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Daily News Roundup: Friday, 1st February 2019

Posted: 1st February 2019


Metro Bank acknowledges accounting flaw

Metro Bank has admitted that the Prudential Regulation Authority found a flaw in its accounts last week despite previously insisting that it spotted the error. Metro Bank’s shares by fell 40% last week after CEO Craig Donaldson said the bank had identified a miscalculation following a year-end review which was run by an auditor. However, the bank said yesterday that the PRA had “helped to identify potential inconsistencies in certain loans”. Commenting on the developments, Nils Pratley in the Guardian says regulators tend to take a dim view of misleading statements. He adds that Mr Donaldson should not assume support from shareholders if Metro Bank seeks more capital. Pratley contends that shareholders will now have even more questions about management credibility. Matthew Vincent in the FT expresses a similar view and suggests that Mr Donaldson’s risk taking looks far too challenging for shareholders. Alistair Osborne in the Times adds that Mr Donaldson will struggle to survive the fiasco.

Bond traders accused of collusion

The European Commission has alleged that traders at eight investment banks colluded via online chatrooms in an attempt to manipulate the sovereign bond market. The eight banks, which have not been named, have been informed that they are under investigation for breaches of EU competition rules between 2007 and 2012. The Times notes that if the banks are found guilty they could be fined up to 10% of worldwide turnover. Simon Hart, head of financial disputes City law firm RPC, commented: “The investment banks may have hoped they had put allegations of market manipulation behind them after Libor and forex, but a new front appears to be opening up.”

Barclays fraud claims implicate Qatar

The jury in the trial of four former Barclays executives has been told that Qatari entities would be implicated if the prosecution’s case proves correct. Mr Justice Robert Jay said that if the Serious Fraud Office's prosecution case proved to be correct, the Qatari entities involved would have to be viewed as also being guilty of dishonesty. “A sham is an agreement that does not mean what it says,” he said, adding that such an arrangement “requires two parties”. Jay also said it was important that the jury did not dwell too much on the soundbites of the case.

Banks suffer as digital rivals rise

New research has revealed that walk-in banks suffered more net closures than any other type of retailer last year, as fast-growing digital rivals lured shoppers away from traditional high street banks. The data showed that branch transactions have fallen by 23% in the last three years, while digital transactions rose by 99%.


Corbyn 'fever' to challenge funds of all sizes

With many businessmen feeling that there is a good chance Jeremy Corbyn and the Labour Party will win the next election, Anthony Hilton suggests that “Corbyn fever” will be a major factor for smaller private equity firms in the coming months - as even larger firms are already struggling to compete with mega-funds operated by tech giants like Alibaba and Tencent.


Deutsche Bank shares tumble amid merger chatter

Shares in Deutsche Bank dropped by more than 4% yesterday amid reports the German lender could merge with Commerzbank later this year. Bloomberg reported that the deal is being brokered by the German government and would only go ahead if the bank's restructuring fails to meet target. The German bank is set to publish its fourth-quarter results today.

Nomura posts biggest quarterly loss in almost a decade

Nomura has posted a net loss of ¥95.3bn for the three months between October and December. The loss was related to historic deals for Lehman Brothers and Instinet.


Uber suspended in Barcelona

Uber has said that it has suspended its services in Barcelona because of new regulations. The decision comes after the Catalan government insisted on imposing a 15-minute delay before passengers could be picked up. Uber said the new restrictions left it with “no choice” but to suspend its services “while we assess our future in Barcelona”.


EU markets watchdog approves Brexit agreement with UK

The European Securities and Markets Authority has approved an agreement on supervisory cooperation with Britain after Brexit to avoid disruption to cross-border financial services. The Memorandum of Understanding was negotiated with the FCA to ensure that regulators in the bloc and London agree to exchange information on financial firms that have cross-border business. Chris Cummings, chief executive of the Investment Association, said the agreement brought much needed certainty for asset managers. He added: “These agreements ensure that delegation of portfolio management, and the necessary exchanges of information needed for the orderly functioning of markets, can continue regardless of the outcome of the Brexit negotiations.”

European cities await Brexit boom

Reuters examines the anticipation in Paris and Frankfurt as financial services companies decide whether to move away from London as Brexit approaches. An analysis of job postings on eight of the world’s major investment bank websites highlight a modest push to recruit staff away from London but little to suggest that the City is set for a rapid demise as the region’s top banking hub. Martin Armstrong, partner at headhunting firm Armstrong International, comments: “Culturally, Paris is French, Frankfurt is German but London is international. The Americans - who own this industry - want to operate in an English speaking environment. No one wants to go.”


Rank profits in a spin

Lucky punters at Grosvenor’s London casinos have dented owner Rank Group’s profits, after they won around £3m more than usual in the six months to December, causing operating profits at Grosvenor to drop 35%. Rank’s pre-tax profits fell 28% to £29.1m on revenues down 2.4% to £366m.


Berry Global mulls bid for RPC

Apollo’s takeover of manufacturing firm RPC has come under threat after US firm Berry Global said it was considering making a bid. Berry said it had reached out to RPC for the due diligence information needed to make an offer, but also stressed it the announcement “does not amount to a firm intention to make an offer”.


WPP sells Richard Attias & Associates stake

WPP is selling an undisclosed stake in Richard Attias & Associates, the consulting firm behind the so-called Davos in the Desert conference in Saudi Arabia last year, as part of an ongoing plan to simplify its structure.


House price growth at near six-year low

UK house prices grew at the slowest annual rate for nearly six years in January, according to the Nationwide, with prices up by just 0.1% from a year earlier, and down from a rate of 0.5% in December. However, month on month prices grew 0.3% at the start of 2019 compared to a 0.7% slip between November and December. The average property price is now £211,966, just £210 more than a year ago.

Tough year for Foxtons

Indicating that earnings are expected to fall 80% on the previous year, London estate agent Foxtons has called 2018 one of the “toughest sales markets” ever in the capital. Sales revenue for the year fell 16% to £36m, while fourth quarter sales revenue was £9m, down from £10m the previous year. Foxtons closed six London branches in the second half of last year and expects full-year revenue to fall 6% to £111m when it publishes results next month.


MPs pressed to scrap business rates to save high streets

The Treasury select committee has launched an inquiry into the impact of recent changes to business rates policy, asking whether the system should be scrapped in favour of a land value tax and a digital services tax.


Central banks invest in gold

Central banks bought more gold last year than at any time since President Nixon ended the gold standard back in 1971. Stocks rose by 74% from 374.8 tons in 2017 to 651.5 tons. Analysts said the gold price rallied toward the end of the year amid concerns about Brexit, a falling stock market and expectations for less aggressive US monetary policy and have climbed to their highest level since May.


IoD warns that some businesses are planning to relocate

The Institute of Directors has said that nearly a third of small firms have either moved, or may yet shift operations out of the UK as a result of Brexit. The Institute of Directors said 11% of firms - chiefly larger companies - had shifted some activities overseas while another 18% were planning to or actively considering it. Some 62% of companies said they had no intention of moving because of Brexit. The IoD survey showed financial and insurance companies were most likely to have already shifted some operations away from Britain, followed by manufacturers and professional, technical and scientific firms.

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