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Daily News Roundup: Friday, 3rd July 2020

Posted: 3rd July 2020

BANKING

Lord Cromwell exits Banking Competition Remedies

Lord Cromwell is stepping down as executive chairman of Banking Competition Remedies, the body charged with managing a fund to increase competition in the business banking market. He will be replaced by Richard Anderson, with the role to become a non-executive position. Banking Competition Remedies has its origins in the £45bn taxpayer-funded bailout of Royal Bank of Scotland, with it launched to distribute the £775m RBS agreed to provide to improve service and competition in business banking. The body, formed in 2018, has seen a number of setbacks, including Metro Bank having to return £50m of its £120m allocation as growth plans were hit by an accounting blunder, while Nationwide handed back the same sum having opted against entering the business banking market due to economic fallout of the COVID-19 pandemic. Banking Competition Remedies was also caught up in a conflict of interest dispute with Starling Bank. The body said Lord Cromwell has “decided to stand down to coincide with the completion of most of the major decisions” required of it.

Monzo founder steps down from board

Monzo co-founder Tom Blomfield has left the digital bank’s board. Mr Blomfield, who served as the company’s chief executive until earlier this year, is said to be leaving the board to concentrate on his role as president of the start-up, a position he took so as to focus more on its strategy than on meeting its regulatory requirements. Sources say Mr Blomfield is still expected to attend board meetings but will not be given an official board observer role.

Tesco Bank lowers interest rate on current accounts to 0%

Tesco Bank has announced that interest rates on current accounts would drop to 0%. In an email to customers, the lender stated: “During March 2020, the Bank of England decreased base rates from 0.75% to their lowest ever level of 0.10%. Given this significant change to the base rate, we’ve reviewed our current account interest rate and made the decision to reduce this to 0%.” The bank, which has over 5m customers, made the announcement as savings accounts across the country are affected by the financial impact of the coronavirus pandemic.

PRIVATE EQUITY

Kennet raises £200m to invest in software firms

Kennet Partners has raised £200m for a new fund to invest in software companies, raising the investment for its fifth fund in partnership with Swiss private banking firm Edmond de Rothschild. Saying the fund will focus on software companies riding a wave during “times of profound change,” Hillel Zidel, managing director at Kennet Partners, said: “The current pandemic has significantly accelerated the move to digitisation.”

INTERNATIONAL

EU banks plot payments system

A group of EU banks say they expect to have a “truly European” payments system up and running in 2022, with policymakers and central bankers eager to deliver a rival to Mastercard and Visa, as well as tech firms like Alipay and Google. The European Payments Initiative will offer a card for consumers and retailers across Europe. Banks that have already signed up include BNP Paribas, Commerzbank, Deutsche Bank, Santander, ING, UniCredit and Societe Generale. The European Central Bank has welcomed the launch of the unified payment system.

BNP takes on Wall Street in risky tilt at crown

BNP Paribas has ambitions to move ahead of Deutsche Bank and Barclays as Europe’s investment banking leader and could also take on Wall Street players such as JPMorgan Chase.

Deutsche works with regulators on Wirecard Bank bailout

Deutsche Bank is working with Germany’s financial watchdog BaFin on a potential bailout of Wirecard Bank, the deposit-taking unit of the scandal-hit payments group.

Singapore traders team up in bid to improve lending practices

Hin Leong Trading and three other Singapore-based commodity traders are to improve lending practices and transparency by joining forces. The announcement represents "the first set of best practices in commodities financing that banks in Singapore are developing with the trading community, with support from the government agencies," according to Ong-Ang Ai Boon, Director of the Association of Banks in Singapore.

IMF calls for Ukraine central bank independence to be protected

The International Monetary Fund has said the independence of Ukraine’s central bank must be retained following the unexpected resignation of governor Yakiv Smoliy.

MEPs decide whether to fight for gender balance at bank watchdog

MEPs are considering whether French regulator François-Louis Michaud should become executive director of the European Banking Authority, with some calling for a female candidate to shake-up male domination of financial policymaking.

AVIATION

Ryanair reveals passenger figures

Ryanair has revealed that it flew just 400,000 passengers in June, representing a 97% fall compared to the year earlier period. However, with April and May seeing a combined 110,000 people fly on the airline, the figures reveal a slowly growing demand for aviation. Meanwhile rival Wizz Air carried 502,253 passengers in June, an 86.3% fall on 2019’s figure.

