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According to the Lloyds Business Barometer, confidence increased by six points to 36% in August, while overall economic optimism also climbed 6%, following a slight dip in July. The Lloyds Business Barometer also showed that pay growth expectations reached a three-year high, with over a third of UK businesses expecting rises of at least 2% over the coming 12 months. 

Companies expecting a 3%-plus wage growth jumped by five points to 17%, hitting a record level since the bank first asked the question back in 2018. However, the net balance of companies expecting to up their headcount remains at 18%, the same level as last month. 

Lloyds’ findings demonstrate that confidence has increased in 9 out of the 12 regions and nations of the UK. The North West was up 26 points to 64%, while the East of England was up 14 points to 39%. Scotland also saw increases in confidence, up 34%, while Wales saw an increase of 19%. 

On Thursday, the British bank exceeded analysts’ expectations by reporting a pre-tax profit of £3.9 billion on a net income of £7.6 billion in the first half of 2021. Analysts had expected to see profits of £3.1 billion on revenues of £7.35 billion. 

In the first six months of 2020, the bank saw losses of £602 million as the UK endured the first wave of the coronavirus pandemic. Like other banks and lenders, Lloyds allowed billions as a buffer to cover a feared surge in bad debt linked to the coronavirus pandemic, but has since unlocked £837 million from the buffer as the situation in the UK appears to improve amid a successful vaccine rollout. This led to a net half-year gain of £656 million on provisions. 

The bank has raised its forecasts for the UK economy and has increased its guidance for performance in 2022, with Lloyds now expecting to deliver a return of equity of 10%. 

Lloyds is the biggest mortgage lender in the UK and has benefited significantly from the property market boom amplified by the stamp duty holiday. The bank reported June as the biggest month for mortgage completions as the end of the stamp duty holiday drove a surge in activity on the property market. So far this year, Lloyd’s has lent £9 billion to first-time buyers. Its mortgage book now stands at an impressive £12.6 billion. 

On Thursday, Lloyds Bank General Insurance (LBGI) received a fine of £90.6 million from the Financial Conduct Authority (FCA) for failing to clearly communicate with customers in letters sent between January 2009 and November 2007.

Between these dates, Lloyds and subsidiary Halifax sent out nearly 9 million renewal letters to home insurance customers. The letters implied customers were receiving a competitive price. However, LBGI did not check or provide evidence of the accuracy of the claims. In approximately 87% of cases, customers chose to renew their policies with the bank. In 2009, LBGI rewrote the letters and omitted problematic phrasing. However, the FCA has said the issue persisted beyond this year. There were issues identified with approximately 1.5 million letters and 1.2 million policy renewals. 

Customers may have received a quotation for a higher premium when renewing home insurance compared to previous policies, the FCA said. They also said that it is likely that the renewal premiums offered to customers were higher than the premium quoted to new customers or to customers who had decided to change to a different provider. 

Approximately half a million customers were also informed that they would receive a discount based on their loyalty to the bank. However, discounts were not applied and this issue was only identified and corrected by LBGI due to the FCA’s investigation.

Lloyds has apologised and said it has already returned money to some customers who were affected by its misleading insurance renewal letters.

As part of what is becoming a surprise leadership overhaul at the bank, a statement released Monday also suggested that former investment banker Robin Budenberg will be put in place as the lenders new chairman.  If this happens, Budenberg will replace Norman Blackwell, who had discussed leaving the bank this year.

The surprise departure of Horta-Osorio scheduled for the end of June next year, poses more problems for Britain’s biggest mortgage lender as it wrestles with the economic recovery from Coronavirus pandemic and potentially one of the deepest recessions in centuries. The 56-year-old from Portugal, was seen by many as a steady hand at Lloyds, steering the Bank to profitability and full private ownership following a bailout during the financial crisis.  Although his pay may sometimes have caused some negative column inches and discussions, the 56 year old will leave with a stellar reputation in the banking community.

