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Daily News Roundup: Monday, 10th September 2018

Posted: 10th September 2018

BANKING

More reforms needed to avert another financial crisis

Sir Paul Tucker, a former deputy governor of the Bank of England, and Douglas Diamond, a finance professor at the University of Chicago, have said that reform of the banking system is unfinished, with tougher rules on bonuses and more loss-absorbing capital needed to bullet-proof the system against another crisis. Sir Paul said banks “need more equity” because “the macro-economic arsenal has all been used”, with public debt so high and interest rates near zero. Professor Diamond added: “I would like to see bonuses paid in five-year bonds that write down to zero if the bank's capital falls below the regulatory minimum.” Separately, Donald Kohn, a member of the Bank of England's financial policy committee, has suggested that a new financial crisis could be on the way if the lessons of the credit crunch are forgotten and restrictions on lending are scrapped. Meanwhile, calculations by the Times have claimed that Britain has produced £2.4trn less in goods and services as a result of the banking crisis in 2008.

ECB pressure banks over Brexit plans

The European Central Bank has ordered financial institutions to reveal plans to move staff to the Europe after Britain leaves the EU, turning up the pressure on banks and brokers to detail their post-Brexit operational plans. The ECB has stepped up warnings to international banks with a big presence in London, that a “brass plate” presence in the EU, which will see senior managers remain in the City whilst business is routed through a member state will not be sufficient for serving customers on the continent. Firms with a London base were given a deadline of the end of June to apply for an EU banking licence, the process of which will be used by the ECB to demand further details on banks’ Brexit plans.

RBS has closed 60% of branches

According to the Mail, RBS has closed 1,423 branches since it was bailed out by taxpayers back in 2008 – cutting its network by almost two-thirds. Records show the NatWest owner had 2,276 branches in 2007. It has since closed 63% of its network to leave just 853. Campaigners have criticised the closures. Nicky Morgan, the chairman of the Treasury select committee, said that she was concerned the latest cuts could lead to "financial exclusion" for vulnerable customers, such as the elderly or disabled. Kevin Hollinrake, the chairman of the all-party parliamentary group on fair business banking, added that branch closures were leaving customers exposed to a greater risk of fraud online. "The move towards online banking has seen a rise in instances of fraud," he said.

Bank bosses to be quizzed over Brexit

A number of global banks have been called to appear before the Treasury Select Committee to face questions on Brexit. James Bardrick, head of the UK division at US investment bank Citi, Mark Garvin, vice chair at JP Morgan, and Barclays Ireland chief executive Kevin Wall will all appear in front of MPs. Mr Wall is expected to be asked about the impact of a border of Barclays’ Irish unit. Meanwhile, Theresa May’s Chequers plans has been described as “light on detail” for services and financial services by law firm Macfarlanes.

SMEs still struggle to find finance

The Sunday Times says companies looking for finance are still struggling to secure loans, despite big banks insisting they are committed to lending to small businesses. Figures from UK Finance show the outstanding balance of loans and overdrafts to small businesses by major lenders fell by 6.9% to £87.2bn across the country between the final quarters of 2015 and 2017, with small business lending in parts of Yorkshire falling by 27.5% in just two years.

Can banking minnows grow fast enough?

Rosamund Urwin examines Britain’s challenger banks in the Sunday Times, and asks whether new entrants to the sector will ever be able to take on the big four banks. She says for truly new entrants such as Metro, Starling and Monzo, the biggest problem is growth. She adds that the path to profitability is also slow, but notes that one thing in the challenger banks favour is technology. Ms Urwin ends by saying that there is a further spectre on the horizon: the possibility that tech titans such as Amazon will venture into banking. In a separate article, Ms Urwin profiles Goldman Sachs’ new bank Marcus. The retail bank will formally open to the British public this month after a soft launch for staff.

Barclays signs up to fair business lobby group

Barclays has signed up to the SME Alliance – a group that lobbies for fair treatment by banks and advisers. The bank will hold quarterly meetings with the lobby group in what is expected to kick-start a raft of meetings with British lenders.

Richard Meddings will need rugged determination in top TSB job

Following the departure of Paul Pester as CEO of TSB, Martin Arnold in the FT examines the task facing his replacement Richard Meddings. Meanwhile, the Sunday Times reports that the first half of a report into TSB’s IT meltdown is being fast-tracked and will be published before Christmas.

Mandelson criticises Barclays prosecution

Lord Mandelson has criticised the Serious Fraud Office’s prosecution of four former Barclays executives over the bank’s emergency 2008 fundraising from Qatar. The former business secretary suggested political anger at the bank’s refusal to take a Treasury bailout was a factor in the decision.

