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Daily News Roundup: Monday, 14th February 2022

Posted: 14th February 2022

BANKING

Banks funding fossil fuel despite net zero pledges

Analysis shows that Europe's biggest banks have provided billions of pounds to oil and gas companies that are expanding production less than a year after pledging to target net zero carbon emissions. While last April many banks signed up to the UN-backed Net-Zero Banking Alliance (NZBA), which requires them to set targets to reduce carbon emissions, analysis by the campaign group ShareAction shows that 25 of those that signed up to reduce emissions have provided $33bn (£24bn) in loans and other financing to 50 firms with large oil and gas expansion plans. More than half ($19bn) of this came from four of the NZBA's founders: HSBC, Barclays, BNP Paribas and Deutsche Bank. HSBC, Barclays and BNP Paribas have also provided the most finance to these firms since 2016, at $59bn, $48bn and $46bn respectively.

Britain's biggest banks preparing £4bn bonus bonanza

Britain’s Big Four banks are expected to reveal bumper bonus payouts over the next fortnight as profits look set to exceed those reported just before the financial crisis. Barclays, HSBC, Lloyds Banking Group and NatWest could hand out as much as £4bn and plough cash into dividends and share buybacks. Barclays alone could pay out £2bn in bonuses, experts claim, following an excellent year for its investment banking arm.

Banks set for bonus backlash?

Louisa Clarence-Smith in the Times says banks could face a backlash over bonuses at a time when customers are facing a cost-of-living crisis. This comes with NatWest, Barclays, HSBC and Lloyds expected to report total profits of £34bn and large bonus pay-outs in their 2021 results over the next two weeks. Shareholders are also expected to see bumper dividend payments and share buybacks. Luke Hildyard, director of the High Pay Centre, said: “The synergy of huge pay-outs for senior bankers and the cost-of-living crisis experienced by the wider public highlights the miserable results of the UK’s longer-term approach to economic policymaking.”

NatWest to begin search for chairman’s successor

NatWest Group is preparing for the departure of chairman Sir Howard Davies. Sky News reports. Headhunters are expected to be appointed to conduct a formal search later this year. Separately, the Mail on Sunday reports that the bank is set to push through 32 branch closures under the NatWest and Royal Bank of Scotland brands this year.

Britain remains centre of foreign investment after Brexit

Data from 3S Money shows that between 2019 and 2020, the fintech firm saw a 332% increase in non-UK businesses looking to open a bank account in the UK. This growth continued since the UK’s official break from the EU at the end of 2020, with a 108% increase reported in the last twelve months. Despite fears the UK would lose foreign investment because of Brexit, Ivan Zhiznevskiy, CEO of 3S Money, says “the UK still present an extremely attractive business opportunity, especially for high-tech start-ups.” He adds: “Financial inclusion and accessibility are the two main drivers for non-UK businesses choosing to do business in the UK.”

RBS to launch green loan support for SMEs

Royal Bank of Scotland is launching new “green loans” later this month to help SMEs finance the business assets to support their sustainability ambitions. The move comes after parent NatWest Group announced its £100bn “climate and sustainable funding and finance” ambition and the recent publication of its Springboard to Sustainable Recovery report. Research from RBS reveals that more than two-fifths of small firms are making changes to their businesses to go greener.

Lenders to the expat market pull back

The number of banks and building societies in the UK willing to lend to expats living in the EU who want to buy property back home has dropped sharply due to uncertainty surrounding Brexit relations. Guy Stephenson, of mortgage broker Offshoreonline, said: “The trade deal announced between the British Government and the EU in 2020 did not include terms on financial services, making cross-border lending harder. This has left British expats purchasing a buy-to-let in the UK or buying to keep a foot in the British market, left out in the cold.”

Banks warned on risk of AI loan bias

The FT reports than financial regulators have told banks they can only use AI to process loan applications if there is proof that the technology does not discriminate against minorities.

PRIVATE EQUITY

Private equity deals in Scotland exceed £2bn

Scotland’s private equity market saw more than £2bn worth of deals in 2021, research shows. The analysis shows that the 44 investment deals recorded in 2021 was the largest number in the last five years and 55% up on 2020, when 29 deals worth £1.7bn took place. However, the £2.1bn in deals recorded last year is 19% lower than in 2019 when deals worth £2.59bn were transacted. The number of private equity exits in Scotland rose from 11 in 2020 to 13 in 2021, surpassing 2019 levels when ten exits took place. Deal values also increased, from £61m in 2020 to £69m in 2021. In 2019, Scottish exits totalled £72.9m.

INTERNATIONAL

Watchdog sounds alarm on financial risks of Europe’s property boom

The European Systemic Risk Board has warned seven of the 30 countries it oversees that their banks are at risk from soaring property prices, loose lending standards and rising household debt levels.

FINANCIAL SERVICES

Crypto exchange founder says FCA is stifling innovation

The founder of Blockchain.com, Peter Smith, asserts that the Financial Conduct Authority (FCA) is smothering innovation in the crypto sector leaving the UK straggling behind its competitors. Blockchain.com is Britain’s biggest cryptocurrency start-up worth $5.2bn (£3.8bn) and an upcoming funding round could take that to $20bn. Smith agrees with the former Chancellor Philip Hammond’s claim that the UK was “manifestly behind the curve” when it came to clear regulation of cryptocurrency. Smith said: “I think there are regulators in Europe that are doing really interesting stuff like Ireland and Germany, they’ve come out with full regulatory frameworks, licences that you can apply for. You now have these purpose built frameworks that companies like us can apply and operate under. But you haven’t seen that in the UK.”