In announcing the departure a year in advance, Lloyds will hope that this will leave plenty of time for the board to secure an experienced successor and ensure a smooth transition.  The annoncement touched upon the fact that the banking giant will be considering internal and external candidates as they begin their search for a new chief executive in the near future.

During his tenure, Horta-Osorio cut thousands of jobs and managed a long-running and costly response to a scandal where British banks mis-sold insurance to consumers. He also pushed into wealth management and insurance as a way to diversify a revenue stream heavily dependent on the British economy and mortgage borrowers.

Lloyds booked a provision of 1.4 billion pounds ($1.75 billion) for soured loans in the first quarter as the coronavirus lockdown crushed economic growth and caused the bank to scrap previous targets. Its shares have also suffered as the Bank of England pushed lenders to scrap their dividends amid the pandemic.

Lloyds have been due to announce their new strategic plan early next year, as their current one directed by outgoing CEO Horta-Osorio, which involved heavy investment in technology and cost-reductions comes to an end. It is unclear whether this will change their plans.

Although Horta-Osorio has suffered a few setbacks during his decade long stint at the bank, most notable when Lloyds cut his pay by 28% to 4.73 million pounds for last year and his handling of a recent whistleblower report into a fraud case, Lloyds will be disappointed to lose a chief executive who has broadly delivered excellent results throughout what has been a tumultuous time in the economic sector.

Lloyds shares rose about 2% in London trading, one of the smallest gains in a broad rally by the Whether by Horat-Osorio or the new CEO, Lloyds have some ground to make up, currently sitting 49% down this year, which ranks as the worst performance among Britain’s five major banks.

This article first appeared on our sister publication's website www.ceotodaymagazine.com

In a recent interview with Finance Monthly, Dame Inga Beale discusses the current state of the insurance industry, drawing a contrast with the innovations occurring in banking.

“If you speak to some of the challenger banks, and you say, ‘who are your competitors?’ They say, ‘Oh, we don't really have any competitors. We're so unique, we're so different to the old banks that we don't really regard them as competitors.’” she said.

“It's interesting how they think they've created something so new and innovative that they don't even regard the old traditional incumbents as being a threat.”

It has been a memorable year for FinTechs, culminating in British challenger bank Starling pipping traditional firms to the title of Best British Bank. Business Insider Intelligence reported in October 2019 that 68% of consumers are using a checking or savings account with a challenger bank. 83% of those surveyed claimed they are likely to switch to a challenger bank in the next 12 months. Beale believes it is a focus on the consumer that has driven a revolution.

“Insurance I believe is behind banking. I think it's because we haven't been putting the customer at the heart of what we've been doing. They [challenger banks] have appealed to the young generation much more and have managed to brand themselves in a modern, exciting way. I think insurance has got a bit of catch up to do” she said.

“We [insurers] often traditionally look at things from our internal point of view. We segment customers according to the way we look at them; maybe by postal codes or something rather than the wants, needs, desires of the customers.”

“We often traditionally look at things from our internal point of view. We segment customers according to the way we look at them; maybe by postal codes or something rather than the wants, needs, desires of the customers.”

The insurance industry has also been slower to adopt the innovations of InsurTech firms. Usage-based insurance (UBI) is increasingly becoming the norm but the implementation of technologies such as Robotic Process Automation (RPA) has been slow to market. While 30% of companies adopted this technology to review claims in 2018, no insurers were using it to evaluate the risk of insuring a client in the underwriting process. Despite this, the market for underwriting improvements is set to grow to over 60% by 2020.

“Most of the insurers these days are investing in incubators or innovation labs. But to actually amalgamate them into your existing business is the tough call. There are not many [insurance firms] that have mastered that yet,” says Beale.

“If they don't learn how to amalgamate this new InsurTech and this new technology approach, the interaction with a consumer will suffer. Consumers want a different type of product that's more tailor-made, responsive. We need to think differently and incumbent large insurers, unless they adapt, will be left behind.”

A multitude of choice is available to today's insurance consumers. Beale pointed out the moves the industry has made to simplify the process.

