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Daily News Roundup: Friday, 16th October 2020

Posted: 16th October 2020

BANKING

Banks expecting spike in mortgage defaults

Banks are bracing themselves for a spike in the rate of defaults on mortgages during the final three months of this year, the Bank of England’s latest credit conditions survey has found. The BoE’s quarterly report also shows that lenders expect demand for mortgages to stabilise in the fourth quarter, after rising in the previous three months. Lenders are expected to restrict loan products in Q4, though not by as much as in Q3. It was also found that banks raised the cost of loans in the third quarter and plan to continue increasing average interest rates in the fourth. Mark Harris of mortgage broker SPF Private Clients said concerns about the impact of the coronavirus crisis on earnings “and what will happen to property prices, particularly for those borrowing at high loan-to-values” is driving increasing caution in the sector. Andrew Montlake of mortgage broker Coreco said that would-be buyers with small deposits may struggle to be approved, adding: “It's no real surprise that the banks are pulling down the shutters for those with smaller deposits … What we need to avoid, however, is banks catastrophising and pulling products for more robust borrowers at lower loan-to-values."

MPs call for update on forgery claims

MPs have asked the Financial Conduct Authority and the National Crime Agency (NCA) for an update on their investigation into claims of widespread signature forgery at British banks. The Bank Signature Forgery Campaign says it has submitted more than 360 crime reports backed by 19 files of documentary evidence and testimony from handwriting experts to the NCA. The allegations include forgery, perverting the course of justice and proceeds of crime money laundering offences, with allegations made against banks including Lloyds and Royal Bank of Scotland – both of which deny wrongdoing. In a letter to FCA chief executive Nikhil Rathi and the NCA’s Graeme Biggar, Treasury Select Committee chair Mel Stride has asked for details of what the authorities are doing to address the allegations, what offences they believe may have been committed and the legal arguments being considered.

Loan surge opens door for challengers

Lucy Burton in the Telegraph look at how challenger banks are increasing market share by stepping in where larger rivals have pulled back on lending to new business customers. With many banks seeing a surge in applications for Bounce Back Loans – the support finance being rolled out to help small firms through the coronavirus crisis – some have stopped accepting applications so as to manage the backlog. John Cronin, a bank analyst at Goodbody, said this means there is “something of a gap emerging in the market", opening the door for "younger credit institutions" to attract more small business customers.

NatWest chair in interest rate warning

NatWest chairman Sir Howard Davies has warned that lenders are “not completely ready” for negative interest rates, saying there would be "technical issues and many contractual issues", with many banks’ systems only designed to deal with positive rates. Sir Howard added: “We are really assuming interest rates are pretty well zero for any reasonable planning horizon. It could be worse than that”.

INTERNATIONAL

Morgan Stanley profits jump 25%

Morgan Stanley saw profits jump 25% year-on-year in Q3, hitting $2.7bn. Revenues were up 16% at $11.66bn year-on-year, with revenues in its investment banking arm up 11% on last year as revenues in trading and equity underwriting surged. Fixed-income trading revenues were up 35% year-on-year, to $1.9bn.

AUTOMOTIVE

Ford to pair with rivals to avoid EU fines over emissions

Ford has said it is planning to buy carbon credits from rivals that have sold more electric or hybrid cars in order to help it meet European emissions goals.

AVIATION

Jet could boost economy and jobs

BAE Systems says the Tempest project, the UK’s proposed new fighter jet programme, could support thousands of jobs and boost the economy, according to initial estimates. The report says the programme could support around 20,000 jobs every year between 2026 and 2050 and add £25.3bn to the UK's economy by the middle of the century. The analysis does not include the potential benefit of export sales.

Ryanair cuts schedule, closes bases

Ryanair has reduced its winter schedule, closed three bases and warned of further job losses. The budget carrier will cut its capacity between November and March to 40% of last year’s levels, down from its previous forecast of 60%, blaming weak demand on “mismanagement” of the COVID-19 pandemic by European governments.

