Banks could see £53bn bill for PPI
A surge of PPI complaints in the run-up to the August 29 deadline has left the UK’s banking sector bracing itself for a multi-billion pound hit. Royal Bank of Scotland (RBS) and CYBG have warned that an unprecedented number of complaints could cost up to £900m and £450m respectively, with both groups blaming significantly higher claims last month for a worse-than-expected blow to profits. The news hit the value of CYBG, owner of Yorkshire Bank, Clydesdale and Virgin Money, with shares down by around 20%. Citi analyst Andrew Coombs considered RBS and CYBG’s worst-case cost estimates, saying that if they applied proportionally other banks, Lloyds and Barclays would face payouts of £2.8bn and £1.8bn, respectively. The Co-Operative Bank also said it had received more claims than expected, and is taking time to give a fuller estimate of the costs. The Financial Conduct Authority has reported that approximately £36bn in compensation has been paid out so far. Dominic Lindley of financial services think-tank New City Agenda has estimated that PPI payouts could end up costing banks £53bn.
Financial council to support lending to SMEs
The Treasury and the Department for Business, Energy, and Industrial Strategy has announced a finance council to support lending to SMEs following the UK’s departure from the EU. Business Secretary Andrea Leadsom and John Glen, economic secretary to the Treasury, will chair the council, with representatives from various lenders also sitting on the committee. The council will "identify and address any barriers" faced by SMEs in securing finance, with Ms Leadsom saying: "Our financial system is strong and banks have the capacity to lend.”
Debt warning over contactless payments
Experts have warned that the ease of contactless payments are seeing young people falling into debt. The study, carried out by The Claude Littner Business School at the University of West London, found that more than a tenth of young people are thinking of refraining from contactless and online payments, saying using cash may help control their spending. The poll of 100 people aged 18 to 44 found that around two-thirds put overspending down to the ease of digital payments. UK Finance analysis suggests two in every five card transactions in Britain are now made with contactless technology.
FTSE fall could make Metro a takeover target
The Mail looks at the impact that dropping out of the FTSE 250 could have on Metro Bank, saying its relegation will limit the amount of funds which may be able to invest in it, as many focus primarily on FTSE 350 firms. This, analysts at Goodbody warn, could squeeze its ability to raise cash from shareholders in future. If its ability to produce better returns for investors are hit, the experts suggest the bank could become a takeover target for high street rivals.
Monzo the best start-up to work for
Challenger bank Monzo has been named Britain’s most-desirable start-up for young professionals to work for in a ranking by LinkedIn. Fellow challenger bank Revolut came in second while Starling Bank and Tide both made the top 10 and ClearBank came in eleventh place. Katie Carroll, UK managing editor at Linkedin, said: “It’s fantastic to see continued innovation in tech spearheading our top start-ups list this year,” adding: “This list shows just how much the digital transformation we’ve seen in the last decade is impacting every aspect of our lives.”
Aldermore enjoys rise in profits
Aldermore has reported that its profits rose to £130m in the year to June, up from £117m 12 months earlier. Loans are up from £9bn to £10.6bn, its net interest margin sat at 3.3%, and savings deposits rose 15% to £9bn.
Glass Lewis backs Advent’s Cobham bid
Shareholder adviser Glass Lewis has recommended Cobham shareholders back the company's £4bn takeover by Advent International, with this coming just days after advisory service Institutional Shareholder Services gave the same advice.
PAG pays $540m for control of Chinese biotech start-up
PAG has paid $540m for a 58% stake in Hisun BioRay Biopharmaceutical, the biotech division of Chinese state-owned pharma company Zhejiang Hisun Pharmaceutical.
KKR mulls Hensoldt move
KKR is preparing for a stock market flotation or sale of German defence supplier Hensoldt, with a deal potentially worth €2bn. Banks have reportedly put forward options for including a listing of 20-30% on the stock exchange or a sale to a private equity business. KRR bought Airbus's defence electronics business for €1.1bn euros in 2016, later rebranding it Hensoldt
ECB to consider damage done by negative rates
European Central Bank policymakers will next week meet to consider a fresh economic stimulus package, with the impact of negative interest rates set to be debated.
Danske poaches finance director from Commerzbank in shake-up
Danske Bank CEO has shaken up the bank’s top management, poaching Commerzbank CFO Stephan Engels and making Berit Behring, head of Danske’s operations in Sweden, head of wealth management.
Electric car registrations surge
Figures from the Society of Motor Manufacturers and Traders show that 3,147 new electric cars were sold in the UK in August, up from 659 in the same month last year. However, the number of plug-in hybrids registered fell by over 70% to 907. Combined, sales of pure electrics and plug-in hybrids were 4.6% higher than in August 2018. Petrol car sales rose 1% in August to 59,019, a 63.8% market share, while 24,484 diesel cars were sold in August – a decline of 12.2% year-on-year that left such vehicles with 26.4% of the market. Overall car sales in August were down 1.6% on August 2018, dipping to 92,573 registrations.
