Coventry facing probe after miscalculating risk
Coventry Building Society is facing possible enforcement action from the Bank of England after it admitted that it had understated its risk-weighted assets by £222m. The mistakes meant that the building society’s common equity tier 1 ratio, a measure of financial strength, was 32.6%, and not 34.2% as stated in its last results. The Coventry said it had applied the wrong multiple or “scalar” and said: “We are still extremely well capitalised,” adding “The society uses internal ratings based models to calculate its risk weighted assets and is seeking to update these models to ensure compliance with upcoming Basel III reforms." The Times’ Patrick Hosking queries: “If the Coventry can gets its calculations wrong by 6% with no one noticing, what's to stop it being out by 26%, or 46%?”
RBS to pay out £40m over forex scam
Some £40m in compensation is to be paid out by Royal Bank of Scotland to 730,000 customers after the bank uncovered a scam where staff on the lender's foreign exchange desk manipulated the rates applied to overseas transactions - earning NatWest owner RBS tens of millions of pounds in extra profits. The employees added 0.06% to the rate applied to more than 10m foreign exchange payments. The scam was discovered in 2014 and had been running for four years.
Banks circling Sainsbury's mortgage book
Grocer Sainsbury’s has received several offers for its £1.9bn mortgage book as it looks to exit the market. While Royal Bank of Scotland and Santander UK, which had previously shown an appetite, haven't tabled formal proposals, Lloyds Banking Group is understood to be among the interested parties in the auction, which is being handled by BNP Paribas.
Virgin launches its first digital account
Virgin Money has launched a digital current account and mobile app, featuring a linked, easy-access savings account. The Virgin Money Current Account pays 0.5% interest on credit balances up to £2,000.
Former lawyer bags £23m with consultancy float
Former SJ Berwin private equity partner Matthew Hudson has made a tidy £23m after the asset management consultancy he founded floated for £100m on London’s junior market. Hudson founded MJ Hudson in 2010, after a career at now-defunct City firm SJ Berwin and US law firms Proskauer Rose and O’Melveny & Myers. Dankse Bank now owns 5.1% of the stock, while Canaccord Genuity, which had backed the company before, increased its holding to 16.7%. Mr Hudson and his wife, Katherine, still own a 27.9% stake in the business.
Lagarde follows Draghi’s policy lead but sounds upbeat tone
Christine Lagarde has held her first rate-setting meeting as president of the European Central Bank during which she committed to maintaining Mario Draghi’s bond-buying programme and keep policy rates unchanged. However, she said the €20bn a month quantitative easing programme was unlikely to push growth and inflation back to target and new stimulus measures might be needed.
StanChart sells stake in Indonesia’s Permata Bank for $1.3bn
Standard Chartered shares rose 2.23% on news it has sold its stake in Indonesia’s Bank Permata for $1.3bn. Shore Capital’s Gary Greenwood said the stake sale appeared “to represent excellent value”.
JPMorgan executive ‘sickened’ over racism revelations
JPMorgan Chase co-president Gordon Smith has reacted to revelations of racism at an Arizona Chase branch by saying he was “sickened” and the incidents “strike at heart of who we are”.
Capital breaks for green lending ‘feckless’, says ex-regulator
The FT follows up on comments from former Basel committee chief Bill Coen who raises concerns about a relaxation of capital rules by US and European regulators.
Central bankers have a limited ability to tackle climate change
Harvard fellow Megan Greene says central banks need to recognise what they can and cannot do about climate change – “they have no real policy role,” she says. “Their job is to contain the fallout.”
Fintech: the rise of the Asian ‘super app’
The FT looks at the threat to traditional banks from fintechs across Asia, such as Ant Financial, Paytm and Go-Jek, which are forging business models that could yet be used in other parts of the world.
Wizz Air to set up low-cost airline in Abu Dhabi
Hungarian low-cost airline Wizz Air plans to set up a low-cost airline in Abu Dhabi next year called Wizz Air Abu Dhabi - a joint venture with state-owned Abu Dhabi Development Holding.
