TheChek News Flow

Borrowing costs breach threshold for first time since last year’s disastrous mini-Budget

The average cost of a five-year fixed-rate UK mortgage has hit 6 per cent for the first time since November, just as banks face growing scrutiny over whether they are doing enough to ease the pressure on consumers.

Top bankers at HSBC, NatWest, Lloyds and Barclays have been called to a meeting with the UK’s financial watchdog on Thursday to address the gap between spiralling mortgage costs and savings rates.

The Bank of England has lifted interest rates to a 15-year high of 5 per cent as it battles to bring inflation under control. The steep jump in mortgage rates, but smaller increase in savings rates, has led to accusations that banks are profiteering amid a cost of living crisis.

According to data provider Moneyfacts, the average rate for a five-year mortgage hit 6.01 per cent on Tuesday, the highest level since the aftermath of former primer minister Liz Truss’s ill-fated “mini” Budget.

By contrast, the average easy access savings rate available across all banks is 2.45 per cent, according to Moneyfacts. The rates offered by the four biggest high street banks, Lloyds, NatWest, Barclays and HSBC, range from 0.9 per cent to 1.75 per cent.

According to people familiar with the matter, the Financial Conduct Authority and the executives are planning to discuss the pricing of cash savings and how banks communicate with their customers on rates. The meeting could result in a “savings charter”, or set of commitments, the people added.

Jeremy Hunt, the chancellor, wants to lift the rates on savings accounts, both to help ease the pressure on households’ straitened finances but also to cool spending and assist the central bank in its fight against inflation.

Thursday’s meeting is the latest move by the FCA to address concerns that banks are failing to fully pass on the benefits of higher rates to savers even as the lenders benefit from higher borrowing costs. The regulator wrote to bank chiefs about the issue in February.

As they confront growing criticism, banks have pointed to the much higher rates available on savings accounts that require consumers to lock their money up for two years. According to Moneyfacts, the average rate on such accounts is 4.77 per cent.

But some analysts point out that the pool of people able to lock money up will be much smaller.

“The majority of customers have easy access accounts,” said Andrew Hagger, a personal finance expert at MoneyComms. Fixed-rate savings accounts would require people “to be happy tying their money up for a length of time during a cost of living crisis,” he said.

Some shareholders on Tuesday defended the banks, which are expected to be hit by an increasing amount of bad debts as the economy slows.

“The government and regulators were quite happy for savers and banks to suffer over a decade of zero interest rates,” said Richard Buxton, UK fund manager at Jupiter. “As rates rise both savers and banks can benefit, but any intervention to cap margins in a competitive industry is a dangerously slippery slope.”

He added: “Profiteering is an emotive expression at odds with returns on capital.” 

The spectre of the FCA intervening on pricing products has led to warnings that the regulator risks overreaching.

“It is concerning that the FCA appears to be bowing to political pressure and overreaching the current Treasury recommendation to have regard to the government’s economic policy when advancing its objectives,” said Simon Morris, of law firm CMS, adding that “telling banks how to price their products” was not captured by regulators’ statutory duty to ensure banks were “well run and adequately capitalised”.

Michelle Kirschner, a lawyer at Gibson Dunn, said: “There is a suggestion in the market that a failure to pass on better savings rates to savers is a failure to treat customers fairly. This conflates fairness with price. The FCA is not a price regulator and it is ultimately difficult to see how the FCA could intervene to mandate that banks pass on better savings rates to their savers.”

Also in today’s newsletter, hedge fund bets on higher oil prices are evaporating

Opec+ — which is in the news again, with Saudi Arabia and Russia announcing further production cuts on Monday — is gathering in Vienna, though not for a ministerial meeting, but its big jamboree known as the Opec International Seminar.

It’s in effect a conference where we would normally get to hear the oil cartel’s view of the world alongside some of the great-and-the-good of the energy industry, with companies such as BP, TotalEnergies and Occidental Petroleum all represented by their chief executives.

But the coverage might be a little sparse when it kicks off on July 5 as Opec has, once again, decided to ban large swaths of the media from attending one of their events. Freedom? That’s so July 4.

