UK banks can withstand hard Brexit
S&P Global Ratings has said that the UK’s major banks are robust enough to withstand a no-deal Brexit but the sector’s outlook for the year will hinge on Britain’s departure from the EU. Analysts at S&P said that while balance sheets were robust, a disorderly Brexit would pose some problems for the sector. S&P Global analyst Osman Sattar said: “A no-deal Brexit could result in severe macroeconomic weakness, which would lead to rising personal and corporate UK insolvencies and weaker collateral values. In time, this would likely play through to banks' asset quality and activity, undermining earnings and, possibly, capitalisation to a modest degree.” Meanwhile, City AM reveals that banks in the City have drafted in extra staff to work through the night next Tuesday, following Theresa May’s crunch vote on Brexit, in order to respond to market volatility and investor calls. Analysts said traders had already priced in a defeat for Theresa May in parliament, after the PM lost two key votes in the space of 24 hours earlier this week.
Morgan: Government does not protect small businesses
Nicky Morgan, the chair of the Treasury Select Committee, has accused the Government of “burying its head in the sand” over protecting SMEs from being mistreated by banks and other lenders. Ms Morgan said there was cross-party support to regulate commercial lending for SMEs, but the Government believes there is “not a clear case” for it, as there would be a number of direct and indirect costs associated with such a move. In a report on SME finance, the Treasury Committee said that commercial lending to small firms was “mostly unregulated” under the current regime, and this was “failing businesses”.
FCA intervenes to release mortgage “prisoners”
The FCA has said that tens of thousands of mortgage “prisoners” in Britain could be freed after the regulator said it would ease affordability checks required by home loan providers when remortgaging to a cheaper deal. Andrew Bailey, the CEO of the FCA, said the watchdog will publish a consultation in the spring. He said: “To help these customers, we will consult on changes to our responsible lending rules, with the aim to deliver a more proportionate affordability assessment.” Jackie Bennett, director of mortgages at UK Finance, said the trade body would continue to work with its members and the FCA to help customers who want a like-for-like mortgage to switch lenders more easily.
One in three savings accounts pay less than base rate
New research from the FCA has revealed that 29% of savings accounts pay less than the Bank of England interest rate of 0.75%. The problem is worse than last year, when 26% of accounts lagged the base rate. Anna Bowes, of consumer group Savings Champion, said: “These figures show that many banks and building societies haven't been treating their customers fairly. Savers should act on the fact that some providers treat them really poorly, and move their money away.”
HSBC handling Saudi money
The Mail reports that major banks including HSBC are handling a £6bn bond sale for Saudi Arabia months after distancing themselves from the regime over the murder of Washington Post columnist Jamal Khashoggi.
RBC work culture faces City probe
A probe has been launched by the FCA into the working culture at the Royal Bank of Canada in London after dozens of former employees complained over their treatment.
EU strengthens financial regulation to stop ‘dodgy business’ from UK after Brexit
The European Parliament’s Economic and Monetary Affairs Committee has approved a draft law giving the EU’s securities, banking and insurance watchdogs more powers to build a European capital market. The move would give more power to regulators to stop the sale of harmful financial products and scrutinise the conduct of people who work in finance more closely. Plans to give the European Securities and Markets Authority more power over delegation were watered down after lobbying from the fund industry, however, but it will still be able to make recommendations on the oversight of firms. The regulations are designed to prevent British businesses from gaining a competitive advantage over their continental rivals.
Deutsche Bank sued over share trade tax
Hamburg-based bank M.M. Warburg has filed a lawsuit against Deutsche Bank seeking €46m that the bank was ordered to pay in capital gains tax. A Deutsche Bank spokesman said the bank had not seen the court filing but added that the allegations were "without merit" and that the bank “strongly rejected” the accusations.
ECB urged to keep options open as it winds up stimulus
ECB policymaker Francois Villeroy de Galhau has said that the ECB needs to keep its policy options open in the face of growing economic risks. Mr Villeroy said that while the path towards monetary policy normalisation remained desirable, it must also be “gradual and pragmatic”. The head of France’s central bank said: “We need to keep our options open... we are predictable, but not precommitted.”
Banks raise bets on prime broking for struggling hedge funds
According to the FT, big banks are continuing to throw extra resources into prime broking businesses in a bid to make up for the slowdowns in areas hit by financial turbulence.
Carige could be nationalised
Italian bank Carige could be nationalised to save it from collapse after a failed £360m private fundraising bid.
Pay boost for AIB workers
The majority of workers at Allied Irish Banks are to get a 3% rise this year following negotiations between the bank and unions.
Jaguar Land Rover to cut up to 5,000 jobs
Jaguar Land Rover is cutting up to 5,000 jobs from its 40,000 strong UK workforce. Management, marketing, and administrative roles are expected to be hardest hit, but some production staff may also be affected. The layoffs are part of a £2.5bn cost-cutting plan amid what is being called a "perfect storm" - a downturn in Chinese sales, a slump in diesel sales, and concerns about UK competitiveness post-Brexit. Meanwhile, Ford has announced widespread cuts across its European operations, although large-scale job losses are not expected imminently in the UK. However, Ford's European president, Steven Armstrong, refused to guarantee there would be no redundancies at the carmaker's Dagenham and Bridgend engine plants.