“Consumers want to shop around and the price is important to them, so, lots of companies have responded by providing an online product where they're part of price comparison websites. That means the consumer can make instant decisions,” she said.

“Consumers want to shop around and the price is important to them, so, lots of companies have responded by providing an online product where they're part of price comparison websites. That means the consumer can make instant decisions."

Though price comparison websites have now serviced an estimated 85% of consumers, Beale believes they may already have peaked.

Beale says: “There might always be a place for comparison sites but I think this idea, that you will partner with a firm and they would be your financial support is much more likely to be the future. Therefore, you will have a strong affinity with that firm providing the customer service is up to it.”

“I think you'll shop around far less on price because we'll be using data triggers to feed in automatically, and you'll feel, actually, that pricing is fair because I only paid for the exposure I had on that day.”

Beale also admitted that there is a long way to go before customer loyalty reaches such heights to make a dent in the role of price comparison websites.

“We tend to have people buying insurance products that are very geared to specifics; so people will buy insurance for their car, insurance for their travel, insurance for their home. We haven't yet managed to package that up nicely so that the consumer's life is made simpler.” she said.

“We've got a long way to go to build that ecosystem around an individual and surround you with this nice bubble of the financial protection and support that you need in your life.”

Since leaving the demands of corporate life behind, Inga Beale has become a regular keynote speaker with the Champions Speakers agency, where she specialises in topics such as diversity and inclusion, insurance and business management.

Amidst a large swathe of planned job cuts at Lloyds, at the beginning of November the bank announced that there was a silver lining - a £3 billion investment programme that will see the country’s biggest high-street lender radically transform its digital strategy. While 6,000 existing roles are being cut from a broad range of areas, 8,000 are being created to focus on areas of digital expansion, including in the group transformation unit. And, the CEO of Tectrade Alex Fagioli points out, it’s about time for Lloyds, as it begins to play catch up with an industry that has quietly been revolutionised by high-street banks and start-ups that have gone all-in on digital banking.

Digital banking provides a great deal of benefits to administrators and alike. Customers are given a more flexible way of banking, accessing their accounts and transferring their money without relying on bank hours. Managers have an unprecedented insight into the activity of branches and can offer services to their customers which they had previously been incapable of. However, the challenges and risks that come with digital transformation have led traditionally large financial institutions like Lloyds to poorly implementing such practices to the detriment of all involved.

In April, a routine systems upgrade at TSB went awry and left 1.9 million customers locked out of their accounts for up to a month. Similarly on Friday 1 June, 5.2 million transactions using Visa failed across Europe as a result of one single faulty switch in one of Visa’s data centres. This isn’t just a continental issue; Atlanta-based Sun Trust – a bank with 1,400 bank branches and 2,160 – experienced a significant outage to its online and mobile banking platforms in September due to a botched upgrade. In all of these cases, the outages weren’t the result of cyberattack or weather-related problems. Instead, these outages came as a result of seemingly insignificant technical factors that had been overlooked – and Lloyds would be wise to heed these cautionary tales.

The challenges and risks that come with digital transformation have led traditionally large financial institutions like Lloyds to poorly implementing such practices to the detriment of all involved.

In the first two instances, cause of the outages are very clear– and they were entirely preventable. TSB rushed into an upgrade by hastily initiating the update across its entire system. For a technical reason that we will likely never know, the update tanked the entire bank and left it at a standstill while it tried to pick up the pieces. Even when it managed to get everything back in place, TSB is now permanently scarred by the event, with its reputation still reeling. The prevention for this would have been a gradual rollout, as opposed to a sweeping installation. If the upgrade was initially piloted with non-essential systems, then the bugs would likely have been spotted early, with little fuss and no media spotlight.