Record results reported at Redrow
Redrow has reported the sixth consecutive year of record figures, with revenues up 10% to £2.1bn in the 12 months to June 30th, pre-tax profits rising 7% to £406m, and earnings per share increasing 8% to 92.3p. The firm’s profit margin slipped due to a higher proportion of less profitable social housing units built. Executive chairman John Tutte added that trading since the start of July had been “encouraging”, with the number of reservations ahead of the same period last year.
Watchdog considers crackdown on high-risk investments
Charles Randell, chair of the Financial Conduct Authority (FCA), has suggested confusion about which financial products were regulated and which were not means there is a need to “consider whether these issues are best addressed by further restrictions on the sale of high cost, risky and illiquid investments, by changing the scope of FSCS coverage, or both." He warned that "skimmers and scammers" often operated in the "grey areas", but noted that a straight ban on the sale of regulated investments by FCA authorised firms – which is an "apparently simple and obvious step" – is "not quite so simple". Changes need “careful thought,” Mr Randell suggested, adding that “complexity isn’t a good reason for avoiding fundamental questions about the current system.”
FCA urges tech firms to tackle financial crime
Financial Conduct Authority (FCA) chair Charles Randell has urged large internet firms to play a greater role in tackling financial crime. Addressing the Cambridge Economic Crime Symposium, he warned that “financial crime, specifically fraud against individuals, has reached epidemic proportions”. He added that online platforms, where scams and risky investment schemes are often promoted, must to do more to help protect consumers. He suggested that “as a minimum” firms should swiftly remove suspected fraudulent content when authorities ask them to, while also calling for them to use their “extraordinary resources” to help develop algorithms and machine learning tools that can identify such content.
City in recession since 2017
Regional GDP figures from the Office for National Statistics show that London's financial services sector has been in recession since Q3 2017, with the capital's banking and asset management industry shrinking 11% in the 18 months to the end of 2018. The Times notes that financial services contributed £132bn to UK GDP last year, 6.9% of total output, with half of that from the capital.
LEISURE AND HOSPITALITY
CMA suspends legal action against Viagogo
The Competition and Markets Authority (CMA) has suspended legal action against ticket reselling website Viagogo, saying the company has addressed its concerns. The watchdog had previously said it was pursuing legal proceedings after repeated warnings over Viagogo’s compliance with consumer protection law. “Key information needed to make informed decisions before buying a ticket is now much clearer,” said Andrea Coscelli, chief executive of the CMA.
Halifax changes house index methodology
Halifax has changed its methodology for compiling the house price index, a key measure used by the Treasury and the Bank of England, aimed at bringing it into line with other indices that suggest a sluggish housing market. Lloyds Banking Group will disclose the impact when it publishes the tweaked index for August. The Halifax index last month said prices were 4.1% higher than a year earlier, while Nationwide said the annual rise was just 0.3%. Lloyds traditionally bases its estimate on the 10,000 mortgages it approves each month, but it has now widened its sample to include homes bought under Help To Buy and on shared ownership mortgages.
Dixons Carphone's mobile revenue down
Dixons Carphone has maintained its financial guidance for the full 2019-20 financial year, despite reporting a significant decline in first-quarter mobile phone sales. Like-for-like revenue in its UK & Ireland mobile phones division fell 10% in the 13 weeks to July 27. Comparable sales in its UK & Ireland electricals division rose 2%, while sales in its international division on the same basis were up 4%. Overall group like-for-like sales were flat, in line with analysts’ consensus expectations.
Boohoo boosts full-year guidance as sales soar
Boohoo expects full-year revenue to rise between 33% and 38%, ahead of its previous 25%-30% guidance. Margins before interest, tax, depreciation and amortisation will remain at about 10%, Boohoo added.
No-deal bill a ‘chink of light’ for business
The head of the CBI, Carolyn Fairbairn, has said that progress in passing a bill to stop a no-deal Brexit in parliament has been a “chink of light” for UK business. However, she said that the “cloud has not gone away” for companies until a deal was agreed. As a result, Ms Fairbairn said, many businesses would continue to prepare for a potential no-deal. “So many businesses are stockpiling for 31 October in the same way they did for 29 March at enormous cost and expense,” she said. The CBI has previously said leaving the EU with a deal is essential to protect the economy and jobs.
The pound has rallied to its biggest two-day surge in 10 months as fears over a no deal Brexit on October 31 eased. This came on the back of two defeats for Boris Johnson in the House of Commons, with MPs voting in favour of a Bill designed to block a no deal Brexit, while a separate vote saw the Prime Minister’s call for an early general election rejected. Sterling gained more than half-a-percent on the euro to stand at €1.1161 by 4pm yesterday, having reached a high of €1.1169 at around midday. It also rose 0.8% against the US dollar to $1.2349, building on Wednesday’s 1.4% climb - its biggest one-day jump since March.