Volkswagen reveals sales record amid UK jobs cuts
New EU emissions standards didn’t stop Volkswagen revving up a new sales record for 2018, with 6.24m cars sold last year.
Virgin and Stobart set for Flybe bid
Virgin Atlantic is heading a consortium which includes Southend Airport owner Stobart and the US private-equity firm Cyrus Capital Partners to launch a takeover bid for Flybe, the trouble regional airline. Flybe blamed rising fuel costs and currency volatility for the decision to put itself up for sale at the end of last year.
Outflows from UK funds highest since Brexit vote
Outflows from UK funds hit the highest level since the EU referendum in November, according to the Investment Association, with outflows totalling £2.1bn. Fixed income funds faced retail outflows of £1.2bn, equity funds saw outflows of £467m followed by funds classified as other, which experienced outflows of £637m. Investment Association chief executive Chris Cummings said: “A combination of international trade tensions, ongoing Brexit uncertainty and the market volatility seen from October onwards, have clearly dented confidence."
Prudential renews link with Singapore lender
Prudential is to pay £662m to renew a tie-up with Singaporean lender United Overseas Bank until 2034. The deal will give Prudential access to more than four million United customers based in Singapore, Malaysia, Thailand, Indonesia and a new territory in Vietnam. CEO Mike Wells said: “We believe there is a significant opportunity for future growth in South-East Asia and the renewal reflects our commitment to using our capabilities to benefit our customers and shareholders.”
Axa moving staff to Dublin
Axa is moving staff to Ireland ahead of the UK’s impending exit from the EU. CEO Thomas Buberl said that Axa's XL unit had already made plans to move staff to Ireland from the UK before its takeover by Axa last year in a $15bn (£11.8bn) deal. The majority of the roles would move from London, but some jobs would move from France also. Buberl did not confirm how many roles would be affected by the change.
Probe builds pressure on insurers to end ‘loyalty penalty’
The FT contends that a review by the Financial Conduct Authority of the insurance industry’s pricing practices could force insurers to tear up their business models.
Wall Street battles for supremacy in volatility market
Asset managers are scrambling to find a replacement for Barclays $700m exchange-traded note, known by the ticker VXX, which is closing down.
LEISURE AND HOSPITALITY
M&B holiday sales rise 9.8%
Pub operator Mitchells & Butlers has reported a 9.8% rise in comparable sales for the three-week holiday season, including sales of over £12m on Christmas Day, but warned about the ongoing uncertainty around Britain's looming exit from the European Union.
MEDIA AND ENTERTAINMENT
Digital advertising firm floats
Shares in Ocean Outdoor, the firm behind major advertising spaces, have started trading on the London Stock Exchange. The company, which manages major outdoor advertising venues including Piccadilly Lights, Westfield and the BFI Imax, was bought for £200m in March last year by acquisition vehicle Ocelot Partners.
Liberty Media discusses deal to take holding in agent to the stars
Hollywood entertainment agency CAA could soon have a new major shareholder - Liberty Media. Such a move would give Liberty hefty leverage for its other businesses, including Formula One.
Growth in professional recruitment slows
Recruitment consultancy Robert Walters has warned that unless Brexit is dealt with swiftly the slump in hiring activity for professionals such as lawyers, accountants and IT workers will get worse. Uncertainty around the UK’s departure from the EU was affecting workers trying to move jobs and businesses trying to release capital to bring in new staff, the company said.
Consumer spending slows, Barclaycard says
Essential consumer spending growth slowed to its lowest rate in more than two years in December, according to data from Barclaycard, to 1.8% year-on-year - a contraction in real terms. Clothing spending fell by 3% and expenditure in department stores fell by 6.3% during the Christmas period, while non-essential expenditure rose by 2%, boosted by leisure spending, with pubs toasting an increase of 12.9% and restaurants enjoying a rise of 9.1%.
Debenhams keeps CEO in place despite shareholder rebellion
Two major shareholders in Debenhams, Mike Ashley's Sports Direct, and Landmark Group, have voted against the re-election of CEO Sergio Bucher to the board. The retailer said Bucher will however remain in his role. Chairman Sir Ian Cheshire was also voted off the board and will now step down. The board said if Sports Direct and Landmark’s votes were stripped out, support for Bucher was at 99.6%. It had therefore agreed that he should continue as CEO reporting to the board.
CBI issues new Brexit warning
The CBI is set to warn against a no-deal Brexit claiming it would cost the country 8% in GDP. The lobby group suggests Theresa May’s deal is the best solution. Its director general, Carolyn Fairbairn, will warn business leaders in Bristol that parliament must end its brinkmanship and avoid a disorderly Brexit or risk profound economic consequences. In November, the CBI’s head of EU negotiations, Nicole Sykes, described Mrs May’s agreement as “not a good deal”, a view echoed by the Institute of Directors, the Federation of Small Businesses and UK Finance; but the groups appear united in accepting that a no-deal outcome would be worse.