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Daily News Roundup: Friday, 19th May 2023

Posted: 19th May 2023


PRA could reject Revolut’s banking licence bid

The Bank of England has told the Treasury that it is minded to reject Revolut's application for a banking licence, although sources say a final decision has yet to be made. The Bank’s Prudential Regulation Authority (PRA) said in March that it planned to issue a statutory warning notice to Revolut, saying the fintech firm’s initial application would be turned down owing to concerns over its balance sheet flagged in a qualified audit opinion. Sources close to Revolut said that the PRA had told it to produce a set of accounts with an unqualified audit opinion and to simplify its share structure before a licence could be granted. Revolut's chief executive, Nik Storonsky, recently said that bureaucracy made Britain an unattractive place to do business, suggesting that he could move the company abroad if a licence is not granted.

Union questions Lloyds’ flexible work plans

Lloyds has come under fire over its flexible working plans at its AGM, with representatives from Unite arguing that possible changes to its hybrid working policies disadvantaged women, carers and working parents. Lloyds is trialling changes to compressed working arrangements that see staff working the same hours over fewer days. While Unite warned that the review would make flexible working harder, a Lloyds spokesperson said it is “a strong advocate of flexible working and remains committed to providing a supportive and rewarding place to work for colleagues.” The bank last month told staff that hybrid workers would have to spend at least two days a week in the office, with exceptions for workers with disabilities or long-term health conditions. JPMorgan, BNY Mellon and BlackRock have all recently demanded that employees work in the office more often.


Deutsche Bank settles Epstein lawsuit

Deutsche Bank has agreed to pay $75m to settle a proposed class-action lawsuit alleging that the bank facilitated the Jeffrey Epstein's sex-trafficking. Deutsche Bank did not admit wrongdoing as part of the settlement, sources say. Mr Epstein became a Deutsche Bank client in 2013 after he was dropped by JPMorgan. In 2020, Deutsche was fined $150m by New York state's financial regulator over its relationship with Mr Epstein.

Lazard CEO set to stand down

Lazard chief executive Ken Jacobs is expected to step down from the role, with Peter Orszag, who currently runs the investment bank's financial advisory unit, set to succeed him.


Geely doubles Aston Martin stake

Zhejiang Geely Holding Group, the Hong Kong-based owner of Lotus, is investing £234m in Aston Martin Lagonda, almost doubling its stake in the brand. The investment takes its share in the car-maker to about 17%, making it the third-biggest shareholder.


EasyJet losses narrow

EasyJet saw its revenues climb 80% in H1, hitting £2.7bn. With the removal of all travel restrictions, passenger revenue in the first half jumped from £985m to £1.75bn. Pre-tax losses for the six months to March 31 came in at £415m, with this 25% down on the same period last year, while passenger numbers were up 41%. The company said its holiday business had delivered incremental revenue of £173m in the six months to March, up from £54m in the same period last year. EasyJet expects costs per seat, excluding fuel, to be “broadly flat” for the six months to September 30.


Financial services brands fail Google’s trust guidelines

A new study shows that four in five well-known finance brands are currently failing Google’s guidelines for quality and trustworthy websites. Analysis by financial services digital marketing agency Balance suggests that guidance based on Google’s Experience, Expertise, Authoritativeness, and Trustworthiness (EEAT) guidelines and the Financial Conduct Authority’s consumer duty are not being followed. The agency analysed 50 websites across the main sectors of financial services, giving each website a score across the four areas of Google’s EEAT recommendations. Of these, 49 failed to achieve top marks across all of the areas. The one site with a perfect score was in the price comparison sector, while at the other end of the scale, one bank received zero points. Price comparison websites came out on top, scoring 9.4 out of 12 on average, followed by consulting firms (9), investment firms (7.9), banks (6.5), insurance brands (5.9) and building societies (5.3). Alex Murphy, co-founder and chief marketing officer at Balance, said: “The results we found were troubling, especially with consumer duty looming.” “Financial services need a new way of thinking in order to support their customers,” he added.

FCA to carry out more assessments with less notice

The Financial Conduct Authority (FCA) plans to assess firms with little or no notice if it identifies a possible risk of harm. Nick Hulme, head of the FCA’s advisers, wealth and pensions department, said the watchdog is adopting a more proactive, assertive, data-led approach and notes that it now has a dedicated financial crime supervision function within consumer investments. He said: “Financial crime can be enabled or facilitated through any firm, unwittingly or not, at any time and we can see that in supervision.” Noting that the FCA needs to be “actively searching for the evolving threats,” he said increased supervisory scrutiny “will lead to better anti-money laundering controls and fewer, less impactful frauds.” The regulator will “undertake more firm assessments with less and sometimes even no notice” where the data and information it holds suggests risk of harm may be present, Mr Hulme added.


