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Good morning. We start the working week with an exclusive story about the financial state of the biggest western banks that still remain in Russia.
A Financial Times analysis shows that the seven top European banks by assets in the country paid the Kremlin more than €800mn of taxes last year, a fourfold increase on prewar levels, despite promises to minimise their Russian exposure after the full-scale invasion of Ukraine.
These banks — Raiffeisen Bank International, UniCredit, ING, Commerzbank, Deutsche Bank, Intesa Sanpaolo and OTP — reported a combined profit of more than €3bn in 2023. Those profits were three times more than in 2021 and were partly generated by funds that the banks cannot withdraw from the country, leading to an increase in tax payments.
The taxes paid by European banks, equivalent to about 0.4 per cent of all Russia’s expected non-energy budget revenues for 2024, are an example of how foreign companies remaining in the country help the Kremlin maintain financial stability despite western sanctions. Here’s more on how western lenders are benefiting as well.
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Baltic security: Foreign ministers in the region have warned that GPS jamming blamed on Russia risks causing an air disaster after interference with navigation signals forced two Finnish flights to turn around mid-journey.
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Russian politics: Police have launched a crackdown on associates of deceased Kremlin critic Alexei Navalny, arresting two more journalists accused of working in the past with the opposition leader’s media team.
Here’s what else I’m keeping tabs on today:
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Inflation: Germany releases its preliminary consumer price index for April. Read Martin Wolf’s latest column on the lessons policymakers should be taking away from the recent surge in global price pressures.
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Middle East: US secretary of state Antony Blinken meets Gulf state ministers on the sidelines of the World Economic Forum’s special meeting in Riyadh. They are expected to discuss efforts to achieve a ceasefire after Israel said it would be willing to delay a long-planned assault on Rafah in exchange for hostages.
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Pedro Sánchez: Spain’s prime minister is set to announce whether he will resign after his wife was accused of corruption.
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Companies: Beazley has a trading update, while Philips and Vivendi have results, as does Paramount. The Hollywood group is set to fire chief executive Bob Bakish after he clashed with Shari Redstone, who controls the company, over merger talks with Skydance Media.
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Passover: Markets are closed in Israel for the last day of the Jewish holiday.
Five more top stories
1. Eleven EU countries are set to be reprimanded by the European Commission over excessive government spending once new fiscal rules enter into force this year. The countries, which include France, Italy and Belgium, last year ran budget deficits larger than the 3 per cent of GDP threshold allowed under EU rules. Here’s how some are applying for exemptions.
2. The EU would need to impose tariffs of about 50 per cent to stem the flow of cheap Chinese electric vehicles into the bloc, according to new analysis from the Rhodium Group. Brussels’s blockbuster anti-subsidy investigation into Chinese electric cars is expected to conclude within weeks, but researchers say any punitive action will probably prove ineffective. Here’s why Chinese carmakers are unlikely to be deterred.
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More on EVs: Carmakers from Germany, Japan and South Korea have opted to strike tie-ups with China’s tech groups in a bid to catch up with Chinese EV makers.
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Chinese spies: Recent arrests in Germany and the UK point to the growing scale and ambition of Chinese espionage operations.
3. Exclusive: General Atlantic and CVC Capital Partners have paused sales of stakes in US fast-food chain operators over Gaza boycotts in Indonesia and Malaysia, where the brands are being shunned by customers over Washington’s support for Israel. The chains have been targeted by consumers in the Muslim-majority countries despite stressing their neutrality and local ownership under a franchise model. Here are the brands affected.
4. Michael Gove has compared the UK government’s levelling-up policy to a half-built cathedral and urged critics to wait six more years before casting judgment on the process. The levelling-up secretary described the Conservatives’ plan to narrow regional inequalities as a “work in progress” that had been severely disrupted by the Covid-19 pandemic and the war in Ukraine. Read his full interview with the FT.
5. The remuneration gap between UK and US bosses has widened after median pay for S&P 500 chief executives jumped 9 per cent to $15.7mn in the year to April 15. The rises came despite the underperformance of some US companies last year, according to a recent analysis. FTSE boards are under pressure, with British executives complaining they are underpaid and warning of a talent exodus. Here’s how the transatlantic peers compare.
The Big Read
The energy crisis that Europeans feared two winters ago has not come to pass, thanks to a combination of unprecedented energy policy interventions, cuts in demand and good luck. But that does not mean Europe is in safe waters. The short-term response to the crisis may have created bigger problems for the bloc in the future, including a heavy reliance on historically volatile liquefied natural gas markets with implications for industrial competitiveness and the green transition.
We’re also reading . . .
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Glass ceiling: An FT analysis has found little improvement in the financial services sector when it comes to gender parity in career progression.
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Debanking: Complaints about being deprived of a bank account are rising in the UK, but the issue can be detoxified with sensible and innovative ways to manage risk, writes Patrick Jenkins.
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‘Whitewashing’: From bribes to sex scandals, recent high-profile cases have raised questions about the quality and independence of lawyer investigations.
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Sudan conflict: As a brutal civil war heads into its second year, “death has become normal” for the residents of Darfur’s besieged capital, El-Fasher.
Chart of the day
Britons are choosing to spend less money in pubs and bars than at any time since the Covid lockdown ended. A survey by Deloitte, which asked nearly 3,200 UK consumers if they had spent more, less or the same on leisure in the past three months, showed sentiment in “eating out” and “drinking in pubs and bars” had declined by about 6 percentage points from the previous quarter. Here’s why.
Take a break from the news
Four times a week, Clair Heaviside leaves her Peak District home at 5.30am and runs the equivalent of a half marathon to her office in Manchester. Active commuters such as Heaviside are running, cycling and even skiing to the office for the mental and physical health benefits.
Additional contributions from Benjamin Wilhelm
