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Daily News Roundup: Friday, 5th October 2018

Posted: 5th October 2018

BANKING

Regulators clear Virgin Money takeover

The Financial Conduct Authority and the Prudential Regulation Authority have cleared CYBG’s £1.7bn takeover of Virgin Money. The combined group, which will have about 6m customers, will be headquartered in Glasgow and will be rebranded as Virgin Money. CYBG's David Duffy will stay on as chief executive, with Virgin Money boss Jayne-Anne Gadhia serving in a consultancy role as his senior adviser. The combined group will have about 9,500 employees, although CYBG has said it intends to reduce that total by about a sixth. CYBG has also said that the takeover will create the UK's “first true national competitor to the large incumbent banks”. James Moore in the Independent questions whether Britain’s big five banks should be worried by the merger. He notes that Ian Gordon, an analyst at Investec, confirms his view that although Virgin Money will be a bit bigger than other challengers, the big players will remain “utterly dominant”. Mr Gordon also believes the big banks look undervalued in terms of their share prices.

Lloyds in breach of PPI rules

The Competition and Markets Authority has said it is taking action against Lloyds Banking Group after the lender failed to tell thousands of customers about their right to cancel their PPI. The watchdog said it was taking action against Lloyds for “serious breaches” after it failed to remind 14,000 customers between 2012 and 2018 that they still have a policy and can cancel it. A spokeswoman for the bank, which has paid over £18bn in compensation claims over mis-sold PPI, said it was writing to all affected customers to apologise. “Whilst we have resolved the cause of the issue, we are extremely sorry for any inconvenience caused,” she said.

McEwan: No-deal Brexit could result in recession

RBS chief executive Ross McEwan has warned a no-deal Brexit could tip the UK economy into recession. He said that a “bad Brexit” could result in “zero or negative” economic growth which would hit RBS's share price. He also said the bank was becoming careful about lending to certain sectors of the economy - particularly retail and construction. Mr McEwan said: “We are assuming 1-1.5% growth for next year but if we get a bad Brexit then that could be zero or negative and that would affect our profitability and our share price.” He said that RBS’s lending to large businesses was down 2% this year as they delayed investment decisions. On a brighter note, Mr McEwan said that SMEs seemed relatively unaffected by Brexit and were continuing to borrow, invest and grow their businesses.

Nomura looks to Paris as post-Brexit EU lending hub

Japanese bank Nomura, which employs about 2,300 people in London, is in advanced talks with regulators about using Paris as its post-Brexit European lending hub. President Macron’s administration has sought to woo financial institutions with promises of lower employment costs and other tax benefits.

Santander campaigns for small business customers

Santander is making its 123 current account available for business customers as it moves to increase its slice of the small business banking market. The lender will offer small businesses an account costing £12.50 a month and will return cash, based on their turnover, of between 1% and 3%, with a maximum of £300 a year. The move comes as Santander gets ready to bid for a grant from the £775m RBS fund designed to increase competition and innovation in business banking.

Hitachi Capital names new COO

Jonathan Biggin has been named as chief operating officer at Hitachi Capital. He most previously worked at Lloyds Banking Group, having also held senior positions at Barclays, American Express and Bank of America.

PRIVATE EQUITY

Guy Hands taps red-hot fundraising market with new fund

Guy Hands' new fund, Terra Firma Special Opportunities Fund IV, has invested in a bumper deal to acquire Finnish school buildings specialist Parmaco.

INTERNATIONAL

Danske Bank facing US probe

US authorities are investigating Danske Bank's €200bn money laundering scandal - which took place in its Estonian branch between 2007 and 2015. The US Department of Justice has levied monster fines on European banks over similar failings, it disciplined ING for $900m (£693m) in September over money laundering, and HSBC $1.92bn in 2012 for similar.

Deutsche Bank hires consultant

Deutsche Bank has hired consultant Oliver Wyman to help it pass US banking stress tests, after failing them this year.

The exodus of so many bank bosses may be a warning signal

An editorial in the FT looks at the recent departures of several high-profile bank bosses and suggests it could indicate a financial downturn.

AUTOMOTIVE

UK car sales tank

Just 339,000 cars were registered in September, according to the Society for Motor Manufacturers and Traders (SMMT), down 87,000, or 20%, on last year, after new testing requirements hit supply chains. While registrations of petrol and diesel cars fell, hybrids and electric cars were up almost 4%.

Honda to invest in GM’s self-driving car unit

General Motors has said that Honda will work jointly with the company and its self-driving car unit Cruise Holdings to fund and develop a purpose-built autonomous vehicle for Cruise.