TRG wins investor backing in activist fight

The Restaurant Group (TRG) has won support from one of its biggest investors in a dispute with the activist hedge fund Oasis. Oasis, which owns 12.3% of TRG, has called for a strategic shake-up of the group. This comes after TRG rejected Oasis's demand for a board seat. Royal London Asset Management, which owns just under 5% of TRG, is set to vote in favour of its board on all resolutions including directors' re-election and remuneration. Columbia Threadneedle Investments, which holds a 19% stake, has also vowed to back TRG's chairman and CEO.


De La Rue activist questions chair appointment

An activist investor has questioned banknote printer De La Rue’s decision to appoint Clive Whiley chairman. Crystal Amber executive Richard Bernstein said the decision to appoint Mr Whiley rather than Nat Rothschild was a mistake. Mr Bernstein added: “This is a wasted opportunity not to involve a leader who already had a clear plan to rejuvenate a business that has suffered greatly over many years from poor management." Crystal Amber, which owns a stake of around 10% in De La Rue, had sought to replace previous chair Kevin Loosemore with industrialist Pepijn Dinandt.


Mortgage arrears and repossessions increase

Data from UK Finance shows that the number of households falling into arrears increased in Q1. Mortgages in arrears of more than 2.5% hit 76,630, marking a 2% increase on Q4 2022. There were 27,700 mortgages in arrears of between 2.5% and 5%, with this up 5% quarter-on-quarter. Lee Hopley, UK Finance’s director of economic insight and research, said the increase in arrears reflected “the increased cost-of-living weighing on households’ incomes.” The report also reveals that repossessions jumped by 50% in the first quarter, with 750 homeowner mortgaged properties repossessed. There were also 410 buy-to-let mortgaged properties taken into possession, representing a 28% increase on the previous quarter. Mr Hopley noted that despite the increase, the total number of possessions remains significantly below the levels seen prior to the pandemic.


Next chairman survives shareholder vote

Next chairman Michael Roney has survived a shareholder vote that saw a fifth of investors opt against backing him. Mr Roney won 79.2% of shareholder votes at the retailer’s annual meeting. There was also a significant revolt against the company’s pay plans, with 16% of votes cast against its remuneration policy. Next said it would engage with shareholders who had voted against Mr Roney’s re-election to the board, saying it recognises that there was a “significant vote” against the resolution. Advisory group PIRC had said that investors should vote against Mr Roney, who also chairs the Grafton Group, saying: “It is considered that a chair cannot effectively represent two corporate cultures.”

The Works sees sales increase

The Works has reported a 6.1% increase in total sales to £316.6m during the year ending April 30. In-store sales saw a significant surge of 7.5% on a like-for-like basis, accounting for 88.8% of total sales. However, online sales experienced a decline of 15%, resulting in an overall like-for-like sales growth of 4.2%.


Bank defends rate policy and QE

The Bank of England has denied that its policy on interest rates and bond buying programme has helped drive a surge in inflation and house prices. Officials have refuted suggestions from MPs on the Treasury Select Committee that near-zero borrowing costs and quantitative easing helped fuel an asset price bubble following the financial crisis. Governor Andrew Bailey said: “The period in which the house price to income ratio rose most was the period of ten years before 2007,” adding: “That was the period when it rose most substantially. It hasn’t done the same thing since then.” Ben Broadbent, the Bank’s deputy governor, told the committee that the decision to buy bonds in 2020 had not caused inflation to hit 40-year highs, saying: “The idea that this is the cause of double-digit [inflation] is not well-supported.” Since December 2021, the Bank has raised its benchmark interest rate from 0.1% to 4.5%. It has also started selling off the £850bn of UK bonds it bought to stimulate growth and lift inflation.

Consumer confidence climbs

Consumer confidence has increased for the fourth consecutive month, according to GfK's survey of consumer sentiment, which rose by three points to -27 in May. Consumer sentiment last year slumped to a record low of -49 as energy prices and inflation soared. The survey of 2,000 people found increased optimism in all areas of personal finances, including their outlook over the next 12 months, which saw a five-point jump to -8. Joe Staton, client strategy director at GfK, said the survey reflected "a stronger underlying financial picture across the UK than many would think."


Sustainable investing appeal declines

The popularity of sustainable investing has fallen, according to a poll by the UK arm of broker Charles Schwab, with investors prioritising returns over ESG issues. The poll shows that the proportion of retail investors who were unconcerned if their investments underperformed as long as they were sustainable fell to 47% in February, from 55% in late 2021. Those who considered ESG factors when putting money into a new investment fell by six percentage points to 38%, while willingness to pay extra fees for ESG investments slid from 58% to 50%. Richard Flynn, managing director at Charles Schwab UK, said: “With the need to maximise returns seemingly growing in importance amid the cost of living crisis, fewer investors seem to be factoring in ESG-related considerations into their investment decisions.” The poll also shows that 61% of investors believe the UK is a good area to invest, marking a nine-point decline. The US, however, was up two points to 66%.

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