Government sells off 5.4% of RBS stake
The government has begun its sell-off of shares in Royal Bank of Scotland (LON:RBS), taking their 79% stake to just below 73%.
The shares were sold at 330p a share, raising £2.1bn. However the sale was well below the 500p per share the government paid when the UK bailed the bank out after the financial crisis, prompting criticism of the move.
The government sold off 5.4% of its stake last night, slightly more than the 5.2% expected by analysts. The government could have sold far more, given the high interest from investors. Around 60% of the shares were sold to hedge funds while, geographically, just under half were bought by investors in the UK.
RBS chief executive Ross McEwan said: “I’m pleased the government has started to sell down its stake.
“It’s an important moment and reflects the progress we are making to become a stronger, simpler and fairer bank. There is more work to be done but we’re determined to build a bank the country can be proud of.”
However, Ian Gordon, a banking analyst at the stockbroker Investec, said he was “perplexed” by the timing of the sale: “Last night’s disposal at 330p achieved a new 2015 low and arguably sold the taxpayer short.”
HSBC profits rise, driven by success in Asia
HSBC (LON:HSBA) reported positive half yearly earnings this morning, with a pre-tax profit of $13.6 billion, up 10% on a year ago.
Figures were driven by strong performance in Hong Kong, with a surge in individual investments and a strong Chinese market earlier in the year. Asia now accounts for two thirds of the bank’s profits, and HSBC are considering moving their headquarters back to Hong Kong.
Growth in Europe and the US remains slow, with the group agreeing to sell its Brazilian opearations for $5.2 billion as it attempts to cut underperforming sectors of the business. The bank has also pledged to cut 50,000 jobs, with over half in brazil and Turkey.
“The environment for banking remains challenging,” said Douglas Flint, the group’s chairman. He mentioned that economic conditions are uncertain in many parts of the world, and “regulatory workloads have never been higher”.
“HSBC’s wealth management revenues in Hong Kong from equities, mutual funds and asset management increased significantly.”
RBS shares drop in the wake of sale rumours
Shares in RBS (LON:RBS) dropped nearly 2 per cent this morning, following rumours that the Government will start selling off its majority stake in the bank at close of trade today.
UK Financial Investment, which manages the Treasury stakes in RBS and Lloyds, advised by Goldman Sachs, has a small window in which to start the sale. It is likely to be today or early next week, but will depend on the interest of investors – if there is too little, the sale may be delayed until September.
In July’s Emergency Budget, George Osborne announced that the government would start to sell off their 79 percent share in the bank. At today’s price, the sale will be around £2 billion, and represents a significant loss on the 502p average price paid in the £45 billion bailouts of RBS in 2009.
UBS trader convicted for rigging Libor rates
City trader Tom Hayes has been found guilty by a jury of rigging Libor rates, in a scandal that shook the industry.
Tom Hayes has been found guilty of eight counts of conspiracy to defraud between 2006 and 2010. He was the “ringmaster” in an enormous fraud to manipulate the interbank lending rate whilst working for both UBS and Citigroup.
London’s Southwark Crown Court heard how he constructed a scheme to interfere with the rate in order to boost his six-figure salary.
In an audio clip played during trial, he said “influencing” Libor was “commonplace” and admitted he was a “serial offender”.Mukul Chawla QC, prosecuting, said Hayes would “cajole”, “beg” and “bribe” brokers through “corrupt” trades to help manipulate Libor.
“On an almost daily basis he set out to dishonestly manipulate or rig Libor at his bank and other banks.”
“He behaved in a thoroughly dishonest and manipulative manner by repeatedly cheating those with whom he had entered into huge financial transactions.
“The motive was a simple one: it was greed.” He was arrested in December 2012, and it due to be sentenced shortly.Nokia to sell map business to German trio
Three of Germany’s premium carmakers have joined together to buy Nokia’s (NYSE:NOK) maps business, in a deal estimated at 2.5 billion euros.