Likewise, the Visa incident came as a result of a single faulty switch and that betrays a lack of understanding of its own systems. It is shocking how few companies have carried out any form of disaster recovery testing on their infrastructure. Administrators are incapable of having a full understanding of the systems they are responsible for without testing them in a controlled and simulated environment. With a controlled disaster test, that faulty switch would have been highlighted and those 5.2 million transactions would have been completed. It’s similar to a car – the reason that MOTs are essential is so that any issues can be highlighted well ahead of them having a serious effect on the vehicle’s performance. Banks must carry out a cyber MOT in order to keep their systems in check and to give IT teams a full working knowledge of any potential issues.

But this is all in the case of preventable issues, and in the modern day accepted wisdom is not if, it’s when outages will happen.

Thus far we’ve only addressed routine operations, but cyberattack is of course an omnipresent threat. Ransomware has spent the past couple of years as the ‘big bad’ in cybercrime, and it is an even bigger threat to the financial sector. Over the past 12 months, the financial services and insurance sector was attacked by ransomware more than any other industry, with the number of cyberattacks against financial services companies in particular, rising by more than 80%.  If a bank were to be hit by a ransomware attack, all online systems for banking and insurance transactions will need to be taken offline, rendering that organisation unable to operate. According to a report from Osterman Research, there is a 50% chance of employees in this industry suffering productivity loss, a 30% chance that the financial and insurance services will shut down temporarily, and a 20% chance of revenue loss and adverse effect on customer perception. In cases of ransomware, data recovery can be very difficult as there is a large amount of customer information stored in a variety of disparate systems. As such, many organisations may feel they have no choice but to pay the fee demanded of them to regain access to the data.

Over the past 12 months, the financial services and insurance sector was attacked by ransomware more than any other industry, with the number of cyberattacks against financial services companies in particular, rising by more than 80%.

Equally as unpreventable are environmental factors. Areas like the Southern States of the USA are frequently dominated by hurricanes and tropical storms which can cause large disruptions to everything from schools to banks. Many of these buildings have to be built with this in mind, and network operations should be created with the same mindset. In the UK, by contrast, we don’t have to deal with such extreme weather conditions, but environmental considerations must be made with the potential for freak accidents. A burst pipe in a shared building or road workers drilling through electrical or network cabling, for example, could see a bank offline for an indeterminate period of time outside of its control. One example of this in action was with National Australia Bank, which suffered a power outage that downed ATMs, Eftpos and online banking across the country for five hours in May.

In all of these situations where outages can occur, banks must make sure they have the capacity to get their systems back online and fast. The best way to do this is by adopting a zero-day approach to architecture. Zero-day architecture won’t prevent an outage, but it will mitigate the effects. It allows organisations to minimise downtime and recover from backups without having to worry about lost data.

A zero-day recovery architecture is a service that enables administrators to quickly bring work code or data into operation in the event of any outages, without having to worry about whether the workload is still compromised. An evolution of the 3-2-1 backup rule (three copies of your data stored on two different media and one backup kept offsite), zero-day recovery enables an IT department to partner with the cyber team and create a set of policies which define the architecture for what they want to do with data backups being stored offsite, normally in the cloud. This policy assigns an appropriate storage cost and therefore recovery time to each workload according to its strategic value to the business. It could, for example, mean that a particular workload needs to be brought back into the system within 20 minutes while another workload can wait a couple of days.

Without learning the lessons of the high-profile outages that have come before it from banks that have undergone their own transformations, Lloyds is doomed to repeat the same mistakes.

As it begins its massive investment in digital transformation, Lloyds could very easily sink its budget into exciting features that promise to improve the lives of customers and employees. However, without learning the lessons of the high-profile outages that have come before it from banks that have undergone their own transformations, Lloyds is doomed to repeat the same mistakes. You can promise all the features in the world, but without a solid foundation the bank will essentially be a house of cards, ready to collapse at the slightest sign of danger. All banks, regardless of size, must prioritise the minimisation of downtime by having common sense policies in patch management, full knowledge of a system gained through disaster testing and a recovery strategy in place that enables it to get back online at speed.

