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Daily News Roundup: Monday, 17th August 2020

Posted: 17th August 2020

BANKING

Investment banks improve balance in the boardroom

Analysis from New Street Group shows that 37% of board members at UK banks are women, compared to 35% across Europe and 33% in the US. Across investment banks the percentage of women on boards has grown from 25% in 2015 to 31% in 2020. Citi leads the way, with women making up 44% of the boards, while Lazards has the next highest proportion, at 36%. Andrew McIntee, managing director at New Street Group, said: “Some investment banks have had a reputation for being an ‘all-boys club’ at board level but there has been real progress on that front in recent years. More women have moved into senior roles in investment banking, both as executives and non-execs.”

Record borrowing decline on the cards

A new report suggests demand for consumer credit will fall by a record 15.9% and Britain's unsecured debt pile is unlikely to recover to 2019 levels until 2022. The report also suggests mortgage lending will grow just 2.6% this year, the slowest rise in half a decade. Andrew Hagger, founder of personal finance site Moneycomms, said the coronavirus crisis has “been a game changer to such an extent that consumer spending and borrowing habits will have changed permanently for some.” Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said borrowing would “eventually” return to pre-coronavirus levels, but the question was “how long it's going to take.”

BoE: Banker bonus cap can reduce risk-taking

A Bank of England (BoE) study suggests the EU’s cap on banker bonuses can help to curb excessive risk-taking. Britain had opposed the cap which says a bonus can be no more than 100% of a banker’s fixed pay, or double that amount with shareholder approval, with some critics saying such restrictions could be counterproductive as fixed pay may be bumped up. While some bankers have been hoping Brexit will see the rule discarded, the BoE report says analysis shows “some appropriately designed restrictions on bonus payments could mitigate excessive risk-taking”.

Automatic refund call over PPI

Kevin Hollinrake, co-chairman of the all-party parliamentary group on fair business banking, believes PPI refunds should be automatic so customers do not have to hire lawyers. He has urged the Financial Conduct Authority to order banks to give customers all of their money back, even if they have already had a claim rejected or been partially refunded, saying: “This is the only way that consumers will be treated equally and fairly.”

Single leadership for NatWest’s wealth management divisions

NatWest has announced that it will bring all of its wealth management businesses under the single leadership of private banking chief executive Peter Flavel. The move will bring together Coutts, Adam & Company, Holt’s, Drummonds, PCAIS, Premier Banking and Premier 24. Mr Flavel said the new service would put Coutts’ asset management expertise “at the heart of all investment propositions”.

First Direct makes Mastercard switch

HSBC’s First Direct brand will begin to move customers from Visa to Mastercard debit cards in 2021. The deal marks the second big bank to switch from Visa to Mastercard, after an agreement with Santander in 2018. First Direct’s 1.6m customers will lift Mastercard’s market share above 15%.

Mutuals apply for full licences

South West Mutual and Avon Mutual have applied for a full banking licence with the Prudential Regulation Authority and plan to launch as banks in 2022. The Sunday Times notes that two more regional lenders have registered as mutual societies and a further four are in the process of registering.

Coutts in Post Office link

Private bank Coutts is allowing its customers to make transactions in Post Office branches. This means customers with the Queen’s back can now bank from 22,500 locations, including the UK’s 11,500 Post Office, NatWest branches and ATMs.

PRIVATE EQUITY

Government explores bailout loans for private equity-owned groups

The Government is reportedly exploring ways to offer loans to companies owned by private equity groups, with sources saying ministers want to support debt-laden firms without breaching EU state aid rules.

PE investors could lead M&A recovery

The Sunday Times’ Jill Treanor looks at private equity, saying firms in the sector are “likely to be doing more buying than selling” in the “COVID-19 climate”, pointing to City sources who suggest firms are “waiting to pounce on weakened businesses”, with bankers working on potential deals that could revive the mergers and acquisitions market.

INTERNATIONAL

Berkshire Hathaway cuts stakes in US banks

Berkshire Hathaway significantly cut its stakes in some of the largest US banks in Q2, selling stock in Wells Fargo and JPMorgan Chase and exiting an investment in Goldman Sachs. Berkshire reduced its Wells Fargo stake by 26% in the quarter and reduced its stake in JPMorgan by 62%.

Viva Wallet hires Jefferies for fundraising

Greek payments company Viva Wallet is seeking to raise €500m to support its digital banking operations and has hired Jefferies to advise on a fundraising that will offer investors stakes in a new legal entity which will take on all Viva Wallet's banking loans. Viva Wallet secured a banking licence through a merger with Praxia Bank in January, with the acquisition cleared by the Bank of Greece in early August.

Australia moves closer to a cashless society

Figures from the Australian Payments Network show that the number of ATMs across the nation are at their lowest level in 12 years at 25,720, with at least 2150 terminals removed in the last quarter. Meanwhile, analysis shows that Australia's big four banks – ANZ, Commonwealth, NAB and Westpac – shut a combined 175 branches in the last 12 months.

AVIATION

EasyJet sells planes for £608m

EasyJet has sold 23 planes, netting £608m in cash. The airline has agreed to sell the aircraft to China’s Jin Shan 37 Ireland Company Limited, which is owned by Bank of Communications subsidiary Bocomm Leasing. It will lease the aeroplanes back from the new owner.