BMW (ETR:BMW), Audi (ETR:NSU) and Mercedes will hold equal stakes in the business, HERE, and aim to use the locations services to develop self-driving cars in the future. The three companies have clubbed together to prevent the technology being used by rivals in Silicon Valley or China.
“With the joint acquisition of HERE, we want to secure the independence of this central service for all vehicle manufacturers, suppliers and customers in other industries,” said Chief Executive Dieter Zetsche of Daimler.
On its website, Here stated that “no single carmaker can do it on its own”.
“The new ownership structure of Here will allow us to accelerate our strategy, further scale our business and fulfil our intent to become the leading location cloud company across industries,” said Here president Sean Fernback in a statement.
For Nokia, this marks another step in the company’s regeneration. The company has moved its focus away from mobile handsets to focus on its upcoming acquisition of Alcatel-Lucent.
Rajeev Suri, President and Chief Executive Officer of Nokia, said: “With this step we complete the latest stage of Nokia’s transformation. Nokia will be a renewed company, with a world-leading network technology and services business, as well as the licensing and innovation engine of Nokia Technologies.”
Trinity Mirror shares climb 10%
Shares in newspaper group Trinity Mirror (LON:TNI) are up by nearly 10% after releasing its half yearly earnings report.
The market reacted positively to the news that Daily and Sunday Mirror publisher expects to hit 2015 profit forecasts. The group was also net cash positive for the first time in its history.
Recent restructuring has led to cost savings of £7 million, and lower newsprint prices have contributed to overall operating costs falling by £32.9 million.
However, group revenue fell by 11.0% and publishing revenue fell by 9.6%. The papers’ digital content performed strongly, with average monthly uses growing by 55 percent. Revenue from digital advertising was up 44 percent.
Chief Executive Simon Fox commented:
“We remain confident that our strategy will deliver sustainable growth in revenue and profit over the medium term despite the difficult print advertising market conditions. The actions we are taking in support of both our print and digital products provide the Board with confidence that profits for 2015 will be in line with expectations.”
Trinity Mirror is currently trading up 9.21 percent at 145.25 pence per share.
Bank of England announce inflation forecasts on ‘Super Thursday’
Mark Carney is set to announce the Bank of England’s inflation forecasts in a press conference on Thursday, giving way to speculation that an interest rate hike is close.
City traders are calling the day ‘Super Thursday’, as at least two or three of the nine members of the Bank of England’s interest rate-setting committee are expected to vote for a rate rise for the first time since 2007. Interest rates were cut to a low of 0.5% in 2009 in an effort to stimulate the economy after the financial crash.
However, the strength of sterling is causing disagreement among its policymakers over when is the right time; the pound hit its highest level in over seven years against the currencies of Britain’s main trading partners last month.
David Miles, another independent monetary policy committee member, whose term is about to end, said in a speech last month it was time to start to bring rates back towards normal levels, from their record low of 0.5%. “The time to start normalisation is soon; that is not something to shrink from,” he said.
However with inflation at zero, Andy Haldane, the Bank’s chief economist, said in a recent interview with the Guardian that “there is no rush to move rates from where they are right now.”
Bitcoin price drops – but what lies ahead for cryptocurrencies?
The value of Bitcoin dropped to $275 yesterday, after a month of constant climbing.
Bitcoin rallied strongly during Greek crisis, seeing around a 40 percent rise in less than a month during June and early July. Traditionally, when a currency is volatile, cryptocurrencies provide a more stable alternative; their decentralised nature means banks cannot impose controls and its anonymity allows money to transfer in and out of a country without difficulty.
Before Greece’s referendum, Tony Gallippi, the co-founder of bitcoin payment processor Bitpay, tweeted that he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exited the Euro. Whilst the value never rose that high, the currency managed to stay at around $300.