Online shoppers face new anti-fraud checks

New rules introduced by the Financial Conduct Authority will require retailers to confirm the identity of online shoppers. The new anti-fraud rules come into force on 14 March and will mean more requests for ID verification. The customer authentication (SCA) rules stem from legislation that came out of the European Banking Authority and was adopted into UK law before Brexit. Jana Mackintosh, the managing director of payments at UK Finance, said: “For retailers, implementing SCA will provide customers peace of mind that payment processes are more secure.”

Car insurance increases despite new rules

Car insurers are increasing prices despite the introduction of rules designed to protect drivers from being exploited. The Association of British Insurers has warned that “cost pressures” facing the industry are causing premiums to rise. The ABI, which represents 200 providers, has yet to publish any data in 2022 but its most recent analysis, covering Q4 2021, shows that the average premium for fully comprehensive car insurance rose by £11 to £440. MoneySuperMarket analysis covering the same period found a 7% rise, from £412 to £444. Financial Conduct Authority regulations introduced on January 1 banned companies from overcharging current policyholders, with the rules looking to end the so-called “loyalty penalty” on existing home and car insurance customers.

LV CEO under pressure to give up bonus

LV chief executive Mark Hartigan is under pressure to give up his bonus after the failed attempt to sell the insurer to Bain Capital. Mr Hartigan and departing chairman Alan Cook tried to sell the mutual for £530m until members voted against the move in December. Mr Hartigan is in line for a bonus of up to £740,000 for 2021 but critics argue that he should not receive more than his basic salary of £435,000, having spent up to £43m of members' money as he looked to push the sale. Gareth Thomas, chairman of Parliament's All-Party Group on Mutuals, said: “A bonus should be a reward, whereas the only thing Mr Hartigan needs is to be shown the door … If he refuses to quit, the least he can do is give up his bonus. Failing that, the company should scrap it.”

Arm’s flotation on Nasdaq ‘a huge potential blow’ to London

Baillie Gifford’s James Anderson tells the FT that Softbank’s plan to list Arm Holdings in New York would be vote of no confidence in London. The decision is likely to spur more rapid reforms to encourage tech firms to list in the UK. Meanwhile, the London Stock Exchange is expected to lobby Softbank on a dual listing. All this is moot though until the legal dispute with the head of its Chinese joint venture, Allen Wu, is resolved.

‘Buy now pay later’ boom fuels consumer debt concerns as transactions soar

The popularity of “buy now pay later” services is concerning regulators worldwide as research finds a third of users fail to pay instalments on time while and vulnerable are put at risk of problem debt.

Former FCA board member criticises Solvency II reforms

Mick McAteer, a former board member of the Financial Conduct Authority, has claimed ministers and regulators are doing secret deals on insurance sector reforms that could mean higher charges for policyholders.

LEISURE & HOSPITALITY

Butlin’s bidders balk at £700m price tag

Blackstone has put its Butlin’s holiday camps up for sale as it reshapes its Bourne Leisure parks arm. But potential bidders have been stunned by a £700m valuation for the three camps reportedly put forward by Rothschild, which is handling the sale.

REAL ESTATE

City exodus over as normality returns

Graham Ruddick in the Times says cities are regaining their allure, post-pandemic, suggesting that “like so many of the trends that emerged during COVID-19 … the flight out of London and other big cities is reversing as something like normality returns.” The rebound, he adds, can also be seen in commercial property, with West End developer Great Portland Estates last week reporting a record number of office lettings for its financial year, including seventeen deals in the past four months alone.

Chinese developers selling off more London property to raise cash

A flagship London project has been sold by Shanghai-based Greenland Holdings, marking the latest move by a Chinese developer to abandon UK ambitions in order to raise capital to repay debts.

RETAIL

Prospective Boots bidders given deadline

The Times reports that Walgreens Boots Alliance has given prospective bidders for Boots until the end of February to submit first-round bids in a £7bn auction. Sebastian James, the Boots UK chief executive, has reportedly been meeting prospective bidders alongside advisers at Goldman Sachs, who have been touting the opportunity for the company to offer more health services, including vaccinations, and an improving range of beauty brands. Sources said that the frontrunners considered to be Bain and CVC, while Issa brothers and TDR Capital, who bought Asda last year and own the EG Group petrol forecourts business, are taking a close interest in the process and are expected to make a bid.

ECONOMY

GDP bounce leads to bets on 2% rates

Markets are pricing in an interest rate of 2% by the end of the year after official figures showed GDP rebounded last year to grow by 7.5%. Although it marks a healthy bounceback, it comes after the economy crashed 9.4% in 2020 when it was shut down due to Covid. Traders are expecting the Bank of England to tighten rates from 0.5% today to 2% by November in three or four steps. Inflation is forecast to rise to a peak of 7.25% in April when the energy price cap increase comes into effect, wiping out pay growth and reducing households’ real post-tax incomes by 2% - the biggest annual drop on record.

OTHER

HMRC makes first NFT seizure

HMRC has seized three Non-Fungible Tokens (NFT) as part of a probe into suspected VAT fraud, making it the first UK law enforcement to seize an NFT. Nick Sharp, HMRC’s deputy director for economic crime, said the first seizure of an NFT "serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC". "We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets,” he added.

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