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Daily News Roundup: Friday, 9th November 2018

Posted: 9th November 2018

BANKING

Paragon will not appeal PPI ruling

Paragon Banking Group will not appeal a county court ruling forcing it to pay compensation over the mis-selling of PPI. Lawyers have said the move has wide implications for other such cases as an unsuccessful high court appeal could have set a precedent which saw more lawsuits against banks. Issues related to the mis-selling of PPI have so far seen lenders pay out around £34bn in compensation, with Lloyds Bank paying out £18.8bn and Barclays and Royal Bank of Scotland paying out around £15bn between them.

Decision on cash machine tax appeal expected

A near-£400m legal dispute over business rates paid on cash machines is approaching conclusion, with the Court of Appeal preparing to hand down its judgment in a case brought against the government by Tesco, Sainsbury’s and the Co-operative Group among others, who were supported by independent cash machine operator Cardtronics Europe. The firms object to a ruling last year which upheld a 2013 decision that cash machines installed in the front of a shop or petrol station should have a separate business rates bill. This comes amid a continuing row over dwindling access to cash dispensers, particularly in rural areas. It is estimated that business rates from separate bills for cash machines will raise £44.5m in rates tax across England and Wales in 2018 and £181.3m over the four-year course of the 2017 business rates regime.

FCA: EU banks may have to boost UK presence

The Financial Conduct Authority has said European banks may have to increase the scope of their British operations to ensure UK customers' money is protected should they fail, adding that it may extend the UK's financial services compensation scheme to European Economic Area firms. The regulator also said it has plans in place to ensure financial services keep operating even if there is no transition period after Brexit, but added that European Economic Area (EEA) citizens and UK citizens living in the EEA could be affected if their bank provider cannot operate in the EEA after Brexit.

Banks race to launch blockchain trade platforms

The FT looks at how banks including HSBC, Standard Chartered, Bank of China, Deutsche Bank, Societe Generale and UBS are turning to platforms utilising blockchain technology to conduct transactions.

OneSavings sees loan book growth

OneSavings Bank has reported loan book growth of 16% for the nine months to September 30, with net loans and advances up by £1.18bn to £8.5bn. The lender believes it can increase its loan book by a fifth this year.

Glitch hits Barclays site

A technical problem meant Barclays’ online banking customers were briefly shut out of their accounts on Thursday. Barclays says issues have now been resolved for all customers but declined to say how many users had been affected.

PRIVATE EQUITY

Chancellor announces sale of Bradford & Bingley loans

In one of Europe’s biggest ever state asset sales, private equity firm Blackstone and insurer Prudential are buying two portfolios of buy-to-let mortgages from UK Asset Resolution (UKAR) for £11.8bn. Chancellor Philip Hammond said the deal “marks another major milestone” for taxpayers, with UKAR’s balance sheet now at £22bn, down from £116bn when it was set up seven years ago to run off the bad loans made by Bradford & Bingley and Northern Rock.

Blankfein revelation piles pressure on Goldman

David Crow in the FT looks at a scandal which has seen two former Goldman Sachs employees charged over fraud at Malaysian state development fund 1MDB – and the firm’s role in the matter.

INTERNATIONAL

US DoJ sues UBS over mortgage securities

The US Department of Justice has filed a lawsuit against UBS over allegations linked to residential mortgage-backed securities, with the suit coming after negotiations over the size of a settlement UBS would pay broke down. A source close to the matter said UBS rejected a proposal that it pay around $2bn. UBS has been accused of misleading investors about the quality of mortgage loans backing 40 securities offerings. UBS said the claims “are not supported by the facts or the law” and vowed to “contest any such complaint vigorously in the interest of its shareholders.” The justice department has previously settled similar claims against Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase and Morgan Stanley.

UniCredit profit hit by sanctions and lira strains

Italian bank UniCredit says net profit fell 99% on last year to €29m for the three months to September. This comes as the bank put aside €741m "mainly due to increased provisions for US sanctions" over which it is nearing a settlement. It also took a €846m hit on Turkish lender Yapi Kredi, of which it owns 41%, due to falls in the lira. Stripping out one-off costs, UniCredit reported adjusted net profit of €875m, marking an increase of almost 5%.

EU squeezing more territories over money laundering

The European Commission has ramped up legal pressure against Malta and Luxembourg for not fully applying European Union rules to prevent money laundering through banks and firms. While the Commission has already sent legal warnings for the same reason to Estonia and Denmark, the European Central Bank shut down Pilatus Bank in Malta this week over money laundering and fraud allegations.

SocGen boosted by gains on Euroclear stake

Societe Generale’s net income hit €1.23bn in Q3, up 32% on a year ago, with the revaluation of Euroclear delivering a €271m boost. Revenues were up 9.6% to €6.53bn.

French demands for €3.7bn fine over alleged tax evasion case ‘irrational’ - UBS

The French financial prosecutor has called for UBS to face a €3.7bn fine over allegations it helped rich clients evade tax. The bank contests the matter and dismissed the “irrational” demands.

