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Daily News Roundup: Friday, 20th January 2023

Posted: 20th January 2023

BANKING

HSBC to avoid penalty for breaching over 50 open banking rules

The Competition & Markets Authority has said it will take no further action against HSBC for breaching open banking rules on more than 50 occasions over the last five years. Open banking was introduced by the CMA in 2018 to free up data sharing between traditional banks and smaller start-ups, and now has over six million users in the UK. HSBC’s failure to make accurate, comprehensive and up-to-date product and reference information available may result in “consumers taking decisions that they would not have taken if they had access to the correct information,” the CMA said. While the CMA said it will monitor the bank’s future compliance closely, it “does not consider it appropriate to take further formal enforcement action”. 

Brexit pushes up number of EU bankers earning above €1m

The number of bankers and investment professionals in the EU earning more than €1m hit a record high in 2021 after Brexit propelled more top earners to the continent. The European Banking Authority (EBA) said Brexit-related relocations increased the number of bankers in the EU earning seven figures or more by two fifths in 2021. The EBA said the increase in millionaires was “linked to the overall good performance of institutions, in particular in the area of investment banking and trading and sales, continuing relocations of staff from the UK to the EU and a general increase in salaries”. Italy, France and Spain took the lion’s share of the increase, with 70%, but Germany remains the member state with the largest population of high-earning bank employees, with 589.

UK bank shares slide on bad debt, recession fears

Investors have demonstrated some caution around UK bank shares as worries about loans turning bad and recession fears stalk the global economy. On Thursday, Barclays shed 2.8%, HSBC 0.6% and Standard Chartered 0.8%. Domestic-focused lenders Lloyds and NatWest also traded lower, finishing down 1.0% and 2.2%, respectively. “Although in the last quarter of the year default rates only increased for small and medium-sized businesses, they are forecast to rise for larger businesses too in the first few months of 2023. Sharply rising interest rates are clearly taking their toll and its adding to nervousness about taking on too much debt,” Hargreaves Lansdown’s Susannah Streeter said.

Tesco Bank gives staff £1,250 to help with rising cost of living

Tesco Bank is to give more than 3,000 staff a £1,250 pay increase to help them deal with the cost of living. The bank said over 90% of its workforce were eligible for the extra pay, which is dated from the beginning of January. Tesco Bank Chief Executive, Gerry Mallon, said: “The rising cost of living is having an impact on households across the country, and we’ve been listening to colleagues about how this is affecting them. The salary increase aims to provide sustainable, long-term support to colleagues, including our contact centre colleagues who show great commitment to helping our customers in the current economic climate.”

Demand for new mortgages fell 75% at end of 2022

Data from the Bank of England show demand for home mortgages fell sharply in the final three months of last year, with new loans for property purchases dropping 75% compared with the previous three months. Lenders expect the fall in demand to continue in the first quarter of this year, although the landing will be softer than the end of 2022, the BoE said.

INTERNATIONAL

JPMorgan rules out more special pay awards for CEO Jamie Dimon

JPMorgan Chase has assured investors that chief executive Jamie Dimon would not receive any more special awards “in the future” following investor pushback on a one-off special award projected to be worth about $50m over several years. The Wall Street bank paid Dimon $34.5m for his work 2022, unchanged from the prior year despite the company suffering its steepest decline in profits in more than a decade. Separately, JP Morgan has reportedly set aside at least $10bn to back its entry into the world of direct lending, according to Reuters. Finally, JPMorgan, along with Standard Chartered, has won Chinese regulatory approval to expand operations in China as the country moves to boost confidence among overseas investors.

Global anti-money laundering fines surge 50%

Banks and other financial institutions were fined almost $5bn for failing to prevent money laundering and other financial crime last year, up more than 50%, raising questions over the effectiveness of fines in cleaning up the financial system.

AUTOMOTIVE

Starmer: Strategic plan needed to save UK car industry

Sir Keir Starmer says a strategic plan is needed to save the UK car industry, after the collapse of Britishvolt, the country's biggest project to build electric car batteries. The Labour leader told the BBC at the annual World Economic Forum in Davos that a five or ten-year plan was needed "and not the sort of instability we've had the last year".

FINANCIAL SERVICES

Regulatory Reform Group lobbies for smart change

Backbench Conservative MP Bim Afolami has written to Rishi Sunak calling for a "regulatory framework which is pro-innovation, pro-investment and [which] will help the UK to become a more globally competitive economy". Mr Afolami is part of a group of parliamentarians and private sector chiefs who have joined forces to examine whether regulators are acting as a barrier to investment in Britain. Mr Afolami wrote to the Prime Minister in his capacity as chair of the Regulatory Reform Group, which includes Lord Tyrie, former chair of the Competition and Markets Authority, and MPs such as Sir Robert Buckland, Vicky Ford and Mark Garnier as members. A private sector advisory council chaired by Tracy Blackwell, chief executive of Pension Insurance Corporation, will work in concert with the parliamentarians. NatWest Group, CVC Capital Partners and London Stock Exchange Group will be represented on the council.

