Wednesday 10/04/19

  1. In FINANCIALS NEWS, Nationwide makes history with new mortgages while SocGen and Barclays announce job cuts
  2. In HIGH STREET NEWS, more shops shut down and Debenhams faces a tricky future
  3. In INDIVIDUAL COMPANY NEWS, Boeing gets zero orders last month for its 737 and Saudi Aramco’s bond sale sizzles
  4. In OTHER NEWS, I bring you wedding day prophecies and how to revive an iPad. For more details, read on…



So Nationwide introduces new mortgages while SocGen and Barclays shed staff…

Nationwide breaks new ground with mortgages for over-55s (Financial Times, James Pickford) heralds a major step for the UK’s second-largest mortgage lender as it has become the first of the major high street lenders to offer mainstream, equity release and retirement interest-only mortgages to older borrowers. Thus far, over-55s have had few options mortgage-wise because they fell foul of affordability tests or minimum age requirements but pressure has been increasing from regulators, such as the Financial Conduct Authority, to lend to “later-life borrowers”. * SO WHAT? * Given that Nationwide has 14m customers, you would have thought that the other majors are likely to follow suit. Nationwide customers will be advised on ALL the types of mortgages they qualify for, regardless of what they originally asked for, which is a departure from the situation until now where older borrowers had to go around to different providers to get advise on all the different types of mortgages. The new products will be available to existing customers today and to new customers this summer. I think that this is a major development and will become increasingly important as our population continues to age.

SocGen cuts 1,600 jobs as investment bank overhauled (Financial Times, Stephen Morris) heralds tough times for the French bank’s staff as job losses are part of its plan to cut €500m in costs. The investment bank will feel the pain most acutely as 1,200 jobs will be axed – 750 in France, with the rest to come from London and New York. In all, this will equate to about 8% of global headcount. SocGen said that it wants to focus on its “areas of strength” like equity derivatives and structured finance. On the other hand, it is going to close its commodities and proprietary trading unit and reorganise its fixed-income division to make it more profitable as well as its international retail business. * SO WHAT? * This seems to be a knee-jerk reaction to a succession of poor results from the bank, including a 50% fall in investment banking profit in Q4 as trading revenues fell off a cliff. SocGen isn’t the only one with problems – French rival BNP Paribas is suffering almost identical problems as well as the likes of UBS, JPMorgan and Barclays. SocGen is negotiating with French unions currently and the cuts should be completed by the third quarter. Separately, Double blow as Barclays and SocGen axe 2,000 workers (Daily Telegraph, Lucy Barton) mentions 460 job cuts at Barclays, mainly in operations and technology in the West Midlands.



More stores shut down and Debenhams stirs up trouble…

Shop shutdowns hit record level as high street diversifies (Daily Telegraph, LaToya Harding) cites PwC research compiled by the Local Data Company which shows that the number of high street shop closures was at record highs last year on a combination of weaker customer footfall, higher business rates and the continued shift to online shopping. To add insult to injury, store openings were at their lowest level on record – which has resulted in the biggest full year net decline yet. Banks, estate agents and recruitment agencies were hardest hit whereas the number of sports and health clubs, bookshops, ice cream parlours, vaping shops and cake shops grew. * SO WHAT? * Unsurprising, but you could argue that the high street is going to become more diverse as consumers seek out products and experiences that can’t be replicated online.

I mentioned the latest goings-on in the whole Debenhams debacle yesterday but ‘Mystic Mike’ should have heeded own prophecies (Daily Telegraph, Ashley Armstrong) is an excellent article which basically says that Mike Ashley put in too little effort too late to get his way at Debenhams and that the future of the ailing department store is still far from certain, Ashley’s losing bets begin to stack up (The Times, Dierdre Hipwell) takes a closer look at what I have

previously called “Mike Ashley’s  Bag of Cr*p” – the investments he’s made in companies that have hit the skids and he’s picked up on the cheap. His £150m loss from his 29% stake in Debenhams is going to be particularly painful given poor performance from other stakes in Findel (discount retailer), Mysale (the “flash sale” specialist) and Goals Soccer Centres (five-a-side footy operator) among others. Sports Direct is also thought to be heavily in the red on its stake in Iconix, a sporting brands business. There are also stakes in unlisted companies such as Evans Cycles, House of Fraser and to throw into the mix as well – so Ashley is not looking like such a canny operator at the moment. * SO WHAT? * As I keep saying, I think that Debenhams is a business in terminal decline and only a miracle will save it in its current form. Banks and hedge funds are now going to determine the company’s future and I doubt very much whether they will want to hang on to their stakes for longer than they have to. I suspect that they will break it up into smaller chunks as it will be a very brave buyer who wants to buy the entire thing and take on its massive debt. Ashley will be annoyed that he won’t really have a say, but you never know – he may still be able to pick up some assets on the cheap. The problem is that his reputation as a canny deal maker hangs in the balance given poor performances at the moment and he might have to think a bit harder about what to spend his money on.



Boeing’s order book suffers and Saudi Aramco’s bond sale sees strong demand…

Given recent events, I don’t think you’ll be surprised to see Boeing didn’t get any commercial 737 orders in March (Wall Street Journal, Doug Cameron), the first time this has happened in almost seven years. Analysts are now expecting the impact of compensation, delayed airline payments and costs to fix the 737 MAX to be somewhere in the region of $2-3bn (a wide range, I know). * SO WHAT? * Boeing obviously needs to fix the problem (and its reputation) asap in order to stem the decline, but it needs to make sure it’s done right otherwise it could be in for

worse problems in the future. The company has a backlog of 4,625 MAX orders worth over $440bn (ex-discounts), so you can see the need to address their mistakes. Rival Airbus will probably benefit as a result but it seems that Trump is doing his level best at the moment to clip their wings with potential tariffs in the offing.

Orders for first Saudi Aramco bond smash $100bn (Financial Times, Robert Smith, Simeon Kerr and Joe Rennison) highlights the massive demand for the company’s first international bond sale – a sign that the whole Khashoggi killing last year is being forgiven. The strength of the order book has allowed the company to increase the amount it can raise in the offering and lower its borrowing costs. This is all good for Crown Prince Mohammed bin Salam’s plans to finance efforts to wean his country off reliance on oil revenues.



And finally, in other news…

Want to know whether your wedding will last? Wedding photographers have their say in ‘Red flags’ at weddings which show marriage is doomed, according to photographers (The Mirror, Zoe Forsey Then there’s a story that anyone will small children will relate to in Man gets locked out of iPad for 47 years after young son gets his hands on it (The Mirror, Shivali Best Ouch!