The Notebook: Victoria Scholar on a wave of bank results, Elon Musk, and a holiday read
The Notebook is where interesting people say interesting things. Today it’s Victoria Scholar, head of investment at interactive investor, on bank results, Elon Musk and an unputdownable holiday read
Bank on it?
With UK banks currently reporting earnings, key themes so far have been rising interest rates, growing credit loss provisions, share buybacks, volatile financial markets, and bonuses.
Standard Chartered is among the best performers in the sector year-to-date and is up by around a third over one year. It achieved pre-tax profit of $4.3 billion in 2022, the highest return since 2013. While StanChart has clearly benefitted from the rising rate environment, other banks were more cautious. HSBC’s 2023 net interest income guidance missed expectations while Barclays and NatWest said the boost from monetary tightening created a smaller-than-expected lift to earnings.
Nervousness towards the macroeconomy was laid bare by the banks’ impairment provisioning. Barclays faced an extra £500 million in credit impairment charged in the fourth quarter and NatWest set aside £337 million for potential bad loans. HSBC said its annual expected credit losses rose to $3.6 billion, ahead of forecasts because of inflation and China’s embattled property market.
Nonetheless, most banks appear to be returning cash to shareholders. Barclays announced plans to buy back a further £500 million bringing the total to £1 billion and said it plans to pay a dividend of 5 pence per share. HSBC pledged to pay out more regularly to shareholders through dividends and buybacks. NatWest is also planning to buyback shares of up to £800 million this year and Standard Chartered similarly announced a $1 billion buyback programme.
For trading-heavy banks, financial markets provided a tailwind with Barclays enjoying a 79% boost to fixed income trading in the fourth quarter while StanChart’s 2022 trading income reached a record high.
Banks took a mixed approach to bonuses with Barclays cutting its bonus pool by half a billion pounds after last year’s series of scandals and a slump in dealmaking. The slide in M&A activity also prompted HSBC to cut its annual staff rewards by 4%. However Standard Chartered’s bonuses totalled $1.6 billion, the highest since the financial crisis and NatWest increased its bonus pool by nearly a quarter.
Could public sector pay be bumped up?
The UK public sector achieved a surprise £5.4 billion surplus in January, spending less than it received in tax receipts and other income. This was better than average analysts’ expectations for a deficit of £7.8 billion. Self-assessment tax receipts hit a record high, partially offset by expenditure on energy support. This is a welcome development for the Chancellor Jeremy Hunt ahead of his Spring Budget announcement on 15th March and could provide some wiggle room for the Treasury to raise public sector pay.
If you’re not in front of Elon…
Meta has announced that Instagram and Facebook users will be able to pay $11.99 (£9.96) a month on web for blue tick verification status. CEO Mark Zuckerberg said “this new feature is about increasing authenticity and security across our services.” The rollout will commence in Australia and New Zealand this week with other countries to follow. It comes after Elon Musk launched Twitter Blue, a monthly paid subscription service for verified status in December after his takeover of Twitter for $44 billion in October.
Can we quote you on that?
This is an innovation which works for many types of organisations
Lead researcher Professor Juliet Schor, of Boston College discussing the UK’s four-day week trial
ChatGPT, star novelist
ChatGPT has prompted a surge in artificial intelligence written books on Amazon. On its Kindle store there were 200 e-books authored or co-authored by ChatGPT as of mid-February including “The Wise Little Squirrel: A tale of Saving and Investing” and “The Power of Homework.” ChatGPT was released in November last year and has caused a media frenzy partly thanks to its astounding conversational abilities. It reached 100 million users in just two months, which according to UBS makes it the fastest growing consumer internet app in history.
One for the beach – when you get there
Having just got back from a week on holiday, Tomorrow and Tomorrow and Tomorrow by best-selling author Gabrielle Zevin, was my favourite beach read of the trip by far. I was initially slightly turned off by its subject matter, video games as someone has never been a big fan of Nintendo or PlayStation. But don’t let this put you off because it is about much more than shooting, fighting or racing. It covers a multifaceted relationship between the two main characters Sadie and Sam. What initially starts off as a friendship between two children develops into a business partnership in which they navigate life and its vast and complex spectrum of human emotions over thirty years.