In our main read today we explore why the cartel’s struggles may go far beyond its media battle. Thanks for reading. — David

Opec is pushing oil uphill

Opec and its allies’ attempts to raise the oil price over the past 10 months are well-documented, as is the cartel’s growing frustration that, well, it’s not really worked.

When they first started announcing cuts in October, Brent was about $85 a barrel. Now it’s at about $75 a barrel. In August the Opec+ group will be holding back more than 5mn barrels a day from the market, with Saudi Arabia’s own output down to 9mn barrels a day — the lowest, aside from during Covid, in more than a decade.

For all their efforts it’s not really been a great return.

The hope for Opec+ is that prices may still rise in the coming months, with forecasts suggesting the oil market will be in a steep deficit for most of the second half of this year.

But the group’s recent struggles may reveal a difficult underlying truth. Few investors buy the cartel’s message that we’re simply no longer investing enough in oil production, and therefore the price needs to rise to avoid shortages.

The market believes, to put it simply, that there will be enough oil around for the foreseeable future.

The International Energy Agency’s medium-term outlook last month should have made for sobering reading (though Opec has started its own beef with the IEA too).

While the IEA has been at the forefront of warning about a tightening market later this year, its prognosis for the next few years is much more benign.

“The outlook improves over our 2022-28 forecast period,” the IEA said.

“Growth in world oil demand is set to slow markedly during the 2022-28 forecast period as the energy transition advances.”

The reason for the IEA’s rather relaxed air is countries like Guyana, Brazil and even the US are all adding output, while big Opec members such as Saudi Arabia and the UAE also want to increase capacity. At the same time, by the end of this decade oil demand will be barely growing or potentially already heading into reverse.

This is a very different backdrop to the $100 a barrel era of roughly (feel free to argue with me on the precise definition) 2005-14, when rapid demand growth in China and the rest of the developing world meant there were genuine fears the world could run short.

That anxiety helped keep the market bid up even when there was no threat of immediate shortages. The higher prices of that era, of course, eventually solved their own problem — by acting as a midwife for the US shale boom and other supplies.

This time? There might be periods of relative tightness — like last year, with Russia’s full-scale invasion of Ukraine — or even temporary panic. But a structural shortfall in supplies? It’s harder to see, and even harder to get investors to buy into it.

For Opec this is a problem. If oil traders and financial investors are generally relaxed about the supply outlook long-term it inevitably filters through to prices today.

Sure there are also short-term factors at play — pick from recession fears, a lacklustre Chinese rebound from Covid, or worries about inflation generally.

But underpinning oil’s rather flat 2023? An almost complete lack of fear about the long-term. That’s a big shift that should worry Opec+ even more. (David Sheppard)

Want to see what a complete lack of fear looks like? Hedge fund managers have reduced their bets on oil going higher to the lowest level in years. It is particularly noticeable in US benchmark West Texas Intermediate, where net longs — the difference between the number of bets on rising and falling prices — are just a third of the level of a year ago.

Ineos owner Jim Ratcliffe accuses UK regulator of being ‘hostile to business’

The businessman is the latest to criticise what some executives view as an increasingly aggressive stance by the CMA

Sir Jim Ratcliffe, the owner of chemicals giant Ineos, has accused Britain’s competition regulator of becoming “increasingly hostile to business” after it blocked its purchase of assets being sold by a Swiss group.

Ratcliffe said the decision by the Competition and Markets Authority to block the deal with Switzerland’s Sika earlier this year was “yet another example of a deal being stopped that would benefit the UK”.

“Add to this, the ridiculous North Sea windfall tax and continuing high energy costs and we are seeing a government that is driving business out of the UK,” he said on Tuesday.

Ratcliffe, one of the UK’s richest men who is also in the race to buy Manchester United football club, is the latest to criticise what some executives view as an increasingly aggressive stance by the CMA. Activision Blizzard, the video games maker, branded Britain as “closed for business” earlier this year after the regulator blocked its acquisition by Microsoft.