European Banking Authority to probe member countries over Danske Bank

The European Commission has ordered the European Banking Authority to investigate Denmark, Latvia and Estonia over alleged regulatory failings including in the €200bn Danske Bank money-laundering scandal.

Fed holds US rate

The US Federal Reserve has held interest rates steady. "The labour market has continued to strengthen and economic activity has been rising at a strong rate," the federal open market committee said. It has already raised rates three times this year and is set to do so again in December.

ECB veteran in Italy warning

The European Commission has said that Italy's fiscal plans are based on implausible growth assumptions, while Vitor Constancio, the European Central Bank's former financial stability chief, said the EU is effectively powerless in a matter that could result in a market crisis. Lorenzo Bini-Smaghi, chairman of Societe Generale, has said: "Italy is going straight into a wall. The crash is going to be violent.”

AUTOMOTIVE

Auto Trader drives up profit expectation

Used car website Auto Trader saw revenues climb 7% to £176.8m in the six months to the end of September, with pre-tax profit up 9% to £114.5m. The figures prompted chief executive Trevor Mather to declare that growth for the full year was "likely to exceed previous guidance".

FINANCIAL SERVICES

MPs to probe access to services

The Treasury Select Committee is to investigate consumers' access to financial services, with MPs to determine if “financially vulnerable” customers are failing to get a basic level of service from providers, including banks and insurers. The committee will also look at whether vulnerable consumers pay more for financial services products. Committee chair Nicky Morgan said: "With bank branches closing and the number of free-to-use ATMs falling, it's becoming difficult for vulnerable customers to access certain services." She added: “Vulnerability, as defined by the Financial Conduct Authority, is where someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”

FCA in Brexit scam warning

The Financial Conduct Authority (FCA) has warned consumers to watch out for fraudsters attempting to take advantage of Brexit-related confusion, while bank customers are also advised to exercise caution. The FCA has advised consumers to beware of unexpected calls, emails and text messages.

AJ Bell in £500m float

Retail stockbroker and fund manager AJ Bell has floated for £500m, with founder Andy Bell on course for a £140m windfall. The firm has £46.1bn in assets under management and nearly 200,000 customers. Mr Bell is reducing his stake in the firm from 28% to 25%, while Invesco reduces its holding from 44% to 25%. AJ Bell is planning to list 25% of its shares, with analysts expecting the business to be valued between £500m and £700m.

Icap changes name as profits fall

Icap is to change its name to Nex after the sale of its broking business. The new company name is intended to evoke “the spirit of an agile and innovative company that is robust, resilient and trusted”. Revenues for the year to the end of March fell 6% to £1.2bn, a 3% drop excluding the effects of currency movements and the closure of several trading desks, while pre-tax profits were down 6% to £89m.

MANUFACTURING

BAE Systems boosted by Budget pledge

BAE Systems has reiterated its flat earnings forecast for the year, boosted by the Chancellor’s most recent Budget in which an extra £1bn was pledged for defence investment between now and the end of 2019. This follows the Ministry of Defence’s awarding BAE Systems a new £1.5bn nuclear submarine contract while also pledging £900m for an existing programme.

REAL ESTATE

Number of borrowers in mortgage arrears falls

The number of mortgages in arrears in the third quarter of 2018 was 5% down on the same time last year, according to UK Finance. It said there were 77,600 homeowner mortgages in arrears of 2.5% or more of the outstanding balance. Repossessions are also down over the last 12 months, but numbers have crept up in recent months.

RETAIL

Sainsbury's enjoys boost from Argos takeover

Sales growth at Sainsbury’s picked over the first-half, the retailer benefiting from the hot UK summer, as well as the integration of Argos stores into its supermarkets. Like-for-like sales increased 0.6% in the 28 weeks to September 22nd, an acceleration from the 0.2% growth it reported for the first quarter. Profits were down 40% to £132m, due to restructuring costs, and other charges related to its planned merger with Asda; excluding these costs, however, pre-tax earnings rose by a fifth to £302m.

ECONOMY

Britain bottom of growth table, Brussels forecasts

The European Commission predicts Britain will grow more slowly next year than any other European Union economy bar Italy and will take the bottom slot alone in 2020. The forecasts for growth of 1.2% for both 2019 and 2020 are based on the assumption that Britain strikes a Brexit deal that continues the “status quo in terms of trading relations with the EU”.

OTHER

Monese installs 'Brexit meteorite' to make firms consider future

Fintech start up Monese has installed a sculpture of a meteorite in front of King's Cross station in London, referencing recent claims that Britain will be the last European country to know if a meteorite should approach Earth because it is leaving the EU's space surveillance and tracking programme. Company founder and chief executive Norris Kopel said the installation was meant to remind firms to continue to seek out business across Europe, even in the event of a no-deal Brexit.

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