FINANCIAL SERVICES

Charles Stanley reports fall in revenue

Charles Stanley said group revenue fell 6.8% to £39.9m in the three months to September 30, resulting in a 4.1% reduction over the half year to £82m. Total funds under management and administration rose 12.9% in the six months to September, and edged up 0.9% in the quarter. However, the investment manager said this movement mainly reflected the market volatility caused by the pandemic.

Investment managers asked to join Kickstart scheme

Investment 20/20, part of the Investment Association, is urging investment managers to support young people with work placements amid the pandemic. The organisation is calling on the industry to provide placements for 16 to 24-year-olds on university credit, as it announces a new initiative in support of the government’s Kickstart scheme.

UK pensions regulator shifts focus to millennial generation

The Pensions Regulator is set to toughen its oversight of pension schemes used by millennials. Baroness Ros Altmann says it is right that the regulator increases its focus on pension customers.

HEALTHCARE

Chemists’ concerns

The National Pharmacy Association has warned that local chemists could be forced to cut services unless the Government pumps cash into the sector. Chairman Andrew Lane said chemists are bracing themselves for a second wave of coronavirus and the extra pressure and costs it will bring them. Analysis published last month shows that 72% of independent pharmacies will be losing money within four years if things go on as they are, with community chemists underfunded by £497m a year.

LEISURE AND HOSPITALITY

Pub industry warns of closures

The British Beer & Pub Association (BBPA) has warned that, without a proper package of financial support in place, new coronavirus restrictions will decimate pubs. The BBPA said that pubs were already struggling due to the current restrictions in place, low consumer confidence and lack of tourists and commuters in cities and towns. Meanwhile, Marston's has said it will cut up to 2,150 furloughed jobs following new restrictions being rolled out. The pub and brewer said since the first lockdown was lifted, 10,000 of its employees had returned to work, but said new measures mean jobs are going to be affected.

Heineken fined by pub watchdog

Heineken has been fined £2m by the Pubs Code Adjudicator for “seriously and repeatedly” taking advantage of struggling landlords in a breach of the rules that lasted at least three years. The watchdog said Heineken’s Star Pubs and Bars business forced the pubs to sell its own beer despite repeated warnings that its approach was “unreasonable”.

MEDIA AND ENTERTAINMENT

BT investigated over rural broadband claims

BT is being investigated by Ofcom over an alleged failure to provide adequate broadband to rural homes and businesses. The Government introduced new laws two years ago that gave all customers the right to access a decent broadband connection. However, some rural customers claim BT has presented them with quotes of up to £100,000 to install broadband at their homes or businesses despite the Government’s wish to make affordable connections available to everyone.

DCMS to probe impact of music streaming

A new committee run by the Department for Digital, Culture, Media and Sport (DCMS) is to investigate the impact that music streaming is having on artists, record labels and the sustainability of the music industry. The committee will examine the business models of major streaming companies such as Spotify, Apple Music, Amazon Music and Google Play to determine their fairness towards the writers and performers whose material populates the platforms.

REAL ESTATE

Hammerson collects just a third of rents

Hammerson was only paid 38% of rents owed for the current quarter after the retails sector was hit by COVID-19. The shopping centre owner said it collected 41% of rents across the global business, as the retail sector continues to struggle. Hammerson said that as of Tuesday, all of its shopping destinations had reopened, with 94% of its tenants allowed to trade in the UK and Ireland. However, rent payments have been slow to return after the Government extended its moratorium on lease forfeiture by commercial landlords until the end of the year.

RETAIL

AO World sales jump

AO World said it expects to report a 57% increase in first-half revenue on strong consumer demand during the COVID-19 pandemic. The retailer said it expects to report revenue of £715m for the six months to September 30, with UK revenue expected to be up by about 54%.

ECONOMY

Cash managers concerned over negative rates

The Association of Corporate Treasurers (ACT) has warned that negative interest rates would be a "very bad idea". Caroline Stockmann, chief executive of the ACT, said her members are “very worried” about negative interest rates. The body, which represents 90% of the FTSE 100, said businesses may refuse to pay interest fees on their deposits if the Bank of England cuts rates below zero, adding that negative rates could also cause “systems and IT issues."

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