BANKING
Branch hours short of pre-pandemic levels
Analysis by the Financial Conduct Authority show that, at the end of June, 93% of leading bank’s branches were open less than they had been before the pandemic. While branches were open for longer than they were during the first three months of the year, 13% were shut after 2pm on a weekday and 30% closed by 3pm. On Saturdays, less than 20% of leading banks’ branches were open after 2pm. NatWest and Santander said they had returned to pre-pandemic hours, although 14 NatWest branches remained temporarily closed due to staff isolating. TSB said most branches remained open 9am to 5pm. HSBC said 113 out of 511 branches were currently open from 9am-5pm but added that it would introduce longer opening hours for the majority of the rest from November 22. Barclays said 99% of its branches had returned to permanent hours from September 6, although the hours are different than they were pre-pandemic. Lloyds, which runs Halifax and Bank of Scotland, said 99% of branches were open with regular hours, and larger branches were open from 9am to 5pm. Nationwide said the majority of its branches were back to pre-pandemic opening hours of 9am-4.30pm. Analysis shows that banks closed 267 branches between April and June, with only 60% of people now living within 2km of a bank branch. Andrew Hagger, founder of the personal finance site Moneycomms, said: “More people have migrated to banking online, however for those needing to use a branch for certain transactions, or want to because they prefer it, reduced and restricted opening hours make it more inconvenient.”
Banks set to resist EU efforts to wrestle business from the City
British banks are strengthening lobbying efforts to resist EU attempts to lure business away from the City of London after Brexit. UK Finance says it will be building up its capital markets arm, with the organisation set to see extra work as it seeks to influence Britain's post-Brexit financial rule book and protect London's role as a global hub. The Telegraph’s Lucy Burton cites insiders who say UK Finance will call for unnecessary red tape to be cut and will resist certain EU proposals, including a European Commission bid to turn non-EU banks' European branches into subsidiaries. Ms Burton says that while the EU is “trying to wean itself off its dependence on the City” for access to capital markets, the UK has been fighting to retain the City's pull by promising bankers that EU-driven laws governing the financial system are to be repealed. She says the Treasury is “seeking to ditch the legalistic approach” taken when Britain was in the EU, where rules were set by the bloc and Whitehall through legislation and only enforced by regulators.
BoE considering easing mortgage rules
The Bank of England is considering easing mortgage rules, with officials weighing whether to allow lenders to the increase the volume of large home loans they provide. Banks are currently limited in the proportion of loans they can give to borrowers who need more than 4.5 times their salary, with these not allowed to represent more than 15% of new loans issued. The stress test rules, which were drawn up after the financial crisis, are designed to ensure that banks are resilient enough to withstand borrowers running into financial difficulty if interest rates jump. Ray Boulger, a mortgage broker at John Charcol, said “there's a good argument for the rules changing”, adding: “It would mean that people who can't afford their first property or couldn't borrow enough would have a chance to get on the ladder. In theory, this would push up house prices.”
Boden: Starling is taking on the big banks
Starling Bank aims to overtake Barclays in the business banking market within five years, with founder and CEO Anne Boden saying this is a "very realistic" timescale to more than double its 7% share of the small business market. In an updated version of her book Banking On It, Ms Boden said she no longer considered the likes of Monzo as direct competition, writing: "The extraordinary experiences of the year 2020 made it clearer than ever that our competitors are now Lloyds, Barclays et al.” Saying that Barclays is "now in our sights", Ms Boden added that Starling is no longer a challenger but a mainstream player that is "taking on the big banks". "We see a world where we are growing substantial market share and people will be saying, 'NatWest, HSBC and Starling'," she said. Meanwhile, Starling has bought a mortgage book worth around £1bn from specialist lender Kensington Mortgages. Kensington, which is owned by private equity firms Blackstone and Sixth Street, recently appointed Morgan Stanley to lead a sale process. The deal for Kensington’s mortgage book follows Starling's first acquisition in July, when it bought Fleet Mortgages for £50m in shares and cash.
