BANKING
TSB reveals record profits
TSB has revealed its highest pre-tax profits since relaunching in 2013 as increased lending and higher interest rates bumped up its total income to more than £1bn. Statutory pre-tax profits rose to £183.5m for 2022, from the £157.5m it made the previous year. Total statutory income surged by more than 12% to £1.1bn, which TSB said reflected it lending more, as well as taking in more cash from higher interest rates and deposit margins. Robin Bulloch, TSB's chief executive, said: “With a relentless focus on improving our service, and more satisfied customers, we have delivered a strong set of results for 2022.” He added: “This includes balance-sheet growth, reduced underlying costs and improved overall profitability and, for the first time, TSB will pay a dividend to our parent company Sabadell.” Executives confirmed that most staff were in line for larger bonuses this year, worth 11.8% of their pay, compared with 10.2% a year earlier.
NatWest to close another 23 branches
NatWest is to shut another 23 branches in England and Wales, adding to a raft of high street banking closures already announced this month. The sites will close in the first half of this year. The bank said the closures were due to more customers moving to mobile and online banking. The company has announced 102 closures since last February, and the latest announcement brings the tally of high street bank branches slated for closure since the start of January to 87. A NatWest spokesperson said: “We understand and recognise that digital solutions aren't right for everyone or every situation, and that when we close branches we have to make sure that no one is left behind,” adding: “We take our responsibility seriously to support the people who face challenges in moving online, so we are investing to provide them with support and alternatives that work for them.”
INTERNATIONAL
Morgan Stanley bankers fined $1m over messaging
Several bankers at Morgan Stanley have been fined more than $1m for using WhatsApp and other unauthorised messaging services to carry out business. The bank imposed the penalties after an investigation into record-keeping failures at a number of financial firms. The probe saw Morgan Stanley pay a $200m fine to the US Securities and Exchange Commission and the Commodity Futures Trading Commission last year. Fines handed to banks and other financial firms over the violations have now exceeded $2bn, with lenders including Goldman Sachs, Citigroup, Bank of America and Barclays paying penalties.
Senators urge PCAOB to increase oversight of crypto auditors
Democratic Senators Elizabeth Warren and Ron Wyden have called on the Public Company Accounting Oversight Board (PCAOB) – the US’ accounting watchdog - to increase oversight of firms that audit cryptocurrency companies in the wake of the collapse of crypto exchange FTX. In a letter to the watchdog, the senators asked why auditing firms failed to identify corporate mismanagement and a lack of internal controls at FTX. They added: “When PCAOB-registered auditors perform sham audits - even for firms that may lay outside of the PCAOB's jurisdiction - they tarnish the credibility of the PCAOB.”
BofA promotes 360 employees in diversity push
Bank of America has promoted 360 employees to managing directors, with more than 50% of these representing women and people of colour.
AVIATION
Airports may be breaking competition law, says CMA
UK airports could be breaking competition law, according to information received by the Competition and Markets Authority (CMA). The regulator, along with the Civil Aviation Authority (CAA), has written to airport operators warning of “serious consequences” for illegal information sharing. The letter warns that the watchdog has “recently received intelligence to suggest that some UK airport operators might not always be complying with competition law.” It adds that the CAA “is aware of this intelligence and shares the CMA’s serious concerns about the possibility of competition law breaches in the sector.” The CMA and CAA, which did not specify which airports they had concerns about, warned they may take “formal enforcement action” if they receive further intelligence of suspected competition law breaches.
FINANCIAL SERVICES
‘Wild West’ crypto firms failing basic checks
The majority of crypto firms seeking to do business in the UK fail basic checks needed to operate, with 85% unable to meet the minimum standards required by the Financial Conduct Authority (FCA). The City watchdog has told MPs on the Treasury Select Committee that its “robust” approach means just 15% of applicants were granted registration, with the regulator identifying “significant failures” over issues including customer due diligence, risk assessments, transaction monitoring and governance. In some cases, the FCA also identified “likely financial crime or direct links to organised crime” and referred the firms involved to law enforcement agencies. The report from the regulator comes as the committee conducts an inquiry into the regulation of the sector following several high-profile scandals, including the collapse of crypto exchange FTX. Reflecting on the FCA data, committee chair Harriett Baldwin said: “These statistics have not disabused us of the impression that parts of this industry are a Wild West.”
