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Daily News Roundup: Monday, 14th October 2019

Posted: 14th October 2019

BANKING

Revolut looks to raise £1.2bn and become Europe’s most valuable fintech

Revolut has hired JP Morgan to help it raise £1.2bn from investors in a move that could value the company at between £3.9bn and £7.9bn, making it the most valuable fintech company in Europe. Revolut is looking to arrange a £395m equity raise and issuance of a £790m convertible loan. The group is also expected to announce veteran fund manager Martin Gilbert as its new chairman in the coming months.

NS&I prepares for Brexit-induced inflows

NS&I CEO Ian Ackerley warns that concerned investors could withdraw billions of pounds from the stock market if Britain has a long and complicated exit from the EU, resulting in massive inflows to the Treasury-backed bank. Analysts predict NS&I would be forced to reduce rates further and limit deposits to ensure it remains within its £11bn net financing target for 2020-21.

Digital v traditional – there’s still all to play for

The Times’ Simon Duke considers whether digital-only banks will decimate the retail business of high street banks to the same degree that disrupter payment firms did to incumbent payment processors after the 2008 crash. Analysts say all is still to play for as digital lenders still need to persuade customers of traditional banks to move their current accounts. In the meantime, high street lenders are “copying the best features from millennial-friendly apps and creating their own online-only offshoots.”

Rose to lead RBS review

Incoming Royal Bank of Scotland CEO Alison Rose is expected to launch a review of the bank's operations when she takes up her post next month, the Sunday Express reports. Oliver Shah in the Sunday Times points to threats from challenger banks, fiercely competitive mortgage lending and signs that default rates on loans are creeping up.

Lloyds prepares for Horta-Osorio exit

Lloyds Banking Group is understood to have stepped up its succession planning amid speculation that its chief executive Antonio Horta-Osorio will go within a year. Mr Horta-Osorio is tipped for the top job at HSBC and his three-year strategy for Lloyds would culminate in 2020.

Contactless used for half of debit card transactions

Contactless payments accounted for half of all debit card transactions in July, the first time the 50% level has been reached, according to figures from UK Finance. Contactless was used 647m times on debit cards during the month.

Quinn looks to axe equities arm

HSBC is to review its global equities sales and trading business under caretaker boss Noel Quinn, writes Emma Dunkley in the Sunday Times. The move raises the prospect of more job cuts as the bank comes under pressure from low interest rates and unrest in Hong Kong to cut its cost base.

PRIVATE EQUITY

Retirement pots could boost VC funds

The state-owned British Business Bank (BBB) is considering allowing up to 5% of private sector retirement pots to be invested in venture capital funds in a move that could provide a £50bn funding boost to start-ups. To mitigate the extra risk, the BBB could create an investment vehicle to pool pension contributions in a fund of funds.

Private equity firms go small after string of big deals collapse

The total value of investments of $1bn or less have surged to record highs this year as PE firms turn away from big deals following a string of failures.

INTERNATIONAL

Goldman and Morgan Stanley expected to suffer IPO earnings hit

A slowdown in M&A activity and a tough IPO market have led to lower earnings expectations for Morgan Stanley and Goldman Sachs – down 15% and 10% respectively for Q3, according to a Bloomberg survey.

Banks launch platform to propel bond issuance into electronic age

Nine top Wall Street banks have formed a new company called DirectBooks, a platform designed to make the issuance of corporate bonds more efficient.

China to scrap foreign ownership caps for fund companies from April

The China Securities Regulatory Commission has announced that it will abolish limits on foreign ownership of fund management companies in the country from April 2020.

Citigroup names new global co-heads of equity capital markets

Citigroup has named Douglas Adams and James Fleming its new global co-heads of equity capital markets.

AUTOMOTIVE

Labour vows to ban sale of non-electric cars by 2030

Labour says it wants to work with industry to end the sale of cars with internal combustion engines by 2030, as part of its plans to tackle the climate emergency.

AVIATION

Failed airlines to fly passengers home

Insolvency legislation is set to be reformed to enable bankrupt carriers to be put in "special administration", allowing their aircraft and crew to continue flying.

FINANCIAL SERVICES

Global regulators put pressure on Libra with enhanced scrutiny

Randal Quarles, the head of the global Financial Stability Board, wrote to G20 finance ministers on Sunday warning of a “host of challenges” related to global cryptocurrencies such as Facebook’s Libra which need to be addressed urgently. Mr Quarles said stablecoins posed “challenges for financial stability” as well as risks over data privacy, global competition, money laundering, tax evasion and cyber security. The first board meeting of the Libra project is set to be held today and comes after Mastercard, Visa, Stripe, eBay and Mercado Pago confirmed they would withdraw from the scheme. Last week, PayPal also announced it was also pulling out of the project.