PRIVATE EQUITY

UK venture capital turns its attention towards tech

The Telegraph looks at the reasons why UK venture capital companies have upped their investments in the UK tech scene. In the three months to the end of June, around £1.6bn was invested in UK businesses, across 244 deals, and the region accounted for six of the 10 top European deals done. David Mott, chair of the British Private Equity and Venture Capital Association notes that the gap between the UK and the US is also starting to close.

BlackRock to expand its private investment activities

Mark Wiseman, global head of active equities at BlackRock, has said growing its private investment capabilities had become an “increasingly big priority” for the investment group.

INTERNATIONAL

HNA prepares to exit Deutsche Bank

China’s HNA Group is preparing to offload its 7.6% stake in Deutsche Bank. HNA has been told by the Beijing government to exit its position, according to The Wall Street Journal.

EU seeks new powers for money laundering crackdown

  1. European Commission is planning to give the European Banking Authority more investigative resources to tackle money laundering.

AUTOMOTIVE

Tesla chief accountant resigns after a month

Tesla’s chief accounting officer has stepped down after less than one month in the role. Dave Morton, who joined Tesla on 6 August, resigned on 4 September, according to documents filed with the SEC.

AVIATION

BA apologises for data breach

Alex Cruz, the boss of British Airways, has apologised for what he says was a sophisticated breach of the firm’s security systems. The airline said personal and financial details of customers making or changing bookings had been compromised, but the stolen data did not include travel or passport details. Mr Cruz has promised that passengers will be compensated. Meanwhile, Barclays and Santander have revealed that they are automatically issuing replacement cards to thousands of customers who booked flights with British Airways after the data theft.

Air Partner bolsters board after accounting troubles

Air Partner has appointed Joanne Estell as CFO following an accounting scandal at the private jet charter and air freight business. When it reported full-year figures in June, Air Partner said the accounting problem was limited to £4.4m, adding that while it was “disappointing… no customer, operator or supplier was disadvantaged.”

FINANCIAL SERVICES

Ashmore opens up Irish operation

Ashmore is set to open an office in Ireland as part of Brexit contingency plans as it seeks to ensure access to EU clients following Britain's divorce. It said that there remains “substantial uncertainty” regarding the terms of the UK's departure and the resultant implications for the financial services industry.

Old Mutual set to raise £200m

Old Mutual Global Investors (OMGI) is set to raise £200m by listing a new fund – the Merian Chrysalis Investment Company – to invest in private companies. It will be the first foray by OMGI into listed funds and its first vehicle dedicated to investing in unquoted firms.

Transferwise reports profit, plans to cut fees

Fintech firm Transferwise has reported a pre-tax profit of £7.9m in the year to March, compared with a loss of £801,000 the previous year. Revenue rose by 77% to £117.3m. Co-founder Kristo Käärmann said the company will continue to keep undercutting banks by lowering the fees it charges to send money across borders.

Mercer slams ‘unfair’ fund fees

Mercer, the consultancy group, has said that fees paid to active equity managers are unfair and should be restructured to better reflect the returns to investors.

Reinsurers in pensive mood after year of disasters

The FT examines why reinsurers have not lifted prices despite large payouts in the past year due hurricanes and earthquakes.

LEISURE AND HOSPITALITY

Côte Brasserie reports annual loss of £93m

Restaurant chain Côte Brasserie has said that it made an annual loss of £93m. Turnover was up 13.9% to £150.2m, with gross profits up 12.2%. The company reported last week that it was seeking a merger partner.

Tui in talks over transition deal

Travel operator Tui is in talks with aviation regulators over a bespoke 12-month transition deal to mitigate the fallout of a no-deal Brexit.

REAL ESTATE

House prices pick up

UK house prices picked up last month, rising at the fastest annual rate since November, according to the Halifax. In the three months to August, prices climbed by 3.7% from a year earlier, up from 3.3% annual growth in July. However, the monthly change was just 0.1%, leaving the average cost of a house little changed at £229,958. Russell Galley, managing director of the Halifax, said low interest rates and a "constrained" supply of homes for sale were supporting prices. He added that household finances were being helped by "a low unemployment rate and a gradual pick-up in wage growth".

RETAIL

Waterstones buys Foyles to fend off Amazon

Waterstones has agreed a deal to buy the 115 year-old-family book chain Foyles, saying that the deal will help to “champion” real bookshops in the face of online rivals, such as Amazon. The transaction, of which the terms were not disclosed, is expected to be completed before the end of the year.

SPORT

Premiership set to vote down CVC bid

The Guardian reports that Premiership Rugby is expected to reject a £275m bid from CVC Capital Partners for 50% of the business.

ECONOMY

Squeeze on incomes expected

Official figures this week are expected to put the average pay increase at just 2.4% in the year to July - less than the inflation rate - confirming that a squeeze on real incomes has returned. Separate numbers from the ONS are forecast to show that GDP growth edged up slightly in July, to an annual rate of 1.4% from 1.3%.

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