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The Bank of England’s demand that banks suspend their dividends in the wake of the Covid-19 crisis went down like a tuna milkshake the morning after a heavy night on the town at HSBC.
Shortly afterwards, the FT reported that the internal debate about the location of HSBC’s headquarters – it has regularly threatened to quit London – had been reopened amid investor outrage.
The bank, which makes 90 per cent of its profits in Asia, has a small army of shareholders in the region, particularly Hong Kong, where many people count on the payment. Some have threatened legal action.
The latest results, however, cast a new light on the UK central bank’s decision.
HSBC’s first quarter saw profits cut in half to $3.6bn (£2.8bn) as bad loans surged – provisions leapt by a staggering 417 per cent, putting them on track to hit the highest level since the financial crisis.
It’s worth noting that the bank has always taken a relatively conservative approach with these. But with the economic blowback from the novel coronavirus only just beginning, it isn’t unduly pessimistic to wonder whether it mightn’t get quite a bit worse before it gets better.
Another telling figure in HSBC’s numbers was that it experienced a surge in deposits. This isn’t just because people have been parking money in cash at a time when the markets are in a slough of despond. The bank cited corporates drawing down pre-agreed lines of credit and then depositing the borrowed money so it’s there when they need it.
The chances are that they will.
There is a tendency in Britain to use dividends as a proxy for everything that’s wrong with the current model of capitalism. It is understandable given the behaviour of its privatised utilities in particular. But it’s not entirely helpful. They play an important role they in, for example, pensions. Anyone who has one of those in Britain is probably exposed to HSBC to some degree, and they will therefore be affected by the cut. It isn’t just angry investors in Hong Kong who have cause to be discomfited by the central Bank’s decision.
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5/13 Fingerprint payment
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8/13 RIP Payday Loans
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The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process.
13/13 Beast from the east economic impact
The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.
1/13 Flybe collapses
Airline Flybe has collapsed. All future flights on the Exeter-based airline have been cancelled – leaving more than 2,300 staff facing an uncertain future, and wrecking the travel plans of hundreds of thousands of passengers.
The chief executive, Mark Anderson, said: “Europe’s largest independent regional airline has been unable to overcome significant funding challenges to its business.
AFP via Getty
2/13 Future product placement will be ‘tailored to individual viewers’
Marketing executives say that product placement in films and televison shows on streaming services such as Netflix may be tailored to individuals in future. For instance, if data shows that a viewer is a fan of pepsi, a billboard in the background of a shot would host an advert for pepsi, while for a viewer known to have different tastes it could be for Coca-Cola
Paramount
3/13 Corbyn wishes Amazon a happy birthday
In a card sent to Amazon CEO Jeff Bezos on the company’s 25th birthday, Labour leader Jeremy Corbyn writes: “You owe the British people millions in taxes that pay for the public services that we all rely on. Please pay your fair share”
4/13 No deal, no tariffs
The government has announced that it would slash almost all tariffs in the event of a no-deal Brexit. Notable exceptions include cars and meat, which will see tariffs in place to protect British farmers
Getty
5/13 Fingerprint payment
NatWest is trialling a new bank card that will allow people to touch their hand to the card when paying rather than typing in a PIN number. The card will work by recognising the user’s fingerprint
NatWest/PA Wire
6/13 Mahabis bust
High-end slipper retailer Mahabis has gone into administration. 2 Jan 2019
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7/13 Costa Cola
Coca-Cola has paid £3.9bn for Costa Coffee. A cafe chain is a new venture for the global soft drinks giant
PA
8/13 RIP Payday Loans
A funeral procession for payday loans was held in London on September 2. The future of pay day lenders is in doubt after Wonga, Britain’s biggest, went into administration on August 30
PA
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Elon Musk has concluded that Tesla will remain public. Investors and company directors were angry at Musk for tweeting unexpectedly that he was considering taking Tesla private and share prices had taken a tumble in the following weeks
Getty
10/13 Jaguar warning
Iconic British car maker Jaguar Land Rover warned on July 5, 2018 that a “bad” Brexit deal could jeopardise planned investment of more than $100 billion, upping corporate pressure as the government heads into crucial talks
AFP/Getty
11/13 Spotif-IPO
Spotify traded publically for the first time on the New York Stock Exchange on Tuesday. However, the company isn’t issuing shares, but rather, shares held by Spotify’s private investors will be sold
AFP/Getty
12/13 French blue passports
The deadline to award a contract to make blue British passports after Brexit has been extended by two weeks following a request by bidder De La Rue. The move comes after anger at the announcement British passports would be produced by Franco-Dutch firm Gemalto when De La Rue’s contract ends in July.
The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process.
13/13 Beast from the east economic impact
The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.
But even though HSBC’s business in the territory was notable for holding up remarkably well, the wider economic backdrop show why the Bank of England wanted its charges to focus on conserving capital and lending into the economy. These results serve to strengthen its case.
Credit is, meanwhile, due to recently installed CEO Noel Quinn for temporarily suspending thousands of job cuts planned as part of a cost cutting drive. You can file that under “social responsibility”.
It’s a novel concept, one some businesses finding easier to grasp than others. They’re going to hear more about it in the weeks and months to come, including from some of their investors. That is one of the more welcome developments to emerge from the crisis.
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