Switzerland’s declining military equipment sales amid global arms surge

The world spent $2,443,000,000,000 on armaments last year, almost CHF2.3 trillion. As demand increases, so do the sales of defence companies that manufacture all kinds of military equipment.

In Switzerland, however, sales are falling. And this by more than a quarter, down 27%, to be precise. Arms exports from Switzerland totalled just under CHF700 million in 2023.

On the one hand, this has to do with Switzerland’s strict export regulations. On the other hand, Qatar has also contributed to the decline in sales. The small Persian Gulf country which hosted the FIFA World Cup in 2022, had taken extensive security measures. Specifically, it purchased air defence systems to protect the multiple stadiums. This order of CHF120 million which was placed prior to the FIFA World Cup caused part of the sales percentage drop between the years.

Strict export regulations

“The sales departments of Swiss companies have significantly less contracts,” says Matthias Zoller from SWISS ASD, aeronautics, security and defence, the association of internationally active security and defence technology and aviation companies under the umbrella of Swissmem. The companies manufacture both military and civilian products.

Political tightening on export regulations can also be felt in the industry. For example, the German company Rheinmetall is producing less products in Switzerland, such as ammunition for Gepard tanks. This is because since 2021 Switzerland has banned the export of military materials to belligerent countries. The ban also applies to countries that could possibly pass the materials on to other countries.

“Our European neighbours and our most important customers have lost confidence in Switzerland and are no longer placing orders from us. One example of is the Netherlands: it has decided to stop procuring Swiss defence equipment as a matter of principle,” Matthias Zoller continues.

Conflicts abroad, debates at home

The debate about the delivery of decommissioned Leopard tanks was noticed by the Swiss public. It quickly became a polarising issue. Naturally, the industry is concerned for the future of its business. The “dogmatic interpretation of neutrality” is very threatening for the defence industry, Swissmem President Martin Hirzel told the Neue Zürcher Zeitung newspaper in an interview last October.

An estimated 14,000 people work in the Swiss defence industry but the trend is unlikely to increase. Industry associations are active at a political level in an attempt to soften the strict export laws.

UK food inflation to be ‘low single digits’ through 2024, says Sainsbury’s boss

LONDON (Reuters) – Sainsbury’s, Britain’s second largest supermarket group, expects food inflation to remain in “low single digits” in 2024, its boss said on Thursday.

British food inflation leapt to a 45-year high of 19.2% in March 2023 on surging energy costs, labour shortages and disruption to Ukrainian exports, but it fell to 4% in March, according to official data.

UK grocery inflation fell further to 3.2% this month, according to industry data published on Tuesday.

“We see (food) inflation continuing to stabilise,” Sainsbury’s CEO Simon Roberts told reporters after the group published full year results.

“(Food) inflation has come down and we’d expect it to stay in low single digits” for the year ahead, he said.

Roberts said he did not expect anticipated poor UK harvests of crops such as potatoes and onions due to widespread flooding earlier this year to have a significant impact on food inflation.

He said he was confident Sainsbury’s could “protect availability without causing any impact for customers,” noting that commodity costs “in the main” were coming down.

Roberts said there were, however, some inflationary impacts still around, highlighting higher wages in the supply chain.

Swiss wages increase but growth slowed by inflation

Nominal wages in the country rose by an average of 1.7% in 2023, the Federal Statistical Office (FSO) announced on Thursday. An increase of 1.8% had previously been forecast.

For many workers, however, the wage increases were eaten up by inflation. Taking into account average annual inflation of 2.1%, real wages fell by 0.4% on average, according to the FSO.  

+ Swiss salaries: high, stable, and not enough for many

Wages rose by 0.9% in nominal terms in 2022 but dropped sharply, by 1.9%, in real terms, mainly due to an inflation rate of 2.8%. 

The FSO estimates nominal wage growth on a quarterly basis. The figure is based on cumulative data on gross wage growth, and includes 13th-month salary payments. The figure can change with subsequent estimates.  

Adapted from German by DeepL/kp 

Tech Stocks Drag Down US Futures, Eyes on Weak Yen: Markets Wrap

(Bloomberg) — Technology stocks led declines in US equity futures Thursday after Meta Platforms Inc.’s disappointing outlook underscored the risk of volatility in a high-stakes earnings week.