The CMA has been approached for comment.

Ineos agreed in January to purchase Sika’s concrete additives business which had sales of $1bn. The Swiss speciality chemicals group was selling the assets to mollify CMA concerns stemming from its SFr5.5bn ($6.1bn) acquisition of MBCC Group, a supplier of construction chemicals, in November 2021.

Sika said in March that it had agreed with Ineos to scrap the deal after receiving “provisional negative feedback” from the CMA due to competition concerns. Private equity firm Cinven acquired the assets instead.

Ratcliffe said the CMA was “building a reputation as an overly aggressive regulator with little regard for the impact of its decisions on UK business”.

He added: “Its attitude is mirrored in the lack of government support for manufacturing; whether in reviews such as this, or in our uncompetitive approach to energy policy.”

Ratcliffe’s damning verdict of the CMA is the latest in a series of scathing attacks on the UK government and the state of manufacturing. He singled out the decision to raise the tax on North Sea oil and gas producers in an interview with the Financial Times in May, accusing the government of playing “primitive politics”.

One of Britain’s most successful postwar industrialists, Ratcliffe founded Ineos in 1998 with Andy Currie and John Reece. In the first 10 years, the company made more than 20 acquisitions, snapping up unloved commodity businesses from the likes of ICI, BP and BASF as these giants restructured.

Today the group’s activities span oil and gas fields, refineries and chemical works. Ratcliffe’s business empire includes several consumer brands and sports interests including football club OGC Nice, a stake in the Mercedes-AMG Petronas Formula One racing team and the off-road Grenadier 4x4 vehicle.

Ratcliffe, who is the majority owner of Ineos, has also bid to acquire Manchester United, one of the world’s most famous football clubs, from its American owners. The FT has previously reported that the Ineos proposal was to acquire control of United from the Glazers but without extending an offer to minority shareholders of the New York-listed club.

However, the structure of Ratcliffe’s proposal has drawn concern from the club’s board and minority shareholders, according to people with knowledge of the matter. Sheikh Jassim bin Hamad al-Thani, the son of one of Qatar’s richest men, has proposed a full takeover and sweetened his offer in early June but the process has dragged on since the Glazers first said last November that they would consider a sale.

A deal would be Ratcliffe’s highest-profile acquisition in sports, adding to a collection of assets that includes a high-profile cycling team, French football club Nice and a third of the Mercedes F1 racing outfit. He previously failed in attempts to acquire Chelsea FC.

Two competing groups offer cash injections as French supermarket races to restructure debts

Heavily indebted French supermarket chain Casino has received two offers of a cash injection from groups led by prominent billionaires.

The competing proposals are part of Casino’s voluntary negotiation with creditors to restructure its debt and bring in new money in a bid to save the group now controlled by businessman Jean-Charles Naouri.

The proposal led by Czech billionaire Daniel Kretinsky and joined by French entrepreneur Marc Ladreit de Lacharrière included €1.35bn in cash, which together with debt converted into equity would deliver a total injection of €1.8bn, according to a person familiar with the matter. The group had previously offered €1.1bn.

The consortium’s bid is vying with that from a trio of prominent French businessmen, including telecoms tycoon Xavier Niel and retail entrepreneur Moez-Alexandre Zouari. In a statement on Tuesday, the group said it had offered to inject €900mn of cash into the group. That sum will be joined by contributions from others, such as €100mn from French supermarket group Intermarché and €600mn from unsecured creditors, according to a second person familiar with the matter.

Casino, which owns the Franprix and Monoprix chains, is racing to conclude an agreement with its creditors by the middle of the month to stave off the risk of default. The company is battling high debts, a rapid cash burn and falling revenues in its domestic market.

Naouri’s debt woes stretch back years. In 2019, he was forced to put Casino’s parent companies, through which he holds his 52 per cent stake in the supermarket group, into a type of bankruptcy process known as a procédure de sauvegarde. Casino is trying to avoid a similar fate.

However, the current restructuring process will spell the end of Naouri’s control of Casino, which he built through years of debt-fuelled empire building that took the business to Latin America and pushed into industries including solar panels.