Welsh road ruling derails Costain
Costain shares tanked on Thursday after it warned profit will be around £20m lower than expected following the arbitration case over its A465 Welsh motorway project. Full-year underlying profit will now be between £17m and £19m, Costain said, after previously estimating profit of between £38m and £42m. Costain’s year-end order book will be about £4.2bn, with the company winning around £600m of new work in the second half of the year.
Equity release industry defends protections
The rise in popularity of equity release over the last five years has caused alarm for some campaigners who fear it could trigger a fresh financial scandal. Nearly 500,000 people have borrowed £28bn via equity release since 1991with £2.8bn accessed in the nine months to September alone. The loans come with interest rates averaging 4.91% and experts such as Baroness Altmann say this can lead to soaring debts, wiping out the value of a borrower's home when they die and leaving them with no inheritance to pass on. The Financial Conduct Authority said on Wednesday that it is undertaking “exploratory work” into lending in later life. Jim Boyd, chief executive of the Equity Release Council, said: “Our standards go beyond statutory regulation to provide the highest level of consumer protection for any type of property-based loan. Our members’ customers are guaranteed qualified financial advice, face-to-face independent legal advice and clear product safeguards, including secure tenure for life and a no negative equity guarantee.”
PingAn’s OneConnect cuts valuation in blow for SoftBank
The fintech arm of China’s biggest insurer, Ping An, has cut its expected valuation by about half ahead of a planned IPO in the US. OneConnect’s announcement is a further blow for backer SoftBank’s giant Vision Fund.
Big investors turn screw over climate pollution disclosure
A growing number of large asset managers, including LGIM, BNP Paribas and TCI, are threatening to vote against directors at companies that do not improve their emissions reporting.
EU confirms one-year Brexit reprieve for derivatives industry
EU nation states have approved draft plans from the European Commission to extend an existing March 2020 expiry date for access for European companies to UK clearing houses.
Securities dealing taxes: FTT would be OTT
The FT’s Lex says Labour’s plan for a financial transaction tax is “flawed” with derivatives “notoriously tricky” to tax and “funds and investors could relocate.”
Insurance sector ripe for innovation
Lauren Jones asserts in the Scotsman that the insurance sector is ripe for the sort of disruption from technology seen in financial services, stating that data access and collaboration between insurtech providers and insurers is key to driving forward innovation.
LEISURE & HOSPITALITY
Puregym buys Fitness World for £350m
Gym operator Puregym has acquired Fitness World from FSN Capital and Kirkbi in a £350m deal that makes Puregym the second biggest in Europe in terms of number of gyms after Basic Fit. Puregym was acquired by Leonard Green & Partners in 2017 in a deal that valued the business at £600m.
MEDIA & ENTERTAINMENT
WPP agrees Goldman Sachs share buyback
WPP has agreed to buy back up to £300m in shares from Goldman Sachs, following the $4bn sale of market research firm Kantar. The advertising giant said the share buyback programme will continue to March 2020 and represents roughly a quarter of the total share buyback amount approved by shareholders, who expect to be paid out to the tune of £950m.
Five more years of Britain's Got Talent
Simon Cowell’s Syco Entertainment has signed a new exclusive five-year deal with ITV. It means there will be five series of Britain’s Got Talent and at least one of The X Factor.
Outsourcer Serco returns to growth
UK revenues have returned to growth for the first time since 2013 for public services outsourcer Serco with profit likely to come in at £129m on revenue of £3.2bn. The news sent shares up 5% to settle at 1% up on the previous close.
Biggest property fund withdrawals since Brexit vote
Property funds have been hit by the most investor withdrawals in a week since the Brexit vote in 2016. Data compiled by funds network Calastone reveals that savers have pulled a net £193m out of property funds in the week since M&G suspended its £2.5bn Property Portfolio following a rush of withdrawals. Around £60m was withdrawn within 24 hours of the M&G announcement, with subsequent net daily outflows ranging between £23m and £37m. The figures have fuelled concerns that other funds will be suspended.