Nasdaq 100 contracts fell 1%, with Meta accounting for more than half of that decline. The Facebook parent tumbled as much as 15% in premarket trading after it projected second-quarter sales below analyst expectations and increased spending estimates for the year. Alphabet Inc., which reports earnings later along with Microsoft Corp., also dropped. S&P 500 futures slid 0.6%.

Europe’s Stoxx 600 Index was steady as traders processed a deluge of corporate updates on the busiest day of the earnings season. Anglo American Plc soared 14% after rival mining giant BHP Group made an all-share takeover proposal valuing it at £31.1 billion ($38.8 billion).

The stakes are high for earnings from the tech behemoths after the frenzy around artificial intelligence powered Wall Street’s record-breaking rally. The market’s reaction is a sign of how expectations of the boost from AI to profits at companies developing the technology may have run ahead of expectations.

“I think we are just hitting a little bit of a reality check,” Sonja Laud, chief investment officer at Legal & General Investment Management, said on Bloomberg Television. “This doesn’t take away the excitement around the potential going forward, but it’s probably valuation coming back to a more realistic pathway.”

Aside from results, traders are keenly awaiting US economic growth figures due later after weeks of scaling back their expectations for Federal Reserve interest-rate cuts. Economists surveyed by Bloomberg predict GDP likely cooled to around 2.5% in the first quarter, with the figures still potentially suggesting persistent inflationary pressures.

“Any downside surprises could see markets bringing expected Fed interest rate cuts earlier — after having been pushed out to much later this year,” economists at Rand Merchant Bank in Johannesburg said. “However, upside surprises could see continued market volatility as the market tries to ascertain the risk that a hotter-than-expected economy poses to anticipated interest-rate cuts.”

The yen extended losses after weakening beyond 155 per dollar for the first time in more than three decades on Wednesday, heightening the chances of intervention ahead of Bank of Japan’s policy decision Friday. The Japanese currency depreciated to as weak as 155.74 per dollar on Thursday, a new 34-year low. The BOJ is forecast to keep its interest rate settings unchanged Friday, while the yen’s plunge makes it more likely the bank will tone down its stance on keeping policy easy.

Governor Kazuo Ueda’s “press conference is expected to take a hawkish tone, and even if depreciation in the yen doesn’t accelerate, the government is likely to intervene at the same time and swing the yen stronger by about 5 yen,” said Eiji Dohke, a strategist at SBI Securities. The first intervention would probably be of trillions of yen followed by smaller long-term purchases, he said.

Treasuries were little changed after yields rose in the previous session. Investors absorbed a $70 billion sale of five-year Treasuries on Wednesday at a slightly higher-than-anticipated yield, following an even-stronger show of demand for the auction of two-year notes on Tuesday. 

In Asian stocks, a regional gauge dropped by more than 1% as shares in South Korea and Japan tumbled. Stocks outperformed in Hong Kong amid increased purchases by Chinese investors. Mainland traders have snapped up $20 billion of Hong Kong stocks on a net basis since March, putting the market on track for the biggest two-month inflow since 2021, BNP strategists including Jason Lui said in a note.

Meanwhile, Secretary of State Antony Blinken said the world’s largest economies must “lay out our differences,” as he began two days of talks in China, with the threat of US sanctions targeting Beijing over its support of Russia’s war in Ukraine looming over his visit.

Corporate Highlights:

