City icons reel in the cash
GEORGE Osborne’s punishing stamp duty may have put the kibosh on London’s residential property but there is no evidence to suggest that Brexit is doing the same for commercial real estate. Quite the opposite in fact.
Japan’s biggest bank MUFG, part of the Mitsubishi group, may be opting to move 100 or so jobs to amsterdam, but a great deal of money is heading to the UK.
the ‘Walkie talkie’, or 20 Fenchurch street in the heart of the city’s insurance district, may have offended architectural tastes but that hasn’t stopped it being bought by hong-Kong based LKK health Products for £ 1.3bn, nicely rewarding developers/investors Land securities and canary Wharf.
this purchase follows the £1.2bn paid by another hong Kong investor, cc Land, for the ‘ cheesegrater’ developed by British Land, and the sale of the Gherkin to the Brazilian branch of the safra family at a price estimated at well in excess of £700m.
the thirst for high quality buildings in the square Mile does not suggest anyone is really expecting a wholesale exodus of bankers, insurers and traders from the city by March 2019 or any time soon after.
there may be signs of overheating in the consumer credit and car leasing markets, but commercial property does not look to be a problem. net lending by banks and building societies to the sector fell slightly in June according to the Bank of england.
Indeed, bank exposure to the property sector at 7.1pc of total loan books is at the lowest level since 2001. Banks, rightly, have become more cautious about property after a dreadful past. they should be reassured that for the best of prime sites there is no shortage of overseas investors still keeping faith with the UK’s financial resilience.
Flint legacy
A DecaDe ago HSBC was the canary in the mine as the bank wrote down billions of pounds of loans made by american subprime mortgage provider household.
It was part of the toxic legacy of a global expansion forged by former chairman sir John Bond. HSBC has been paying the price ever since.
even though HSBC’s latest results are accompanied by pages of litigation risks, the bank has been guided back to calmer waters by departing chairman Douglas Flint and soon-to-leave chief executive stuart Gulliver.
new broom as chairman Mark tucker, the first outside boss in the bank’s 150 years, inherits something more recognisable.
HSBC may still be a sprawling global bank but it has returned to its roots with hong Kong and china the great and expanding source of income.
In the first half of the year, asia earned pre-tax profits of £6.2bn of which more than half came from hong Kong.
that partly explains why tucker, as the departing chief executive of super-asia insurer AIA, looks to be a good choice to lead HSBC.
By contrast, in spite of efforts to become a really global presence, income in the UK, where it owns the old Midland Bank, was a modest £830m. HSBC has been a serial whinger about regulation, threatening to move back to hong Kong if the Government failed to roll back bank taxation and to migrate to Paris over the Brexit vote.
not much of this has come to pass, so we should treat moans about ‘ring fencing’, a product of the independent Banking commission, as par for the course. normalisation of interest rates would be a start in clawing back profits in Britain.
there is much still to do at HSBC. It is spread too thinly, over-bureaucratic and arguably still too big to manage competitively. rates of return are sub-octane.
still, there won’t be much complaint from investors in receipt of a 5.3pc dividend yield and another share buyback bringing the total to £2.7bn over the last 12 months.
Unicorn hunt
‘SPREADSHEET’ Phil hammond deserves credit for recognising that Britain’s unicorn start-ups, firms valued at $1bn ore more, often fall into overseas hands because of a lack of UK funding. a consultation led by Damon Buffini is sensible.
But isn’t this something the already established British Business Bank could do straight away given proper resourcing?
Instead, more hopeless delays.