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Daily News Roundup: Friday, 11th March 2022

Posted: 11th March 2022


Mortgage costs rise £800 in just six months

Two increases in the Bank of England base rate have spurred a rise in the cost of home loans. The average two-year fixed rate being sold by the country's largest lenders has climbed from 0.89% to 1.89% since October last year, when banks began increasing prices. This is despite the Bank Rate only going from 0.1% to 0.5% since December. This will cost Britons £840 per year more if repaying a £150,000 mortgage over a 25-year term. David Hollingworth, of L&C Mortgages, said: "Rates have been shifting rapidly as lenders adapt to higher borrowing costs from the central bank. The sheer pace of change is taking borrowers by surprise." Borrowers who have lapsed onto their lender's standard variable rate are paying on average 4.14% in interest, equal to an additional £2,107 each year on a £150,000 mortgage.


Blackstone takes more space in Mayfair

Private equity giant Blackstone is in talks to lease more office space in Mayfair’s Berkeley Square after increasing its London-based workforce during the pandemic. It is noted that the firm, which has been luring talent from investment banks, paid a record $1.6bn in performance-related pay to its dealmakers and executives in 2021.


Goldman Sachs and JPMorgan withdraw from Russia

Goldman Sachs became the first Wall Street bank to announce the imminent closure of its Russia business on Thursday, followed swiftly by JPMorgan Chase. Both said they were winding down their business in Russia in compliance with regulatory and licensing requirements. Western Union has also said it will be suspending its operations in Russia in light of the conflict in Ukraine. New York-listed Marsh McLennan, the world's biggest insurance broker, also announced it would exit Russia, stating that ownership of its Russian businesses will be transferred to local management that will be independently operated.

Deutsche Bank has €2.9bn in Russian credit risk

Deutsche Bank has disclosed €2.9bn in credit risk to Russia and said that it had reduced its exposure further over the past two weeks. Meanwhile, the German lender said that it aimed to lift its post-tax return on equity above 10% over the coming three years. It is aiming to increase revenue by almost a fifth, to €30bn, while further cutting its costs. Elsewhere, Credit Suisse outlined its Russian risk on Thursday, detailing a gross credit exposure of SFr1.6bn ($1.7bn) at the end of 2021. The lender said this included derivatives and financing exposures in its investment bank, trade finance exposures in its domestic Swiss bank and loans in its wealth business. Meanwhile, executive pay at the bank was slashed by 64% after a year which saw Credit Suisse hammered by the collapse of hedge fund Archegos and finance firm Greensill.

ECB to end QE by third quarter

The president of the European Central Bank, Christine Lagarde, has said the eurozone’s €3.3trn quantitative easing programme would wind down by the third quarter of the year if inflation falls back to the ECB’s 2% target next year. Lagarde went on to say that interest rates would follow “shortly after” the end of bond buying, raising the prospect of higher rates before the end of the year.

Bank for central banks suspends Russia

The Bank for International Settlements has suspended Russia’s access to its “services, meetings and other BIS activities” in response to western sanctions on Moscow. The Times notes that the institution does not provide monetary or financial plumbing to execute payments or manage the financial system, making Russia’s suspension largely symbolic.

European banks could be branchless by 2025

A new survey by the Economist Intelligence Unit (EIU) and Temenos has found that 70% of European banks expect physical branches will be phased out by 2025. The study also found more than a third of European banks are looking to snap up fintech firms over the next three years to build up their online offering.


BMW shares fall despite largest profit in company’s history

BMW’s net profits hit an all-time high of €12.5bn in 2021, a 150% increase on 2019, but shares fell 6% amid concern over rising inflation and the economic impact of the conflict in Ukraine. Elsewhere, Volkswagen CEO Herbert Diess has warned that a prolonged war in Ukraine risks being “very much worse” for Europe’s economy than the coronavirus pandemic.


Russia could refuse to return leased jets

Russia has said it will enact laws to prevent aircraft leased to its airlines from being returned. The move could mean a $10bn hit for western aircraft finance companies.


L&G sees profits rise

Legal & General’s pre-tax profits rose 28% in the year to December 31. In its full year results, the firm posted profits of £2bn, compared with £1.6bn in 2020. Operating profit rose 11% to £2.3bn, and the group will pay a full year dividend of 18.45p. The revenues were driven by significant improvements in operating profit at Legal & General Insurance and Legal & General Capital. L&G also said individual annuity sales were up 5% to £957m compared to £910m in 2020. It expects the annuity market to recover from its “slight dip” during the pandemic when people deferred retirement.

Prudential enjoys bump in new business profit

Prudential saw new business profit rise 15% to $2.5bn in the year to 31 December, up from $2.2bn in 2020. The company’s gross premiums for 2021 inched slightly higher than in 2020, up from $23.4bn to $24.2bn. However, Prudential swallowed a loss of $2.8bn for the full-year, plunging from its 2020 profit of $2.1bn. Prudential also signalled it is not planning to close its office in London despite moves by the Asia-focused insurance giant to shift its centre of gravity towards Hong Kong.