• Barclays Plc posted first-quarter revenue that topped analyst estimates after its stock traders collected a surprise windfall from tumultuous global markets.
• Deutsche Bank AG relied on its traders and investment bankers to make up for a slowdown in income from lending, as Chief Executive Officer Christian Sewing seeks to deliver on an ambitious revenue goal.
• BNP Paribas SA’s fixed-income traders trailed all of the large Wall Street banks in the first quarter, taking the shine off a strong performance in other parts of the investment bank.
• Unilever Plc sales jumped more than expected in the first quarter as Chief Executive Officer Hein Schumacher pushes ahead with his turnaround plan.
• Nestle SA sales growth sputtered in the first quarter as the maker of Nespresso coffee was hit by cooler demand in North America and supply constraints at its vitamins unit.
• STMicroelectronics NV reported weaker sales than analysts expected, exacerbated by a slowdown in chip demand from the automotive sector.
• AstraZeneca Plc’s profit rose in the first quarter, buoyed by demand for its cancer blockbusters Imfinzi and Tagrisso as well as newcomer Enhertu.
• Hermes saw Chinese buyers snap up its luxury products as the Kelly bag maker showed its resilience amid a broader slowdown in demand for the sector.
• Pernod Ricard SA said quarterly sales were flat as weak demand in the US and China markets for its pricey booze continued.

Key events this week:

• US GDP, wholesale inventories, initial jobless claims, Thursday
• Microsoft, Alphabet, Airbus earnings, Thursday
• Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday
• US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
• Exxon Mobil, Chevron earnings, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.1% as of 9:35 a.m. London time
• S&P 500 futures fell 0.6%
• Nasdaq 100 futures fell 1%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The MSCI Asia Pacific Index fell 1%
• The MSCI Emerging Markets Index fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro rose 0.3% to $1.0727
• The Japanese yen fell 0.2% to 155.66 per dollar
• The offshore yuan rose 0.1% to 7.2635 per dollar
• The British pound rose 0.4% to $1.2519

Cryptocurrencies

• Bitcoin fell 0.2% to $63,903.23
• Ether rose 0.1% to $3,134.1

Bonds

• The yield on 10-year Treasuries was little changed at 4.65%
• Germany’s 10-year yield was little changed at 2.58%
• Britain’s 10-year yield declined one basis point to 4.32%

Commodities

• Brent crude rose 0.5% to $88.47 a barrel
• Spot gold rose 0.4% to $2,326.56 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Masaki Kondo, Winnie Hsu, Jan-Patrick Barnert, Alice Atkins and Divya Patil.

©2024 Bloomberg L.P.

African migrant disaster survivor haunted by weeks lost at sea

By Ngouda Dione and Zohra Bensemra

FASS BOYE, Senegal (Reuters) – Adrift on the Atlantic Ocean, the migrants from West Africa resorted to drinking seawater to quench their unbearable thirst. Then they started dying one by one.

Disposing of the bodies became a daily trial for those still alive on the brightly painted wooden fishing boat. 

“I thought I would be next, that one morning, I too would be dead and in the sea,” said Birane Mbaye, one of 101 men and boys who set off from a fishing village on a wild stretch of Senegal’s coastline last July hoping to reach Europe.

They never made it. Back home in Fass Boye, a huddle of low-rise concrete buildings hemmed in by a patchwork of fields and the ocean, Mbaye recalled the five-week ordeal and explained why he would risk his life again for a chance to better provide for his young family.

Earning as little as 2,000 CFA franc ($3.28) per day as a fisherman for hire, Mbaye shares a sparsely furnished room with his wife and 1-year-old daughter in his parents’ half-built house. They sleep on a mattress on the floor and wash in water from a plastic kettle.

Entrenched poverty and tales of fortunes earned abroad drove Mbaye and a close friend, Omar Seck, to squeeze onto the boat bound for Spain’s Canary Islands, some 1,400 km (870 miles) from their village.

Record numbers attempted the perilous Atlantic crossing last year after other routes to Europe across the Sahara Desert and Mediterranean Sea became more heavily policed. Over 39,900 people reached the Canary Islands from West Africa, an all-time high, according to Spain’s interior ministry. Most were from Senegal or neighbouring Gambia. 

But rickety boats, motor failures and bad weather are just a few of the dangers that too often lead to disaster. At least 6,007 people are believed to have died on this route in 2023, according to migrant rights group Caminando Fronteras (Walking Borders). Others likely left and were lost without trace.

LOST LIVELIHOODS

Dozens of wooden fishing boats, known as pirogues, line Fass Boye’s sandy beach, a sign of fishing’s central role in the local economy. But like many coastal communities, the village about 100 km north of Senegal’s capital, Dakar, has seen hundreds of its residents leave in search of more opportunity.

