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Daily News Roundup: Friday, 1st March 2019

Posted: 1st March 2019


Finance firms given 15-month regulatory grace in event of no-deal

The FCA and the Bank of England will give banks, asset managers, insurers and brokers until mid-2020 to fully comply with rules that replace EU law in the event of a no-deal Brexit. Publishing a “near final” version of a rulebook that would come into effect if Britain leaves without a deal, the regulators said: “In most cases, we plan to allow firms a period of 15 months to adapt.” FCA executive director international, Nausicaa Delfas, said the announcement was a significant milestone in the financial sector's preparations for a no-deal Brexit. “They ensure that there is a functioning regulatory regime from day one, and that firms are clear as to the requirements they need to meet by end March 2019 and beyond, so they can continue to meet the needs of their customers,” Delfas said.

Bankers have not learnt from the financial crash

Christine Lagarde, the head of the IMF, has warned that the banking industry has not learnt from the financial crisis and is still not behaving properly. Pointing to bumper bonuses, campaigns against regulation and irresponsible investing, she said: “In too many cases, the financial sector has strayed from its original, noble purpose. And too often, it has worked hard to serve itself rather than serve people and the economy at large. That is why the financial industry needs what I call an 'ethics upgrade'.” Ms Lagarde added that cyber-attacks could cost the banking system $350bn, while threats come from high-risk debt markets and the shadow banking sector that are less regulated than the traditional banks. She argued that instead of addressing these problems, bankers have been pushing for bigger pay packets and less regulation.

Overdraft fees questioned

The Treasury Select Committee has criticised Lloyds Banking Group’s overdraft fees, suggesting that they “fly in the face” of efforts by the regulator to make charges clearer and more transparent. The bank previously announced it would introduce a tiered overdraft system, meaning fees will increase for anyone borrowing less than approximately £4,100. Nicky Morgan, head of the committee, said: “It’s puzzling that while welcoming the FCA’s simplification proposals, Lloyds Banking Group has introduced such a complex tiered system for, potentially, a relatively short period of time. Lloyds’ new overdraft fees appear to fly in the face of the FCA’s attempts to make overdrafts clearer and more transparent.” Lloyds said the changes encouraged customers to reduce overdrafts and that it was working with the regulator on the issue.

Bramson used loan from rival to buy Barclays stake

It has emerged that Sherborne Investors, the investment vehicle headed by Edward Bramson, used a $1.4bn loan from Bank of America to help fund its stakebuilding in Barclays. The New York-based activist also bought derivatives from the US bank, restricting the gains Sherborne could enjoy from its position in Barclays, but also limiting any losses the fund. Meanwhile, Barclays former CEO John Varley had admitted he had to delegate responsibility for decisions made by the bank at the height of the financial crisis when it was forced to raise more than $11bn in order to survive. Varley told the SFO in 2014 that he had to place heavy reliance on others to run a bank the size of Barclays.

Co-op Bank posts profit

The Co-op Bank has posted its first profits for six years. Under new CEO Andrew Bester, the Co-op Bank made an operating profit for 2018 of £15m, though costs for IT and PPI mis-selling took it to a loss £141m. The annual report reveals a £1.13m pay-off for one individual, thought to be Liam Coleman, who oversaw the sale of the bank to New York hedge funds before leaving last June after five years.

Barclays and TSB customers locked out of apps

Barclays’ and TSB's customers were locked out of their mobile banking apps on Thursday morning following IT outages. While Barclays thanked users “for bearing with us”, less patient customers took to social media to vent their frustrations. Figures showed that NatWest suffered more service and security incidents than any other provider during the last three months of 2018, with nine such issues, while Barclays, Cahoot and Santander each suffered seven incidents and Lloyds Bank saw six. Monzo and Starling suffered no issues, neither did M&S Bank and Virgin Money.

Revolut CFO steps down

Peter O’Higgins has stepped down as CFO of Revolut amid questions over the fintech firm’s compliance systems. Revolut confirmed that Mr O’Higgins stepped down at the start of the year. It added that his departure was unconnected with concerns raised over compliance. Meanwhile, the Times reports that Revolut job applicants were asked by the firm to work for free.