FINANCIAL SERVICES

UK vows to complete City assessments

The Government has vowed to provide the paperwork that will ensure the City of London maintains post-Brexit EU access within the next two weeks, having this week missed the deadline. Downing Street has blamed the EU for missing the deadline, saying the UK received the paperwork later than it had anticipated, adding that it was far more detailed than expected. City minister John Glen told a House of Lords committee he was unsure when the EU would provide clarity on the issue, saying that while the UK will be able to conclude the assessments needed to ensure the UK’s financial services industry maintain access to EU markets “in the next couple of weeks”, the EU’s assessment for the UK “is a matter for them and I can’t tell you exactly when that would be.”

Wirecard saga leads Odey to sue German regulator

Hedge fund tycoon Crispin Odey is planning to sue the German financial regulator for millions of pounds after it banned short-selling on collapsed payments firm Wirecard last year. He said his firm has claimed for €18m from BaFin because of the ban and for failure to act on concerns raised by both whistleblowers and by the Financial Times.

LEISURE AND HOSPITALITY

Restaurant owner falls into administration

Casual Dining Group, the owner of restaurant chains Café Rouge and Bella Italia, has gone into administration. More than 90 outlets will close immediately, with 1,900 of the firm's 6,000 staff losing their jobs. Some 159 of the group's 250 outlets will remain open. Turnaround fund Aurelius Equity Opportunities has reportedly made an offer to take over Cafe Rouge and Bella Italia, while Endless is said to be competing with private equity investor Trispan for control of the Las Iguanas brand.

Mitchells & Butlers reports £121m lockdown loss

Pub chain Mitchells & Butlers has recorded a £121m pre-tax loss in the half-year ending in April as a result of lockdown restrictions. Operating profit fell to a £51m loss, compared to a £140m profit a year earlier, while revenue was at £1.039bn, compared to £1.186bn in 2019.

Ladbrokes head speaks out on gambling regulation

Ladbrokes Coral head Kenny Alexander has cautioned that gamblers could turn to the unregulated black market if the industry is over-regulated, even as the House of Lords Gambling Industry Committee publishes a report urging Government action to reduce harm resulting from gambling.

REAL ESTATE

Housing bosses call for stamp duty cut

Business leaders from the housing sector have written to Rishi Sunak calling for a new Help to Downsize scheme they believe will boost the property market, driving its recovery by freeing up larger homes. In a letter to the Chancellor, the signatories argue that waiving stamp duty for older homeowners moving to smaller, more suitable homes will help open up space on the property ladder for families seeking larger homes and first-time buyers. The letter says that a quarter of people will be 65 or over by 2040, with this equating to 18m people – up 5m on the current number. However, it adds, the UK’s housing stock “is not adequate to meet this change.”

RETAIL

Sales down in June despite online surge

Analysis of retail data shows that total like-for-like sales were down 14.4% year-on-year in June, despite online sales rising by 102.6%. The 14.4% fall marks an increase on the 18.3% dip seen in May but still represents the fifth consecutive month of negative like-for-like sales.

ECONOMY

Executives expect unemployment to rise and sales to dip

A Bank of England poll of British business executives suggest that unemployment will rise to 3.5m this year. Across the 2,776 people surveyed, the average expectation was that the jobless rate would hit 11% by year end, far exceeding the official unemployment rate of 3.9% recorded in April. Firms taking part in the survey also said that, on average, 30% of employees had been furloughed in June, down from 36% in May, with this expected to fall to 18% in Q3 and 5% in the final three months of the year. The poll also found that executives expect sales to be 38% lower than they would have been had there been no coronavirus outbreak, foreseeing a 26% dip in Q3 followed by a 16% hit in Q4 and a 10% slide in Q1 2021. The firms quizzed also said they expect costs to be 7% higher in the next quarter than they would have been had the pandemic not occurred.

OTHER

Corporate debt levels unsustainable?

David McIlroy in an opinion piece for City AM warns of growing concern that levels of corporate debt are unsustainable. He says companies have been loaded up with levels of debt via Bounce Bank Loans and the Coronavirus Business Interruption Loan Scheme which would be unthinkable were interest rates not close to zero. He points to a report from TheCityUK’s Recapitalisation Group, which last month predicted that UK businesses would have £100bn of unsustainable debt by March 2021, with around half of this owed by SMEs. This, he suggests, “will be a significant barrier to economic recovery.”

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