Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
1). Bank financial results: All you need to know
Bank financials are coming through thick and fast, with a number of global banks posting their earnings for the year, and receiving a mixture of shareholder responses.
Here is a round-up of the all the results posted this week:
- Pre-tax profit 2017: £752m (compared with £6.95bn loss in 2016)
RBS reported its first annual profit in 10 years. Chief exec Ross McEwan labelled it a symbolic moment, which was however shadowed by the potentially massive fine the bank still awaits from the US justice department (DoJ) over the sale of financial products linked to risky mortgages. RBS were expected to reach a settlement by end of 2017, without which the government cannot begin to sell down its stake in the bank. Shares in the bank fell 4% in early trading.
- Full year loss 2017: £1.92bn (compared with £1.62bn loss in 2016)
Barclays posted a hefty loss on Thursday of 1.92bn, whilst revenues fell 2%. The loss is largely attributed to one-off costs the bank incurred, £127m of which was due to the Carillion collapse. Barclays also lost £2.5bn on the sale of Barclays Africa Group and a £900m charge related to changes in US tax rules. Excluding these, the bank pre-tax profit would reach £3.5bn. Also lying in wait are numerous legal and regulatory obstacles, which include: an SFO investigation into Qatar loans; a DoJ investigation into poor quality of loans; and an FCA investigation into Jess Staley for his handling of a whistleblower.
Barclays is expected to more than double its dividend payout to shareholders next year to 6.5p a share, causing its share price to rise by 4% in early trading.
- Pre-tax profit 2017: £5.3bn (compared with £4.2bn in 2016)
Another strong financial performance for Lloyds last year, with increased profits, strong capital generation and increased capital returns. Having returned to full private ownership in 2017, the bank announced a share buy-back of up to one billion pounds and is now focused on its strategy to lead the technological advancements of the banking sector. Lloyds has committed to investing £3bn in creating a ‘digitised’ bank, with a simplified and progressive modernisation of its data and IT infrastructure. Lloyd’s shares were up 1.6 percent in early trading.
- Pre-tax profit 2017: £10.8m (compared with £16.8m loss in 2016)
Metro Bank has reported its first ever annual profit since its inception in 2010. Revenues rose 51 per cent to £293.8m and its loan book grew 64 per cent to £9.6bn. Chief executive Craig Donaldson is optimistic about the results: “We’ve reported our first full year of profitability, had continued exceptional growth in both deposits (47%) and lending (64%), and have the privilege now of looking after over one million customer accounts.”
Unfortunately Metro Bank’s growth had a negative effect on its capital ratio, with its common equity tier one ratio falling from 18.1 per cent to 15.3 per cent. The FT reported that this raises the prospect of a share issue this year and in turn, the bank’s shares dropped 7 per cent in early trading.
- Pre-tax profit 2017: £12.3bn (compared with £5.1bn in 2016)
HSBC’s pre-tax profit for 2017 has more than doubled to £12.3bn compared with £5.1bn the year before, due largely to the absence of hefty restructuring costs the bank had incurred in previous years. However, HSBC didn’t quite reach its estimates, with projections for the year’s profit forecasted at £14.1bn. A big hit to the lender’s bottom line was the controversial US tax reforms, which also affected Barclays’ results, and led to a $1.3bn charge for HSBC.
HSBC are in a good position as CEO Stuart Gulliver hands his post over to John Flint this week, with Asia accounting for the bulk of its global profits and acting as a key driver for future growth. Shares fell 3.7 percent in early trading.
2). Barclays end law firm panel reviews
Barclays is about to embark on its last ever panel review, as the bank introduces a system that will see external legal advisors assessed on an ongoing basis.
The bank had its last panel review in July 2016, where it cut its roster by 60% and handed two-year appointments to 140 firms.
Under the new system – based on ‘active relationship management’ – law firms will be able to be added and removed to the bank’s panel on an ad hoc basis.
Following the 2016 review, Barclays implemented a number of changes to how it manages it’s relationships with law firms. Most notably, this included the creation of a rating system which graded panel firms on a number of metrics, such as billing rates, service delivery, alternative fee arrangements and feedback from in-house counsel.
The grades – which are currently assessed annually – are not fixed, and firms are encouraged to accept and implement feedback to improve their score.
“Panel refreshes are not supporting what we want to do” said Barclays head of external engagment Stephanie Hamon. “What we really want is our relationships to be a win-win partnership and for us all to develop. If you keep resetting the clock every two years, you can’t really build those relationships.”
Ashurst, Hogan Lovells, Simmons & Simmons, Addleshaw Goddard, Eversheds, Bond Dickinson, DWF and Reed Smith were among those retaining spots on the 2016 panel, which is split into three tiers – panel firm, core specialist firm and specialist firm.
The bank also became the first big UK lender to publish its gender pay gap data, revealing a 48 per cent gap in mean hourly pay between men and women in its corporate and investment bank.
3). Movers & Shakers of the Week
Orrick Herrington & Sutcliffe has recruited City corporate partner Paul Doris from Watson Farley & Williams, as the US firm pushes forward with plans to ramp up its London corporate presence.
DLA Piper has hired a three-partner tax team from Reed Smith, just 12 months after they joined from the collapsed European arm of King & Wood Mallesons (KWM). Paris tax partners Sylvie Vansteenkiste, Fanny Combourieu and Raphael Bera all made the move.
David Wilkinson is set to join the Intellectual Property team at Ashurst.
Paula Fernández-Longoria becomes the offices second partner
Team head David Pickering and partner Elspeth Kinder have departed as a team of 15 lawyers and support staff to Manchester-based firm JMW.
Jackie Kahng joins Ropes as a Partner in Hong Kong.
Mergers & Alliances
Office Openings & Closings