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Good morning. European banks are on course to return more than €120bn to shareholders off the back of their 2023 results as they pass on the benefits of surging interest rates to investors.
Bosses of European lenders are under pressure to boost their valuations and win over investors, who have been spooked by dividend bans and windfall taxes across the continent in recent years.
The biggest listed European banks have pledged €74bn in dividends and €47bn in share repurchases, a 54 per cent increase on the previous year’s capital returns and far higher than every year since at least 2007, according to figures compiled by UBS.
Buybacks have been the biggest source of growth over the past three years, with just a few billion euros of repurchases a year across the 50 biggest banks in the years running up to 2020.
Since then, European banks have taken advantage of their turbocharged profits on the back of rapid interest rate rises to buy back stock at suppressed prices. Read the full story.
Here’s what else I’m keeping tabs on today:
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Sweden’s Nato bid: Hungary’s National Assembly is expected to vote for ratification of Sweden’s membership in the alliance.
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Global trade: The World Trade Organization Ministerial Conference begins in Abu Dhabi and runs until Thursday.
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Central banks: Israel makes its interest rate announcement while BoE deputy governor Sarah Breeden opens the Bank of England Agenda for Research conference.
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Industry events: MWC Barcelona and the Geneva International Motor Show begin.
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Companies: Bank of Ireland, Bunzl, Domino’s Pizza, Fidelity National Information, SBA Communications and Zoom report.
Five more top stories
1. Israel plans to raise about $60bn in debt this year, freeze government hiring and increase taxes as it almost doubles its defence spending to support its war in Gaza, according to a senior finance official. The conflict with Hamas has taken a severe toll on the economy, but the finance ministry expects it to begin to recover as large numbers of reservists are demobilised and consumer spending picks up. Read more about the country’s fiscal plans.
2. Ryanair is demanding compensation from Boeing for worsening aircraft delivery delays that have forced the airline to lower its forecasts for passenger numbers and warn it is on the cusp of cancelling some flights this summer. Chief executive Michael O’Leary said he was “genuinely not sure” how many 737 Max planes the US company would deliver in time for the peak summer months, with the airline regularly revising down its estimates as manufacturing issues have gripped Boeing. Read more from O’Leary’s comments.
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Ethiopian Airlines: The head of Africa’s largest carrier has called for the implementation of an agreement allowing airlines to operate freely to increase competition and reduce costs for travellers on the continent.
3. Buyout firms are shaving tens of millions of dollars off interest costs by refinancing debts racked up in private credit markets with publicly traded bonds and loans, delivering a windfall for the Wall Street banks that arrange them. Roughly $10bn of so-called private credit loans have been refinanced in public markets, as borrowers pay down burdensome loans in favour of a cheaper alternative, according to data from Bank of America. Read the full story.
4. Labour’s worker rights shake-up is leaving UK businesses on edge. The effort — meant to restore the power of unions and the role of collective bargaining, boost wages and give workers more security and control over their hours and terms of employment — is prompting deep unease among business leaders, who say many of the proposals could backfire.
5. A lack of competition in Britain’s audit market and a regulatory drive for better quality have pushed up fees for London-listed companies by 75 per cent over the past five years, according to a new report, with the average cost of an audit for a UK public company jumping to £694,000 in 2022-23. Here’s how the developments are affecting smaller companies.
The Big Read
The World Trade Organization — which holds its biennial ministerial conference this week — has fallen hostage to sharp divisions between the US and China as trade friction escalates between China and the west. As the world trade body falters, Beijing is accelerating efforts to construct an alternative trade architecture that is insulated from Washington’s influence and centred upon the developing world.
We’re also reading . . .
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UK media: The BBC’s outgoing chair tells Henry Mance that diminishing institutions such as the public broadcaster weakens the fabric of the state.
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Sovereign debt: Could bond vigilantes now turn their disruptive talents to the US Treasury market, asks John Plender.
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How to save HR: Human resources professionals are uniquely maligned, but it doesn’t have to be this way, writes Stefan Stern of Bayes Business School.
Chart of the day
Before Nigeria went to the polls last year, the IMF recommended that its government “permanently remove fuel subsidies”. Bola Tinubu, who won the highly contested vote and became president in May, removed them on his first day in office. But with Nigerians now experiencing the worst economic crisis in more than two decades and the naira currency sinking to record lows almost weekly, that decision has come under scrutiny.
Take a break from the news
. . . and read our dispatch from Milan’s autumn/winter 2024 fashion week, where designers at Bottega Veneta, Ferragamo and Bally face the challenge of pleasing conservative customers — and sometimes owners — while generating enough creative spark.
Additional contributions from Benjamin Wilhelm
Read the full article here