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Daily News Roundup: Friday, 4th February 2022

Posted: 4th February 2022

BANKING

NatWest deepens bonus pool to £300m

NatWest's board plans to pay almost £300m in bonuses to staff, with this marking the first time it has pushed through a year-on-year increase in the pot since its Government bailout in 2008. A source says the taxpayer-backed bank’s bonus pool would be over 40% bigger than the £206m paid out in 2021 but shallower than the £305m awarded in 2020. NatWest will retain a £2,000 cap on cash pay-outs set after the £45.5bn taxpayer rescue. While the Treasury owns a 52% stake in the lender, it is expected to reduce its interest to below 50% this year. NatWest's operating profit for the first nine months of 2021 was £3.6bn, putting the bank on track to record one of just a few annual profits since 2008.

Nationwide and Santander raise mortgage rates

Nationwide became the first lender to announce it will increase mortgage rates after the Bank of England's decision to raise the bank rate from 0.25% to 0.5%, with Britain's biggest building society passing the full increase onto customers as of March 1. The bank’s ‘base mortgage rate’ and ‘standard mortgage rate’ deals will see rates rising to 2.5% and 3.99% respectively, with tracker mortgages also seeing the full increase. Nationwide has not said whether the increase will be passed onto savers. Santander was not far behind, announcing rates on its standard variable rate would rise by 0.25 percentage points to 4.74% from March, with tracker rates increasing by the same amount.

Virgin Money CEO rules out TSB bid

Virgin Money CEO David Duffy has ruled out a bid for TSB, saying: “We don't want to do any large transactions. The future is actually not about scaling up, it is about digital.” TSB, which is owned by Spain's Sabadell, has been a target for Co-op Bank and, reportedly, Nationwide Building Society.

PRIVATE EQUITY

Carlyle sees record sales

Private equity Carlyle firm sold out of a record $15.3bn of deals in the fourth quarter, with its cut of profits from successfully exiting investments more than quadrupling in 2021. It reported a record $903m of distributable earnings in Q4, taking the total to $2.2bn for the year. Carlyle is increasing its quarterly dividend by 30% to 32.5 cents a share.

INTERNATIONAL

Danske Bank’s Q4 profit exceeds estimates

Danske Bank expects to increase profits this year after reporting better-than-expected Q4 net profit of 3.65bn Danish crowns. This was above an average of 3.4bn forecast by analysts. Denmark's biggest lender expects net profit for 2022 to fall between 13bn and 15bn Danish crowns, exceeding an 11.1bn average analyst forecast. "Our business continued to develop positively with total income increasing 4%, and our initiatives to become a more efficient bank resulted in costs decreasing 4%," CEO Carsten Egeriis said in a statement.

ING sees pre-tax profit climb 27%

Dutch lender ING has reported a 27% rise in pre-tax profit, hitting €1.33bn in Q4. Analysts had forecast pre-tax profit of €1.47bn, up from €1.05bn in the same period of 2020.

FINANCIAL SERVICES

Campaigners call for well-designed regulation

Campaign groups have urged policymakers to focus on promoting financial inclusion at home rather than making regulators "cheerleaders" for global finance. With the Treasury reviewing financial regulation post-Brexit, officials have proposed giving the Bank of England and Financial Conduct Authority a secondary objective of promoting the international competitiveness of finance. However, in a joint statement, 37 campaign groups and charities have warned that asking regulators to do this “risks eroding their independence.” Charities including the Centre for Responsible Credit, the Financial Inclusion Centre, Tax Justice System and Finance Innovation Lab suggest: “Balanced input from industry and civil society advocates, with the regulators acting in the public interest and maintaining independence, is more likely to produce well-designed regulation that delivers better outcomes." While officials say Britain will adhere to high international standards and not return to the "light touch" regime seen before the financial crisis, former Business Secretary Sir Vince Cable warned in the statement: “Now that the financial crisis is over a decade behind us, banking lobbyists are agitating for a relaxation of the very regulations that are designed to keep our money safe.”

Scottish Widows lays out plans for net zero pension investments

Scottish Widows has rolled out plans to decarbonise its investment portfolio and halve emissions by 2030 as it becomes the first major pensions provider to confirm a net zero strategy. The pensions group has laid out a series of commitments to hit net zero by 2050 including investing £20-25bn into “climate aware investment strategies”, and “excluding high carbon investments” from its portfolio. Scottish Widows also said it would pump a further £3bn investment into Blackrock's Climate Transition World Equity Fund, on top of an existing £2bn allocation.

HEALTHCARE

CMA fines pharma firms over restricted competition

The Competition and Markets Authority (CMA) has handed four pharmaceutical firms £35m in fines for an illegal arrangement in the supply of anti-nausea tablets. A CMA investigation found that the firms in question were involved in an arrangement that restricted competition in the supply of prochlorperazine and buccal to the NHS. The watchdog has fined Focus £15.5m, Alliance Pharmaceuticals £7.9m, Lexon £7.3m, and Medriech £4.6m. Medreich's fine would have been higher but was reduced by 40% as the firm admitted its involvement and co-operated with the probe.

