Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
HSBC’s new chief Georges Elhedery is engaging in a reshuffle. It could be the purposeful reshaping of a supertanker towards a promising new future — or it could be merely some drag-reducing furniture rearrangement. Either way it should raise questions about the bank’s broader direction of travel.
It is not hard to see why Elhedery may be looking to declutter his vessel. The bank, listed in both Hong Kong and London, is in a sweet spot: expenses consume just under 50 per cent of its income, and it generated a 15 per cent return on tangible equity in 2023, where 10 per cent is the least shareholders tend to demand. Yet its seas can only get choppier.
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Widely expected rate cuts are one menace. For every 100 basis points that interest rates decline, HSBC’s illustrative sensitivity analysis yields a $2.6bn cut from full-year net interest income.
Indeed, a Barclays analysis suggests that, should 2026 rates fall to 3 per cent, the bank will need to cut $1.4bn of costs to keep its returns on equity above 13 per cent. That’s a glum prospect for HSBC’s 214,000 employees. Gold-standard Singaporean competitor DBS is 50 per cent more profitable per employee, Barclays reckons.
Elhedery hasn’t put a number on what level of costs his rejig will save. HSBC’s unmoved share price on Tuesday suggests investors think not much. Yet there’s virtue in simplicity. The bank is unshackling its two home markets, Hong Kong and the UK, from any regional-and-product matrix and turning them into standalone full-service banks. That may make them sprightlier. Crunching together its investment banking and commercial lending businesses should help reduce some overlap.
What results, though, is still somewhat ungainly. The bank is headquartered in the UK despite making nearly three-fifths of its profits in Asia. Major shareholder Ping An, the Chinese insurer, has unsuccessfully pushed for the separation of its Asian business from the rest of its operations.
Putting UK and Hong Kong businesses in their own divisions, meanwhile, shows their lack of synergies with each other and the rest of the organisation. And a further split in the way the businesses are managed between ‘Eastern’ and ‘Western’ looks odd for a global bank. HSBC’s valuation reflects its uncomfortable straddle. Its shares trade at an undemanding valuation of 1.1 times tangible book — a premium compared to the beleaguered European banking sector, but a big discount to the largest US banks and DBS.
HSBC may insist that it is simply aligning its workforce with its strategy. For a new chief executive with something to prove, it’s helpful to make an entrance. But having changed what HSBC looks like, his next challenge is to be clearer about where it’s going.
LABOUR’S massive public sector pay hikes led to a record-busting September of borrowing.
The Office of National Statistics say the government has borrowed £6.7 billion more than planned this year after the third highest September on record.
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Labour’s massive public sector pay rises lead to huge surge in September borrowingCredit: Getty
It came despite an increase in tax take due to fiscal drag meaning more workers were stung on their wages.
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The stats bosses said: “While tax revenue increased, this was outweighed by increased spending, partly due to higher debt interest and public sector pay rises.”
Government borrowing rose to £16.6billion in September – £2.1billion more than a year earlier.
Borrowing for the year stood at £79.6billion, £1.2billion more than a year earlier and £6.7 billion more than forecast.
This came despite the first fall in central government benefit payments since early 2022, in part due to Labour’s decision to test the winter fuel allowance, which is paid out in November and last year cost around £2 billion.
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Treasury Chief Secretary Darren Jones said the state of the public finances meant there would be “difficult decisions” in the October 30 Budget.
City firm Blick Rothenberg said “Income Tax annual receipts were “up 8.6% in the last 12 months, equating to £22.6bn more in the Treasury’s coffers.
“The main cause of the income tax increase is fiscal drag which continues to bring more people into higher rates of tax.
“This has been created by wage rises over the past 12 months and the freezing of the personal allowances and tax bands.”
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New workers’ right rules will just mean firms hiring fewer people say Julia Hartley-Brewer
Abu Dhabi-based supermarket giant Lulu Retail Holdings on Monday announced its decision to proceed with an Initial Public Offering (IPO) of 25 per cent of its stock in a bid to list its shares in the Abu Dhabi Securities Exchange (ADX). A total of 258 crore shares will be on offer, with a nominal value of US 0.014 each.
UAE retail investors (including eligible employees of the group), professional investors, and eligible senior executives can subscribe to the IPO. The subscription period will open on October 28 and end on November 5, with the final offer price to be determined through a book-building process.
The company sees a semi-annual dividend payout ratio of 75 per cent of annual distributable profits after tax, and estimates the dividend for the six months ended 31 December 2024 to be paid in the first half of 2025. In the GCC alone, Lulu has more than 240 stores across six countries.
“Integral to our growth is the vision and ambition of the UAE, KSA and the other GCC nations where strong national leadership is enabling positive demographic and consumption trends and driving impressive economic growth,” said Lulu founder and chairman Yusuffali M.A.
“We’re looking forward to welcoming new shareholders to Lulu and are sure they will share our passion for the company and excitement for the future,” added Yusuffali.
The IPO will be done in three tranches. The first tranche is the public offering to UAE Retail Investors, including eligible employees. The second tranche is open to professional investors, and the third to eligible senior executives under the “Senior Executives Offering”.
Lulu sees GCC retail market to continue steady growth
“With GCC retail presenting a USD 100 billion market opportunity over the next five years and our business in the Kingdom of Saudi Arabia primed for further growth, we are confident that Lulu will continue to be where the world comes to shop,” estimated Lulu CEO Saifee Rupawala.
The group sees positive retail growth in the near-term future for the region, based on growing youth populations, rising spending power, and climbing employment rate. It projects a growth of 4.2 per cent CAGR for the GCC grocery retail market and 4.8 per cent CAGR for the GCC modern from 2023 to 2028.
Lulu boasted a 61 per cent rise in net income of USD 11.6 crore from continuing operations for the first half of FY 2024, up 61 per cent from USD 7.2 crore from the same period a year ago. Revenue grew 5.5 per cent to USD 386.8 million (around Rs 3,252 crore).
SPORTS Direct customers have been snapping up £14.99 urns to store their loved one’s ashes.
The retail giant, owned by businessman Mike Ashley, has offered the grey aluminium vase with silver trim on its website alongside its football boots.
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Sports Direct customers have been snapping up its £14.99 urns
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Sports Direct, owned by businessman Mike Ashley, heavily discounted the items down from £114.99Credit: Getty
The 26cm by 18cm urns were heavily discounted — down from £114.99.
Described as a “cremation urn”, the listing added: “Ashes of your loved one are securely stored in this urn via a top lid.”
Engravings were also available for an extra £5 — with one example reading: “In Loving Memory, Grandad.
“Forever in our hearts.”
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Shoppers were in hysterics about the merchandise at Europe’s biggest sports retailer, established in 1982 by the ex-Newcastle owner and now operating under Mr Ashley’s Frasers Group.
One Sports Direct customer joked: “I’ll have some Slazenger socks, some off-brand running shoes, and a cheap tin to stick nan in, please.”
Another said: “Stuff like this started after Mike Ashley bought House of Fraser a few years back.
“He’s merging all his other business into his existing Sports Direct stores.
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“It’s more obvious online, as you wouldn’t necessarily be browsing in-store for football boots, and stumble into the urn section.”
Last night, after The Sun contacted Sports Direct, website links to the item stopped working.
Sports Direct and JD Staff head-butted and bitten by violent shoplifters, probe reveals
The firm later refused to comment.
Sources said it had not been withdrawn, but had sold out.
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
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Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
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Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
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Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
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No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen And Meta Join Forces To Boost AI With Flexible, On-Demand Network Solutions
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
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Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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