26th October 2022
Bite-sized business news from the UK and beyond
- HSBC profits soar on rising interest rates
- Adidas profits tumble as ties cut with Kanye West
HSBC profits soar on rising interest rates
Europe's biggest bank HSBC reported £6bn in profits in the three months to September, well ahead of market expectations. The £1bn increase on the year before was driven by rising interest rates making lending more profitable.
How did we get here?
The Bank of England has increased interest rates seven times in the past year from 0.1% to 2.25%, in a bid to tame soaring inflation.
Those rate rises, as well as fallout from September’s disastrous mini-budget, sent mortgage and loan rates soaring for everyday customers and helped HSBC’s profits.
The bank has been under pressure from its largest shareholder, Chinese insurer Ping Am, to split its high growth Asian business from the rest of the world. The insurer has been frustrated by the HSBC’s falling share price and by the fact that British banking regulators forced the bank to stop paying dividends during the height of the pandemic, cutting a source of income for shareholders.
The latest quarterly earnings will strengthen Ping An’s break off argument. Profits in the Asia business came in at £3.1bn whereas the European arm, swung from a £557m profit to a £1.39bn loss after it took a large write down on the sale of its French banking business and the bank booked extra reserves for loan losses in anticipation of a UK recession.
Zooming out: HSBC’s results marks the start of earnings season with fellow banks Barclays, Lloyds and Natwest reporting their performance in the coming days. If the sector continues to benefit from rising interest rates with bumper profits, then there could be more calls for a windfall tax to support public finances.
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- Pound hits a six-week high as new prime minister takes office
- Prices of staples such as pasta and tea soar in UK, hitting poorest hard
- Google and Microsoft hit by slowing economy
- Premier Inn owner warns of higher costs after returning to profit
- WhatsApp messaging platform back online after global outages
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- Apple to hit streaming service users with inflation-busting price rise
- EY Israel rejects break-up plan pushed by global bosses
Adidas profits tumble as ties cut with Kanye West
Yesterday Adidas announced it would end its partnership with Kanye West following a slew of offensive behaviour from the rapper and designer. The sportswear giant said the decision would mean its annual profits would be up to €250m lower.
How did we get here?
The list of Kanye West’s business partners is growing thinner by the day. This week talent agency CAA cut ties with West, who now goes by Ye, and executives at studio MRC are scrapping a completed documentary they made about the rapper. This follows luxury fashion house Balenciaga’s move on Friday to end its partnership with Ye.
The growing corporate boycott of Ye is a response to a series of antisemitic comments he made in recent weeks as well as the controversial "White Lives Matter" T-shirt designs he showcased at Paris Fashion Week.
West and Adidas began collaborating in 2013 with the creation of the Yeezy brand and is thought to be one of the most successful partnerships in the company’s history. While the company does not disclose the sales numbers, analysts estimate Yeezy trainers make up 8% of total sales.
Forbes magazine says the end of the deal will cost West his position in their list of billionaires with his net worth dropping from $1.5bn to $400m.
Earlier this month Adidas, which is second only to Nike in the global sports apparel market, put the relationship ‘under review’ after the rapper lashed out at the company on social media.
There was growing criticism of Adidas’ initial inaction with many pointing out that the German brand should have zero tolerance for antisemitism considering it was founded by a member of the Nazi Party.
Zooming out: The West saga has added to a growing list of challenges for Adidas. This month it had warned that weakness in demand in in China and major Western markets will hurt profits. The company is also looking for a new CEO, after announcing in August that current boss Kasper Rorsted would be leaving next year.
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