Diminishing fish stocks and soaring living costs have made it hard to make ends meet, locals say. They blame overfishing by international trawlers and say their small boats can’t compete.

Mbaye, who is in his mid-thirties, started thinking of trying for Europe after the birth of his daughter, Maguette, in April last year. He worried about the family’s financial future after he spent all his savings on traditional festivities to mark her arrival.

He recalled his excitement on July 10 when he heard that a boat would be departing clandestinely that night.

He and Seck hurried to buy rice, biscuits and fresh water for the trip. He was happy to be travelling with his friend. They had known each other since childhood, learned to fish together and were constantly in each other’s company, he said. The possibility of work as farm labourers in Spain had dominated their conversations for weeks.

Mbaye called his mother to ask her to pray for him. As a final step, he took what he described as a mystical bath in herb-scented water – a local tradition meant to ward off bad luck.

Laden with passengers and supplies, the open-topped pirogue slipped into the dark ocean at around 10 p.m. and started the journey north up the West African coast, Mbaye said. They expected to reach the Canary Islands within a week or so. 

The mood was festive for the first few days, despite the cramped conditions and lack of shelter from the scorching sun.

“We all thought that upon our arrival we would all find work in which we could flourish,” Mbaye said.

Then the wind picked up, and violent swells lashed the boat’s sides. Sometimes the pirogue appeared to be going nowhere, as if glued to the roiling water, he said. 

One day, he isn’t sure how long into the trip, the outboard motor fell silent. They had run out of fuel.

ADRIFT

For days, they drifted. At some point, they drank the last of their water. They still had biscuits, which they rationed out each day, but their mouths were so dry they struggled to eat. 

“You couldn’t even spit,” Mbaye said.

That’s when they started drinking seawater, which speeds up dehydration through salt buildup.

“It was very hard to drink, and that’s what killed a lot of people,” he said, pausing as if to steady his voice. “We would talk to someone, and the next day, they would be dead.” 

From then onwards, Mbaye’s memories of the voyage are hazy, but vivid nightmares about his friend still shock him awake at night, screaming.

He remembers helping to drop Seck’s body over the side of the boat, letting it sink into the depths like many before it. 

“We didn’t really have a choice. We had to control our emotions and throw them into the sea,” he said.

He took Seck’s silver ring as a keepsake.

“When I wake up and look at the ring, I remember … how I lost a dear friend,” he said. “Sometimes I see him as if he were real and sitting next to me.”     

RESCUE 

Weeks passed, and Mbaye began slipping in and out of consciousness. He recalled thinking, “If we weren’t found the next day, I would die.”

But on Aug. 14 – after 35 days at sea – their luck turned. A Spanish fishing vessel spotted the pirogue about 140 nautical miles northeast of Sal Island in the Cape Verde archipelago, Spain’s Maritime Rescue Coordination Centre said. They had drifted over 350 nautical miles west of their intended route and were nearly as far from the Canary Islands as when they started.

Only 38 people survived. Seven bodies were recovered, and 56 people were reported missing, presumed dead. Most were from Fass Boye.

Mbaye has no memory of the rescue, but news footage from the time shows exhausted-looking people being helped off the Spanish boat in Cape Verde the next day.

Doctors rushed Mbaye to hospital, where he was treated for kidney damage that kept him behind after Senegalese authorities flew his fellow survivors home. When Mbaye later returned to Fass Boye, his feet were so swollen he had to use a cane to walk.

He is now back working on fishing boats, toiling at night on the open sea, even as he battles enduring kidney problems and painful flashbacks.

He takes comfort in family life, cradling his daughter at the beach where his mother and wife earn extra money by drying and smoking fish. At home, he bows in prayer, spreading his mat in a sandy courtyard where his wife hangs their washing to dry.

On one wall of their home hangs a photo of Mbaye and six of his fishermen friends, all perched on a colourful pirogue on the beach. Of the group, three are in Spain, and another died trying to reach there.

Mbaye is not deterred by his own disastrous attempt.

“I won’t give up,” he said. “If I have better opportunities in Senegal, I prefer to stay here. But if I don’t, I’ll risk my life again.” 