 

https://www.tectrade.com

As UK banks continue to report their interim results, the forecast remains positive for banking giants Royal Bank of Scotland (RBS) and Lloyds Banking Group. While the outlook is rosy, traditional lenders still face fierce competition from digital challenger banks, with 61% of smartphone owners opting to bank solely online.

RBS is expected to outperform analyst predictions and Lloyds’ strong financial performance is forecasted to continue. Although confidence is high, traditional institutions remain under pressure to maintain market share in the increasingly digital climate. To do so, many are focusing on securing their long-term future by improving customer-centricity, regardless of the short-term impact on profit.

Many traditional banks are looking for novel ways to raise the standard of their customer services, with features such as chatbots and roboadvisors, says Bhupender Singh, CEO of Intelenet Global Services.

Mr. Singh comments: “Despite 42% of people moving to alternative service providers for personal banking needs, over half are choosing to stick with their traditional bank, making these institutions a force to be reckoned with.

“But this does not mean that traditional lenders should become complacent - in the age of the customer, it is crucial that banks can provide advice and support that is truly in the customers’ best interest. One way that banks are streamlining the customer experience, is by using chatbots and AI technology to carry out customer interactions.

Mr. Singh continues: “For instance, voice recognition software can be paired with customer records and predictive tools to identify a specific customer and confirm which department they require before sending them there directly, without the customer having to explain their problem multiple times. This dramatically improves the customer experience and, for one bank, has reduced the average handling time by 40%.

“But while technology is a key part of the solution, it is important to remember that it is simply that – a part of the puzzle. A human touch is still essential to solve many of the financial issues that people face. Much of the best automation and AI technologies in the banking sector takes away the burden of repetitive tasks for staff, allowing them to focus their efforts on quality in-person service.”

(Source: Intelenet® Global Services)

According to today’s reports, UK GDP grew by 0.4% in the third quarter of the year, relatively better than expected, and up from 0.3% growth from the second quarter. The UK’s manufacturing sector also returned to positive growth, with output rising by 1% during the quarter. Below are some comments Finance Monthly had heard on the matter.

Rebecca O’Keeffe, Interactive Investor’s Head of Investment, had this to say: “With expectations still rife that the Bank of England will raise interest rates next month, today’s GDP figures will be closely scrutinised to see whether they give any excuse for policymakers to hold fire or if they support their hawkish intent. Uncertainty about Brexit, the relatively fragile state of the British economy and fears over personal debt and household incomes could all be making Mr Carney think twice about whether now is the right time to start the process of raising rates. However, the prospect of delaying could lead to accusations of the MPC crying wolf again and severely dent sterling. Rocks and hard places abound, and the Governor will be keeping his fingers crossed that today’s figure gives him a valid excuse either way.

“Lloyds bank, which has more private shareholders than any other UK company, has become a stalwart income play for investors, with a dividend yield of close to 5% and optimism that this yield could increase. Although there was no new comment on dividends, Lloyds confirmation today that they expect to ‘deliver a progressive and sustainable ordinary dividend for the full year and the Board will give due consideration at the year end to the distribution of surplus capital through the use of special dividends or share buy backs’ is music to the ears of income investors.”

Emmanuel Lumineau, CEO at BrickVest, said: “Today’s announcement is good news for the economy and will bolster the case for higher interest rates for the first time in more than a decade. For the commercial real estate industry, higher interest rates and rising inflation make borrowing and construction more expensive for owners, which can have a constraining effect on the market but can also lead to an increase in property prices. There has certainly been an abundance of international capital flowing into real estate, almost every major institutional investor globally has been increasing their portfolio allocation to real estate over the last five years mainly because of lack of alternatives.

“We continue to see the highest level of volatility from the office sector as many international firms currently headquartered in the UK put decisions on hold over their long-term office space requirements. If the UK no longer gives businesses access to the European market, they may need to spread their staff across multiple locations to more efficiently access both the UK and European market. Indeed our recent research showed that 34% of institutional investors believe the biggest real estate investment opportunities will be found in the office sector and the same number in the hotel & hospitality industry over the next 12 months.”