FINANCIAL SERVICES

Regulator tells investment firms to return cash to clients

In a Dear CEO letter, the Financial Conduct Authority (FCA) has told do-it-yourself investment platforms to return money to customers who withdrew cash from volatile stocks and shares during the coronavirus crisis. Regulators are concerned that retail investors might struggle to get hold of their money should a platform go bust. Writing to CEOs of about 600 firms, Megan Butler, executive director of supervision at the FCA, told managers to “consider whether the firm needs to hold client money balances which are unlikely to be reinvested, or whether it would be in your clients’ better interests to place these balances directly with their own current or savings account providers”.

City firms back scheme to tackle underrepresentation

The fund management industry will work to tackle the underrepresentation of black talent in the City, with the #100blackinterns initiative set to see the industry’s leading firms support black people trying to establish a career in the City. Eighty leading firms, including Legal & General, Schroders and Goldman Sachs, are joining the initiative, with a minimum of 100 paid internships in front line investment roles to be offered to black graduates.

Schroders allows staff to work from home

Fund manager Schroders is to allow thousands of staff to permanently work from home, making it the first City institution to tell workers they will no longer be required to be office-based, even after the coronavirus pandemic has passed. With an internal message to staff suggesting there will be far greater flexibility over where and when employees do their jobs, a company insider said Schroders staff “have been told the firm will not go back to nine-to-five."

Fink retains position as highest paid CEO

The pay of CEOs at 31 leading US and European asset management firms hit $233m last year, a 12% increase. BlackRock’s Larry Fink was the top earner, taking home $25.3m.

LEISURE AND HOSPITALITY

Yo Sushi to cut jobs

Restaurant chain Yo Sushi has announced plans to cut 250 jobs as part of a major restructuring. The firm has confirmed that a CVA will see 19 of its 69 UK outlets close.

REAL ESTATE

Sales climb to 10-year high

Figures from Rightmove show that the housing market has had its busiest month in more than 10 years in July. The property platform says the number of monthly sales agreed in Britain was up 38% on the same period last year and worth a total of more than £37bn, with more properties coming on to the market than in any month since 2008. Rightmove says the average asking price on a property in Britain is now £319,497. While asking prices have fallen by an average of 0.2%, this has been driven by a 2% drop in London.

Yorkshire leads on house price growth

Analysis from property website Home shows that amid the post-lockdown recovery in the property market, Yorkshire is leading the way with 8.1% year-on-year price growth. The North West of England is also performing well, with growth of 6.7%, while the Asking Price Index for August shows Scotland has seen growth of 6.6%. Asking prices in July were up for a third consecutive month in all English regions, Scotland and Wales. The lowest level of growth was seen in Greater London, where asking prices were up 0.5%, while the South East was just ahead at 0.6%.

RETAIL

Quiz agrees banking deal

Fashion retailer Quiz has agreed an extension of its banking facilities with HSBC. The firm says the total bank facilities available to it has increased from £1.75m to £3.5m, with this comprising of an overdraft of £2m and a working capital facility of £1.5m.

ECONOMY

BoE economist sees signs of rapid recovery

Britain's economy is on course for a rapid recovery from the coronavirus crisis, Bank of England chief economist Andy Haldane has predicted. Noting that strong consumer spending has already helped claw back as much as half of the losses seen in the wake of the pandemic, Mr Haldane says the economy is expected to expand by more than a fifth in the second half of the year. This, he adds, would be “by far the fastest rise” since quarterly records began. Saying that economic activity is rising “sooner than anyone expected”, he insists that the “foundations for an economic recovery – a rapid one – are already in place, hiding in plain sight.”

Lloyds warns of double-dip recession

Lloyds has warned that a second wave of coronavirus cases could send the UK into a double-dip recession, with chief economic adviser Angus Armstrong saying the impact would depend on the size and timing of a wave of new cases, as well whether a new lockdown was enforced. He also said the scale of any Government support measures would be a factor. Lloyds, which has been reassessing its outlook for the economy every three months, expects economic activity to fall 10% this year and rise 6% in 2021.

Economist in recovery warning

Holger Schmieding, chief London economist of Berenberg Bank, has warned that the economic impact of the coronavirus crisis could stretch to 2023, dampening hopes that a swift V-shaped recovery is on the cards. Mr Schmieding commented: “Our guess is that the UK will take until early 2023 to get back to where it was in terms of 2019 output.” He went on to say that the UK “has fallen into a deeper hole than Germany and America”.

OTHER

Pandemic set to cost 1m jobs

With the latest Office for National Statistics figures showing that the number of workers on company payrolls has fallen by 730,000 since March, employment experts believe total coronavirus-related job losses will pass the 1m mark by the start of September. Melissa Davies, chief economist at consultancy Redburn, warns that losses are “unlikely to stop at one million”, calculating that if 30% of workers currently furloughed do not return to work, it equates to around 2.25m job losses. Paul Dales of research firm Capital Economics believes the 1m mark has already been hit, suggesting “lags in the data mean it hasn’t been confirmed yet.”

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