($1 = 610.5000 CFA francs)

FTSE 100 hits record high on BHP bid for Anglo American, earnings push

By Pranav Kashyap and Sruthi Shankar

(Reuters) -Britain’s benchmark FTSE 100 stock index touched a record high on Thursday led by miner Anglo American on a buyout offer from BHP Group, while investors cheered earnings from several blue-chip firms including Unilever, AstraZeneca and Barclays.

Anglo American surged 12.5% to a nine-month high after BHP said it made an offer to buy the London-listed miner, valuing its share capital at 31.1 billion pounds ($38.91 billion).

The deal would create the world’s biggest copper miner with around 10% of global output. BHP’s UK-listed stock, however, fell 2.7%.

“The deal also means that BHP is going to have access to a much larger amount of copper and iron ore. That’s a key area for future growth and markets are really catching on with that impressive jump in the share price,” said Fiona Cincotta, senior market analyst, City Index.

The FTSE 350 industrial metal miners index rose 1.7%, while the blue-chip FTSE 100 0.6% to 8,083.90, after hitting a record high of 8,098.14 earlier.

“The FTSE 100 doesn’t have as many tech stocks compared to U.S. indices and you’ve got the idea of the weaker pound, which is also supported and UK index,” Cincotta added.

Other European markets slipped and Wall Street was set to come under pressure after social media giant Meta Platforms gave a dour forecast.

AstraZeneca gained 5.1% after the drugmaker reported quarterly revenue and profit above market estimates.

Unilever rose 4.8% after the consumer goods company posted better-than-expected first-quarter sales growth.

Barclays climbed 4.5% even as the lender posted a lower first-quarter profit.

On the flipside, the mid-cap FTSE 250 fell 0.2%, with WH Smith sliding 7% after the British airport retailer flagged lower growth at start of the second half.

($1 = 0.7994 pounds)

(Reporting by Pranav Kashyap and Sruthi Shankar in Bengaluru; Editing by Varun H K and Rashmi Aich)

Explainer-Why Spain’s Prime Minister Sanchez is taking a break from public duties

MADRID (Reuters) -Spanish Prime Minister Pedro Sanchez said he will suspend public duties until next week to decide whether he wants to continue leading the government after a court launched a preliminary investigation against his wife.

Sanchez, who last year secured another term for his Spanish Socialist Workers’ Party (PSOE) as leader of a minority coalition government, said he would announce his decision on April 29.

“I urgently need an answer to the question of whether it is worthwhile … to lead the government or renounce this honour,” he wrote in a letter shared on his X account on Wednesday.

WHAT PROMPTED SANCHEZ’S MOVE? 

A Spanish court confirmed on Wednesday it had launched a preliminary investigation into his wife, Begona Gomez, for alleged influence peddling and business corruption following a complaint raised by anti-graft campaign group Manos Limpias (Clean Hands), whose leader has links to the far-right.

The court did not provide further details as the case is sealed and in the early stages.

Manos Limpias accused Gomez of using her influence as the wife of the prime minister to secure sponsors for a university master’s degree course that she ran.

Gomez has not commented. Sanchez says his wife has done nothing illegal and is being attacked “to weaken me politically and personally”. He has said his wife will defend her honour and will cooperate with the proceedings.

Manos Limpias uses a unique Spanish legal instrument known as the “people’s accusation” to bring criminal complaints against third parties. Judges can choose whether or not to act on such complaints, and not every accusation has led to a judicial investigation.

Several media reported on Wednesday that the directors of two online news outlets that originally published the claims of Gomez’s alleged wrongdoing will testify as witnesses. 

WHAT ARE THE ALLEGATIONS AGAINST HIS WIFE?

Manos Limpias claimed – citing the online newspaper reports – that Gomez received favours from airline Air Europa and its Spanish holding company Globalia during her time as director of an African research centre at Madrid’s IE business school until 2022, according to radio station Cadena Ser, which shared a document it said was the legal complaint on its website.

IE said in a statement that it had never received any financial support from Globalia or its entities. 

In March, Spain’s conflict of interests watchdog threw out a complaint made by the opposition People’s Party that claimed there was a link between a government bail-out for Air Europa, following the COVID crisis that grounded travel, and the “economic and professional ties” of Sanchez’s wife.