Naouri and Casino have been shedding assets for years to pay down debt, but it has not been enough to offset its loss of market share in France.

Casino’s unsecured bonds are trading at a little over 5 cents on the euro, suggesting bondholders are braced for a near total wipeout in a restructuring. 

The French government has been monitoring the situation closely given the potential fallout for Casino’s roughly 50,000 employees in the country, where it is the sixth-biggest food retailer by market share. A finance ministry committee known as CIRI that helps distressed companies has been taking part in talks over Casino’s negotiations with creditors.

Hotel group is a cheap way for investors to join in the post-pandemic tourism festival

Hotel groups are in a buoyant mood as tourism continues to bounce back from the pandemic. Their bullishness is apparent in expansion plans published by Accor recently.

The Paris-listed owner of the affordable Novotel and Ibis brands intends to open more than 1,200 hotels over five years. People are keen to travel despite the current high cost of living. Accor’s shares have rallied more than 40 per cent so far this year.

Accor already has nearly 5,500 hotels. The majority are owned by someone else. Accor manages them for a fee or owners pay to operate within the franchise. Normally half of Accor’s growth comes from switching hotels to its brands rather than from new builds.

Larger British rival InterContinental Hotels Group, an earlier convert to the same “asset light” model, plans to add 1,900 hotels to its stable of more than 6,000 premises. Smaller groups such as Spain’s Melia hotels have announced their own modest growth plans.

But has the industry drunk too much of its own punch?

The evidence suggests not. Global industry revenue per available room — a key measure of demand — recovered last year to $73.9, from $50.7 in 2021, according to consultancy STR. However, revpar remains below the 2019 level of $79.7.

That points to headroom for rises if left-field events such as wars or financial shocks do not spoil the party.

Accor recently set an ebitda target of €920mn to €960mn for 2023, compared with €675mn last year. Visible Alpha consensus previously pointed to 2023 ebitda of €933.7mn.

The company’s shares have had a good run lately after a bumpy 10 years. Accor’s strategy has caused frustration with investors, although it is now a slicker business than when chief executive Sébastien Bazin checked in.

Accor trades at a discount to rivals. Its forward enterprise value to ebitda multiple of 10.7 times remains behind a pre-Covid average of 11.6 times, according to Barclays. Accor looks like a cheap way for investors to join in the post-pandemic tourism festival.

Un audit confidentiel dévoile les difficultés des chaînes de Vivendi. Le poids de CNews dans le débat public n'a pas été converti en profits, pas plus que l'omniprésence de Cyril Hanouna sur C8. Même Canal + accuse des pertes en France.

Corsaire d'industrie, en croisade au nom d'une certaine vision du monde occidental, Vincent Bolloré, qui a récemment cédé ses ports africains et ses activités de logistique, bénéficie d'une réputation d'implacable gestionnaire. Or, le milliardaire breton cumule les pertes, en France, dans les médias qu'il contrôle avec Vivendi. Et veille à ne pas le faire savoir. Impulsé au niveau groupe par les instances représentatives du personnel, un audit comptable du cabinet Sextant, que s'est procuré La Lettre A, dévoile des chiffres jusqu'alors inédits. Remis début juin aux représentants du personnel et à la direction, son diagnostic sur la situation économique et les perspectives du groupe montre que les résultats financiers de chaînes de télévision contrôlées par Vivendi sont tous déficitaires dans l'Hexagone, à l'exception de CStar, qui affiche un résultat positif de 2 millions d'euros en 2022.

Si la donne n'est pas nouvelle pour CNews et C8, qui n'ont jamais cessé de plomber les comptes de leur maison mère, les pertes de Canal + sur le territoire métropolitain ont, jusqu'ici, été occultées. Ce piètre bilan pour les chaînes de télévision du groupe en France pourrait s'inviter à l'ordre du jour du comité de groupe de Vivendi, ce mercredi 5 juillet.

