FT : ECB poised to close lender owned by longtime adviser to Prince Andrew

ECB poised to close lender owned by longtime adviser to Prince Andrew
Rowland family’s Banque Havilland faces loss of licence over alleged compliance and anti-money laundering failings

The European Central Bank is preparing to withdraw the operating licence for Banque Havilland, the Luxembourg-based lender owned by Prince Andrew’s longtime financial adviser David Rowland and his family.

The bank has been informed of the ECB’s draft decision, said two people familiar with the matter.

Banque Havilland has been mired in controversy in recent years and faced multiple regulatory probes.

ECB officials believe that under the ownership of the Rowland family — best known in Britain for patriarch David’s former role as Conservative party treasurer and his close personal links to the Duke of York, who borrowed millions from the bank — Banque Havilland has had repeated compliance and anti-money laundering failures.

The ECB declined to comment. Banque Havilland did not respond to a request for comment. David Rowland could not be reached for comment.

Rowland made his fortune in the 1970s and 1980s in daring and often complicated financial investments in shipping, natural resources and property.

The draft decision is not yet final as it must be approved by the ECB’s board of governors, although the process is usually regarded as a formality and is expected to take place quickly.

Once the decision is taken, the bank’s home supervisory authority, Luxembourg’s Commission de Surveillance du Secteur Financier, will formally announce the decision to revoke the licence, ending the bank’s ability to operate in Europe.

CSSF did not respond to a request for comment.

The Luxembourg bank is Havilland’s central operation. The future of its branches in Dubai, Switzerland, Liechtenstein and Monaco, which are outside the ECB’s regulatory jurisdiction and may be able to continue operating under their own local licences, remains unclear.

Regulators in Switzerland and Liechtenstein have imposed a restriction of new clients being taken on by Havilland as a result of the pending ECB decision.

Finma, the Swiss regulator, said: “[We are monitoring] ongoing compliance with the relevant legal standards by the Zurich branch of Banque Havilland, Liechtenstein, and all other banks licensed in Switzerland and their branches.”

Banque Havilland’s British arm was shut down last year after the Financial Conduct Authority imposed fines of £10mn against the lender and £353,000 against its branch chief executive, David Rowland’s son Edmund, for putting together an investment scheme at the behest of Saudi and Emirati clients that was designed to crash Qatar’s currency, according to an internal bank presentation quoted by the regulator in its enforcement notice. The bank has challenged the FCA’s decision.

The head of the bank’s Monaco branch is meanwhile on trial for alleged money-laundering violations. Prosecutors accuse him of accepting huge cash deposits from clients and failing to raise compliance concerns about their origins or the clients’ identities, allegations that he denies.

Revoking a bank’s licence is the ultimate power of the ECB, which can take such decisions on its own initiative or at the request of a national authority. The last time it did so was to withdraw the licence of Baltic International Bank in Latvia at the request of the local supervisor in March 2023.

Previously an arm of Icelandic bank Kaupthing, which collapsed in the 2008 financial crisis, the Luxembourg bank was bought by the Rowland family in 2009 and renamed after Havilland Hall, the stately home owned by David on the tax haven of Guernsey.

The Duke of York attended the celebrations to inaugurate the new bank in 2009 and played a key role in securing the opening of its Monaco branch by lobbying Monaco’s hereditary ruler Prince Albert to secure a local licence for Havilland, the Daily Mail revealed in 2021.

David Rowland in 2017 personally paid off a £1.5mn loan the bank had made to the duke, who was under financial pressure at the time, according to media reports.

At least seven of David’s eight children are employed or have previously been employed by the bank.

According to its 2023 financial statements, the bank has assets of just over €1.35bn and a €463mn loan book. It has enjoyed particularly strong growth in Liechtenstein, where at least €200mn of new money from wealthy clients was taken on in 2022.

Asked by the Liechtensteiner Volksblatt newspaper in 2022 about the impact on the bank of EU sanctions on Russia, group chief executive Marc Arand complained public opinion often “confused the issue” of sanctions compliance and said “all financial market participants come into contact with Russia in one way or another”.

>>> Diamond Offshore and Noble Corporation (NE) announce expiration of the the w

Diamond Offshore and Noble Corporation (NE) announce expiration of the the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, in relation to the pending merger between Noble and Diamond (16.26 +0.42)
  • Completion of the transaction is subject to the satisfaction of the remaining customary closing conditions, including approval by Diamond's stockholders and the receipt of informal clearance by the Australian Competition & Consumer Commission.
  • A special meeting of Diamond stockholders to vote on the transaction is currently scheduled for 8:30 a.m. CDT on August 27, 2024.