Private bank launches new digital service

Hampden & Co has launched a new digital service, including a mobile banking app. CEO Graeme Hartop said: “Our aim with the new digital banking service is to enable another channel between banker and client, while providing the client with more information and capabilities to help manage their finances.”

Bankers named on fintech list

Senior figures in the banking industry have been recognised on Innovate Finance’s annual “stand out” list for women excelling in fintech. HSBC’s head of digital innovation Diana Biggs, Starling Bank founder Anne Boden and Monzo chief technology officer Meri Williams were all named on the list.

Students’ bank accounts frozen amid money-laundering concerns

The FT reports that nearly 100 Barclays bank accounts belonging mainly to Chinese students at UK universities have been frozen amid concern they contain £3.6m of suspicious funds.


Antler makes London debut

Singapore-based venture capital firm Antler has launched its first London office, with plans to invest around £24m in the capital's startups over the next four years. Founder Magnus Grimeland said: “London is a truly dynamic, entrepreneurial city brimming with fantastic business talent. We think London is, and will continue to be, a global hub for entrepreneurs with ambition and drive. The city is full of opportunity and energy.”

London top hub for unicorns

Figures from London & Partners have revealed that the number of unicorn start-ups in London reached 13 last year, up from eight in 2016. The figure was almost double its closed European rival, with Berlin hosting seven unicorns last year. Venture capital firm GP Bullhound has predicted that London will be home to a quarter of all new unicorns founded in Europe over the next few years.


Mozambique files case against Credit Suisse

The government of Mozambique has filed a case in the High Court in London against Credit Suisse over what has become known as the “tuna bond” scandal. Credit Suisse was one of the lenders that helped to arrange $2bn (£1.5bn) of government-backed loans that pushed Mozambique into a debt crisis. Also named in the filing are three former Credit Suisse bankers, who have already been indicted in the US.


Aston Martin unveils £30m Brexit fund

Aston Martin Lagonda has used its first annual results since its stock market debut to announce a £30m fund to help navigate any Brexit-related disruption. The luxury carmaker said its board had approved “plans for up to £30m of advanced working capital and/or operating expenses” linked to the UK's departure from the EU. The company reported revenue of £1.1bn - a rise of 25% on 2017 - though its bottom line was hit by a series of costs including £136m linked to its stock market listing.

UK to miss electric car sales target, Auto Trader warns

Auto Trader has estimated that just 75% of new cars sold in the UK in 2040 will be electric. The Government has targeted an end to non-electric sales by then.


Profits soar at British Airways owner

International Airlines Group, the owner of British Airways, has revealed that its profit rose by 9.5% last year. Revenue rose by 6.7% from $22.8bn in 2017 to $24.4bn last year despite facing challenges such as increasing fuel prices, foreign exchange costs and Air Traffic Control disruption. Meanwhile, IAG has said that it plans to order 18 Boeing 777-9s and options for 24 more for British Airways.


Telford Homes posts surprise profit warning

London housebuilder Telford Homes has cut its profit outlook on the back of its commitment to less lucrative build-to-rent schemes and project delays in the capital. Telford is doubling down on build-to-rent housing for institutional buyers, rather than private house sales, which though less risky awards lower margins. Chief executive Jon Di-Stefano asserted: "We believe that build to rent housing will be one of the keys to solving London’s housing crisis."

Bovis rebounds from quality scandal to post record profits

Bovis Homes has posted a 47% rise in pre-tax profits to £168.1m for 2018, along with a 20% dividend rise, as the firm continues its positive turnaround under Greg Fitzgerald.


Hastings adds more customers as profit grows

Hastings Group has reported a 2.6% rise in profits for 2018, as the insurer added more customers which helped it to combat a drop in the price of motor insurance policies in Britain last year. Hastings said profit before tax rose to £152.9m for the year to December 31, 2018, up from £149m, a year earlier. The company added that it was investing around £20m a year in digital initiatives - including measures to tackle fraud.

Big investors pour cash into UK investments

Data from Bloomberg shows that the UK’s top ten investors – including Invesco, Schroders, Aberdeen Standard and Legal & General – have increased their holdings of UK-listed shares by an average of more than one third over the past three years. Tim Wallace in the Telegraph suggests that many investors are taking the view that lower prices mean UK assets are now more attractive, encouraging investors who are confident in the UK’s long-term future to put more money into the market.

