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Daily News Roundup: Monday, 18th December 2023

Posted: 18th December 2023

BANKING

Banks told to keep testing failure procedures

The Bank of England says banks should keep testing their failure procedures, with deputy governor Dave Ramsden saying UK lenders must never assume they are too big to fail. With regulators bringing in new rules after taxpayers had to bail out lenders during the global financial crisis, Mr Ramsden said: “I think we have a done a lot to overcome the problem of too big to fail, but it's really important to stress that this isn't a one-and-done thing," adding: “You need to keep testing that conclusion." He went to say that the collapse of Credit Suisse and Silicon Valley Bank earlier this year highlight a need to enhance regulators' "toolkit" for smaller bank failures and enhance the readiness to "bail in" banks using their own resources.

Metro Bank scraps mortgage portfolio sale

Metro Bank has decided to shelve the sale of its £3bn homeowner mortgage portfolio due to unfavourable market conditions. The bank, which recently secured a £925m rescue deal, made the decision in the best interests of shareholders and cited its "renewed balance sheet strength." The auction, which had been in discussions since October, saw Barclays, Lloyds, NatWest, and HSBC flagged as potential bidders.

StanChart sued over sanctions busting claims

Standard Chartered Bank is facing a £300m High Court battle after losing a key legal fight over allegations that it broke US sanctions on an “industrial scale”. The bank is being sued by more than 200 investors who claim it made misleading or untrue statements about breaking US sanctions on Iran between 2007 and 2019. US lawyer Gary Osen believes Standard could be facing damages of “several billions of dollars” if it loses the cases.

Cambridge could drop Barclays in favour of greener bank

Cambridge University is considering severing ties with Barclays after more than 200 years due to the bank's refusal to stop financing new oil and gas projects.

PRIVATE EQUITY

Private equity buyouts in Europe fall by 18% in 2023

The number of buyouts of companies across Europe by private equity firms fell by 18% this year to 637 deals, with the cumulative value of the deals collapsing by 50% to €67bn. The decline is attributed to falling valuations and the rising cost of debt used to finance the deals. The Centre for Private Equity and Management Buyout Research at Nottingham University Business School reported that this is the first time in six years that the total value of deals across Europe has not exceeded €100bn. The UK market saw a 15% fall in deals to 160 completed as of last week. Private equity buyers are expected to see a recovery in deal activity in 2024.

INTERNATIONAL

SEC denies petition for new crypto rules

The US Securities and Exchange Commission (SEC) has denied Coinbase Global's petition for new rules in the digital asset sector. The SEC, in a 3-2 vote, stated that it would not propose new rules as it disagreed with Coinbase's claim that current regulations are unworkable for the crypto sphere. Coinbase, the country's largest crypto exchange, plans to challenge the decision in court. 

Blackrock and State Street subpoenaed in ESG probe

The US House Judiciary committee has subpoenaed BlackRock and State Street as part of its environmental, social, and governance (ESG) probe. The committee is investigating allegations that these investment firms colluded in committing to make certain investments.

AVIATION

Edinburgh Airport up for sale

The owner of Edinburgh Airport, Global Infrastructure Partners, has hired HSBC and JP Morgan to oversee a sale of the aviation hub it has owned for more than a decade. An auction next year could draw bids of £2.5bn.

CONSTRUCTION

Planning permissions for new homes hit record low

Planning permissions granted for new homes have fallen to a record low, with developers warning that supplies of new housing next year could drop to their lowest in a decade. The latest Housing Pipeline report from the Home Builders Federation (HBF) recorded the lowest 12-month rolling total since its survey began in 2006. The trade body warned that “an increasingly anti-development policy environment and worsening economy will see the number of homes built in the coming years fall to record low levels”. The report comes as communities secretary Michael Gove prepares to make a speech outlining ideas to speed up the planning system and push councils to draw up local housing plans.

FINANCIAL SERVICES

L&G's fund arm shifts to US-style bonuses for UK leaders

Legal & General Investment Management has updated its pay policy to support US-style mega-bonuses for London listed companies. The revised guidelines will support bonus schemes linked to a company's share price performance over time, similar to the structure in the US. While basic salaries for executives in the US, UK, France, and Germany are similar, US business leaders can expect to receive $9.5m a year in long-term bonuses compared to $2.6m in the UK. The move aims to address concerns that UK companies are struggling to recruit top executives due to higher pay opportunities in the US.