However, more recently the value of bitcoin has taken a hit and the price now stands at $280, up from a low of $276. The currency’s picture remains generally Bullish, but the inability to get up to the highs reached in the last month could present a problem and the chart indicates that there may be further decline.
Bitcoin is a form of digital currency, created and held electronically and controlled by no one. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.
According to a report by Goldman Sachs, there are differences of opinion among analysts over the advantages of bitcoin as a currency.
Roman Leal, Goldman Sachs’ IT Services equity analyst suggests that traditional payment providers could theoretically save over 100 billion dollars per annum by using Bitcoin. However, he also recognises that comparisons of cost between Bitcoin and current payment systems can be misleading because of different costs that are accrued at different points in the respective systems.
Jeff Currie, head of Goldman Sachs commodities research finds that bitcoin’s attributes make it a commodity rather than a currency. He defines a commodity as “any item that ‘accommodates’ our physical wants and needs. And one of these physical wants is the need for a store of value.” However, he also believes it is unlikely to replace gold as a commodity store of value.
Daniel Masters, Co-Principal of traditionally commodity-focused hedge fund, Global Advisors, agrees. He sees parallels between bitcoin and silver, which saw an explosive rise in price as new investors and users entered the market – as Bitcoin has done recently.
Information Technology specialist Ken Hess believes that cryptocurrency may well be the future, given its strengths. However, he believes that instead of Bitcoin, there is likely to be a government-backed cryptocurrency:
“I think it will happen because there are some advantages to the public ledger. But in order for it to work you are going to need better security. You’re going to need reversible transactions. You’re going to need more stability. You’re going to need a way to put lost and stolen money back into circulation and a way to track the money.”
The advantages and disadvantages of bitcoin have been debated by industry experts since its introduction, but its seems to make no different to its popularity; according to Bobby Lee, CEO of BTCChina, the world’s largest Bitcoin exchange, Bitcoin “is real, it’s simple, and it’s here to stay”. Given the UK government’s recent interest in bitcoin start-up Blockchain, he may well be right.
HSBC profits rise, driven by success in Asia
HSBC (LON:HSBA) reported positive half yearly earnings this morning, with a pre-tax profit of $13.6 billion, up 10% on a year ago.
Figures were driven by strong performance in Hong Kong, with a surge in individual investments and a strong Chinese market earlier in the year. Asia now accounts for two thirds of the bank’s profits, and HSBC are considering moving their headquarters back to Hong Kong.
Growth in Europe and the US remains slow, with the group agreeing to sell its Brazilian opearations for $5.2 billion as it attempts to cut underperforming sectors of the business. The bank has also pledged to cut 50,000 jobs, with over half in brazil and Turkey.
“The environment for banking remains challenging,” said Douglas Flint, the group’s chairman. He mentioned that economic conditions are uncertain in many parts of the world, and “regulatory workloads have never been higher”.
“HSBC’s wealth management revenues in Hong Kong from equities, mutual funds and asset management increased significantly.”
Greek markets fall 22% after five weeks of closure
Athens’ main stock index has seen its biggest drop on record as it opened this morning after a five week closure.
The Athex saw a 22.87% fall within just a few minutes of trading, with the four biggest banks all down 30%, the maximum allowed.
The overall banking index .FTATBNK was also down to its 30 percent limit.
“Most of the selling pressure is seen in bank shares, where there is about 100 million euros worth of unexecuted selling orders,” said investment adviser Theodore Mouratidis told Reuters.
“There may be some more slide in store for (Tuesday) unless buyers emerge later in the session.”
The Greek markets have been shut since the government imposed capital controls whilst a bailout deal was being discussed.
Data released today shows that the manufacturing industry has also dropped to its lowest level on record, and Markit’s purchasing managers’ index (PMI) for manufacturing fell to 30.2 points. Manufacturing accounts for approximately 10 percent of Greece’s economy.
The European Commission expects Greece to go back into recession this year, with the economy contracting by between 2% and 4%.