Mihir Kapadia, CEO and Founder of Sun Global Investments, has said: “While the 0.4% is still below the UK’s long term growth rate, it certainly contributes to a positive momentum, and means that the economy has not yet rolled into a recession that was largely predicted over Britain’s decision to leave the EU. The UK’s annualised growth is now sitting at 1.5%, a subpar score against a formidable looking EU economy.         

“Sterling has risen on the back of today’s growth report, up 0.25% against the US dollar to $1.317. The City is getting into a more hawkish tone, expecting that the pick-up in growth raises the chances of a UK interest rate rise next month. The third quarter has been particularly difficult for the UK economy, with inflation ringing 3% while wage growth has been subdued. Consumers are facing an increased squeeze in living standards while the city has been brought to its knees by the increased uncertainty over Brexit proceedings.”

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown

2016 was the quietest year for initial public offerings (IPOs) in the UK since 2009. The uncertainty following the result of the EU referendum stalled a number of planned IPOs and the US also saw the number of companies going public falling to 7 year lows. Low interest rates make debt more attractive to companies looking for funding, while market turmoil early in the year, as well as the political uncertainty surrounding Brexit and the US election, played a part.

Retail investors had the disappointment of being denied involvement in a Lloyds share sale, although there is still time and plenty of opportunity to rectify this with the remaining c. £2 billion stake.

Today’s announcement confirms that more shares have been sold to the institutions through the trading plan and the taxpayer is no longer the largest shareholder in Lloyds. The taxpayer stake has now fallen below 6%.

Looking ahead, now that interest rates are rising in the US and stock markets are hitting record highs, 2017 could see issuing shares return as a popular way to raise funds. Here are some potential candidates for IPO:

O2

O2 is currently owned by Telefonica, and rumours that the Spanish giant is considering an IPO of its UK business have been swirling for some time. With more than 25 million customers nationwide, the group is one of the UK’s largest mobile operators, and also owns half of Tesco mobile.

Telefonica had previously tried to sell the business to Three owner CK Hutchison for £10.3bn, but the deal was blocked by EU regulators. If the company achieves that price tag at IPO it would be the largest flotation since mobile rival Orange listed back in 2001.

O2 has a long track record of ownership by private investors and if Telefonica decides to return O2 to public ownership, the company’s strong customer base would provide an excellent starting point for including private investors in the launch. That might have the added bonus of making customers stickier in what is a notoriously fickle industry.

BGL Group

2016 saw GoCompare.com split off from parent esure. 2017 could see rival comparison website CompareTheMarket.com join it on the stock exchange with owner BGL Group rumoured to be considering an IPO in the first half of 2017.

The website, which is BGL’s most high profile business, was launched in 2006, with its signature Meerkats first appearing on TV screens in 2009. However, the group also operates a similar website in France under the “Les Furets” (the Ferrets) brand, runs a life insurance business and offers support services for other insurers.

The other three big UK price comparison websites are already listed, which should mean that investors are familiar with the model and make a float easier. But why would investors be interested in yet another price comparison business? Well, it’s the most popular comparison site in the UK and grew revenues by 16% last year, compared to just 5% at GoCompare . . . Simples!

Sky Betting & Gaming

Private Equity firm CVC bought an 80% stake in Sky’s betting arm back in 2014, and there were rumours that an IPO was on the cards in September of last year. However, while CEO Richard Flint acknowledged that CVC will be looking to exit the business at some point, and an IPO is a possibility, there was no timescale at that time.

21st Century Fox’s bid for Sky has altered the situation somewhat. Sky still holds a 20% stake in the business and it’s unclear whether Fox will choose to retain it following the acquisition. The group has no gambling operations elsewhere, and faces strict gambling laws in the US. That might put an IPO back on the cards.

The group is currently eyeing international expansion into markets where Sky already has operations, targeting the German and Italian markets. The move follows a 51% increase in UK revenues in 2015/16. That was driven by a strong performance in the group’s sports betting operations, which saw revenues rise 64%, while online gaming (including Bingo, Poker and Casino) grew 36%.

