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Plus500 plans US and European expansion after strong earnings

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Financial markets bookmaker Plus500 plans to hike its marketing spend after shrugging off a drop in customers to deliver earnings well ahead of market expectations.

The company said in a trading update that 2021 revenue and ebitda will beat consensus forecasts after its average revenue per customer hit $1,271, up 16 per cent year on year. Revenue in the third quarter remained resilient and well ahead of pre-pandemic levels at $211.4m, though was slightly down on the year-before figure of $216.4m, it reported.

The active customer count dropped 16 per cent year on year to 166,310 even after 26,169 new sign-ups. The average customer acquisition cost jumped 33 per cent to $1,416 each.

Having ended the quarter with net cash of $766.9m, Plus500 said it would make substantial investments to grow its share of US retail futures and options trading as well as to launch its investment platform in key European countries over the coming quarters.

Liberum, Plus500’s house broker, said the investment requirement would cut 2022 ebitda expectations by about 12 per cent in exchange for longer term growth.

Briefly

HSBC revealed a share buyback of up to $2bn after reporting a 74 per cent increase in quarterly earnings. The bank said it would release $700m of cash that had been set aside for bad loans that had not materialised, adding to the $700m it had already released this year. Pre-tax profits for the third quarter were $5.4bn, compared to $3.1bn a year earlier, beating the $3.8bn average estimate predicted by analysts. “While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us,” said Noel Quinn, chief executive.

A merger approach by Co-operative Bank to rival lender TSB has been knocked back, thwarting plans that would have created one of the UK’s largest high street banking chains. Banco Sabadell, the banking group that owns TSB, confirmed it had received an approach from the Co-op. But the Spanish group’s board responded that “this is not a transaction that we wish to explore at this moment as we have previously expressed publicly”. Co-op also confirmed that it had sent a letter to Sabadell and added that no discussions in relation to a potential transaction are currently taking place.

ITV and Lord Michael Grade are among potential bidders circling Channel 4 as the government prepares to privatise the state-owned network, reports The Sunday Times.

Tesco’s online store was knocked offline by an attempted hack. The company apologised for an outage that began on Saturday morning and continued into a second day. The supermarket said late on Sunday that both its website and app were back up.

Russian gold miner Petropavlovsk said total production was down 2 per cent year on year in the third quarter due to a drop in the volume of third-party concentrates processed. Own-mine gold production rose 17 per cent.

Rishi Sunak will use this week’s Budget to shore up the UK’s fragile public finances, while focusing remaining resources on the NHS, the “levelling up” agenda, skills and helping hard-pressed families. The chancellor is expected to be given a short-term Budget windfall by the Office for Budget Responsibility, which is set to upgrade its forecasts to show stronger growth in 2021 and 2022.

Beyond the Square Mile

The Italian government and UniCredit have called off negotiations over the acquisition of troubled lender Monte dei Paschi di Siena, after attempts to reach a deal over a costly recapitalisation fell through.

The secretary-general of the Basel Committee on Banking Supervision has warned the EU not to delay the next phase of global banking rules, as draft plans show that Brussels is suggesting giving European banks a two-year extension to an internationally agreed deadline.

Poland’s prime minister has accused the EU of making demands of Warsaw with a “gun to our head”, urging Brussels to withdraw threats of legal and financial sanctions if it wanted to resolve the country’s rule of law crisis. Mateusz Morawiecki promised to dismantle a disciplinary chamber for judges that the European Court of Justice found to be illegal by the end of the year.

Essential comment before you go

Has China’s ever more strident rhetoric and the Communist party’s apparent ease with untrailed regulatory change put Xi Jinping on a collision course with luxury goods and those who most crave them? Leo Lewis writes that the questions swirling around the luxury sector are a microcosm of wider investor confusion over the true intention behind the language of “common prosperity”.

This year’s boom in private equity transactions “will leave many investors bitterly disappointed and could ultimately cause wider, long-term economic problems”, writes Robin Wigglesworth. The outperformance of private capital strategies over the past two decades have derived from the leverage embedded in them, but returns are heavily skewed towards the top performers. “That makes the average return look artificially attractive to a lot of desperate pension plans, which might instead end up paying enormous fees for something that in practice is little more than fool’s gold.”

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