canada, is now in doubt.
Airbus expects production to be cut in half
Airbus is predicting that production could be cut in half this year as the coronavirus grounds flights around the world, with demand not expected to return to normal for some time. Staff at the group’s UK base in Wales have been asked to take two week’s holiday.
WeWork sues SoftBank after withdrawal of $3bn deal
WeWork board members have launched a legal challenge against SoftBank after the Japanese investor pulled out of a $3bn (£2.4bn) tender offer for the troubled co-working firm. In the lawsuit, filed in Chancery Court in Delaware, WeWork accused SoftBank of putting "its own interests" first, of breaching its contract and its fiduciary duty to minority shareholders. WeWork called on SoftBank to complete the tender offer or pay alternative compensatory damages. Meanwhile the FT reports on how WeWork is coming under increasing pressure as a result of coronavirus, with many tenants refusing to pay rent or seeking terminations of their leases during March.
Pandemic hits UK house prices after rise last month
The latest Halifax research has revealed that UK house prices were up 3% year on year in March, but remained flat on a monthly basis. However lockdown measures introduced in response to coronavirus at the end of March have seen buyers and sellers put house moves on hold, with a negative trend predicted for house prices as a result.
Figures reveal steep decline in footfall
Data firm Springboard has revealed that visits to shopping centres, high streets and retail parks were down 81% last week and 75% in the last week of March as a result of coronavirus lockdown measures. Visits to stores that remain open were up 21% on Sunday from a week earlier, and in London a rise of 51.4% was recorded. It is expected that footfall will drop to its lowest level in more than a decade this year, and nearly all companies believe it will take at least six months before trading returns to normal.
Productivity growth held back by financial services
The Office for National Statistics (ONS) has revealed that UK productivity was up 0.3% year-on-year in the final quarter of 2019, with the figure barely growing since the 2008 financial crisis. "Financial services has seen a net negative contribution to output per hour growth, reflecting that its productivity has actually declined over the decade," the ONS said. "This contrasts with the years leading up to the 2008 economic downturn, where financial services saw extremely strong productivity growth, so the post-downturn decline may offer evidence that this earlier growth was unsustainable."