Connect with us

Industry News

Metro Bank share price could continue ascent ahead of H1 earnings

Metro Bank closed 6% higher on Monday, with the stock gaining traction after hitting a year-low of 71p in late-May and surging to a new support level 110p per share throughout July. The UK challenger bank seems to have finally turned a corner after months of turmoil that included a £900 million accounting error that…

Metro Bank closed 6% higher on Monday, with the stock gaining traction after hitting a year-low of 71p in late-May and surging to a new support level 110p per share throughout July.

The UK challenger bank seems to have finally turned a corner after months of turmoil that included a £900 million accounting error that prompted the lender’s founder Vernon Hill to quit and Metro Bank to initiate a £350 million capital hike to shore up its balance sheet.

However, the lender has seen a shift in investor sentiment of late due, in large part, to its recent acquisition of peer-to-peer (P2P) lender RateSetter in a move that will boost the bank’s turnaround efforts.

Metro Bank will unveil its half-year (H1) results on Wednesday 5 August, with investors eager for an update on the lender’s performance over the last three months amid challenging market conditions and a surge in bad loans due to the coronavirus pandemic.

Metro Bank closed at 110p per share on Monday, with the stock down 47% year-to-date.

Metro Bank acquires RateSetter for £12 million

Helping to lift Metro Bank’s share price ahead of its H1 earnings this week was the announcement on Monday that it has agreed to acquire P2P lender RateSetter for £12 million.

The deal is part of ‘an important strategic ambition’ that will allow the lender to diversity away from mortgage lending and focus on more profitable areas within consumer lending, according to Metro Bank CEO Dan Frumkin.

The UK challenger entered into an exclusivity deal with the P2P lender in mid-June, with the acquisition representing a major turning point for the troubled bank that will see it diversify away from mortgage lending and help lift its downtrodden share price.

‘RateSetter and Metro Bank share a focus on delivering something better for the customer and the strategic logic of pairing Metro Bank’s strong deposit base with our lending capability is compelling,’ RateSetter co-founder and CEO Rhydian Lewis said.

Strong start for Metro Bank’s turnaround plans

The RateSetter deal represents a major win for the UK challenger bank, with the lender in the early stages of a four-year turnaround plan that aims to right the wrongs of its previous management.

The loss making lender is eager to impress investors with its upcoming H1 results on Wednesday, with onlookers expecting a rise in bad debts as a result of the Covid-19 pandemic, but have clearly welcomed its turnaround efforts, reflected in the uptick in share price value over the last few weeks.

In July, Metro Bank announced that it had appointed Robert Sharpe as its new chairman, a man capable of helping Frumkin to turn the business around and considered a proven dealmaker in the retail banking sector.

Sharpe has a wealth of board and executive-level experience in retail banking, with him leading the transformation of West Bromwich Building Society and heading up Bank of Ireland’s consumer business in the UK.

‘As we navigate the new economic environment caused by Covid-19, community banking has never been more important as people, businesses and communities adapt to this new normal,’ Sharpe said in a statement.

‘It is this community banking model that sets Metro Bank apart and will enable us to continue to grow,’ he added.

Sharpe will take over from Michael Snyder as Metro Bank’s new chairman on 1 November.

How to trade stocks with IG

Looking to trade the Metro Bank and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs and spread bets in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Metro Bank’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade
Continue Reading
Advertisement

Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

Continue Reading

Daily Financial News

Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

Continue Reading

Financial News

Africa’s first Fairtrade certified gold co-operative offers hope to gold miners living in poverty

Syanyonja Artisan Miners’ Alliance (SAMA) has become the first artisanal small scale mining co-operative in Africa to become Fairtrade certified, bringing much needed hope to impoverished communities who risk their lives to mine the rich gold seam that runs around Lake Victoria.

SAMA is one of nine previously informal groups from Uganda, Kenya and Tanzania which has benefitted from a pilot project launched by Fairtrade in 2013. This innovative program aims to extend the benefits of Fairtrade gold to artisanal miners across East Africa.

In that short time, SAMA has undergone training in business and entrepreneurship, as well as safe use of mercury, internal control systems, labour rights and better working conditions, health and safety and more. Previously, daily contact with toxic chemicals used to process gold meant members risked disease, premature births and even death.  Fairtrade gold was first launched in 2011, and SAMA now joins Fairtrade certified gold mines MACDESA, AURELSA and SOTRAMI in Peru.

The co-operative produces just 5 kg gold per year, but nevertheless has the potential to significantly benefit many people in the local community through better conditions through certification. It is expected that Fairtrade and organizations like Cred Jewellery will support the miners, ensuring their gold can be refined and made available to jewellers in the UK and other markets.

Gonzaga Mungai, Gold Manager at Fairtrade Africa said: “This is a truly momentous and historical achievement and the realisation of a dream that is many years in the making. Gold production is an important source of income for people in rural economies. Congratulations to SAMA, it sets a precedent which shows that if groups like this can achieve certification, then it can work for others right across the African continent.”

The Fairtrade Gold Standard encourages better practice and changes to come in line with international regulation around the production and trade of so-called ‘conflict minerals’. Under the Standard, miners are required to:

  • Uphold a human rights policy preventing war crimes, bribery, money laundering and child labour
  • Clearly represent where the minerals were mined
  • Minimise the risks of conflict minerals through robust risk assessments and collaboration across supply chains
  • Report to buyers and trading partners regarding the risks of conflict minerals

Now in its second phase, the programme will focus on supporting other mining groups in the region to access affordable loans and explore a phased approach to accessing the Fairtrade market, allowing more mining co-operatives across Africa to participate in the programme.

Gonzaga added: “Sourcing African metals from smallscale miners in the Great Lakes Region is the responsible thing to do. For a long time companies have avoided buying gold from this region, with devastating consequences for impoverished communities who were already struggling. It has driven trade deeper underground, as unscrupulous buyers pay lower prices and launder illegal gold into legitimate supply chains. That’s why we have chosen to work with these groups to help them earn more from their gold within a robust compliance system that offers social, environmental, and economic protections.”

The Fairtrade gold programme offers a small but scalable solution to sustainable sourcing of gold from the region in line with Section 1502 of the Dodd-Frank Act in the US, OECD Due Diligence Guidance and recent EU Supply-Chain Due Diligence proposals which could come into effect in 2016. This means that up to 880,000 EU firms that use tin, tungsten, tantalum and gold in manufacturing consumer products could be obliged to provide information on steps they have taken to identify and address risks in their supply chains for so-called ‘conflict minerals’.

Continue Reading

Trending