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Daily News Roundup: Friday, 24th September 2021

Posted: 24th September 2021

BANKING

Bank of England considers tough rules on crypto

Sam Woods, the Deputy Governor of the Bank of England, has said he would front-run global rules if necessary to avoid Britain's banks building up big exposures to crypto assets that were not backed by sufficient capital. Woods described controversial rules on crypto assets proposed by the Basel committee, the global standard setter for banking regulation, as “quite sensible”. The rules, which would require Banks to hold capital in reserve equal to their bitcoin exposure, could prevent the majority of lenders from participating in the crypto space. “At this point our banks don't have material exposures to crypto but you can see over time, there is an investor appetite and not just retail, also institutional investor appetite to have a little bit of this stuff,” Woods said.

Nationwide CEO and chairman quit

Both the both chairman of Nationwide Building Society, David Roberts, and chief executive Joe Garner, are to step down the lender revealed on Thursday. The Standard reports that while the departure of Roberts had been rumoured, the loss of Garner will be a serious blow to the mutual.

Customers given control over contactless limits

The limit for contactless card payments will increase from £45 to £100 from the middle of next month. Lloyds Bank, Halifax and Bank of Scotland customers will be able to set their own limits using their banking app. They will also be able to toggle contactless functionality on and off.

Nick Prettejohn named new TSB chairman

Nick Prettejohn, a former chief executive of Lloyd’s of London and Prudential UK, will join the board of TSB in November, the bank has announced, and will take over as chairman from Richard Meddings later in the year.

INTERNATIONAL

Investec expects 125% UK profit growth

Investec has raised its earnings guidance saying adjusted operating profit for its UK business is now expected to be at least 125% higher than the first half of 2021. Chief executive Fani Titi said: “The changes made to simplify and focus the group are bearing fruit, positioning the group well for the future. As Covid restrictions ease, we look forward to growth alongside our clients and increased face to face engagement, which is core to our values and culture.”

Deutsche Bank confident of performance

Deutsche Bank CFO James von Moltke said on Thursday that the bank was on track to achieve its 2022 goal of generating €25bn in revenue. "We do think that our performance is sustainable," von Moltke told a financial conference hosted by BofA Securities.

Goldman Sachs executive who led consumer banking launch set to depart

Harit Talwar, the Goldman Sachs executive who drove its new consumer lending business, Marcus, will exit the bank in October.

AVIATION

BA’s budget plans scuppered

A plan by British Airways to set up a new budget airline at Gatwick will be scrapped after pilots rejected the proposals last week. BA had hoped the new subsidiary would compete with low-cost carriers such as easyJet and Ryanair, but pilots would have been paid less than their easyJet counterparts. A spokesman for BA said: “With regret, we will now suspend our short-haul operations at Gatwick, with the exception of a small number of domestic services connecting to our long-haul operation, and will pursue alternative uses for the London Gatwick short-haul slots.”

FINANCIAL SERVICES

Reinsurers underplay climate risk by up to half, S&P estimates

S&P Global Ratings calculates that reinsurers could be underestimating their exposure to natural catastrophes by between 33% and 50%. “Unmodelled risks and the inherent difficulties in attributing extreme events to climate change create the risk that climate change may not be fully reflected in reinsurers’ catastrophe modelling, particularly in the short term,” said Dennis P. Sugrue, S&P Global Ratings credit analyst. “We believe that those companies that take a more proactive approach to understanding and adapting their exposure to climate risk will be better protected against future capital and earning volatility linked to climate-related losses.”

Pensions Regulator tells DC schemes to ‘prove value or wind up’

The Pensions Regulator (TPR) has told the trustees of smaller defined contribution (DC) pension schemes they must either demonstrate they provide value, or wind up. TPR will bring in new regulations from next month, which include more rigorous value for money assessments. The new rules mean trustees of DC schemes with less than £100m in assets must compare their scheme’s costs, charges and investment returns against three other schemes.

LEISURE & HOSPITALITY

Mitchells and Butlers encouraged by sales

Mitchells and Butlers has revealed that total revenue for the 51 weeks to September 18 was around 45% of pre-pandemic levels. Revenue had hit 97% since May and 104% in the most recent eight weeks, showing the impact of the gradual easing of Covid restrictions. The pub group, which described sales as “volatile” since pubs were permitted to reopen for indoor trading in May, had cash balances on hand of £197m, with undrawn unsecured facilities of £150m, it said in an update for the 51 weeks ended September 18.

PROFESSIONAL SERVICES

Small law firms excluded from economic crime tax

Small law firms will not have to pay into a fund to help pay for the fight against economic crime, City A.M. reports. The Government’s Economic Crime Levy aims to raise £100m annually from anti-money laundering (AML) regulated organisations, including legal practices, banks and accountancy firms. But only those with revenues above £10.2m will be subject to the new tax.

REAL ESTATE

China pumps $17bn into banks over Evergrande fears

As China moves to protect markets against the fallout from Evergrande's debt crisis, major western banks have sought to calm fears over their exposure to the property giant, which was due to pay a $83.5m debt interest bill due yesterday. UBS said it faces “immaterial” risk while HSBC said it was not concerned. Standard Chartered and Deutsche Bank have expressed similar sentiments. The People's Bank of China released $17bn into its banking system on Thursday as part of ongoing efforts to stem contagion.

RETAIL

DFS reports profits despite supply chain disruption

DFS has record pre-tax profit of £99.2m for the year to the end of June, over double the £43.6m last year. Despite its showrooms being closed for 21 out of 52 weeks of its financial year, sales rose by 7.2% to £1.06bn, helped by an increasing number of people ordering sofas online. On the back of the resilient trading, DFS said that it would restart its dividend with a final 7.5p-a-share payout.

ECONOMY

Bank of England holds rates, predicts inflation rise

The Bank of England has revised up its inflation forecasts, predicting it will rise above 4% and that high prices could last until April instead of the end of the year, lifting expectations of a rate rise early in 2022. The Bank’s Monetary Policy Committee voted to hold interest rates at 0.1% and to maintain current stimulus measures, but two members are now calling for support to be reined in. Analysts are now predicting that rates will climb to 0.25% as soon as February. A further increase to 0.5% is possible later in the year. Ruth Gregory, of Capital Economics, said: "The MPC is getting closer to raising rates. Our hunch right now is that the second half of the year seems more likely. But the clear risk is that it happens earlier."

Growth slows to weakest level since March

Britain’s economic growth has been brought to its lowest levels since pandemic restrictions were eased in March, according to the latest IHS Markit/Cips survey. Growth in private sector output slowed in August as firms struggled with severe shortages while costs rose at the fastest pace since the late 1990s. The flash composite purchasing managers’ index dropped to 54.1 in September from 54.8 in August. City economists had forecast a reading of 54.5. Chris Williamson, chief business economist at IHS Markit, said the data would “add to worries that the UK economy is heading towards a bout of ‘stagflation’, with growth continuing to trend lower while prices surge ever higher”.

OTHER

Banks lend billions for Arctic fossil fuel extraction

JPMorgan Chase, Barclays, Citigroup and BNP Paribas are among major banks and investors piling billions of dollars of investment into oil and gas companies preparing to ramp up activity in the Arctic, despite many holding commitments to restrict fossil financing in the region.

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