Business Growth Fund Plans A £15 Billion Support to Bailout Struggling UK Firms

The outbreak of the pandemic has been devastating for the UK both in terms of human cost as well as a business catastrophe. The British government had earlier announced several stimulus packages along with job retention scheme for the employees. All these packages were intended to protect the economic fallout in the UK.

However, these packages come in the form of loans, which need to be repaid. The businesses are already struggling with the liquidity pressures and are now debt-ridden. If the businesses default, this might bring down the financial system of the country and eventually trigger another crisis.

BGF (Business Growth Fund) came up with an idea to buy this debt from smaller businesses through equity. BGF is a well-capitalised organisation, which aims to help businesses across Britain to get bigger and succeed.

BGF has planned for hefty support worth £15 billion through a public-private fund to bailout a large number of firms that are facing problems in repaying Government loans, in these difficult corona times. Stephen Welton, the company’s Chief Executive, is in talks with investors, Government and his shareholders to chalk out finer details of the same.

BGF aims to benefit its shareholders by backing smaller viable businesses to generate good returns. Market experts believe that there is a shortage of capital and equity for smaller companies. In addition, financial institutions are not very comfortable in lending money to smaller businesses. BGF is the answer to the problems faced by smaller businesses. BGF has always encouraged entrepreneurs, small businesses to grow their businesses. BGF is backed by several financial institutions.

To take a closer look, let us discuss some companies backing the BGF.

• HSBC Holdings Plc (LON:HSBA)

HSBC Holdings Plc is a London based banking and financial services company and is a part of the Hong Kong and Shanghai Banking Corporation (HSBC) Group. Recently, the group released the first-quarter results of 2020, with the profits being substantially impacted by Covid-19 and a slump in oil prices. During the first quarter of 2020, the reported profit before tax was down by 48 per cent to USD 3.2 billion, and adjusted profit before tax decreased by 51 per cent to USD 3 billion as compared with the corresponding period of the last year. Customer deposits increased by USD 47 billion in the first quarter of 2020.

(Source: Thomson Reuters)

On a Month till date (MTD) basis, the stock delivered a price return of 4.35 per cent. On 2nd June 2020, while writing at 10:04 AM, before the market close, HSBC Holdings Plc’s shares were marginally up by 1.39 per cent against its previous day closing price; last traded at GBX 386.15. Stock's 52 weeks High and Low is GBX 672.50 /GBX 370.10. The beta of the company stood at 0.81, which indicates lesser volatility when compared with the benchmark index. HSBC Holdings Plc’s market capitalisation stood at £77,472.44 million.

• Barclays Plc (LON:BARC)

Barclays Plc is a global financial services provider offering personal and business banking, wholesale and commercial banking, and private and investment banking solutions to individuals, SMEs, corporates, and high-net-worth clients.

The Consumer, Cards & Payments (CC&P) and Barclays UK (BUK) are expected to show headwinds for remaining FY2020, due to macroeconomic downturn caused by lower interest rate and impact of the COVID-19 pandemic. On 29th April 2020, Barclays released an update for the trading performance for the first quarter of the financial year 2020 ending 31st March 2020. The group has shown strong operating performance, and its return on tangible equity (RoTE) stood at 5.1 per cent for the period, despite impacts of Covid-19 outbreak. The total income increased by 20 per cent to £6,283 million in the first quarter of 2020.

(Source: Thomson Reuters)

On Quarter till date (QTD) basis, the stock delivered a price return of 30.80 per cent. On 2nd June 2020, while writing at 10:18 AM, before the market close, Barclays Plc’s shares were marginally up by 1.77 per cent against its previous day closing price; last traded at GBX 122.90. Stock's 52 weeks High and Low is GBX 192.46 /GBX 80.24. The beta of the company stood at 1.39, indicating greater volatility when compared with the benchmark index. Barclays Plc’s market capitalisation stood at £20,940.38 million.

• Lloyds Banking Group Plc (LON:LLOY)

Lloyds Banking Group Plc is a London based lender and offers a wide variety of banking and non-banking services predominantly in the UK. The group offer services related to current and savings accounts, short and long-term loans, credit and debit cards, unsecured loans, investment products, mortgages, motor finance, protection, bonds, and syndicated loans. The company's operations are differentiated in four operating segments, namely the Commercial Banking segment, Insurance segment, Retail segment, and Consumer Finance segment.

The Company has shown strong operational performance with around 90 per cent of branches open during the period, and ATM’s being running at 95 per cent efficiency. The bank continues to serve its customers in lockdown using digital services. The trading surplus remained strong with £1,988 million and was up by 7 per cent quarter on quarter. The company has a robust balance sheet with strong capital and liquidity position. LLOY continues to be strongly capitalised with 16.9 per cent Tier 1 ratio and 14.2 per cent CET1 during the first quarter of 2020.

(Source: Thomson Reuters)

On Month till date (MTD) basis, the stock delivered a price return of 7.93 per cent. On 2nd June 2020, while writing at 10:42 AM, before the market close, Lloyds Banking Group Plc’s shares were marginally up by 4.28 per cent against its previous day closing price; last traded at GBX 32.27. Stock's 52 weeks High and Low is GBX 67.25 /GBX 27.73. The beta of the company stood at 1.22, indicating elevated volatility when compared with the benchmark index. Lloyds Banking Group Plc’s market capitalisation stood at £21,834.10 million.

• Royal Bank of Scotland Group Plc (LON:RBS)

Royal Bank of Scotland Group Plc provides financial products and services to the customers in the UK and abroad markets. RBS holds brands such as Coutts, NatWest, Holt's Child & Co., Lombard, etc. under its name and few are even older than the Royal Bank itself. The company's operations are differentiated in four operating segments: Personal & Business Banking (PBB), Commercial & Private Banking (CPB), RBS International (RBSI), and NatWest Markets. The Group reported a strong performance in the first quarter of 2020 with Operating profit before tax at £519 million, CET1 ratio at 16.6 per cent.

(Source: Thomson Reuters)

On Month till date (MTD) basis, the stock delivered a price return of 9.15 per cent. On 2nd June 2020, while writing at 10:53 AM, before the market close, Royal Bank of Scotland Group Plc’s shares were marginally up by 4.42 per cent against its previous day closing price; last traded at GBX 120.70. Stock's 52 weeks High and Low is GBX 261.00 /GBX 101.75. The beta of the company stood at 1.53, indicating comparatively higher volatility when compared with the benchmark index. Royal Bank of Scotland Group Plc’s market capitalisation stood at £ 13,950.34 million.