UK regulator dismisses asset managers’ criticisms of cost disclosure rules

The Financial Conduct Authority has brushed off asset managers' concerns over new rules for EU cost disclosure rules. The industry has queried calculation methodologies used in the new Priips regulation.

RSA hit by bad weather

RSA has reported that its operating profit fell by a fifth in 2018 to £517m, although pre-tax profit rose by 7% to £480m. The insurer said it was affected by bad weather in Britain and Canada and losses in big-ticked shipping and property underwriting.


Drug firms colluded to keep prices high

The Competition and Markets Authority has accused two pharmaceutical firms – Auden Mckenzie and Waymade – of colluding to keep prices of a life-saving drug artificially high.


Airbus’ decision to scrap A380 hits Rolls-Royce

Rolls-Royce suffered an £186m blow from Airbus ditching the A380. Higher-than-expected costs associated with repairing Trent 1000 engines, along with its withdrawal from the bidding for Boeing’s mid-sized plane, pushed Rolls to a £2.9bn loss for 2018. Underlying profits were £616m in its overall business, rising £253m on the previous year, while reported revenue was up 7% year-on-year to £15.7bn.


Universal Music bid under wraps

KKR and Tencent Music Entertainment Group are both mulling rival bids to acquire up to half of Vivendi's iconic Universal Music division in a deal potentially worth up to €20bn.


Housing market dancing to Brexit ‘mood music’

House prices in February rose just 0.4% year on year, according to Nationwide’s house price index, down 0.1% from January to an average of £211,304. Robert Gardner, Nationwide's chief economist, said: “Measures of consumer confidence weakened around the turn of the year and surveyors reported a further fall in new buyer enquiries over the same period," while Lucy Pendleton, founder director of James Pendleton, warned: “Assuming there’s no delay to Article 50, this is going to be the mood music until we get through to April.”

Mortgage rates on the up

Mortgage rates are on the rise again, despite the August base rate hike from the Bank of England, with the average two-year fixed mortgage rate up by 0.13% in the past month. Average two-year fixed rates rose from 2.36% in January to 2.49% currently, according to new data from Moneyfacts. However this time last year, average rates were also at 2.36%, suggesting little movement in the price of loans through 2018.


Manchester City signs shirt deal with Puma worth up to £600m

Manchester City has signed a £60m shirt sponsorship deal with Puma, the biggest commercial deal in its history.


Rise in net migration from outside the EU

The ONS has said that net migration to the UK from countries outside the EU has hit its highest level for 15 years. Figures show that 261,000 more non-EU citizens came to the UK than left in the year ending September 2018 – the highest since 2004. In contrast, net migration from EU countries has continued to fall to a level last seen in 2009. The ONS has put net migration in the year to September at 283,000. It says more than 625,000 people moved to the UK and about 345,000 people left.

Business confidence lowest since EU referendum

The latest monthly business barometer from Lloyds Banking Group shows that confidence among British businesses is at its lowest ebb since the Brexit referendum in June 2016. The reading for February was down 15 points from +10 to -5. There was also a drop in the outlook for trading from +27 to +13. That left overall business confidence at +4, down from +19. Britain’s services sector, which accounts for four fifths of national output, had the largest fall in confidence.


Nearly one in ten has never worked

According to official data from the ONS, nearly one in ten adults has never done a paid day’s work. Of the 41m people aged 16 to 64 in the analysis, the ONS found that 3.6m had never been in paid employment. Most of the 3.6m who have never had a paid job are students, accounting for almost two million. Meanwhile, another 510,000 are “looking after the family or home”, almost exclusively female. Overall, women account for the largest share. Nearly three in four of those between the ages of 25 and 64 who have never drawn a salary are female. Separate figures from the ONS showed that the number of those aged 16 to 25 not in education, employment or training, increased by 31,000 to 788,000 in the October to December period.

Goldman Sachs slashes no-deal Brexit risk

Analysts at Goldman Sachs have slashed the chances of a no-deal Brexit to 10%, down from 15%, following this week's cabinet revolt. While Sterling hit five-month highs of $1.335 this week, analysts said Theresa May had created a “clear route” for parliament to rule out a no-deal Brexit.

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