Blackstone fails to stem property fund withdrawals as profits fall
Blackstone has failed to stem redemption requests from its $69bn real estate investment fund, which limited withdrawals at the end of last year as investors rushed to pull cash from the world’s largest alternative asset manager. Its fourth-quarter distributable earnings fell 41% year-on-year to $1.3bn. Its net profit from asset sales fell sharply by 55% to $366.9m during the fourth quarter to December, down from $817.5m a year earlier.
Provident Financial to ditch 140-year-old name
Provident Financial is to change its 140-year-old name and will be known as Vanquis Banking Group from March. Meanwhile, Ian McLaughlin is to replace Malcolm Le May as CEO.
RETAIL
Retail sales drop sharply
A new survey reveals that retail sales dropped sharply at the start of 2023, with a build-up of excess stock also suggesting that the pace of price rises will continue to slow. The CBI's distributive trades survey said the volume of goods sales has fallen significantly this month, which registered a measure of -23%, down from +11% in December. The survey also found the gauge of orders placed with suppliers fell to -32% compared with January last year, down from -21% last month. Orders are expected to fall again in February, but the pace of decline is expected to slow to -19%. Retailers also reported that stock levels this month were higher than the volume of goods they expected to sell, rising to 23%, up from 16% in December.
ECONOMY
Haldane warns of rising mortgage costs
Former Bank of England chief economist Andy Haldane has warned of “more pain to come” from rising mortgage costs, while also predicting that real wages will fall again this year due to high inflation. With the Bank forecast to hike its main interest rate from 3.5% to 4% next week as it looks to cool inflation, Mr Haldane said: “It is painful and I fear there is more pain to come as those mortgage rate rises from last year begin to hit people’s bank accounts over this year.” Mr Haldane told BBC Radio 4’s Today programme that households and businesses have faced a “terrible double whammy” of the pandemic and the cost-of-living crisis. He said there has been a “lost decade and a half in terms of pay rises in inflation-adjusted terms,” going on to say that 2022 saw real pay fall “and we are most likely to see that same happen again.” This, he added, “is putting acute financial stress and indeed mental stress on a great many households.”
Hunt calls for ‘disciplined’ approach
Chancellor Jeremy Hunt says the Government must maintain its “disciplined approach” to the public finances as it looks to bring down inflation. A Number 10 report on a Cabinet meeting at Chequers details that Mr Hunt and Prime Minister Rishi Sunak said inflation was only predicted to fall because of the “tough decisions” taken in the Autumn Statement. The Chancellor said it would be necessary to “retain this disciplined approach in order to reduce inflation, because it is the greatest driver of the cost of living.” This comes amid calls from some Conservative MPs who have urged the Chancellor to cut taxes in his Budget in March.
OTHER
Investor Forum: LSE's decline is 'breathtaking'
The Investor Forum, which represents shareholders with more than £680bn in UK equities, says British stocks are no longer seen as must-own assets and has described the London Stock Exchange’s decline as “breathtaking.” It said the UK has been hampered by disagreements over executive pay, ESG issues and box ticking on corporate governance. Executive director Andy Griffiths said: “The declining relevance of UK equity markets over the last 25 years has been breathtaking.” He warned: “We can’t simply hope for a better outcome. Practical steps are needed from companies, investors and regulators if we are to create a vibrant marketplace to attract capital.” The Investor Forum flagged friction between boardrooms and institutional investors, pointing to “disquiet among a number of FTSE chairs with the state of stewardship.” It added that many of the clashes were down to a “difference of opinion” over pay and over-boarding.
Dealmaking dips to a five-year low
Mergers and acquisitions involving Europe’s leading banks fell to their lowest level in five years last year, according to S&P Global Market Intelligence. Just 103 deals were closed involving banks in Europe in 2022, down from 123 in 2021 and well below the pre-pandemic total of 224 recorded in 2019. The decline came as monetary policymakers increased rates in a bid to ease soaring inflation, reducing access to the cheap cash that had driven dealmaking. Despite the decline, bankers have predicted a rebound in activity this year. Analysts at Peel Hunt forecast that the number of smaller deals will increase as firms finance their own deals without the need to borrow, with the investment bank’s Michael Nicholson saying: “The sheer weight of dry powder, following a period of record fund raising, demands the deployment of capital.”