Funding Circle records profit

Funding Circle has posted pre-tax profits of £64.1m, up from a £106.3m loss in 2020 when the lender provided loans to small businesses weathering the impact of Covid lockdowns. Loans under management at the firm grew 5.8% from 2020 to hit £4.457bn, up from £4.2bn in 2020, while total income for the lender fell 7% to £206.9bn.

Canada pension fund leads £210m fundraising in UK’s Lendable

Ontario Teachers’ Pension Plan has led a £210m funding round in UK fintech Lendable, which connects global institutional investors with borrowers across loans, credit cards and car finance.


Tui cancels Russian deal

Holiday group Tui has cancelled a deal allowing the Russian oligarch Alexei Mordashov to use its name after the billionaire was sanctioned by the EU after Russia's invasion of Ukraine. Tui Russia was established in 2009 as a joint venture with Mordashov's Severgroup to expand the business in Russia and Ukraine. Mordashov had invested in Tui and joined its supervisory board but he was forced to resign last week after the sanctions were revealed.


Evraz shares suspended after UK imposes sanctions on Abramovich

Shares in London-listed steel company Evraz fell by as much as 14% yesterday after Roman Abramovich, its largest shareholder, was sanctioned. Trading in the shares was suspended by the Financial Conduct Authority “in order to protect investors pending clarification of the impact of the UK sanctions”. The UK Government claimed Abramovich had been “involved in destabilising Ukraine and undermining and threatening the territorial integrity, sovereignty and independence of Ukraine via Evraz” while Evraz had also likely been supplying steel to construct Russian tanks. Evraz denied this, stating: “The company confirms that it supplies long steel to infrastructure and construction sectors only.”


Spirent reports increase in earnings and revenue

Shares in Spirent Communications rose on Thursday after the group reported pre-tax profit of £103.6m last year, while its order book grew by 30% to £269.8m.


John Lewis restores staff bonus as losses narrow

The John Lewis Partnership has restored its staff bonus after narrowing losses to £26m last year. The department store group said it would pay a 3% bonus to workers, equivalent to 1.5 week's pay. Chair Sharon White also said the retailer will pay all partners at least the independently verified living wage of £9.90 across the UK, a 2% pay rise. The announcements came with the news that, in the year to January 29th, the group narrowed its pre-tax loss to £26m, from £517m in 2020-21. Profit before exceptional items rose 38% to £181m. Total partnership sales rose 1% to £12.5bn, with John Lewis making sales of £4.93bn, up 4%, and Waitrose £7.54bn, down 1%.

Boohoo shares rise after company hits sales goal

Boohoo shares rose as much as 15% in early trading yesterday, after the online retailer reported sales growth in line with reduced guidance. The firm's trading update revealed a 14% rise in full-year sales, and expected adjusted earnings of £125m. It had issued a profit warning in December, blaming a spike in product return rates, disruption to international deliveries and higher inbound freight costs.


Chelsea in turmoil after Abramovich sanctioned

The future of Chelsea FC has been thrown into doubt after the British Government sanctioned owner Roman Abramovich. Shirt sponsors Three have suspended a £40m deal with the club, while Nike are considering ending their agreements. The sanctions mean the Russian-born billionaire can no longer pursue a sale of the club, for which he was hoping to receive £3bn. The Government could take control of the sale, however, but this would leave Abramovich with nothing.


Sunak must borrow billions or see incomes squeezed

The Institute for Fiscal Studies (IFS) has said decisions taken by the Chancellor in his Spring Statement will reveal whether he believes the Government should be protecting consumers from external events or not. With the cost of living soaring, Rishi Sunak will have to decide whether to cut spending or borrow more to fund increases in public sector pay, which has taken a hit of £1,750 on average due to inflation. Mr Sunak must also decide whether to allow defence spending to fall over the next three years, or to borrow to boost it, says IFS director Paul Johnson, and if the Chancellor is to protect consumers from rising energy prices, he will have to find an additional £10bn just to cover half the increase in costs. However, the Guardian reports that Treasury sources stress that the Government cannot protect the public from what is a global crisis – and underline the fact that the public finances are weaker than at the start of the pandemic, when Sunak took radical steps to protect jobs.

High proportion of Brits expect inflation to linger

Research by Bank of America reveals 35% of Britons believe the cost of living will top 5% by this time next year. “General economic confidence fell, likely due to Russia's invasion of Ukraine. Most notably we think unemployment expectations continued to rise,” Bank of America said.


Russia seeks ‘legal solutions’ to seize assets of exiting companies

Moscow is considering “legal solutions” that will enable Russia to seize and possibly nationalise foreign companies that withdraw from the country in protest against its invasion of Ukraine. Russian president Vladimir Putin said the move was required to protect local Russian suppliers. External management would be brought in, and the enterprises transferred to “those who actually want to work,” Putin said. BP, Shell, Ikea and McDonald’s are among the international businesses that have departed the country.

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