TODAY’S FAYRE – Tuesday 9th June 2015


“After the dread tales and red yarns of the

Line Anything might have come to us; but the divine

Afterglow brought us up to a Welsh colony

Hiding in sandbag ditches. Then we were taken in

To low huts candle-lit, shaded close by slitten

Oilsheets, and there but boys gave us kind welcome,

So that we looked out as from the edge of home.

Sang us Welsh things, and changed all former notions

To human hopeful things. And the next day’s guns

Nor any Line-pangs ever quite could blot out

That strangely beautiful entry to War’s rout;

Candles they gave us, precious and shared over-rations—

Ulysses found little more in his wanderings without doubt.

‘David of the White Rock’, the ‘Slumber Song’ so soft, and that

Beautiful tune to which roguish words by Welsh pit boys

Are sung—but never more beautiful than here under the guns’ noise.”


Ivor Gurney – poet & composer– 1890-1937


Let’s see whether Eoin Morgan can rally the ODI troops after their listless and lamentable display in the World Cup in Australia.  One can surely be forgiven for thinking that Brendon McCullum’s gladiators are better prepared to do battle at Edgbaston today, than England is.


 I don’t how the rest of you all feel, whether you are pro-remaining in the EU or whether you are against the UK’s continued membership. However personally speaking I am offended when J-C Juncker starts telling the British people that they will remain in the EU or equally so, when advice from President Obama to the effect that the UK’s political and economic future lies within the EU. With respect the British people will decide.


By the time this average missive reaches your cornflakes/Pret-a-Manger muffin, HSBC’s CEO Stuart Gulliver will probably have delivered his vision for the bank in the years to come and it may, for some, not make pretty reading, though shareholders should be reassured.

In the wake a lambasting from regulatory bodies and subsequent fines on money laundering, Libor, PPI and FX manipulations, it became clear that Chairman Douglas Flint, CEO, Stuart Gulliver et all could not carry on without making radical changes to its strategy. The bank was too big to manage efficiently. The return on capital of about 8% was disappointing. The attitude of the government towards HSBC’s share of the bank levy surcharge was perceived to be unfair. The castigation of HSBC and on a personal basis the unreasonable vilification of Stuart Gulliver, on the tax affairs of its private bank in Switzerland, probably crystallised Gulliver’s need for a quick resolution.


Look at the bare facts – in the last 5 years HSBC’s share price has remained static. In the same period Wells Fargo’s has gone up 100% and JP Morgan Chase by 70%. Both US banks owe a HUGE debt of gratitude to the FED for its very gracious and favourable treatment of US banks post the crisis in 2008. Without the FED’s assistance at the time of sub-prime, we might be looking at 2 major banks in a totally different light!


HSBC’s return on equity of circa 8% is unacceptable by any standards and the management knows it. So remedial action is required to deliver 10% plus return on equity by the end of 2017, which is the goal. HSBC has a workforce is circa 266, ooo. We understand that 20,000 jobs are to go in the next 2 years – 8,000 in the UK out of 48,000. The retail banking operation is to be ring fenced – the bank’s retail head office is on its way to Birmingham. We understand that the Turkish and Brazilian operations are to be sold when convenient. Total cost cuts will be made by between $4.5 and $5 billion. Also assets totaling $290 billion are to be stripped from the balance sheet. Gulliver believes that downsizing the bank brutally will make the operation more manageable and consequently more profitable. It seems unlikely that HSBC will be satisfied with its operations in the US, without some much needed TLC or surgery. Having lost over $50 billion in Household at the time of Sub-prime lending, the US operations have struggled, though in all fairness HSBC was the first bank to flag up the problem.


Is the fact that Stuart Gulliver is making his presentation today with George Osborne’s speech taking place tomorrow any more than just a coincidence! I wonder? It is rumoured that the Chancellor will make some placatory remarks towards the banking sector. Stuart Gulliver will need to see some evidence of a white flag, since he will announce the result of the bank’s strategic review by the end of the year – particularly the decision on repatriation. As it stands HSBC could well head off ‘hot-foot’ for Singapore, rather than back to Hong Kong, where it could come under the control of China. The Chancellor will need to make concessions to stop a regrettable move east. Otherwise I think HSBC’s board may well be giving due consideration to IPO its UK branches in the name of Midland Bank, unless there was a willing buyer, which would make a much more clinical deal. Let there be peace in our time. London’s reputation as the major financial centre in the world is now being not only diluted but also questioned.


UK companies posting results – Tuesday – RPC GROUP, Thursday – HOME RETAIL (TS), J SAINSBURY (TS), Thursday – WS ATKINS, MULBERRY

US companies posting interim results – Tuesday – CHRISTOPHER & BANKS, Wednesday – KRISPY KREME, MEN’S WEARHOUSE, Thursday KORN/FERRY


Economic data – Tuesday – EU GDP estimates, Wednesday – UK industrial production, Thursday – US Retail sales, Friday EU Industrial production.



David Buik – market commentator


Panmure Gordon & Co


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