LeasePlan targets Amsterdam and Brussels listings

LeasePlan, the world’s largest car leasing company, has announced its intention to launch an IPO and list its shares on the Euronext exchanges in Amsterdam and Brussels.

FINANCIAL SERVICES

Financial contracts could be protected post Brexit

Steven Maijoor, chairman of the European Securities and Markets Authority, has hinted that he would prefer EU firms to access clearing houses in London, should the UK quit the bloc without a deal. He said such a move was necessary in order to avoid "risks to the stability of EU financial markets” if financial contracts were thrown into doubt. Miles Celic, chief executive of TheCityUK, said that Mr Maijoor's remarks were “long overdue” and a “step forward”.

Legal & General £1.8bn boost for regional science hubs

Legal & General has formed a joint venture with Bruntwood, the property company behind Manchester Science Partnerships, to create a £1.8bn network of science and technology centres in regional cities. The partners expect to attract established science and technology companies and start-ups formed from leading regional universities, which will have access to potential venture capital funding from Legal & General.

Santander reveals fully regulated robo-adviser

Santander has unveiled its new robo-advisor. An initial £20 charge is levied for the production of a personalised report, and Alexia Kilby, head of investments at Santander UK, explained that its fully-regulated Digital Investment Adviser is designed to walk “even the most unsure of investors” through a number of questions and activities to deliver easy to understand, regulated investment advice.

Baldock named to L&G board

Henrietta Baldock has been promoted to the board of Legal & General. She will replace Carolyn Bradley who is leaving after four years. The Times notes that Ms Baldock worked in Merrill Lynch’s merger and acquisitions team during RBS’s takeover of ABN Amro.

FCA retreats from ban on pension transfer fees

The Financial Conduct Authority has backed off from a ban on pensions advisers charging on a contingent basis arguing that it needed to consult further.

LEISURE AND HOSPITALITY

Travelodge eyes growth in business consumer sector

Travelodge is to invest £100m in establishing new hotels aimed at the UK’s growing conference sector, as part of its business customer segment expansion strategy. The budget hotel chain announced it would add 10 hotels close to conference centres to its portfolio, targeting three locations in London and others across the UK, including Liverpool, Manchester, Glasgow and Bournemouth.

TGI Fridays owner mulling sale

Electra Private Equity is considering a sale of UK restaurant chain TGI Fridays as part of a broader plan to exit British retail brands.

MANUFACTURING

Smiths Group acquires aircraft parts maker

Engineering firm Smiths Group is buying US-based United Flexible which makes aircraft parts for £265m. It is currently owned by private equity firm Arlington Capital Partners.

MEDIA AND ENTERTAINMENT

Publisher enters administration

Bentley Harrington, which operates the Unilad viral news website, has collapsed into administration, putting hundreds of jobs at risk. The company has debts of £6.5m, including owing £1.5m to UK tax authorities.

REAL ESTATE

Intu chair mulls consortium takeover

John Whittaker, the deputy chairman of Intu Properties, is considering a potential deal to take the company private. Whittaker, who currently owns 27% of the shopping centre developer through his investment firm Peel Group, is working with US asset manager Brookfield and Saudi Arabia's Olayan on a possible offer for the rest of the company. The consortium says its plans are at a “preliminary and exploratory stage”. It now has until 1 November to make a firm offer under takeover rules.

RETAIL

Pre-tax profits halve at DFS

Sofa retailer DFS has revealed that its pre-tax profits almost halved in the 52 weeks to July 28, down 48.5% to £25.8m. Asserting that its new acquisitions, like Sofology in February, would boost market share going forward, DFS acknowledged that economic uncertainty for consumers, along with the recent hot summer, led to sales taking the heat during key trading periods. Revenue rose 14.1% to £870.5m.

ECONOMY

PM will need £20bn to end austerity

The Institute for Fiscal Studies has estimated that Theresa May’s pledge to end public sector cuts and fund pay rises will cost at least £20bn over the next five years. IFS director Paul Johnson told the BBC that the Chancellor would be concerned about adding to rising public sector debt and warned that, if Brexit resulted in a recession, more austerity could follow. A report from the think tank also predicted that male manual workers are at "particular risk" from the new barriers to trade that are likely to be introduced after the UK leaves the EU.

OTHER

Italian ‘Robin Hood’ banker sentenced

An Italian banker who took small amounts of money from wealthy clients and transferred it to the poor has narrowly escaped being sent to jail. Gilberto Baschiera, who was the bank manager in the town of Forni di Sopra, stole about €1m (£900,000) over seven years. He was handed a two-year jail sentence, but because it was his first offence he will not be imprisoned under Italian law.

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