New FTX boss could resurrect bankrupt crypto firm

The new chief executive of bankrupt crypto exchange FTX, John Ray, is looking into the possibility of reviving the platform. He told the Wall Street Journal that he has set up a taskforce to explore restarting FTX.com to "recover more value" for people who lost money. The exchange was founded by Sam Bankman-Fried, who has been charged by prosecutors of orchestrating one of America’s largest financial frauds. Last week lawyers for the new FTX management said it had recovered assets worth more than $5bn, after its collapse left investors, customers and lenders facing losses that US regulators estimated at more than $8bn.

Genesis files for bankruptcy

Cryptocurrency lender Genesis Global Capital filed for Chapter 11 bankruptcy on Thursday. Parent company Digital Currency Group had been in confidential negotiations with various creditor groups since mid-November, amid a liquidity crunch following the bankruptcy of FTX. Genesis said it has more than $150m in cash on hand which will provide ample liquidity to support its ongoing business operations and facilitate the restructuring process.

More customers but less money for AJ Bell

AJ Bell has been hit by a drop in inflows, despite attracting more customers. The company had a 2% increase in customer numbers on its advised platform from 145,371 to 148,636, and a 2% increase in numbers on its direct-to-consumer platform from 280,281 to 285,729 for the final quarter of 2022. However, its net inflows for both divisions fell from £1.4bn to £800m compared with the same period in 2021.

JPMorgan CEO says Bitcoin is ‘a hyped-up fraud’

Jamie Dimon has described Bitcoin as “a hyped-up fraud” during an interview with CNBC in Davos, Switzerland. The boss of JP Morgan told CNBC’s Squawk Box that crypto is a decentralised Ponzi scheme and that regulators “should have stopped all these a long time ago.” However, Dimon did say that blockchain, the technology behind Bitcoin, was something that could be “deployable”.

HEALTHCARE

Lloyds Pharmacy to close all Sainsbury's branches

Lloyds Pharmacy will close all 237 of its outlets in Sainsbury’s supermarkets by the end of the year, putting 2,000 jobs at risk. The group’s parent company Celesio bought Sainsbury's 280-strong pharmacy network in 2015 in a deal worth £125m. Lloyds said it would close the branches in the course of the year "in response to changing market conditions".  Nigel Swift, the deputy managing director of Phoenix UK, which owns the Numark and Rowlands pharmacy groups, said the Lloyds closures were the “clearest possible sign of the dire situation facing community pharmacy in England as a result of insufficient government funding.”

MANUFACTURING

Premier factory closure mooted

Premier Foods is to begin consulting on plans to close a manufacturing plant in Knighton, Staffordshire, in a move that could cost as many as 300 jobs. Premier said that the factory, which makes Marvel skimmed milk powder and Bird’s Custard as well as private label products, did not fit with its “branded growth model strategy”.

MEDIA & ENTERTAINMENT

Netflix co-founder Reed Hastings to step down as chief executive

Reed Hastings, the co-founder of Netflix, is stepping down as co-chief executive 25 years since the company’s launch to become the streaming giant’s executive chairman. Netflix is appointing Greg Peters, the company’s chief product and chief operating officer, to join Ted Sarandos as a co-chief executive. Mr Hastings said the changes were part of a long-in-the-making succession plan that gestated over several years. In announcing the move, Mr. Hastings pointed to Bill Gates and Jeff Bezos as other company founders who moved into chairman roles “after they pass the baton to others.”

REAL ESTATE

KKR real estate fund curbs redemptions in echo of Blackstone move

KKR has become the latest private equity firm to impose curbs on redemptions from its property fund after a surge in requests from clients. KKR Real Estate Select Trust received requests in the first-quarter tender offer period to repurchase 8.1% of its net asset value, exceeding the 5% quarterly limit, according to filings with the SEC. The trust fulfilled 62% of the total investors' repurchase requests. KKR is the latest manager of private REITS to limit investor withdrawals following similar curbs at REITs managed by Blackstone and Starwood Capital.

RETAIL

Inflation concern drives consumer confidence lower

GfK's Consumer Confidence Index dropped three points in January to -45 amid inflation woes and growing concern about another jump in energy bills. Confidence in the general economy for the coming 12 months fell one point to minus 54 and remains 22 points lower than last January, while the forecast for personal finances increased to minus 27 but is still 25 points lower than this time last year. The major purchase index fell six points to minus 40 – some 30 points lower than last January. GfK client strategy director Joe Staton said: “Consumers have a New Year hangover but it's of the economic kind, with high levels of pessimism over the state of the wider economy.”

ECONOMY

Falling energy prices offer ‘easier path’ out of inflation crisis, Bailey says

The Governor of the Bank of England said on Thursday that inflation is likely to fall rapidly this year after energy prices dropped sharply on the back of an unusually mild winter. Andrew Bailey said December’s fall in inflation to 10.5%, reported this week, had been expected but was “the beginning of a sign that a corner has been turned”. The lower energy prices have not yet fed through into inflation, Bailey added, meaning there was more optimism that the path through the next year will be an easier one. Traders are betting the BoE will continue raising rates to a peak of 4.5% by the summer. But Bailey would not endorse this view, pointing to pressures in the UK labour market that have been fuelling wage growth.

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