>>> US After Hours Summary: COUR +20.4%, DECK +10.3%, MHK +10.2%, UCTT +6.4% hig

After Hours Summary: COUR +20.4%, DECK +10.3%, MHK +10.2%, UCTT +6.4% higher on earnings; DXCM -37.5%, ZYXI -22.4%, OLN -8.7%, SAM -3.2% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: COUR +20.4%, DECK +10.3%, MHK +10.2% (also initiating additional restructuring actions), NSC +7.8%, UVE +7.3%, UCTT +6.4%, EGO +6.2%, BYD +3.8%, TXRH +3.6%, BJRI +3.4%, KNSL +3.3%, SSNC +3.3%, VLTO +2.2%, VRSN +2.2% (also approves additional $1.11 bln for repurchases), SKX +2% (also authorizes new $1 bln share repurchase program), HTH +1.8%, DOC +1.7%, BKR +1.2%, NOV +0.8%, ALSN +0.7%, SKYW +0.6%, APPF +0.3%, ENSG +0.3%, LHX +0.2%, CUBI +0.1% (also adopts repurchase plan), EXPO +0.1%, TFII +0.1%

Companies trading higher in after hours in reaction to news: CLLS +13.7% (FDA has granted Orphan Drug and Rare Pediatric Disease Designation Status to UCART22), INO +2.3% (receives advanced therapy medicinal product certificate from E.M.A.), AAOI +1.7% (facilities suffered no known damage from Typhoon Gaemi), BPRN +1.6% (receives approvals from shareholders and regulatory authorities to acquire Cornerstone Financial), PCB +0.9% (authorizes share repurchase of up to 5% of shares), HON +0.8% (ISSC enters into license agreement and acquires assets from HON), BOC +0.5% (authorizes new $20 mln share repurchase program), SWK +0.4% (increases dividend), RTX +0.3% (awarded $1.94 bln U.S. Missile Defense Agency contract), ET +0.2% (increases dividend), AZN +0.2% (FDA Advisory Committee reviewed Imfinzi), COHR +0.1% (completes 100th polished mirror segment)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: DXCM -37.5% (also authorizes new $750 mln share repurchase program), ZYXI -22.4%, OLN -8.7%, HMN -6.5%, CUZ -4.7%, SAM -3.2%, SBCF -2.3%, PFS -2.2%, ABCB -0.7%, JNPR -0.7%, LPLA -0.7%, TREE -0.6%, ASB -0.5%, TBBK -0.4%, WY -0.2%, DLR -0.1%, FIX -0.1%

Companies trading lower in after hours in reaction to news: TNDM -7.5% (in sympathy with weak DXCM earnings), PODD -6.3% (in sympathy with weak DXCM earnings), VOYA -1.6% (increases dividend), GEV -1.3% (report of investigation into failure of wind blade, according to State House News), WY -0.2% (acquires acreage of timberlands in Alabama for $244 mln), CAE -0.1% (CFO to step down), DDD -0.1% (provides litigation updates)

>>> US Close Dow +0.20% S&P -0.51% Nasdaqq -0.93% Russell +1.26%

Closing Market Summary
The stock market exhibited mixed action at the index level today, but the vibe under the surface was positive through the entire session. Advancers led decliners by a 2-to-1 margin at the NYSE and by a 3-to-2 margin at the Nasdaq.

The S&P 500 (-0.5%) and Nasdaq Composite (-0.9%) traded above and below their prior closing levels, following the fickle price action mega cap shares. Meanwhile, the Dow Jones Industrial Average (+0.2%) and Russell 2000 (+1.3%) were either mostly or entirely positive today.

The fickle nature of mega cap stocks was evident in the performance of the Vanguard Mega Cap Growth ETF (MGK), which traded up as much as 0.9% at its high and as low as 2.1% at its low. The equal-weighted S&P 500, however, settled with a 0.1% gain amid rebound action elsewhere.

The upside bias stemmed from buy-the-dip interest after yesterday's solid sell off.
Outsized moves in either direction were reserved for names with specific catalysts. Honeywell (HON 202.45, -11.20, -5.2%) and Ford Motor (F 11.16, -2.51, -18.4%) were losing standouts after reporting earnings news. Meanwhile, IBM (IBM 191.98, +7.96, +4.3%) and ServiceNow (NOW 848.79, +97.92, +13.4%) were winning standouts after reporting earnings.

The 10-yr note yield declined three basis points to 4.26% and the 2-yr note yield rose two basis points to 4.44%. Treasuries were reacting to the this morning's economic releases, which were in-line with the market's soft landing expectation and also acted as support for equities. Also, today's $44 billion 7-yr note auction met strong demand.

