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Daily News Roundup: Monday, 10th August 2020

Posted: 10th August 2020


Banks face second wave of PPI claims 
Banks could face a second wave of PPI claims after a series of court rulings found the products were “unfair”. Banks have already paid out £38bn in compensation for mis-sold PPI, but this figure could rise sharply after a court ruled that because commissions from insurers were never disclosed to customers the relationship with the bank was unfair. The Sunday Times’ Ali Hussein claims that the ruling means anyone who was denied a payment, received only partial refunds or has never claimed can demand all their money back - regardless of whether the products were appropriate for them or not. 

Banks warned as firms take on hefty debts 
Bank lending to firms has reached a 13-year high as businesses take on “staggering” levels of debt to survive the coronavirus pandemic, according to new research. Business lending will rise to 14.4% this year, with many firms not expected to start reducing their borrowing until 2022. In contrast, demand for consumer credit is predicted to fall by 15.9% this year.

COVID-19 restrictions mean rainmakers are left to seal deals online  
Dealmakers have been hampered by a post-lockdown ban on the long City lunch, the Telegraph reports, with bankers fearing a continuation of tough rules prohibiting long meetings to prevent the spread of the coronavirus could spell the end to informal off-record chats. A source at HSBC told the paper that nobody had been given clearance to meet clients for entertainment purposes, while Goldman Sachs and JP Morgan are among other banks requiring staff to follow strict rules. 

Banks accused of putting bereaved families at risk   
The legal trade body Solicitors for the Elderly has accused banks of inviting fraudsters to go after dead people's money after raising the threshold for when a grant of probate is needed before a dead relative's account can be accessed. Both Lloyds and NatWest have doubled their thresholds, to £100,000 and £50,000 respectively. Rosie Todd, of Stevens & Bolton, said: "Banks are trying to help people, but they are [...] leaving the system open to abuse." Both banks said in response that they have robust measures in place to tackle fraud. 

Santander names William Vereker chairman of UK arm
Theresa May’s former business envoy William Vereker, has been appointed chairman of Santander UK as its Spanish parent prepares an “ambitious transformation programme.” Vereker, who is presently vice-chairman of investment banking for EMEA at JP Morgan, will join the board on October 1.

Allica Bank wants to provide alternative for SMEs 
Allica Bank has applied for a £25m grant from a fund designed to drive banking competition, which will contribute to a £50m investment in current accounts for small and medium-sized businesses. The challenger bank is controlled by Warwick Capital Partners.

Bank overdraft charges soar up to 49.9% in UK  
Bank customers with a poor credit rating could face annual overdraft charges as high as 49.9% as a regulatory shake-up of borrowing costs delayed by COVID-19 finally come into effect.  

Rose slashes senior investment banking roles
NatWest boss Alison Rose is expected to announce the departure of at least three of its most senior investment bankers this week as she moves to distance the lender from the “casino” days under former boss Fred Goodwin. 

Pandemic seals dominance of UK’s biggest banks
The pandemic-induced downturn could hold back the push for more competition within the banking sector, with experts fearing the dominance of Britain’s biggest banks will only be further entrenched. 

Elliott increases stake in loans technology newcomer 
US hedge fund Elliott has increased its stake in Welsh fintech company Chetwood Financial bringing its total equity in the firm to £100m.


Stalling AA calls for a rescue of its own  
The FT looks at rescue talks between the AA and private equity firms, reporting that “advisers, former executives and analysts have little doubt the current problems […] started when it was last owned by the industry.” The Sunday Telegraph reports that Albert Bridge Capital, AA's biggest shareholder, has criticised the board for "jeopardising negotiating leverage" ahead of the potential takeover by assessing its circumstances as “dire”.

Top 10 institutional investors fuel market volatility, study finds
A new analysis by four finance professors has suggested that BlackRock, Vanguard, State Street, Fidelity and Capital Group are driving up equity market volatility and fuelling mispricing in company stocks.


JPMorgan report reveals ‘dramatic’ Covid shift to electronic bond trading 
A report produced by JPMorgan Chase shows a dramatic shift in the world’s largest bond market away from traditional trading by phone towards electronic execution during the coronavirus crisis. 

Goldman takes additional $2bn hit for 1MDB settlement 
Goldman Sachs has seen nearly its entire Q2 profits wiped out by $2bn in extra provisions reflecting the cost of settling a key case in the 1MDB scandal.


Aerospace bosses plan £1bn bailout fund 
Aerospace trade body ADS has drafted plans for a £1bn state-backed fund to help small companies struggling with the collapse of the airline industry following the pandemic. The Treasury is being urged to match private sector contributions, with Airbus reported to have already pledged cash. 

Gatwick’s South Terminal may not reopen for a year 
Gatwick Airport bosses have warned that its South Terminal could remain shut until next summer as British Airways initiates over 10,000 job cuts. The airline said over 6,000 staff have applied for voluntary redundancy and another 6,000 could face compulsory lay-offs, with thousands more forced to accept severely reduced pay under new contracts.