Property funds build up 'war chests'

UK property funds are building up 'war chests' of more than 20% to mitigate against potential redemptions in the coming weeks as a result of stock market volatility. Research by investment platform AJ Bell shows that UK property funds run by asset managers Kames, Janus Henderson, Legal & General and BMO Global Asset Management are all currently cash-heavy. BMO UK Property and L&G UK Property have 30% of their assets in cash while the equivalent figure for Janus Henderson UK Property is 27%.

City plans to woo Chinese firms

According to the Mail on Sunday, the City of London Corporation has drawn up a report recommending London takes advantage of the trade dispute between the US and China and positions itself as an alternative market for Chinese funds. Policymakers at the organisation believe there is an “urgent need” to enhance relations with China and attract new financial services investment after the UK leaves the EU.

Jupiter suffers heavy outflows following loss of star stockpicker

Jupiter Asset Management suffered outflows of £1.1bn from its European Growth fund in the third quarter following the announcement that star stockpicker Alex Darwall was leaving.

M&G faces testing split from the Pru

The FT examines the challenges facing M&G as it prepares to break away from insurer Prudential on October 21. M&G will become the UK’s third-biggest listed fund group with £341bn assets.

UK insurers and the £1.2bn cost of loyalty

The FT considers plans to ban insurers from charging loyal customers more that new ones suggesting the FCA proposals would force insurers to “radically alter their business models.” The Telegraph reports that analysts expect Direct Line to be the “most exposed” to the changes.

LSE lays down tougher rules for green bond reporting

The London Stock Exchange is to create a “Green Economy Mark” to identify environmentally-friendly equity issuers and require annual reporting on how proceeds of bonds are used.

HEALTHCARE

Four Seasons sells half its care homes, future of others at risk

Care home operator Four Seasons has sold off its entire freehold estate, making up over half its 322 hospitals and homes, to US hedge fund H/2 Capital Partners in a £350m deal. Four Seasons is also in discussions with landlords after it stopped paying rent on its 135 leasehold sites without warning a fortnight ago.

LEISURE & HOSPITALITY

Pizza Express could jettison 150 restaurants

As many as two in five Pizza Express restaurants are loss making, the company’s lenders fear, with sources saying bondholders are considering a CVA to close those stores. The move could put more than 150 restaurants and an estimated 3,300 jobs under threat. Pizza Express is struggling under a £1.2bn debt pile.

Luxury hotel group Rocco Forte readies for big expansion

Rocco Forte wants to increase its European property portfolio from 14 to 25-30 over the next five years citing a shortage of supply in the luxury market and a move into long-term rental accommodation.

MEDIA & ENTERTAINMENT

Equistone joins potential XLN buyers

Equistone has emerged as a contender to purchase a controlling stake in Blackstone-backed telecoms outfit XLN.

PROFESSIONAL SERVICES

Pinsent Masons cites tough conditions as partner dividend halved

Pinsent Masons partners have been told their next quarterly dividend will be halved after the firm failed to meet billing and cash targets amid “challenging” trading conditions.

Recruiter eyes German office amid London job fears

Goodman Masson is planning to open an office in Frankfurt amid fears of a London job slump in the banking sector post-Brexit.

REAL ESTATE

Land Securities nears £650m sell-off

Land Securities is finalising a £650m sale of its portfolio of cinemas, restaurants and sports centres. The property giant is understood to have agreed to sell its 95% share of X-Leisure unit trust to private equity investor CIT. The trust owns 15 leisure schemes including Brighton Marina, Xscape in Milton Keynes and Castleford.

WeWork chases new financing as cash crunch looms

WeWork could run out of cash as soon as the end of next month, according to reports, while JPMorgan Chase, which led the office company’s IPO preparations, is leading the financing negotiations and considering a contribution to a new $5bn credit line.

RETAIL

Autumn sales see record price cuts

High street stores are slashing prices by up to 90% in a desperate bid to win customers. Analysts say this autumn's sales are “the deepest we have seen historically”.

ECONOMY

Ramsden cautious over growth potential

The deputy Governor of the Bank of England, Sir Dave Ramsden, has warned that Brexit uncertainty has hampered the UK’s potential for growth to the extent that the Bank’s ability to help with interest rate cuts has been weakened.

OTHER

Bank of England is a captive of groupthink

Former MPC member David Blanchflower says the BoE could have foreseen the financial crisis and it is its continued homogeneity and adherence to consensus that means it will fail again.

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