14th July 2021
Good morning Have you ever wondered what happens when the top 0.00001% gather in one place? Well you just imagined the Allen & Co conference in Sun Valley, Idaho where the super-rich including Mark Zuckerberg, Jeff Bezos and Bill Gates spent the past week at the annual ‘billionaires summer camp’.
- British banks free to splash the cash
- Tate & Lyle’s £1.2bn sweet split
Yesterday's market moves
FTSE 100 0.0% 7,125
FTSE 250 +0.1% 22,927
It was a pretty uneventful day in the UK markets with the FTSE100 and 250 barely changing.
On the data front, retail sales rose by 6.7% in June, as growing confidence among consumers and the unleashing of pent-up demand after months of lockdown delivered the country’s best retail quarter on record.
Across the pond US markets edged deeper into record highs as well-received earnings from big banks JP Morgan and Goldman Sachs, offset another unexpectedly strong rise in inflation.
British banks free to splash the cash
What’s going on?
The Bank of England has given banks the go ahead to go back to paying dividends after a ban against payouts was introduced in March 2020.
The Bank’s action follows those of the US Federal Reserve and the European Central Bank. The Fed has already scrapped its payout limits, while the ECB said it planned to do so in October.
Why is this important?
Twice a year the Bank of England releases a report on the financial health of the banking system and British banks passed with flying colours.
At the start of the pandemic there was huge uncertainty as to how the economy would be impacted by lockdown so banks were ordered not to pay any dividends, in case the cash was needed elsewhere in the economy.
Even though Covid-19 is not over, the report concluded that banks have enough of a capital buffer to restart paying dividends and support the economic recovery at the same time.
The conclusions are based on “stress tests” where economic models are run to see what would happen to the banking system under various economic scenarios.
Scenarios include a deep economic recession and possible climate change outcomes.
The Bank of England also said that the outlook for the UK and global economic recovery had improved in recent months reflecting vaccine rollouts and an easing of lockdown restrictions in many countries, and substantial government support schemes like furlough.
UK banks have weathered the pandemic better than many expected. When Covid first hit there were fears that the banking system could be in for a repeat of the 2008-9 Global Financial Crisis. But lessons were learned from back then and banks have much stronger balance sheets today.
Tate & Lyle’s £1.2bn sweet split
Tate & Lyle, the British ingredients manufacturer, has announced that it’s splitting into two businesses:
- Tate & Lyle – will make low-sugar, low-calorie ingredients for drinks, soups and sauces focusing on the growing healthy eating market.
- NewCo – will focus on plant-based products for the food and industrial markets, a business valued at £1.2bn. It was the biggest revenue driver for Tate & Lyle last year, generating £1.7bn, or 60% of group sales.
NewCo will be 50% owned by US private equity firm KPS with the other half owned by Tate & Lyle.
Following completion, expected early next year, Tate & Lyle plans to give back £500m to its shareholders.
The 160-year-old company is a household name best known for making sugar. However it sold its sugar business, including Lyle’s Golden Syrup, in 2010 as part of its long running strategy to pivot towards healthier foods, in line with consumer tastes.
The creation of a NewCo has long been on the cards and the company is hoping that investors will value you it more highly now that its ‘healthy’ division is a standalone company.
Stat of the day
Between 2013 and 2018, the average pop song went from 3:50 to 3:30 in length
Other stories to keep you in the loop
- MPs vote to approve £4bn foreign aid cut
- Jamaica planning to seek billions from UK as compensation for slave trade
- Met seize record £180m haul of cryptocurrency in London
- PepsiCo strong performance fuelled by returning restaurant demand
- Superdrug profits drop by 80% despite 'essential retailer' status
- Flipkart, India online retail giant raises $3.6bn in latest funding round