  • Nasdaq Composite:+14.5% YTD
  • S&P 500: +13.2% YTD
  • Russell 2000: +9.7% YTD
  • S&P Midcap 400: +8.8% YTD
  • Dow Jones Industrial Average: +6.0% YTD

Reviewing today's economic data:
  • Q2 GDP-Adv. 2.8% (consensus 1.9%); Prior 1.4%; Q2 Chain Deflator-Adv. 2.3% (consensus 2.6%); Prior 3.1%
    • The key takeaway from the report is that it didn't show any breakdown in consumer spending. In fact, consumer spending growth accelerated, increasing 2.3% on the heels of a 1.5% increase in the first quarter.
  • Weekly Initial Claims 235K (consensus 240K); Prior was revised to 245K from 243K; Weekly Continuing Claims 1.851 mln; Prior was revised to 1.860 mln from 1.867 mln
    • The key takeaway from the report is that there hasn't been an alarming jump in initial claims -- a leading indicator -- to even higher levels; therefore, a conclusion will be drawn that the labor market is seeing some normal slowing as opposed to a rapid deterioration.
  • June Durable Orders -6.6% (Briefing.com consensus 0.4%); Prior 0.1%; June Durable Goods -ex transportation 0.5% (Briefing.com consensus 0.2%); Prior -0.1%
    • The key takeaway from the report is that the weakness was driven by a large drop in nondefense aircraft and parts orders, which are volatile. An added takeaway is that business spending in June was quite solid, evidenced by the 1.0% increase in new orders for nondefense capital goods excluding aircraft.

Friday's economic calendar features:
  • 8:30 ET: June Personal Income (consensus 0.4%; prior 0.5%), Personal Spending (consensus 0.3%; prior 0.2%), PCE Prices (consensus 0.1%; prior 0.0%), and core PCE Prices (consensus 0.2%; prior 0.1%)
  • 10:00 ET: Final July University of Michigan Consumer Sentiment (Briefing.com consensus 66.0; prior 66.0)

WWD : Hermès Maintains Its Double-digit Pace

Hermès Maintains Its Double-digit Pace
The French firm said it is benefiting from a “flight to quality,” which sent second-quarter revenues up 11.5 percent.

PARIS — Hermès International raced ahead of its luxury peers once again, riding a “flight to quality” in the U.S. and China to achieve an 11.5 percent gain in revenues in the second quarter to 3.7 billion euros.

At constant exchange rates, the increase stood at 13.3 percent, and the double-digit pace was maintained in all regions, demonstrating how higher-end brands are better resisting the global slowdown in luxury spending.

The results handily beat forecasts. HSBC had forecast second-quarter organic sales growth of 10.7 percent and first-half EBIT margin of 42 percent.

Still, momentum at Hermès is weakening, as sales in the first quarter were up 17 percent at constant exchange rates.

Like other luxury players, Hermès came up against tough comps, a downturn in mall traffic in Greater China, and substantial currency headwinds. It tallied the negative impact of exchange rates at 207 million euros in the first half.

Partly reflecting the flight from luxury of aspirational consumers, sales of silk and textiles fell 5.6 percent in the second quarter, and watches sank 4.9 percent.

Bernstein luxury analyst Luca Solca applauded the robust gains in the brand’s most iconic categories, with leather goods logging 17.9 percent organic growth, and ready-to-wear and accessories improving 15.1 percent.

Among standout handbag styles were the Della Cavalleria Elan, and a studded, miniature version of its famous Kelly.

Hermès chief executive officer Axel Dumas characterized the second-quarter results as solid, and highlighted continued dynamism in the American market, which advanced 13.3 percent. “When there are tougher times, there’s a flight to quality,” he told a webcast Thursday evening after the results were released.

Similarly, he said Chinese consumers are “looking for high-quality products, which is good for us.”

What’s more, “they don’t necessarily want the logo to be affixed to what they buy. And so there is this change, which we believe is underway, and is also positive for us.”

Second-quarter revenues at constant exchange rates gained 19.5 percent in Japan, 18.2 percent in Europe, 5.5 percent in Asia Pacific and 99.4 percent in other regions, primarily the Middle East.

Hermès credited local clients, not bargain-hunting Chinese consumers, for the gains in Japan, where it opened two new stores in the first half.

Meanwhile, business in European stores is being pumped up by flush tourists from China, the Middle East and the U.S.

Dumas said trends remain unchanged in the first weeks of July and sounded a sanguine note about the balance of the year.

“Hermès is resilient and solid in the face of a complex and challenging environment. We are forging ahead with confidence and humility,” he said, seated next to chief financial officer Éric du Halgouët, broadcasting from the brand’s airy boutique on the Rue de Sèvres.

Net income in the first half advanced 7 percent to 2.38 billion euros, whereas profits plunged by double digits at luxury rivals LVMH Moët Hennessy Louis Vuitton and Kering.

Bernstein’s Solca noted the EBIT margin at Hermès remains the highest in the industry, and just 50bps lower than anticipated.

At the revenue level, organic sales at LVMH key fashion and leather goods division rose 1 percent year-on-year in the three months to June 30, while group revenues at Kering fell 11 percent in the second quarter, both in reported and comparable terms. (Sales at Kering’s linchpin Gucci brand plummeted 19 percent.)

