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Daily News Roundup: Friday, 3rd February 2023

Posted: 3rd February 2023

BANKING

NatWest boss U-turns on refusal to attend parliamentary hearing

Dame Alison Rose, the CEO of NatWest, has bent to pressure to answer MP’s questions next week after previously claiming she was too busy preparing for the bank’s annual results. MPs will question Rose and the bosses of Lloyds Banking Group, HSBC, and Barclays, on why they have failed to pass on benefits from rising interest rates to ordinary savers, while increasing borrowing costs on mortgages and personal and corporate loans. Chair of the Commons Treasury select committee Harriett Baldwin said MPs “may explore whether banks are boosting their profits by increasing the gap between the interest paid out to savers and the interest paid in by borrowers.”

Lord King: No benefit to having CBDC

Former Bank of England governor Lord King of Lothbury has revealed his scepticism about introducing a central bank digital currency (CBDC) in Britain. He was a member of the Lords Economic Affairs Committee, which carried out an inquiry into CBDCs. Lord King made the point that payments are already digital and there are no problems in our payments system “to which a CBDC is the only or even the most obvious answer.” Lord King added: “The UK should certainly aim to be at the forefront of fintech, but we need to be careful in determining the respective roles of the state on the one hand and the role of competitive private sector players on the other. Central banks are important regulators of payment systems. The case for them to be direct providers of digital retail payments has yet to be made.”

Zopa bags £75m in fresh funding

London-based fintech Zopa revealed on Thursday that it had raised £75m as part of a major growth push and plans for a flurry of dealmaking in the coming months. “It is a clear validation of Zopa's responsible, sustainable and profitable approach to lending, our strong unit economics, and our vision to build Britain's best bank, ” CEO Jaidev Janardana said.

PRIVATE EQUITY

CD&R proposes deal to buy Focus Financial

Clayton, Dubilier and Rice is considering a $4.1bn buyout offer for investment adviser Focus Financial Partners Inc, according to a regulatory filing on Thursday.

Carlyle courts ex-Goldman executive Harvey Schwartz for CEO

Carlyle Group is in talks with the former co-president and chief operating officer of Goldman Sachs Harvey Schwartz, who left the bank in 2018 after losing out on the top spot to David Solomon.

INTERNATIONAL

Santander profit jumps on rate rises

Santander on Thursday reported a net profit of €2.29bn ($2.52bn) in the October to December period, above expectations. However, Loan loss provisions more than doubled in the quarter to €3.02bn, mainly in the United States and Brazil, compared to same quarter of 2021. Net interest income rose 17% to €10.2bn in the quarter on the back of higher interest rates. In the UK, the Spanish-owned lender put aside £321m for bad debts in 2022, and warned of a 10% fall in house prices this year as interest rate hikes knock homebuyer demand. Profits rose to £1.4bn last year, their best since 2010.

Lazard looks forward to M&A revival

Lazard reported an 80% decline in fourth-quarter profit on Thursday following a slump in dealmaking. But CEO Kenneth Jacobs expects improving market sentiment to revive mergers and acquisitions. "Strategic M&A dialog seems to be increasing and market sentiment seems to be improving," Jacobs said. "We're well positioned to capitalize on any M&A recovery."

ING fourth quarter profits grow

The largest bank in the Netherlands, ING Groep NV, reported fourth quarter net profit of €1.09bn ($1.20bn), slightly up on expectations. "Despite the challenging operating conditions and lingering effects of COVID-19, we performed well," CEO Steven van Rijswijk said in a statement, citing rising inflation and higher interest rates as factors.

HSBC begins Saudi Arabia hiring spree

HSBC aims to increase headcount in its global banking and markets business in Saudi Arabia by 10-15% this year, Greg Guyett, the division's chief executive, has said. The move is designed to capitalise on a wave of financing activity in the country.

Nordea Q4 profit up

Finnish banking group Nordea reported an operating profit of €1.6bn ($1.76bm) in the fourth quarter, up from €1.28bn a year ago.

AVIATION

BA and Virgin restart flights to China

Virgin Atlantic and British Airways are to restart flights to China for the first time since the pandemic. However, because the airlines have to avoid Russian airspace due to sanctions, the journey time will be two hours longer. State-owned rivals from China are still using Russian airspace to fly to the UK, however.