Banks plan to add pronouns to name badges
In an attempt to be more inclusive to transgender workers and customers, NatWest is trialling a branch uniform that would give employees the option of adding their preferred pronoun to name badges, while rival lenders including Virgin Money and HSBC are considering whether to add chosen pronouns to name badges. Lucy Burton in the Sunday Telegraph notes that staff at Nationwide can already add pronouns to their name badges. Gender pronouns, she says, “are being hotly debated in boardrooms”, with a number of City firms encouraging staff to sign off emails with their preferred pronoun. Ms Burton notes that the Financial Conduct Authority has proposed that companies record employees’ chosen gender rather than their legal sex.
Danske Bank reprimanded over Bounce Back loans
Danske Bank has been reprimanded over the treatment of some small businesses applying for Coronavirus Bounce Back loans, having required up to 205 firms to open business accounts to access a loan. The Competition and Markets Authority (CMA) said this meant the firms faced new fees, warning that the practice restricts customer choice and, therefore, competition in the market. This is the second time that Danske has been reprimanded over the matter, with the CMA saying it was concerned that Danske "did not investigate the first breach in sufficient detail" so as to identify all affected customers. The watchdog also said that the second breach might not have come to light had Danske customers not seen the CMA announcement of the first breach and subsequently contacted the bank.
INTERNATIONAL
SMFG and Mizuho see H1 profits surge
Sumitomo Mitsui Financial Group, Japan's second-largest bank by assets, saw net profit jump 69% to 456bn yen in the April-September period. Meanwhile, Mizuho, the third biggest lender, said earnings rose 79% to 385.7bn yen in the period. Both banks have lifted full-year profit forecasts on the back of their strong H1 performances.
SEC rejects bitcoin-based ETF
The US Securities and Exchange Commission (SEC) has rejected VanEck’s proposal for an exchange-traded fund that would directly hold bitcoin. The SEC expressed concern that basing a product on the spot price of bitcoin could violate securities rules because the market is too prone to abuse, noting "fraudulent and manipulative acts and practices" in the markets where bitcoin is traded.
FINANCIAL SERVICES
FCA accused of changing rules to avoid paying compensation
The Financial Conduct Authority (FCA) has been accused of changing its complaints scheme in an attempt to avoid paying compensation to victims of failed funds or investment scams. The FCA reportedly changed its complaints scheme ahead of a wave of claims from savers who had lost more than £200m in the collapse of investment firm London Capital & Finance in 2019. The financial watchdog denies acting unlawfully, saying it was “clarifying” the scheme’s guidelines. Andrea Hall, a member of the LCF bondholders campaign group, said: “They thought they would just change the rules and no one would challenge them … They wanted to shut that door on this wall of complaints on their regulatory failures.” Amerdeep Somal, the Financial Regulators Complaints’ Commissioner, is looking into the matter, with a draft report of her findings suggesting the FCA tried to make changes to its complaints scheme “via the backdoor” - which appeared “contrary” to its statutory purpose. An FCA spokesperson said a statement issued in 2020 “did not introduce any new test but instead set out our longstanding approach to offering payments in recognition of financial loss.” They added: “There has been no change to the substance of the test and LCF complaints are being considered under the existing scheme.”
Brexit not a catastrophe for the City
Jeremy Warner in the Sunday Telegraph looks at the impact of Brexit on the City, saying that financial services were almost entirely excluded from the trade agreement struck between the UK and the EU, noting that in all but clearing, the Treasury has struggled to secure equivalence. However, he says the loss of primacy within the EU “does not seem to have materially damaged the City as an offshore financial centre”. He points to data this showing that just 7,600 City jobs have relocated to Europe since the referendum – far fewer than some “more alarmist predictions” had suggested would be lost to the continent. On the negative consequences, Mr Warner notes that almost a quarter of the firms surveyed reported a negative financial impact from Brexit, while it is estimated that more than £1.3trn of assets have been shifted out of the UK into EU member states.
