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Daily News Roundup: Friday, 2nd November 2018

Posted: 2nd November 2018


City staff warned over Brexit

Société Générale has warned its staff they must move to Europe or face losing their jobs as financial institutions activate plans for a no-deal Brexit. The warning will raise fears that it may be too late to stem the loss of jobs from banking amid concerns at the prospect of the UK leaving the EU without an agreement for the financial services sector. A spokesman for Société Générale said: “In the event of a loss of passporting within the Brexit framework some roles within the financial services industry that are currently performed out of the UK will no longer be able to be performed from here for regulatory reasons. We are actively engaged with a small number of staff initially impacted to help them make informed decisions about moving to the EU. For those staff wishing to move, we are fully committed to supporting them.” Meanwhile, new research shows that France and Italy are offering the most generous tax breaks to London bankers moving to the continent after Brexit, while the least beneficial country is Germany.

Barclays turns to Higgins as chairman

Barclays has announced that Nigel Higgins, deputy chairman of Rothschild & Co, will take over from John McFarlane as its next chairman after the bank’s annual meeting in May next year. Crawford Gillies, the senior Barclays independent director who led the search for a chairman, described Mr Higgins as the “ideal candidate”. Mr Crawford said: “He is a hugely respected banker, a strategic thinker, someone with extensive international experience and he has a strong positive leadership style.” Barclays said Mr Higgins would be paid an “all-inclusive fee” at the same rate as Mr McFarlane, who received £800,000 in 2017.

Sweeney moves on

Chris Sweeney has stepped down as managing director of Vanquis Bank, the credit card arm of Provident Financial. Provident’s CEO Malcolm Le May will become managing director of Vanquis Bank on an interim basis.

Monzo launches interest-earning savings account

Monzo has launched its first interest-earning savings pot. Customers will be able to create so-called savings pots within their Monzo account that will earn interest at 1% per year, paid monthly, on savings of £1,000 and above. Tom Blomfield, the company's chief executive, said: “At Monzo, our goal is to build a marketplace bank, that lets people access a choice of products and services from across the market, all from within one app.”


Former Goldman bankers face charges

Two former Goldman Sachs bankers and Malaysian financier Jho Low have been hit with U.S. criminal charges in relation to conspiring to launder billions from 1MDB, Malaysia’s sovereign wealth fund. Prosecutors allege that Tim Leissner and Roger Ng worked with Mr Low to bribe government officials to win 1MDB business for Goldman Sachs. The FT reports that Goldman has placed a current employee – Andrea Vella, the former co-head of investment banking in Asia, on leave as it studied details of the accusations.

ING profits rise despite money laundering penalty

ING Group has reported a profit of €776m (£683m), ahead of analysts’ expectations of net profit of €630m. The Dutch bank was fined €775m in September for inadequate supervision of suspicious client transactions. CEO Ralph Hamers commented: “The settlement did have an impact on our reputation and quarterly results.” Revenues increased by 5.4% to €4.65bn, and underlying profit before tax, which does not include the fine, increased 6.5% to €2.12bn.

Profits rise at Credit Suisse

Credit Suisse chief executive Tidjane Thiam has taken the investment bank, which he is transforming into a leading wealth manager, to a third-quarter profit of 424m Swiss francs, up 74%. Credit Suisse hopes to make a profit for the full year, the first time it will have done so for several years, and Mr Thiam plans to pay half of it to investors once his restructuring is complete. Mr Thiam said: “I can tell you in a quarter like this, the old Credit Suisse would have lost hundreds of millions.” The FT’s Lex suggests that Mr Thiam needs to shape the investment bank more adroitly.

New York hedge fund takes 3.1% stake in Deutsche Bank

US hedge fund Hudson Executive Capital has revealed a 3.1% stake in Deutsche Bank worth around €550m. Deutsche boss Christian Sewing has welcomed the investment.

Germany’s Landesbanken struggle to win clean bill of health

The FT reports that NordLB, a Hanover-based Landesbank, is in talks with suitors which could herald wider consolidation in the German public sector banking market.


Morgan Sindall ‘sticking to its knitting’

Construction firm Morgan Sindall has indicated that it is on track to post record revenues and profits. Founder John Morgan, who remains chief executive, said his company, which turned over £2.8bn last year, had kept its finances in order by focusing on organic growth and smaller, less risky contracts, and “sticking to our knitting”.


Claims of Brexit financial services deal dismissed

Downing Street has dismissed reports that Theresa May has reached a deal with the EU on post-Brexit financial services. A report yesterday suggested that a tentative deal had been reached on all aspects of a future partnership on services and the exchange of data. Such a deal would guarantee UK companies access to EU markets as long as domestic regulations remained broadly aligned with those set by Brussels. However, the PM’s spokesman described the reports as “misleading”. He added: “This is speculation. While we continue to make good progress, agreeing new arrangements for financial services negotiations are ongoing.” The EU’s chief negotiator Michel Barnier has also quashed the reports, tweeting: “Misleading press articles today on Brexit and financial services. Reminder: EU may grant and withdraw equivalence in some financial services autonomously.”