CNews plafonne dans la zone rouge

L'identité politique de CNews, qui a servi de rampe de lancement à Eric Zemmour lors de l'élection présidentielle, est loin d'être un succès commercial. La chaîne d'information continue n'a jamais rapporté le moindre centime à Vincent Bolloré.

L'année 2022 devait être celle de son premier passage à l'équilibre. Or, selon nos informations, Serge Nedjar, le directeur général de CNews, a enregistré un nouveau déficit : 4 millions d'euros. Ces résultats, auxquels le cabinet Sextant a pu accéder en consultant les comptes du groupe, devraient se dégrader en 2023, compte tenu de la baisse générale du budget des annonceurs.

Si CNews, malgré l'audience de Pascal Praud, Sonia Mabrouk, Laurence Ferrari, Dimitri Pavlenko et Jean-Marc Morandini, peine à sortir de la zone rouge, c'est parce que la croissance de son chiffre d'affaires reste insuffisante pour couvrir les investissements de Vivendi. Alors que ses charges de production ont augmenté de 17% depuis 2020, passant de 24,4 à 28,5 millions d'euros en 2022, la chaîne ne voit ses audiences progresser que de manière "relativement limitée" par rapport à ses concurrents directs. En 2022, la chaîne n'a gagné que 0,1% de part d'audience pour se hisser à 2,1%, tandis que BFM TV et LCI en ont respectivement grapillé 0,4% et 0,6%, pour atteindre 3,3% et 1,7%. A croire que, pour Vincent Bolloré, l'intérêt de contrôler cette chaîne ne réside pas dans sa profitabilité, mais uniquement dans son influence sur le débat public.

Interrogations sur les perspectives de C8

Les comptes de C8, chaîne de divertissement dirigée par Franck Appietto, ne sont pas plus reluisants. L'audit comptable montre que ce canal de TNT généraliste a réalisé une perte d'exploitation de 23 millions d'euros en 2022. A la différence de Rupert Murdoch, de Francis Bouygues au cours des grandes années TF1, ou de Nicolas de Tavernost, Vincent Bolloré n'a pas encore trouvé la martingale. Selon nos calculs, C8 a même perdu plus de 650 millions d'euros depuis 2005. Un record depuis le lancement de la TNT il y a 18 ans.

En outre, même si les pertes de la chaîne se réduisent au fil des années, ses perspectives de rebond ne se rapprochent pas pour autant. C8 travaille en effet sur la réduction du coût de ses programmes afin de se rapprocher de l'équilibre. Les coupes ont été sévères : cette enveloppe est passée de 137 millions en 2017 à 82 millions d'euros en 2022. Mais le chiffre d'affaires a baissé en conséquence. Or, cette stratégie malthusienne commence à atteindre ses limites, de l'aveu même de sa direction, rapporté par les experts-comptables du cabinet Sextant.

Le cas Hanouna

Sans aborder directement la question, l'audit permet de mieux comprendre la situation singulière de Cyril Hanouna au sein de C8, qui semble parfois codiriger la chaîne et inspirer les choix des Bolloré. Sur l'ensemble des investissements de C8 dans les programmes, selon les informations du Parisien, 35 millions d'euros reviennent chaque année à la société de productions H2O, que dirige l'animateur et producteur de "Touche pas à mon poste" (TPMP), et dont l'actionnaire est Stéphane Courbit. Jamais une chaîne n'a été aussi dépendante d'un seul homme. Même si les annonceurs continuent à soutenir ces programmes clivants, C8 se trouve dans une situation de dépendance extrême à son prestataire.

Selon nos calculs, l'animateur a également coûté 6,89 millions d'euros à la chaîne depuis 2017, en raison des sanctions infligées par l'Arcom (ex-CSA) pour huit de ses innombrables dérapages dans TPMP. En outre, la ministre de la culture Rima Abdul-Malak a clairement fait savoir qu'une chaîne qui ne respectait pas ses obligations pourrait être privée de sa fréquence, dans la perspective de la remise en jeu de cette dernière et de celle de CNews devant l'Arcom en 2025. Autrement, dit, la "Hanouna-dépendance" de C8 représente un risque industriel sérieux pour le groupe Vivendi.