Heathrow boss to step down

John Holland-Kaye will quit as Heathrow’s chief executive later this year after nine years at the helm. His departure follows the airport racking up £4bn of losses during the pandemic and ongoing clashes with airlines over restricting flights during last summer’s travel chaos.

FINANCIAL SERVICES

Peel Hunt and rivals create new retail offering

Peel Hunt will work with City rivals to create a service that will allow retail investors greater access to flotations and follow-on share offerings. The listed broker’s deal with Hargreaves Lansdown, Jefferies, Numis and Rothschild & Co involves a new company called RetailBook. It means the relaunch of Peel Hunt’s existing REX service, which is intended to give ordinary investors easier access to capital-raisings.

Record annual outflow from retail funds

Investors withdrew £25.7bn from retail funds last year, the largest British annual outflow in 20 years. The Investment Association said the £282m withdrawn in December made it the tenth month of net retail outflows from funds in 2022, as investors reacted to economic and global political turmoil.

REAL ESTATE

Warning of surge in home repossessions as mortgage payments increase

Experts fear the Bank of England’s latest interest rate hike could lead to a further rise in home repossessions. The latest Government data shows there were 3,680 mortgage repossessions between July and September last year, up 30% on the same period in 2021. Analysis by the wealth management company Quilter shows there is often a correlation between the Bank of England's interest rate and repossessions. Karen Noye, mortgage expert at Quilter, said: “Increases in the Bank of England’s base rate will make mortgages more unaffordable and if someone goes into arrears with their mortgage they run the real risk of their home being repossessed.”

RETAIL

JD Sports to open 350 new shops globally each year

JD Sports has set out plans to open up to 350 shops globally each year. The sports fashion retailer's chief executive, Regis Schultz, said the company expects to generate £1bn in cash each year as he outlined the strategy. Mr Schultz, who took over as chief executive officer last August following the departure of Peter Cowgill, said it would continue to invest in the UK but that new openings would be focused on North America and continental Europe. He also shrugged off concerns over Nike and Adidas selling more directly, saying JD was selling products that were about "lifestyle and they are about sports". The plans come weeks after JD said annual profits will be towards the top end of expectations following strong sales growth over the key festive period.

ECONOMY

Bank of England raises interest rates to 4%

The Bank of England raised interest rates from 3.5% to 4% on Thursday – the tenth consecutive rise and a 15-year high. The move was widely predicted as inflation has persisted and remains close to its highest level for 40 years. However, the Bank said that inflation “is likely to have peaked” and a recession would be less severe than previously predicted. The outlook for growth though is poor with the Bank predicting output will not return to the pre-Covid peak until 2026. The BoE went on to say it expects falling energy costs to help push the headline rate of inflation down steeply this year from December’s 10.5% to 3.5% by the end of the year, and then 1% in 2024. Meanwhile, City analysts expect the Bank to raise interest rates again to 4.5% in the spring before a series of cuts next year brings the Bank rate back to 3.5%. Chancellor Jeremy Hunt responded to the rate cut by effectively ruling out tax cuts in his budget next month. Jeremy Hunt said the Government needed to "support" the interest rate rise by not making decisions that could make it harder to bring down inflation.

ECB hikes rates to 2.5%

The European Central Bank (ECB) on Thursday hiked interest rates 50 basis points and indicated that further increases are coming this year. ECB president Christine Lagarde said the rate of price increases across the bloc is still “far too high” despite it dropping a few months in a row to 8.5%. Borrowing costs across the eurozone are now 2.5%.

OTHER

Millions default on household bills as cost of living crisis worsens

Millions of households failed to pay their bills in January, research from the consumer campaign group Which? reveals. Around 2.3m households defaulted on at least one mortgage, rent, loan, credit card or household bill payment in January, up from 1.9m in December. It estimated that more than 16m households had to make at least one change to their normal finances last month, such as cutting back on essentials, dipping into savings or selling possessions. There is typically an increase in the number of bill defaults in January, but Which? warned that persistently high inflation was stretching household finances to the extreme.

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