The poor second-quarter results have dragged on luxury stocks. Shares in Kering fell 7.5 percent on Thursday, while LVMH slipped 1 percent and Compagnie Financière Richemont lost 1.7 percent.

On Thursday, Hermès said it would continue to invest strongly in its production capacity, communications and store network, with expansions in the pipeline for boutiques in Atlanta, Singapore, Shenzhen, China, and Lille, France.

Four leather goods workshops are currently under construction in France, with the first coming onstream this fall, and the others opening over the next three years.

Dumas held out hope its sporty new Hermès Cut watch, unveiled at Watches & Wonders in Geneva last April, would improve its fortunes in that category in the second half, while acknowledging that jewelry is currently outperforming timepieces.

Sales of perfume and beauty products grew 5.6 percent in the second quarter with the “other” category, mainly jewelry and home products, improving 13 percent.

WSJ : OpenAI Is Launching Search Engine, Taking Direct Aim at Google

OpenAI Is Launching Search Engine, Taking Direct Aim at Google
Built with input from publishers, SearchGPT will summarize real-time information on websites

OpenAI is launching a test version of its long-awaited search engine, which it says will cite sources of information including news from business partners such as The Wall Street Journal parent News Corp NWSA 0.05%increase; green up pointing triangle and the Atlantic magazine.

The tool, called SearchGPT, will summarize the information found on websites, including news sites, and let users ask follow-up questions, just as they can currently with OpenAI’s popular chatbot, ChatGPT. The sources are linked at the end of each answer in parentheses.

OpenAI also built a sidebar where it said users can see more results and sources with relevant information.

SearchGPT is OpenAI’s most direct challenge yet to Google’s dominance in search since the release of ChatGPT in 2022 caught the tech company flat-footed. Google this year widely rolled out its own AI search feature that synthesizes information from multiple web sources. Shares in Google-parent Alphabet GOOGL -1.84%decrease; red down pointing triangle fell about 2% in intraday trading after OpenAI announced the test.

Other AI companies are also entering the search battle, including Perplexity, which is backed by Jeff Bezos and founded by a former OpenAI employee.

OpenAI said it partnered with publishers to build the search tool. In recent months, OpenAI representatives have shown mock-ups of the feature to publishers, who have grown increasingly uneasy about the way AI could reshape their newsrooms and newsgathering amid recent declines in online traffic for many publishers.

Publishers are broadly concerned that AI-powered search tools from OpenAI or Alphabet’s Google will serve up complete answers based on news content, eliminating the need to click on an article link and starving publishers of online traffic and advertising revenue.

It isn’t clear how much traffic a product such as SearchGPT could send publishers’ way. “We expect to learn more about user behavior” in the test, an OpenAI spokeswoman said.

Publishers are leery of tech partnerships after more than a decade of dealing with the whims of tech companies including Meta Platforms’ Facebook and Google, whose product changes could sometimes trigger violent changes in online traffic.

Their fears were further fanned when last month Perplexity repurposed a story by Forbes magazine for one of its products and didn’t mention the news source until the bottom of the page. Chief Executive Aravind Srinivas attributed the issue to the product’s “rough edges.”

Even so, many publishers see value in selling access to their intellectual property to AI companies who need massive amounts of data and content to refine their AI systems and create new products like SearchGPT.

Over the past year, OpenAI has struck partnerships with a litany of news publishers including Politico and Business Insider’s parent, Axel Springer; the Associated Press; Le Monde; the Financial Times; and IAC’s Dotdash Meredith, home of such publications as People and Better Homes & Gardens.

In some of those deals, OpenAI has extended millions of dollars in cash and cloud credits to publishers in exchange for the right to train new generative AI models on their work.

Other publishers, including the New York Times, have opted to battle OpenAI and its backer, Microsoft MSFT -1.90%decrease; red down pointing triangle, in court, alleging in lawsuits that their content was used without permission to train OpenAI’s systems. OpenAI has said the Times lawsuit is without merit.

Many of the discussions OpenAI had with publishers about the search tool were focused on how their news content will be used in answers to queries. Thursday, OpenAI said publishers can manage how their content appears in SearchGPT.

In a statement included as part of OpenAI’s press release Thursday, News Corp CEO Robert Thomson said CEO Sam Altman and other OpenAI leaders understood that any AI-powered search must rely on “the highest-quality, most reliable information furnished by trusted sources.”

For now, SearchGPT will be tested as a separate product, but eventually OpenAI plans to integrate it within its main ChatGPT service. News publishers and creators will be among those first few testers and OpenAI will offer a wait list where U.S. users can sign up to try the tool.

Wall Street Journal owner News Corp has a content-licensing partnership with OpenAI.