Canal + pénalisé par le coût des programmes

A la différence des chaînes gratuites contrôlées par Vivendi, qui cumulent les pertes financières depuis leur création, Canal +, qui est payante, avait, jusqu'alors, toujours montré l'exemple des profits. Ce n'est désormais plus le cas. La chaîne dirigée par Maxime Saada a enregistré en 2022 ses premières pertes en métropole depuis sa prise de contrôle en 2015 par Vincent Bolloré, malgré la légère croissance (+2%) de son chiffre d'affaires.

L'an passé, Canal + a généré une perte de 26 millions d'euros en Ebita, contre des résultats positifs de 3 millions d'euros en 2021 et de 101 millions d'euros en 2020. Ces données, que le groupe n'a jamais divulguées, s'expliquent principalement par la hausse des coûts des contenus diffusés par la chaîne. Pour l'ensemble des droits de diffusions de ses événements sportifs (Ligue 1, Champions League, Top 14, etc.), de ses films et de ses séries, la chaîne a dépensé 2,367 milliards d'euros en 2022, contre 2,191 milliards d'euros en 2021 et 1,997 milliard en 2020. En regard, la nette progression du nombre d'abonnés en 2022 (+ 230 000 sur un total de 5,3 millions) paraît insuffisante pour équilibrer les comptes, si bien que la direction envisage de se passer, lors de la prochaine saison, de matchs de Ligue 1.

Néanmoins, il est à prévoir que le résultat de la chaîne à péage reste négatif en 2023. Selon son budget prévisionnel auquel le cabinet Sextant a eu accès, Canal + devrait accuser une perte de 64 millions cette année. En ajoutant cette somme aux 13 millions d'euros de déficit des télévisions gratuites, la facture n'est pas tout à fait négligeable.

Cette situation dégradée était jusqu'ici passée sous les radars. Et pour cause : Maxime Saada s'efforce de toujours communiquer sur les résultats du groupe en y intégrant ses activités internationales, bien plus rentables. En Pologne, dans le reste de l'Europe centrale, ou encore au Vietnam, la galaxie Bolloré enregistre des résultats positifs. En Afrique, l'activité connaît une croissance à deux chiffres.

En 2015, en lançant son assaut sur l'opérateur de télécommunications italien Telecom Italia (TIM), Vincent Bolloré voulait créer, selon ses propres termes, "un Netflix européen" qui serait né du mariage de cette société avec Canal +. Las, huit ans plus tard, le milliardaire breton devrait bientôt quitter l'Italie avec un amer sentiment d'échec.

Dépassé par l'arrivée de son concurrent Xavier Niel, qui a implanté Iliad dans la péninsule en 2018, le géant italien des télécoms court à sa perte : il cumulait, en 2022, 27 milliards d'euros de dettes pour un chiffre d'affaires de 15,8 milliards, et des pertes nettes de 2,92 milliards d'euros.

Sous la pression de la classe politique locale, qui n'a jamais vu d'un bon œil les ambitions transalpines de Vincent Bolloré, la Cassa Depositi e Prestiti (l'équivalent talien de la Caisse des dépôts et consignations) et le fonds activiste américain Elliott Management se sont alliés pour contrôler Telecom Italia afin d'évincer les équipes de Vivendi. Ce plan a d'abord conduit à la mise à l'écart d'Arnaud de Puyfontaine de la présidence du conseil d'administration de l'opérateur le 15 janvier 2023. Il devrait bientôt se traduire par la cession du réseau de téléphonie fixe de TIM. Contre l'avis de Vincent Bolloré, qui en reste le premier actionnaire avec 24% du capital.

Ce projet, jugé nécessaire par le gouvernement italien pour la survie de leur géant des télécoms, intervient alors que les actions du milliardaire breton n'ont jamais été si peu valorisées. Selon nos informations, sa participation estimée à 3,931 milliards d'euros au moment de son acquisition, n'en valait plus que 982 millions d'euros fin mai 2023. Soit une moins-value de l'ordre de 3 milliards d'euros.