HSBC profits rise as it prepares for UK ringfence

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HSBC has reported a rise in its first half profits and announced a share buyback as it prepares to ring-fence its UK retail arm by 2019.

Europe’s biggest bank reported a 5% rise in pre-tax profit of $10.2bn (£7.8bn) for the first six months of 2017, up by about $500m.

As widely expected, the bank has also announced a share buyback of up to $2bn which it expects to complete by the end of 2017.

HSBC shares rose 3% on the news.

The bank’s shares fell back later but its share price has rallied over the past year, helped by the weak pound which makes profits earned abroad more valuable when repatriated to the UK.

Since the 2008 financial crisis, HSBC has been cutting jobs and selling assets to make the group more profitable, while still making dividend payments to shareholders.

“In the past 12 months, we have paid more in dividends than any other European or American bank and returned $3.5bn to shareholders through share buybacks,” HSBC’s chief executive Stuart Gulliver said.

The bank has used share buybacks to offset the impact of shares being paid out as dividends.

The announcement takes the total of HSBC share buybacks since the second half of 2016 to $5.5bn.


Brexit: Race to host EU agencies relocated from London

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EU countries have until midnight to enter a race to bid to provide a new home for two agencies that will be relocated from the UK after Brexit.

The European Banking Authority and the European Medicines Agency, based in Canary Wharf in London, employ just over 1,000 staff between them.

The banking and medicines agencies are seen as the first spoils of Brexit by the 27 remaining members of the EU.

About 20 countries are expected to enter the bidding process.

Glossy brochures

There will be fierce competition to attract the agencies’ highly skilled employees, their families and the business that comes with them.

This includes 40,000 hotel stays for visitors each year.

Countries have printed glossy brochures, posted promotional videos online and hired lobbying firms.

The contest has pitched larger countries against smaller ones from across the EU.

The European Commission will assess the entries based on the quality of office space, job opportunities for spouses and transport links.

European ministers will use a complicated voting system to choose the winners in November.


Barclays sets aside extra £700m for PPI

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Barclays has set aside an extra £700m to meet compensation claims for mis-selling payment protection insurance.

The news came as the bank said costs related to the sale of its Africa business had pushed it into a £1.2bn loss in the first half of the year.

The sale of the Africa business was part of Barclays’ plan to focus on the UK and US.

Stripping out the losses from the Africa sale, Barclays posted a 13% rise in group pre-tax profits to £2.34bn.

Barclays chief executive Jes Staley said: “Our business is now radically simplified, the restructuring is complete, our capital ratio is within our end-state target range, and, while we are also working to put conduct issues behind us, we can now focus on what matters most to our shareholders: improving group returns.”

Advertising campaign

Barclays said it had now set aside a total of £2.1bn to deal with PPI complaints, but this was open to review.

Claims are expected to rise after the Financial Conduct Authority launches a campaign in August to encourage consumers to decide whether to act before the final deadline to bring a PPI complaint in August 2019.

Earlier this year, Barclays sold a near 34% stake in Barclays Africa Group, leaving it with just 15% of the business.

The company said the sale of the stake had led to a loss of £1.4bn, and it had also taken a £1.1bn charge on the sale.


Lloyds sets aside another £700m for PPI insurance claims

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Lloyds Banking Group has set aside another £1bn to cover the cost of insurance mis-selling and the treatment of mortgage customers.

Another £700m will cover payment protection insurance (PPI) claims and £283m will be used to repay about 590,000 mortgage holders.

The bank had already put away an extra £350m this year to cover PPI costs.

It came as Lloyds posted half-year pre-tax profits of £2.5bn, 4% higher than last year.

The results are the first since the government sold its stake in the bank.

The repayment to mortgage customers comes after they were charged from 2009 to 2016 for going into arrears.

The Financial Conduct Authority had been investigating the issue, concluding that the charges should not have been applied as the bank did not always do enough to understand customers’ circumstances and check that their arrears payment plans were affordable and sustainable.

