News in Brief: LinkedIn, BoE, FTSE 350, CFO, fintech versus banking

News in Brief

LinkedIn shares fall 26%

LinkedIn shares dropped 26% after the company projected lower-than-expected profits for the first quarter of 2016.

The social media site forecasted earnings of £0.38 ($0.55) per share, far below analysts expectations of £0.51 ($0.74) per share.

LinkedIn also reported a loss of £5.4m ($8m) for the year, compared with a £2.07m ($3m) profit in 2014, reported the BBC.

LinkedIn has been investing heavily in expansion outside the US and said it plans to continue those efforts.

Chief executive Jeff Weiner said: "We enter 2016 with increased focus on core initiatives that will help drive growth and scale across our portfolio."

The company also said it was phasing-out one of its newer advertising services that had not worked out as planned.

Bank of England cuts growth forecast

The Bank of England (BoE) has cut its forecast for economic growth.

In its latest 'Inflation Report', it cut its forecast for growth this year to 2.2%. In November it had predicted growth of 2.5%, reported the BBC.

The central bank also released the minutes of the latest meeting of its interest rate-setting committee.

It voted 9-0 to keep interest rates at 0.5%. Ian McCafferty, who had been voting for an increase since August 2015, unexpectedly voted for no change.

The report downgraded the BoE's expectations about what is going to happen to wages.

The bank now expects average weekly earnings to increase by 3% this year, down from the 3.75% it predicted three months ago.

FTSE 350 pension deficits swing by £17bn

The accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies increased slightly from £64bn at the end of December 2015 to £66bn on 29 January 2016, according to figures.

Mercer’s 'Pensions Risk Survey' data showed that extreme volatility in the equity markets saw deficits hitting £83bn during January 2016, with a £17bn difference between the low and high point in the month.

On 29 January 2016, asset values were £644bn, representing an increase of £4bn compared to the corresponding figure of £640bn as on 31 December 2015, and liability values were £710bn, representing an increase of £6bn compared to the corresponding figure of £704bn at the same date.

Ali Tayyebi, senior partner in Mercer’s retirement business, said: “It may come as a surprise that despite the fall in global stock markets during January deficits have only increased slightly over the month.”

Tayyebi added: “In part this is a recovery from a particularly difficult first half of the month for equity values, but it also reflects that on average around 50% of schemes’ assets are now invested in corporate bonds and Gilts, which increased in value over the month.”

Mercer’s data relates to about 50% of all UK pension scheme liabilities and analyses pension deficits calculated using the approach companies have to adopt for their corporate accounts.

Bank appoints new CFO

United Trust Bank has appointed a new chief financial officer (CFO), Jonathan Ayres, who was previously CFO of an independent private bank, C. Hoare & Co, and prior to that he was CFO of specialist fund manager Ecofin.

Graham Davin, CEO of United Trust Bank, said: “Jonathan is a very experienced CFO with a great deal of relevant experience in our sector."

Davin added: “I am delighted to welcome him to United Trust Bank where his appointment further strengthens our executive team as we continue to deliver strong growth.”

Earlier in his career, Ayres, who qualified as a chartered accountant with PwC, was head of finance at Cazenove Capital Management and an equity analyst at Goldman Sachs.

Ayres said: “United Trust Bank is an outstanding business with a dynamic management team and a very bright future. I am delighted to be joining the bank at an important stage in its evolution and look forward to working with Graham and the team as we continue to grow the business.”

Fintech innovations create problems for traditional banks

Traditional banks are feeling the pressure from the disruptive impact of fintech innovators, which have a revolutionary consumer-centric focus.

As banks embark on their reporting season, the traditional institutions have set out how they have fared in a tough global environment.

Credit Suisse's year-on-year results are expected to show that the restructuring undertaken by the Swiss bank has not yet fed into their share price.

Deutsche Bank showed their first full year loss since the financial crisis of 2008, attributed by their CEO to ongoing legacy issues.

Banks with high exposure to customers, such as those in the retail sector, are experiencing profound disruption from fintech competitors.

A report by PwC highlights that 55% of bank executives believe that non-traditional players pose a threat to traditional banks.

The report identifies the development of a customer-centric business model as the highest priority for banks if they are to remain competitive over the next five years.