In a joint statement from March, Globalia and Air Europa said the aid received from the Spanish government was “in line with the parameters of other aid received by different companies in the sector in Spain and the rest of Europe”, and it considered itself a victim of “political crossfire”.

WHAT HAPPENS NEXT?

Potential outcomes range from Sanchez remaining as prime minister to his resignation – which would lead to either a new candidate standing for a vote in the lower house or a snap election in the summer – or he could submit himself to a confidence vote to reinforce his leadership.   

According to Spain’s constitution, new elections can only be called one year after parliament was last dissolved. This means the earliest Sanchez could formally call a snap election is May 29, resulting in a vote no earlier than July 21. 

However, he could announce on Monday his intention to do it on that date, after which his government would remain in a caretaker capacity until a new one is formed.  

Were he to lose a parliamentary confidence vote, he would have to resign.

If Sanchez steps down, King Felipe would have to meet with all parties represented in the lower house to kick off a new investiture process, designating a candidate who needs a parliamentary majority to become prime minister.

WHAT OTHER CORRUPTION CASES ARE THERE IN SPAIN? 

In Spain, politicians of all stripes routinely accuse each other along with family members and associates of corruption and there have been some high-profile scandals that resulted in convictions.

Pedro Sanchez came to power in 2018 when the previous conservative government lost a confidence vote in the wake of a graft scandal.

At present, there are several parliamentary commissions examining public contracts for health supplies during the COVID pandemic. 

Earlier this year, former transport minister Jose Luis Abalos refused calls from his PSOE party to resign as a lawmaker after his assistant was accused of taking bribes to facilitate COVID mask contracts.

(Reporting by Emma Pinedo, David Latona and Corina Pons; editing by Aislinn Laing, Rosalba O’Brien and Mark Heinrich)

Ukraine’s Zelenskiy meets Britain’s Jeremy Hunt in Kyiv

KYIV (Reuters) – Ukrainian President Volodymyr Zelenskiy said on Thursday he met British finance minister Jeremy Hunt in Kyiv and called for sanctions against Russia to be tightened to stop Moscow bypassing them.

The Ukrainian leader said in a statement on the Telegram app that he was grateful to close ally Britain for unveiling this week a new 500 million pound ($625 million) uplift in a defence support package for Ukraine.

“Particular attention was paid to sanctions policy. It is important to expand restrictive measures against Russia and exclude the possibility of circumventing sanctions,” Zelenskiy said.

He said Hunt would meet Prime Minister Denys Shmyhal and other ministers later on Thursday.

($1 = 0.8006 pounds)

Factbox-Italian tourist hotspots start to raise defences against overcrowding

ROME (Reuters) – Venice became the first city in the world on Thursday to introduce a payment system for visitors in an experiment aimed at dissuading tourists from arriving during peak periods.

However, it isn’t the only place in Italy that has recently introduced new measures aimed at slowing tourist flows.

Here are some of the initiatives currently in force.

VENICE

The lagoon city has introduced tickets for day trippers that cost 5 euros and are valid from 0830 to 1600 local time. The experiment came into force on April 25, a national holiday in Italy. Tickets will be needed for the following 10 days and thereafter for most weekends until mid-July.

Venice residents, students, workers and home owners are exempt from paying or booking a slot. Visitors aged under 14 and tourists with hotel reservations will need to be registered, but access for them will be free of charge.

Other cities, such as Como, have said they are considering introducing a similar measure, but are waiting to see how the Venice initiative works before deciding.

Besides this, Venice has also said that from June it will limit the size of tourist groups to 25 people and ban the use of loudspeakers by tour guides.

FLORENCE

Florence announced in October it was banning new short-term residential lets on platforms such as Airbnb in its historic centre. It also offered three years of tax breaks to landlords of short-term holiday lets if they start offering ordinary leases for residents.

The city’s famous museum, the Uffizi, offers discounts to people who arrive before 8.55 a.m. and lower prices off-season. To spread out crowds, it also closes at 10 p.m. once a week.

CINQUE TERRE

The five villages that make up the Cinque Terre on the Italian Rivieria regularly get swamped with visitors.