The FCA says Lloyds will refund all fees charged for arrears management and broken payment arrangements, and it will also pay any litigation fees that were applied unfairly to customers who were involved in related legal action.

On top of that, it will also offer payments for potential distress and inconvenience.

The bank will itself approach customers to prompt them to make a claim.

Fraud probe

Lloyds became the UK’s biggest force in personal banking as a result of its absorption of HBOS – the former Halifax and Bank of Scotland – at the height of the financial crisis and was bailed out by the government at a cost of about £20bn.

Lloyds is also having to compensate some of its small business customers, who suffered as a result of widespread fraud at its former HBOS branch in Reading.

Victims saw their businesses taken over by so-called specialists recommended by the branch between the years 2003-07.

These “specialists” destroyed a number of the businesses, squandering the money they made on prostitutes and luxury holidays.

Lloyds is in the process of paying compensation to the victims of the fraud, for which it set aside £100m in the first quarter.

It is also currently undertaking a review of what happened.

Crisis legacy

It is the PPI mis-selling scandal, though, that dwarfs all others.

Lloyds has now increased provisions for claims some 17 times. Its chief financial officer, George Culmer, said it was “disappointing” to be having to do it again.

He also offered no guarantee that there would be no further increases in provisions, although he did say the number “looked appropriate in terms of covering us between now and August 2019”.

Lloyds alone has now set aside £18bn. In total, UK lenders have been forced to set aside more than £30bn to cover PPI compensation costs.

PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments.

The bank’s chief executive, Antonio Horta-Osario, said of the various pots of money set aside for customer redress: “We have a commitment as a management team of putting these legacy charges behind us as soon as possible.”

He admitted, though, that there would “always be redress costs” when running a banking business.

‘Strength’

Laith Khalaf, senior analyst at stockbrokers Hargreaves Lansdown, said that despite the size of the provisions for the various types of misconduct, Lloyds’ performance was satisfactory.

“It’s a sign of Lloyds’ strength that it can shrug off £1.6bn of misconduct charges to post a strong rise in profits,” he said.

“Overall, this is a strong set of numbers from Lloyds, blighted, but not overshadowed, by misconduct costs. The government has exited the bank and is now no longer selling stock in the market, which removes a significant downward pressure on the share price.”

The government had been steadily offloading its Lloyds stake, resulting in about £21bn being returned to the taxpayer.

The government still owns 73% of Royal Bank of Scotland, which was rescu


‘Mini-tornado’ causes trail of destruction

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Wigan faced some of it most adverse weather conditions yesterday when residents came up against a tornado and a huge lightning storm. Yesterday afternoon the borough was hit by a mini-tornado, which swept through Hindley, destroying cars, trees and fence panels.

Residents in the Belmont Road area were disturbed by sudden high winds which left a trail of destruction. Firefighters were called out after a tree was uprooted and fell on a car in the Castle Hill Road area. And neighbours have reported a number of windows being broken and debris swept up and hurled through the air. Eyewitness Kirsty Roe, of Belmont Road, said: “There a number of windows which have been taken out and fences have been damaged.

“You can see where a tree has been ripped up and fallen on a car around the corner. “It was weird – there was an almighty bang and our windows started rattling.

“You could see a circle of dust and debris which had been whipped up.” A Greater Manchester Fire and Rescue Service spokesman confirmed that Hindley firefighters had been called out to deal with a tree which had fallen on a car in the Castle Hill Road area.

A Met Office spokesman said: “There is a chance that a tornado, may have struck in this location. “When people mention tornados they often think about large-scale events which can cause major damage.

“But there can be more localised, smaller events. The key factor will be whether the weather event makes contact with the ground. If it doesn’t, then it’s a funnel cloud, but if it does than it can be classified as a tornado.” At around 10pm last night, the borough was hit again, this time by a huge thunder and lightning storm which ripped through the sky for around 15 minutes.

Spectacular fork lightning lit up the night sky and the heavens opened in a dramatic turn in the weather. Thankfully firefighters have not reported attending to any more damage caused overnight.

 

 

 

 

 

 

 

 


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