Money laundering, household spending, Laura Ashley: Business news in brief Friday 17 February

Family spending still down on a decade ago; US banks push for relaxed rules; Homeware retailer issues profit warning

Laura Ashley revealed a 29 per cent plunge in pre-tax profits to £7.8m for the six months to 31 December (Reuters)

Latest British 'family spending' data raises questions about true economic strength

British household spending barely rose in the year to the end of March 2016 and was around 5 per cent below the level before the financial crisis, an official survey showed on Thursday, suggesting a much more muted picture than previous data.

The figures, though from early last year, may revive the debate about living standards in Britain, nearly 10 years on from the start of the financial crisis. They come when inflation is beginning to pick up sharply following the June vote to leave the European Union.

The average household spent £529 a week, excluding mortgage interest payments, a marginal rise in inflation-adjusted terms from £527 in 2014-15 and below a peak of £555 10 years earlier, the Office for National Statistics said on Thursday.

By contrast, official data used to calculate British gross domestic product has shown household spending growing by 2.7 per cent in real terms in the same period – and then maintaining that pace through the rest of 2016.

Consumer spending has driven Britain’s economy since the EU referendum, and Bank of England Governor Mark Carney has expressed doubts about whether this will persist as inflation looks set to rise faster than wages.

Thursday’s annual “family spending” survey from the ONS may raise questions about the true strength of Britain’s recovery from the global financial crisis.

Reuters

Big US banks to push for easing of money laundering rules

America’s largest banks are to propose a complete overhaul of how financial institutions investigate and report potential criminal activity, arguing that rules imposed in the years after the 9/11 attacks in 2001 and strengthened during the Obama administration are onerous and ineffective, sources said. The Clearing House, a trade association representing the largest US banks including Goldman Sachs, JPMorgan and Bank of America, has long raised concerns about the effectiveness of the current rules, but this will be the first time the group has publicly called for them to be revamped.

The proposal, which could be published as soon as Thursday, will set the stage for an intensive lobbying effort targeting bank regulators and members of the Senate and House of Representatives finance committees. President Donald Trump has said he wants to cut costly regulations for Wall Street.

To keep drug traffickers and terrorists from laundering money through the US financial system, federal law mandates that bank employees file a Suspicious Activity Report with authorities if they suspect transactions could be part of a crime.

Faced with record penalties in recent years over failures to alert authorities to criminal activities, banks say they now over-report, filing hundreds of thousands of SARs out of fear of later falling foul of regulators.

“Now we tell banks to file [a report] on everything that might be criminal,” said Gary Shiffman, chief executive of compliance software maker Giant Oak. “But when everything is a priority, nothing ends up being a priority.”

Reuters

Laura Ashley issues warning after 29% fall in pre-tax profits

Fashion and homewares retailer Laura Ashley has warned over full-year profits after being hit by falling sales and surging costs.

The group revealed a 29 per cent plunge in pre-tax profits to £7.8m for the six months to 31 December.

Retail sales over its first half, which include key Christmas trading, fell 3.5 per cent on a like-for-like basis, putting it on a shortened list of losers over what proved to be a robust festive season elsewhere on the high street.

Shares in the group tumbled 11 per cent as Laura Ashley alerted over profits amid tough trading, with like-for-like sales still in the red since the start of 2017 – down 0.6 per cent in the six weeks to 11 February.

Chairman Tan Sri Dr Khoo Kay Peng said: “Trading conditions have been demanding during the first six months of the year.

“The board have reviewed the first half results and forecasts for the remainder of the year to 30 June 2017 and, given the continued market challenges, feels that net pre-tax profit for the year will fall below market expectations.”

The group said profits were also knocked by rising costs after the pound’s plunge in value since the EU referendum, as well as the new national living wage, which together contributed to a 6 per cent rise in operating costs to £52.3m.

PA

Air France plans long-haul push after full-year profit boost

Air France-KLM Group reported a 35 per cent earnings increase for 2016 and said it will boost passenger capacity this year in an effort to win back the initiative in the lucrative long-haul market.

Operating profit increased to €1.05bn (£890m) from €780m in 2015, helped by a lower fuel bill and productivity gains at Dutch arm KLM, Europe’s biggest airline said on Thursday. Analysts had predicted a figure of about €950m, based on eight estimates compiled by Bloomberg.

Chief executive Jean-Marc Janaillac said in a statement that while political and economic uncertainties are continuing to weigh on fares amid industry overcapacity, the decline in unit revenue slowed to 0.7 per cent in January, indicating a “resilient start” to the year. The group will therefore lift capacity as much as 3.5 per cent in 2017 “in order to regain the offensive” in long-haul markets and boost performance on medium-distance routes.

Bloomberg

JPMorgan and HSBC among those facing fines in South African rand-rigging probe

South Africa’s antitrust investigators urged that a dozen banks be fined for colluding and manipulating trades in the rand, potentially becoming the latest in a string of penalties handed to lenders around the world for rigging currencies.

The Competition Commission identified lenders including Bank of America Merrill Lynch, HSBC, BNP Paribas, Credit Suisse, HSBC, JPMorgan and Nomura as among those that participated in price fixing and market allocation in the trading of foreign currency pairs involving the rand since at least 2007. It referred the case to an antitrust tribunal, concluding an investigation that began in 2015.

The outcome of the probe comes as President Jacob Zuma and his governing African National Congress step up pressure to break the dominance of the country’s four largest lenders and force them to lend more to black clients.

Bloomberg

Lenovo comes up short on smartphones as PC business soldiers on

Lenovo’s mobile-phone business continues to shrink, while its personal-computer division managed anaemic growth in the face of brutal holiday-season competition.

The world’s largest PC maker’s profit plummeted more than two thirds in the December quarter, missing analysts’ projections after HP Inc threatened its position in North America. Smartphone sales declined almost a quarter globally as Lenovo bled market share to rivals such as Huawei Technologies Co – both at home and abroad.

Lenovo remains the leader in a PC market struggling through a prolonged downturn as people opt for smartphones to handle everyday tasks. But it barely maintained pole position over HP as its chief rival widened its share in North America, according to research firm IDC. In the mobile sector, Lenovo is pinning its hopes on premium phones, such as the one with augmented reality capabilities, to breathe life into the loss-making division. Yet it’s still ceding ground to rivals who are winning users over with aggressive sales tactics.

Bloomberg

GM will not ‘rationalise’ UK operations says minister

British business minister Greg Clark said he had been reassured by General Motors that the firm did not intend to “rationalise” its Vauxhall operations in the UK, after a meeting held to discuss GM’s merger talks with France’s PSA.

“There is some way to go in discussions between GM and PSA but I was reassured by GM’s intention, communicated to me, to build on the success of these operations rather than rationalise them,” Clark said in a statement. “We will continue to be in close contact with GM and PSA in the days and weeks ahead.”

Reuters

Greece: No further austerity as part of bailout deal

The Greek government says the country’s economy has met its budget targets and there is therefore no reason for any further austerity measures to be imposed as part of a deal with international bailout creditors.

Greece has been struggling for months to conclude negotiations with its creditors on spending cuts and reforms demanded as part of its third bailout program. It hopes to reach an agreement in time for a Monday meeting of eurozone finance ministers.

Government spokesman Dimitris Tzanakopoulos said on Thursday that no further austerity should be imposed on the Greek people, and said the key to reaching an agreement was for the International Monetary Fund and Germany’s finance ministry to “return to reality”.

Without a deal, Greece will be unable to receive the next instalment of rescue loans.

AP