HL answers critics
Hargreaves Lansdown’s (HL.) reputation took another hit after it revealed to the Treasury select committee that it had concerns about liquidity in the LF Equity Income fund as far back as November 2017, despite continuing to include it on its 'best buy' fund list. Chief executive Chris Hill told the committee that the platform provider had started monthly calls with Neil Woodford in January 2018 to address the issue but said it did not learn until this week that he had breached the 10 per cent cap on illiquid investments on two occasions last year. A spokesperson for Woodford Investment Management said there was never a month-end passive breach.
CYBG rebrand
Aims for market share
Following its merger last year, CYBG (CYBG) is disposing of the Clydesdale and Yorkshire Bank brands, and will be known only as Virgin Money. The corporate name change will come into effect in late 2019, while the entire business will be using the Virgin Money brand by the end of 2021. In a bid to increase its market share by 40 per cent, the group also plans to launch a personal current account later this year, followed by a business current account in 2020. Full-year guidance has also been reaffirmed, while an extra £50m of annual net cost savings has been identified, and will bring the post-merger savings to £200m by the end of 2022.
Challengers scrutinised
Mixed risk management
Challenger banks are “overly-optimistic about the impact of a stress scenario on their business”, according to a confidential review by the Bank of England of the fast-growing sector. A stress-test of 20 non-systemic deposit-taking banks provided the Prudential Regulation Authority with “reassurance about the overall resilience of the sector as a whole”, although risk management practices were found to be mixed, and underwriting standards at some challenger banks were guilty of “weak financial analysis, limited evidence of challenge and high levels of lending outside of policy”.
IAG surprises
Boeing Max orders
International Consolidated Airlines (IAG) surprised attendees of the Paris Air Show with the announcement that it intends to order 200 Boeing 737 Max aircraft – the model that has been grounded since March after two fatal crashes owing to a flaw in the plane’s software killed 346 passengers – in a deal said to be worth around $24bn (£19bn). The purchase from IAG, which will include both 737 Max models 8 and 10, is the first since the aircraft were grounded by the Federal Aviation Authority and the European Union Aviation Safety authority. The planes are expected to be delivered between 2023 and 2027.
Dovish Draghi
Yields lower
European government bond prices shot higher this week after European Central Bank (ECB) president Mario Draghi revealed at the ECB’s annual symposium in Portugal that the bank was considering launching a fresh expansion of its quantitative easing programme if inflation prospects did not improve. President Trump accused Mr Draghi of “unfairly” manipulating the euro, which declined by around 0.5 per cent against the US dollar following his comments. In reply, Mr Draghi said the bank had a mandate to target inflation close to, but below, 2 per cent over the medium term.
Risers and fallers (%)
| JUST GROUP | +14.5 |
| CONSORT MEDICAL | +12.73 |
| PETROPAVLOVSK | +12.05 |
| CHEMRING GROUP | +12.03 |
| ARROW GLOBAL GROUP | +10.92 |
| KIER GROUP | -28.76 |
| LOW & BONAR | -26.54 |
| PENDRAGON | -23.13 |
| THOMAS COOK GROUP | -19.54 |
| AMIGO HOLDINGS | -15.75 |
Week to 18 June 2019
Babcock rebuffs peer
Serco approach
Babcock International (BAB) confirmed that it received “an unsolicited and highly preliminary proposal” from outsourcer Serco (SRP) in January 2019 that proposed an all-share merger between the two companies. The proposal was unanimously rejected by the Babcock board, which said in an announcement that no further offer has been made by Serco. The deal, which was first reported by The Sunday Times, would have created an entity worth £4bn. According to The Sunday Times, a first attempt at a deal was made late last year when Serco chairman, Sir Roy Gardner, approached his Babcock counterpart, Mike Turner. Serco declined to comment on the story.
Mining spat
Deadline extension
Barrick Gold (Can:ABX) and Acacia Mining’s (ACA) spat continued after the two companies agreed to extend Barrick’s deadline to make a firm offer for the 36 per cent of Acacia it does not own by three weeks. Barrick said its initial 14 per cent premium offer from May was fair because of several major issues at the company, with the most important the Tanzanian government refusing to deal with Acacia interim chief executive Peter Geleta or his management team. The Mark Bristow-led major also said Acacia had overstated gold reserves potential at the Bulyanhulu and North Mara mines. Acacia said in a statement it “strongly disagrees with several statements made in the announcement”.