FCA fines broker £642k in cum-ex case
The Financial Conduct Authority (FCA) has fined Sunrise Brokers £642,000 for having deficient anti money laundering systems and controls in relation to cum ex trading. The penalty comes as part of the second case brought by the FCA in relation to cum-ex trading, dividend arbitrage and withholding tax reclaim schemes. The FCA found Sunrise Brokers’ trading between February 17, 2015 and November 4, 2015 showed a pattern of purported trades which was highly suggestive of financial crime. The City watchdog said trading “appears to have been carried out to allow the arranging of withholding tax reclaims in Denmark and Belgium”. Mark Steward, the FCA's executive director of enforcement and market oversight, said that the regulator’s response “demonstrates we will not tolerate firms’ lax controls and that we will work with overseas agencies to ensure London is not viewed as a haven for poor controls and practices.”
Prudential may look to Asia for a new CEO
Prudential has started a process to find a new chief executive to replace Mike Wells, with chairwoman Baroness Shriti Vadera working with headhunters Spencer Stuart and Egon Zehnder to revamp the board. With Mr Wells having split off UK operations into the separately listed M&G and demerging its large American operation, Jackson, the insurer is focused on Asian markets. With this in mind, it has been suggested that the new CEO could be based in Asia, reflecting the new focus on the region. Hedge fund Third Point, run by activist investor Dan Loeb, had criticised the company for the lack of Asian personnel in its management.
Lord Mayor of London says the City 'is coming back to life'
Vincent Keaveny, the new Lord Mayor of London, has urged businesses to get more staff back to their desks as it was revealed the City remains half empty. A study by Orbital Insight shows that in mid-October, the City of London was at 51% of February 2020 levels of activity – while Canary Wharf was at 59% and Wall Street was at 66%. This comes with data suggesting that just 20% of office space is currently occupied in the UK and that the majority of people want a hybrid option mixing office-based and home working.
HEALTHCARE
J&J to spin off consumer division
Johnson & Johnson has announced plans to spin off its consumer division as the company looks to focus on medicines and medical devices. The US firm said that even after the spin off it ill remain the largest healthcare company in the world. The consumer division is set to be split off from J&J in 18 to 24 months' time.
LEISURE & HOSPITALITY
Banks hired to advise on BK UK IPO
The owner of Burger King's UK operations, Bridgepoint, has reportedly appointed Bank of America and Investec to advise on the fast food chain's London Stock Exchange IPO, which is set to take place in the first half of 2022. It is hoped that the listing will raise £600m for the chain's future expansion.
MEDIA & ENTERTAINMENT
Proxy advisory puts pressure on Microsoft
Advisory group Glass Lewis has urged Microsoft shareholders to back a proposal at its annual meeting that would compel the firm to be more transparent about its sexual harassment policies. This comes on the back of concern over the firm’s handling of allegations of misconduct by former boss Bill Gates, with the co-founder accused of inappropriate relationships and sexual advances towards Microsoft employees. Arjuna Capital, an activist investor, has called on Microsoft to release an annual transparency report outlining its sexual harassment policies and any investigations into alleged misconduct.
REAL ESTATE
Landsec sells office building to Blackstone
Commercial property developer Land Securities has sold Canary Wharf office building 6-9 Harbour Exchange to BlackStone's European Property Income Fund in a £196.5m deal. Harbour Exchange comprises two redeveloped office buildings and is let to Equinix with an unexpired lease term of nearly 20 years. The deal is expected to be completed before the end of next year.
ECONOMY
Economists expect inflation to climb toward 4%
Official figures published on Wednesday are expected to show inflation jumped from 3.1% in September towards 4% in October. While City economists expect inflation to have hit 3.8% last month, Nomura’s George Buckley warns it could hit 4.1%. This would mean inflation is more than double the Bank of England’s 2% target. He warned that a “perfect storm is brewing for UK inflation”, pointing to a rise in energy bills and widespread price increases. A poll by Reuters shows that the Bank of England is expected to be the first major central bank to raise rates in the wake of the pandemic. The Bank had been expected to increase its base rate to 0.25% last week but surprised markets by holding it at the all-time low of 0.1%.