Aviva tells staff they can choose to work Christmas Day

Aviva has launched a six-month flexible bank holiday trial, allowing UK staff to work on Christmas Day and take another day off instead. The decision has sparked controversy, but only a few Aviva employees have requested to work on Christmas Day so far.

UK FCA rules out extension of post-Brexit licensing regime

The Financial Conduct Authority has ruled out any extension of its temporary post-Brexit licensing regime beyond the end of this year, pledging to complete work on outstanding cases within the next fortnight.

Lloyd's shows commitment to face-to-face dealings by retaining HQ

Lloyd's of London has reached an agreement with its landlord, Ping An, to remain at its One Lime Street headquarters until at least 2035.

HEALTHCARE

GSK seeks China deals after repairing ties

GSK is seeking deals in China after rebuilding its relationship with the government and local companies since a corruption scandal more than a decade ago saw the company fined £300m.

MEDIA & ENTERTAINMENT

Pearson shareholder calls for US listing

Pearson's largest shareholder, Cevian Capital, is calling for the educational publisher to move its listing to the US, with the activist investor arguing that it would be better for the business. Cevian Capital's founder, Christer Gardell, believes that moving out of the FTSE would be an "easy and effortless way" to increase Pearson's value. Pearson bosses have previously stated that they would consider a move to the US if it were in the best interest of stakeholders.

REAL ESTATE

Mortgage lenders predict further house price declines

Two of Britain's biggest mortgage lenders, Nationwide and Halifax, expect house prices to decline further in 2024. Despite a better-than-expected performance this year, the lenders predict a modest drop in prices due to the economy's weak growth, high mortgage rates, and cost of living pressures. Halifax estimates a 2%-4% fall, while Nationwide sees a low single-digit decline. The shortage of available properties for sale has contributed to the resilience of house prices. However, the recent fallback in mortgage rates and slowing inflation will not be enough to prevent a decline next year. Forecasts from Capital Economics and the Office for Budget Responsibility also predict a decline, while Pantheon Macroeconomics expects a recovery in prices from spring 2024.

RETAIL

Retailers face tough year ahead

Retailers are expected to face a tough year ahead as weak consumer demand and increased costs, including the higher minimum wage, loom. The Retail Think Tank forecasts that shoppers will keep their spending on pause during the first months of 2024, as mortgage and rental costs weigh on consumer confidence. 

ECONOMY

Investors ditch notion that interest rates will stay ‘higher for longer’

Market expectations that interest rates in the US and elsewhere will remain higher for longer have been shattered after last week’s rally in global bond markets, strategists say. Separately, data from the Office for National Statistics is expected on Wednesday to show inflation fell in November. Analysts at Citigroup predict that the rate of price growth in the UK economy dropped to 4.4% last month, down from 4.6% in October.

Vacancies fall below one million

The number of job openings in the UK has fallen below a million for the first time since May 2021, signalling concerns about the health of the economy. Vacancies decreased to 998,562 last month, down 2.7% from October and 8.6% on an annual basis, according to Adzuna, the job search engine. The decline in demand for workers is attributed to pessimism about the UK economy and higher interest rates, which have led to reduced consumer spending.

Private sector growth hits six month high

Private sector output growth has reached a six-month high, according to the S&P Global/CIPS composite PMI covering services and manufacturing firms. December saw a reading of 51.7, with this up from the 50.7 recorded in November on an index where a figure above 50 indicates growth. 

OTHER

Consumer confidence climbs

Consumers recorded an increase in optimism in December, with the GfK Consumer Confidence Index rising to -22 from -24 in November. All five components within the survey saw an increase, with the outlook for personal finances moving toward a positive reading. Joe Staton, client strategy director at GfK, reflected: “Recovery in this number is important as it best reflects household financial optimism and control over personal budgets.” He said that the “slow but persistent” movement towards positive territory in regard to personal finances “is an encouraging sign for the year to come."

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