Speculation has suggested the group could be valued at £1.5bn, and (although 3 years is a relatively short term investment for a private equity fund) that would represent a healthy return on the £800m valuation CVC put on the group when they originally invested.

Darktrace

Away from consumer brands, cybersecurity start-up Darktrace is one potential debutant to keep an eye out for.

Founded by a combination of GCHQ spooks and Cambridge University academics, the group’s software uses machine learning and advanced probability mathematics to detect potential threats. The ability to act independently, drawing on inspiration from the human immune system, means that it can react to potential threats quickly and identify never-seen-before anomalies without relying on existing rules or assumptions.

Darktrace has so far raised over $90m, and was recently valued at $500m. The group reportedly told investors back in October that its ultimate ambition was to float on the stock market, but has since denied that there are any immediate plans to do so.

Nonetheless, with stock markets buoyant and it’s one we think might yet make an appearance in 2017. We just hope that the group chooses to list in London, rather than following the depressingly well-worn path of British tech stocks heading for NASDAQ.

Other contenders rumoured to be considering IPOs in 2017 include;

  1. Vue Cinemas, £1.5 bn - Vue has more than 200 cinemas worldwide, of 85 are in the UK and Ireland. Servicing nearly 90m filmgoers a year
  2. Air Astana, c.$6.5 bn - The Kazakh national carrier is considering an IPO in either London or Hong Kong.
  3. KazMunaiGas, undisclosed - State owned oil and gas company, considering London and Hong Kong as listing destinations.
  4. Sadia, $5 bn - Halal meat manufacturer, currently owned by Brazil’s BRF. Considering London and Dubai.
  5. IMG Worlds, undisclosed - The owner of the world’s largest indoor theme park is said to be considering a listing in London or Dubai.
  6. Crawford Healthcare, undisclosed - The advanced wound care manufacturer has said it is looking “a little more closely” at an IPO following the successful ConvaTec listing last year.

(Source: Hargreaves Lansdown)

Ashish Misra, Lloyds Bank Private Banking

Ashish Misra, Lloyds Bank Private Banking

May has seen the largest fall in sentiment towards UK asset classes since November 2014, according to the monthly Lloyds Bank Private Banking Investor Sentiment Index. With eight out of ten asset classes recording a drop in investor sentiment, UK shares saw the biggest decline, falling 11 percentage points (-11pp) from April to 26%.

UK government bonds saw the second biggest decline in sentiment towards UK asset classes to 12%, a monthly decrease of 4pp. International shares, on the other hand, remain strong with Eurozone shares and Japanese shares reporting the only increases. Eurozone shares recorded the largest improvement for the third consecutive month of over 5pp, but the net balance still remains in negative territory (-23%).

Despite large declines, net sentiment remains strongest for UK property at 47%, while UK shares also remains strong at 26%.

However, market returns show four asset classes performing well in the past month. In contrast to waning sentiment for eight asset classes, market performance, in terms of returns earned, increased for four of the ten asset classes. Commodities saw the largest monthly increase in returns of 8%, a significant shift for the asset class, which could have been helped by the recent rise of crude oil prices. This was followed by Japanese shares and Emerging market shares both sitting at 1%. Their performance against a negative UK result could be on account of a halo effect on contiguous asset classes arising from the political and economic uncertainty of a general election in early May.

“The results paint an interesting picture as a snapshot for UK asset classes. Having recorded their worst performance since November 2014 across all asset classes, the results show investor unease due to potential economic and post- election uncertainty in the UK in May,” said Ashish Misra at Lloyds Bank Private Banking.

“However, Eurozone shares and Japanese shares have displayed positive performances and have gained from the halo effect arising around the outcome of elections in the UK. With continued significant improvement in net sentiment scores for Eurozone shares, the asset class could be the one to watch out for with a potential to extend and sustain the current upward trend in the coming months, unless it hits an unexpected stumbling block.”