MEDIA & ENTERTAINMENT

Discovery eyes BT Sport tie-up

BT is planning to merge its sports division with Discovery’s Eurosport in a deal that would enable it to retain broadcast rights for content incusing Premier League football. Exclusive discussions between the telecoms firm and US-based broadcaster have derailed a £600m deal for BT Sport being put together by streaming company DAZN. BT said that the 50-50 joint venture would remain committed to retaining BT Sport’s existing broadcast rights and give BT Sport customers access to Discovery’s sport and entertainment content.

Shareholders rebel over Future pay plan

Shareholders in magazine publisher Future have voted against a remuneration scheme that could see chief executive Zillah Byng-Thorne pick up a £40m bonus. The board failed to gain the 50% support required to pass its remuneration report, with shareholders representing 55% of votes cast rejecting the pay plan. There was also a rebellion against those who signed off on the scheme, with more than a third of votes cast against the reappointment of Mark Brooker, chairman of the remuneration committee, and committee member Rob Hattrell as directors.

REAL ESTATE

London calling for global investors

Analysis suggests global investors are set to spend £60bn on London offices over the next five years, with the capital offering better yields than other big cities. American property investors will pump £15bn into London offices between now and 2027, with funds from Germany, China, Singapore and South Korea also expected to be active in the City’s office market. The prevalence of office blocks that meet the highest environmental and sustainability standards is said to appeal to property investors looking to future-proof their portfolios, with 1,100 such offices in London. The report estimates that London offices will attract £10.5bn of global capital investment in 2022, with this expected to rise in the next five years, reaching nearly £14bn in 2027.

RETAIL

Slow start to 2022 for retailers

The British Retail Consortium says retailers experienced a slow start to 2022, despite falling coronavirus cases, with shopper numbers falling to 17% below pre-pandemic levels last month. There was a 24.2% decline in high street footfall in January, compared with the same month in 2020, along with a 37.5% drop at shopping centres. Retail parks saw a decline of 13% in shopper numbers.

ECONOMY

Interest rates rise again as inflation soars

The Bank of England (BoE) has increased interest rates to 0.5% from 0.25% as it looks to restrain a surge in the cost of living. With inflation soaring, the Bank opted to increase rates at successive policy meetings for the first time since 2004. Forecasts suggest inflation, as measured by the consumer prices index, is set to peak at 7.25% in April, and average at around 6% across the whole of 2022 - far exceeding the BoE’s 2% inflation target. Having increased rates from a record low of 0.1% in December, some members of the Bank's Monetary Policy Committee (MPC) wanted to see an even bigger increase yesterday, with four of the nine members voting to increase rates to 0.75%. Meanwhile, the Bank has cut its GDP growth forecast for 2022 from 5% to 3.75% and expects the economy to grow by around 1.25% in 2023. The MPC also voted to start the process of reducing the Bank’s £895bn quantitative-easing bond-buying programme. BoE governor Andrew Bailey said interest rates must go up to prevent inflation from becoming “ingrained”, saying an increase to the bank rate is necessary as “it is unlikely that inflation will return to target without it.” Mr Bailey went on to acknowledge that people are already feeling “a squeeze on real incomes” and that higher interest rates “will be felt by households and businesses”. Paul Dales, chief UK economist at Capital Economics, expects interest rates to rise to 1.25% this year, with more increases in 2023.

Energy price cap rise adds £693 to average bills

Households will face a record energy bill increase of 54% from April after regulator Ofgem lifted the cap on default tariffs to £1,971. On the back of energy market prices increasing fourfold over the last year, Ofgem upped the maximum rate that suppliers can charge for an average dual-fuel energy tariff by £693. Once the increase comes into effect, the 22m households which pay by direct debit will face an average of bill of £1,971 a year for their gas and electricity. Those using pre-pay meters will, on average, see bills climb £708 to £2,017. In response to the price cap increase, Chancellor Rishi Sunak has outlined support measures that will see energy bill discounts totalling £350. This includes a repayable £200 discount on bills for homes in England, Wales and Scotland from October, with a further £150 council tax rebate for homes in England in council tax bands A to D. The council tax rebate, which will benefit about 80% of households, will not need to be repaid.

OTHER

Services sector recovery gains momentum

The recovery of the services sector regained momentum in January, with the IHS Markit/CIPS UK Services PMI survey scoring 54.1, having hit a 10-month low of 53.6 in December on an index where a reading above 50 represents expansion. Despite increased activity in the sector, firms also reported steeper cost pressures. Tim Moore, economics director at IHS Markit, noted that growth expectations for the next 12 months have picked up and are now at the highest since last spring. “However, record price increases in the service economy are set to add to the cost of living crisis for UK households,” he added.

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