SLA hit by fund outflows and pandemic turmoil 
Standard Life Aberdeen saw AUM fall to £512bn in the first half of the year, down from £545bn in the same period in 2019 as investors moved money to lower-risk, lower-fee funds. Revenues at the fund manager fell 13% to £706m while pre-tax profits were down 30% to £195m. Outgoing chief executive Keith Skeoch said: “There is no question that the impact of COVID-19 has played a role on our results today, and across our industry, particularly in relation to lower revenue.” However, because the company's balance sheet was “strong” it maintained its interim dividend of 7.3p per share, in line with last year's payment. 

Office workers reluctant to give up remote working 
The Telegraph talks to City bosses who say they expect working from home to continue indefinitely after the pandemic accelerated the remote working revolution. Peter Harrison, chief executive of Schroders, said he thought “we've gone forward 20 years in terms of people's understanding of flexible working” while Direct Line CEO Penny James tells the paper she is trying to create a sustainable version of home working so that it becomes a long term option for the business. Because working from home has been such a success for financial services firms, pleas from the Government for staff to return to offices are being largely ignored, leaving a distinct impression city centres will be changed for good. 

Founders of Hargreaves Lansdown set to pocket £82m payout
Peter Hargreaves and Stephen Lansdown, the founders of the investment platform Hargreaves Lansdown, are set to pocket £63.4m and £18.6m in dividends respectively after profits rose in the 12 months to June. Underlying pre-tax profits were up 11% to £339.5m on revenues that increased 15% to £550.9m. The FTSE 100 firm signed up a record 188,000 extra customers to take the total number of active clients to more than 1.4m.  

Crackdown saves investors £30m 
Analysis of the value assessment reports, which the Financial Conduct Authority forced the asset management industry to publish, shows that fund managers have had to switch more than 320,000 customers on to cheaper versions of their products after failing to justify their fees. As a result of the reports, the fees on dozens of funds were reduced, and others were shut down because of poor performance. 

Post-pandemic digital boom will see services exports to rise $104bn 
A report by Western Union and Oxford Economics suggests the increased use of technology at work is likely to fuel growth in cross-border trade in "digitally deliverable services", such as IT and financial services, by $104bn over the next five years.

EU fund groups call for exemption from maligned performance forecasts
The European Fund and Asset Management Association has written to EU lawmakers warning that the UK’s decision to diverge from Priips rules could put European funds at a disadvantage. 

Property fund investors face six-month notice periods 
New rules proposed by the FCA could leave investors in open-ended property funds required to give up to six months’ notice before they can sell down their investments.

Third Point Re to combine with Sweden’s Sirius 
Third Point Re has agreed a tie-up with Swedish rival Sirius in a $3.3bn deal. Siddhartha Sankaran will run the new group which will be renamed SiriusPoint.


UK restaurants boosted by discount scheme but still in pain
The first day of the Government's "Eat Out to Help Out" discount scheme saw a surge in bookings for restaurants and a doubling of sales, but the industry warned it remained "in crisis" despite the boost.

Edwardian Hotels lines up 1,200 staff cuts 
Edwardian Hotels could slash as many as 1,200 jobs as it battles to stay afloat amid the coronavirus pandemic. Workers are being called upon to agree new contracts with a sharp cut in hours to prevent the cull expanding to 1,500 jobs.


Evening Standard to cut a third of its staff
The Evening Standard is to undergo a major restructuring that will see 115 roles lost as the London newspaper moves away from print to focus on digital in the wake of the pandemic. The job cuts include 69 in editorial - almost half of its team of journalists - and 46 in other areas. 


Shortfall for commercial landlords could soon hit £3bn 
Commercial property landlords could be out of pocket by £3bn come September as tenants continue to withhold rent during the COVID-19 pandemic. Data from Remit Consulting shows that, 35 days after the collection date, commercial landlords have collected just 63.3% of the rent owed for the third quarter and 73.5% for the second quarter. Retail landlords are faring the worst, having collected just 50.5% and 57.2% respectively over those periods. 

House prices surge to all-time high 
House prices rose to their highest level on record last month as the end of lockdown unleashed a wave of demand. The average price of a home in Britain was £241,604, according to the Halifax index - 1.6% higher than average house prices in June and 3.8% up on the year. 


Pret a Manger asks staff to cut hours  
Thousands of staff have been asked by Pret a Manger to work about 20% fewer hours as the fast-food chain tries to survive the pandemic. The company hope cutting hours will help save some jobs, but it is consulting with staff on cuts as office workers resist returning to city centres. 

Trade bodies call for Government support in retail rents 
Trade bodies have called on the Government to fund up to 50% of commercial rents and services charges to help businesses in the retail, hospitality and leisure sectors survive the COVID-19 pandemic. 


Britain’s GDP shrinks by a fifth 
Figures from the Office for National Statistics next week are expected to show the UK economy shrank by 20% in the second quarter, the biggest three-month fall on record. This follows a 2.2% fall in the first quarter and puts Britain into a technical recession. The UK’s reliance on services means its economy will likely be hit harder than any other advanced nation. Spain has recorded an 18.5% drop while the US registered a 9.5% fall. 


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