To try to reduce the overcrowding at peak periods, the authority which oversees the area said this week it would charge visitors 15 euros to walk the most celebrated coastal path. In addition, the path can only be walked in one direction.

CAPRI

The picturesque small island that lies across the bay from the southern city of Naples has doubled its entry fee, which is automatically added to ferry tickets, to 5 euros. The fee will be charged from April 1 to October 1.

CAPRI, ISCHIA, PROCIDA, LAMPEDUSA, LINOSA

These islands have introduced limits, or outright bans, on cars for non-residents during the main tourist season.

Barclays Q1 profit falls 12% as trading slump hits

By Lawrence White and Sinead Cruise

LONDON (Reuters) -Barclays reported a slightly smaller than expected 12% fall in first quarter profit on Thursday, boosting confidence among investors that its turnaround task was on track despite lower income from trading and sluggish mortgage demand.

The British bank reported pretax profit for the January-March period of 2.3 billion pounds ($2.84 billion), down from 2.6 billion pounds a year ago and narrowly above analysts’ forecasts for 2.2 billion.

Its shares were trading 4.3% up at 0840 GMT compared with a 0.5% rise in the FTSE 100 index.

Barclays is bidding to restore investor faith in its universal banking business model, after years of share price underperformance, clashes with activists over the role of its investment bank, and management turnover.

The British bank said in a long-awaited strategy review on Feb. 20 it would invest in its high-returning domestic banking business, as well as axing 2 billion pounds of costs and ramping up payouts to shareholders.

“Barclays has posted a strong foundation for the delivery of 2024 guidance. Now they need to maintain the momentum,” said Max Georgiou, analyst at Third Bridge, describing the lender’s planned savings targets as “challenging” unless more jobs are cut this year.

Thursday’s results were the first under the lender’s new structure, reorganised into five operating divisions instead of three in an effort to provide clearer disclosure on performance and management accountability.

The lender now reports results for Barclays UK, Barclays UK Corporate Bank, Private Bank and Wealth Management, Investment Bank, and U.S. Consumer Bank.

Total investment bank income fell 7%, just shy of expectations, and the unit’s overall return on tangible equity (ROTE) of 12% was 2.4% percentage points lower than the first quarter of 2023.

Still, the performance of the under-pressure unit was in line with its long-term target.

Barclays said income in its traditionally strong Fixed Income, Currencies and Commodities (FICC) unit fell 21% as clients’ trading slowed and against a strong year-ago comparison.

Investment banking advisory fees slid 30% as it failed to capture merger advisory fees.

Equities revenue rose 25%, meanwhile, as the bank performed strongly in both derivatives and cash equities trading.

RIVALS OUTPERFORM

Barclays’ investment bank performance overall lagged rivals on Wall Street, where the top five players on average saw FICC trading revenues fall 3%, equities rise 6%, and investment banking fees rise 25%, according to research from Jefferies.

Rival Deutsche Bank on Thursday posted a better-than-expected 10% increase in first-quarter profit, citing a bounce back in fixed-income trading and deal-making revenue at its investment banking division.

All five of Barclays’ business divisions reported lower ROTE than their first-quarter 2023 comparisons.

The UK Corporate Bank was the laggard, posting ROTE of 15.2% from 21.7% a year ago as a 10% slide in income from transaction banking offset an 18% rise in corporate lending.

Income in the UK bank division, which specialises in consumer and home loans, also fell 7%, amid increased competition in the mortgage market. At 163 billion pounds, mortgage loans and advances echoed the previous five quarters.

But the unit’s net interest margin rose 2 basis points to 3.09% as the pace of savers moving money to high-returning deposit products slowed.

The British bank also said it would sell an Italian retail mortgage book, and reinvest proceeds in its higher-returning domestic business. Its acquisition of Tesco Bank is due to complete by end-2024.

The Italian deal will conclude in the second quarter of this year, generate a pretax loss of around 225 million pounds and be neutral to the bank’s capital levels, Barclays said.

($1 = 0.8017 pounds)

(Reporting By Lawrence White and Sinead Cruise; Editing by Emelia Sithole-Matarise)