City needs to see small print before cheering deal

Katherine Griffiths comments in the Times that reaction to a proposed financial services deal between the UK and EU has been guarded. Catherine McGuinness, the City of London Corporation's policy chief, said it was "positive" that financial services were due to be included in a political declaration between the UK and EU. However, she said that without seeing the text it was impossible to judge whether British negotiators have won real concessions from their EU partners. Meanwhile, Simon Morris, a partner with law firm CMS, summed up the City's scepticism, saying: "This sounds promising - if only a bit too good to be true.” Elsewhere, Nils Pratley writes in the Guardian that the City should temper its excitement, it could yet end up as a humble rule-taker. Alex Brummer in the Mail also comments on the potential financial services deal, stating that the City needs to lift its game and make sure it dominates new markets such as the rapidly expanding renminbi trade. He says an “equivalence” deal should only be a starting point.

Lancashire reveals special dividend

Insurer Lancashire is returning $40m (£31m) to shareholders with a special dividend as it does not anticipate needing any more capital for its reinsurance business. For the year-to-date, profit before tax was $49.6m, while return on equity was 3.9%. For the quarter its loss before tax was $25.3m, at the very bottom end of previous predictions.

Stake in Admiral-backed price comparison site sold at discount

Diane Engelhardt, wife of Admiral-founder Henry, has bought 17% of U.S. price comparison site for $25m, reducing the British insurer’s stake from 71% to 59%.

Swiss Re swings back into profit despite natural disasters

Reinsurer Swiss Re has successfully weathered $1.6bn in natural disasters claims to post net income figures of $1.1bn, up from a $468m loss in the same period last year.


Manufacturing output growth weakest since mid-2016

A fall in new orders led to a “sharp slowdown” in manufacturing production growth, according to the latest IHS Markit/CIPS Purchasing Managers’ Index (PMI), which fell to a 27-month low of 51.1 in October, down from September's 53.6, its weakest since August 2016. Duncan Brock, director at the Chartered Institute of Procurement and Supply, said Brexit continued to hit client confidence and suggested that “alarm bells were ringing” in the sector. The escalating trade war between China and America and new EU emissions tests on cars, a big UK export industry, also weighed on performance last month.

Shipyard set to close

Babcock has told staff at Appledore Shipyard in Devon that the site will close by the end of March 2019, despite being offered a £60m contract by the Ministry of Defence. Babcock said all 199 workers will be offered a move to Devonport Dockyard, also owned by the firm, 45 miles away. The GMB union said it wanted answers from the government and from Babcock about the £60m package which would have offered extra work at Devonport.


House price gap trend to reverse

New research predicts that the North-South house price divide will reverse in the next five years as property values rise faster in northern England, Wales and Scotland than those across London. On a national level, house prices are expected to increase by 14.8% from 2019 to 2023, a rise that would amount to around £32,000 extra on the average cost of a home.


Store closures hurt Carpetright sales amid restructuring

Carpetright has said that its underlying sales declined in its first half, damaged by the disruption caused by a restructuring programme that saw it close 67 underperforming stores. For the year to April 28, the retailer posted a loss of £70.5m. Chief executive Wilf Walsh said: “This is a transitional year as we work through our restructuring plan. This activity is firmly on track and has started to yield benefits.”

Vulture funds step up pressure on Wyevale Garden Centres

According to the FT, so-called vulture funds are circling Wyevale Garden Centres which could push owner Guy Hands to break up the business rather than sell it for a nominal fee.

Debenhams MD moves to Bridgepoint

Debenhams’ managing director Ross Clemmow has left to join Bridgepoint in the same role. Bridgepoint owns restaurant chains Zizzi and Ask and retailers Fat Face and Hobbycraft.


BoE signals faster pace of interest rate rises under an orderly Brexit

Mark Carney, the governor of the Bank of England, has said a smooth Brexit could lead to a rise in interest rates to curb inflation. Business was holding back significant investment due to Brexit uncertainty, Carney said, which could be unleashed once clarity was achieved. An orderly Brexit was the most likely outcome in BoE assessments, but Mr Carney did not rule out rate rises in the event of a no-deal too. Prices could be forced up as demand outweighs supply requiring a hike interest rates to dampen them. The MPC voted unanimously to keep interest rates unchanged at 0.75% on Thursday.


Leeds seeks to attract financial services firm

Local politicians in Leeds are looking to spend money to entice an unknown financial services company to move into the area. Work to help bring the company to the Leeds City Region, dubbed Project Lapwing, is expected to cost the authority £1m. It is hoped that, if successful, the company can “safeguard” 450 jobs, create another 400 jobs and help boost investment in the region by up to £25m by 2028.

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