Ashish Misra, Lloyds Bank Private Banking

Ashish Misra, Lloyds Bank Private Banking

April has seen the largest fall in sentiment towards UK government bonds, according to the monthly Lloyds Bank Private Banking Investor Sentiment Index. Net investor sentiment for the asset class declined five percentage points (-5pp) from last month to 16%.

UK corporate bonds has also seen a decline in sentiment amongst surveyed investors to 14%, a monthly decrease of 3pp. Sentiment towards UK and international shares, on the other hand, remains strong with investor outlook for UK shares sitting at 37%. US shares has edged up to 19% together with emerging market shares, increasing 3pp from last month. Amongst all asset classes, sentiment towards Eurozone shares recorded the largest monthly improvement of over 5pp, but the net balance remains in negative territory (-28%).

Ashish Misra at Lloyds Bank Private Banking, said: “Overall asset class performance paints a positive picture for investors as the average change has shown a steady increase since the start of the year. Interestingly, as UK government bonds decline, US shares have hit their survey high.

“However, Eurozone shares, despite gaining significant momentum, continue to display a highly negative sentiment. This momentum could reflect the quantitative easing by the European Central Bank. As the currency falls, sentiment towards the asset class has gone up with increased export and job prospects.”

In contrast to waning sentiment for some asset classes, market performance, in terms of returns earned, increased for all of the ten asset classes. UK property saw the largest monthly increase in returns of 7%, followed by Eurozone shares (+6%), UK shares (+6%) and Emerging market shares (+5%). UK corporate bonds (+1%), Commodities (+1%) and UK government bonds (+2%) provided investors with the lowest total returns in the past month.

Half of the ten asset classes have seen a fall in net sentiment over the past year. The biggest declines have been for Eurozone shares (-18pp), UK property (-11pp) and Commodities (-6pp). Gold recorded the biggest improvement in net sentiment (+7pp). There have also been gains for emerging market shares (+4pp) and US shares (+2pp).

Ashish Misra, Lloyds Bank Private Banking

Ashish Misra, Lloyds Bank Private Banking

March saw an overall average asset class sentiment reach a high, according to the monthly Lloyds Bank Private Banking Investor Sentiment Index. With continued improvement in overall asset class sentiment, net sentiment increased for seven of the ten asset classes surveyed with only a modest decline for the other three, leading to its highest overall score since June 2014.

However, in contrast to asset class sentiment, actual asset class performance decreased for nine out of the ten asset classes since last April.

Despite receiving the most negative sentiment of all asset classes (-33%), Eurozone shares recorded the largest positive month-on-month gain for the first time. With net sentiment increasing 13 percentage points, Eurozone shares also saw the highest increase for the asset class since the survey began in March 2013.

Ashish Misra at Lloyds Bank Private Banking, said: “The continued improvement in asset class performance paints a positive outlook for investors. Most notable is Eurozone shares, which has gained significant momentum, despite still displaying a highly negative sentiment. This could reflect the improvement in sentiment on account of the commencement of quantitative easing by the European Central Bank and some improvement in the overall macro-economic backdrop for the region despite ongoing challenges in the periphery.”

davidsoncolaw.com

Gold was the biggest net loser in March, dropping 5 percentage points compared with February and saw its first negative swing since the start of the year.

Three out of the four sterling-denominated asset classes recorded a positive performance with UK shares rising 7 percentage points, UK corporate bonds rising 4 percentage points and UK government bonds rising 1 percentage points. UK property saw a 3 percentage points fall in sentiment, signalling its second dip this year.

In terms of an annual change, six of the asset classes recorded an increase, with Japanese shares (+28%), UK property (+17%) and UK government bonds (+10%) seeing the largest increases. Commodities (-38%), Gold (-16%) and Eurozone shares (-9%) were the worst performers.
All of the four sterling-denominated classes saw an increase in terms of annual change with UK corporate bonds and UK shares seeing an increase of 7% and 2% respectively.

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