Hammerson sells Paris site
Shopping centre owner Hammerson has sold its majority stake in Paris complex Italie Deux in the French capital to Axa Investment Managers for £362m, as it looks to turn around its fortunes. Hammerson has seen its share value slide more than 20% over the past year as it swung to a £319.8m loss in the six months to June 30 from a £55.7m profit for the same period in 2018.
Superdry slips to loss but margins improve
Superdry's first-half sales were down 11% amid a pre-tax loss of £4.2m, despite gross margins improving by 2.5 percentage points. Revenue declined in the six months to October 26th and the retailer also racked up a debt pile of £9.3m compared to a cash position of £19.2m in 2018. The group's balance sheet was hit by a £3.9m "isolated error" related to its accounting of inventory and a £6.9m charge to cover bad debts associated with its loss-making joint venture in China. Superdry said it expects second-half sales to decline by “low single digits” and that full-year sales would as a result fall by around 5%.
Dixons Carphone narrows losses despite sales drop
Dixons Carphone narrowed its losses in its latest half-year performance but a turnaround strategy took its toll on profits, the mobile phone seller said. In the six months to October 26th, the group made a pre-tax loss of £86m, an improvement on the £440m loss of a year earlier. This year’s figures include a £26m charge reflecting lower “network receivables”, or money owed by contract customers, and a provision of £30m to cover regulatory costs. Overall UK & Ireland electricals revenue dropped 1%, although mobile revenue in the home markets declined 18%, hurt by a 10% drop in like-for-like sales.
Championship clubs posting record losses
Championship clubs have run up “frightening” losses as they increase spending on player and staff wages in an attempt to reach the Premier League. Championship sides ran up a record high total of £307m in pre-tax losses in 2017-18 despite revenue of £749m. Separately, The Premier League has appointed interim chief executive Richard Masters on a full-time basis.
Conservatives win majority in General Election
The Conservative Party headed by Boris Johnson have won an overall majority in the UK General Election. The BBC called the result at just after 5.00am after the party passed the threshold needed to gain full control of the House of Commons. As things stand, the Tories have won 342 seats, with Labour collecting 200 seats, the SNP 46 seats, the Liberal Democrats 8 seats and other parties 22. Speaking to supporters after retaining his Uxbridge and South Ruislip constituency, Mr Johnson said the result had given him a “powerful new mandate” to deliver on its manifesto. He said: “It does look as though this One Nation Conservative government has been given a powerful new mandate to get Brexit done.” He added that the Government would “recruit 50,000 more nurses and 6,000 more GPs, and we will build 40 new hospitals.” Elsewhere, Jeremy Corbyn said that he will not lead Labour into the next election, saying the party’s performance was “very disappointing”. He said that the issue of Brexit had “polarised” politics and “overridden so much of normal political debate”. The party lost seats in its Northern heartlands which have traditionally been Labour for decades including Workington, Darlington and Sedgefield – or in the case of Bishop Auckland and Blyth Valley for the first time ever. Mr Corbyn was urged to step down by some MPs within his party. Elsewhere, Jo Swinson, who only became the Lib Dem leader in July, lost her seat in Dunbartonshire East to the SNP by 149 votes. Speaking after the result, Ms Swinson blamed the national result on a “wave of nationalism” and said it would bring dread and dismay for millions of people. The SNP’s leader Nicola Sturgeon, hailing her party’s results, said Scotland had sent a “clear message” on a second independence referendum. Scotland’s First Minister said the results had exceeded her expectations. Nigel Farage claimed that the Brexit Party has “killed the Liberal Democrats and hurt the Labour party”. His party is unlikely to win any seats, but Mr Farage said he was happy that his party had killed off hopes of another referendum. In Northern Ireland, Nigel Dodds, the leader of the DUP, lost his Belfast North seat to Sinn Fein.
Minouche Shafik is favourite to succeed Carney
London School of Economics head Minouche Shafik has emerged as the favourite to succeed Mark Carney as the Governor of the Bank of England, according to a Treasury source.