UK exports recover in February
David Abbott of BTG Advisory reflects on Office for National Statistics (ONS) data showing that UK exports to the EU climbed by £3.7bn in February, with this marking a turnaround from the £5.6bn decline recorded in January. The figures also show that UK imports from the EU climbed 7.3% to £17.1bn. Mr Abbott says the data will help diminish fears that the plunge seen in the opening month of 2021 “was a harbinger of a post-Brexit permanent collapse in trading with the EU”. January’s figures, he adds, were more likely to have been “transitory and a function of several interrelated factors” - including stockpiling in November and December in anticipation of border disruption, the UK’s latest national lockdown, global supply chain disruptions brought about by the pandemic, and Brexit-driven border disruptions. The ONS figures, Mr Abbott notes, contrast with a British Chamber of Commerce (BCC) survey in which 41% of UK exporters reported decreased export sales over Q1, while just 20% reported increased export sales. He highlights that while the BCC poll represents the self-reported experience of around 2,900 UK exporters, the ONS data is sourced from HMRC and represents trade in goods which accounts for more than 90% of trade in goods value.
Investors target bankers’ bonuses
The Institutional Investors Group on Climate Change, a group of 35 investors which includes Legal and General Investment Management, Nordea Asset Management, Aviva and Pimco, has urged banks to stop lending money to companies focused on fossil fuels. This comes with analysis suggesting banks have lent $3.8trn to such companies in the past five years and provided more fossil fuel financing last year than they did in 2016. The group also wants bankers’ bonuses to be linked with progress on hitting emissions targets and lenders to commit to becoming net zero by 2050 or sooner. Stephanie Pfiefer, chief executive of the group, said. “Organisational net zero commitments will not have the impact needed. Investors are calling on banks to make enhanced net zero commitments, with clear interim targets, focused on reducing their indirect emissions to zero.” The investors say they have opened talks with 27 of the world's largest banks and expect to expand the list over time.
Three in four do not trust online banking
A survey by security software company SmartSearch shows that 76% of customers do not fully trust online banking. While three quarters of respondents said they “lack trust towards using their banking services online”, 81% said trust is “the most important factor in their purchasing journey”. The research comes as online banking grows and branch closures continue, with some estimates suggesting that up to 40% of high street banks could shut within the next 12 months. With UK Finance data showing that £208m was scammed via bank transfers in H1 2020, John Dobson, chief executive of SmartSearch, says: “It is important we do everything we can to safeguard against cyber threats so customers can feel greater trust in online services.”
TSB calls for combined effort to tackle fraud
TSB chief executive Debbie Crosbie believes banks should declare how often they reimburse customers who are victims of fraud, suggesting that displaying the reimbursement rate would help end a "victim-blaming approach" currently taken by the sector. TSB says all companies should protect their customers against losses, with the bank having started to guarantee customers against fraud losses two years ago. The Payment Systems Regulator earlier this year launched a consultation on making fraud refunds automatic. Ms Crosbie said: "This crime is spreading across every sector; the only way to tackle the trend is to work together - banks, businesses, government and regulators."
Banks shift £900bn in assets to the EU, post-Brexit
A study by the New Financial think-tank suggests that more than 440 firms in banking and financial services have relocated part of their business, moved employees or set up new entities in the EU following Brexit. The report also reveals that banks have moved or plan to move more than £900bn in assets to the EU, while insurance firms and asset managers have transferred more than £100bn. William Wright, managing director of New Financial, said the analysis is “almost certainly a significant underestimate of the real picture.”
Banks offer 95% deals under new initiative
Banks will today start to introduce 95% loan-to-value mortgages as part of the Government’s mortgage guarantee scheme. The new scheme will be available to anyone buying a home costing up to £600,000, unless they are buy-to-let or second homes. The Government is offering a partial guarantee, generally of 15%, to compensate lenders if the borrower defaults on repayments. Lloyds, Santander, Barclays, HSBC and NatWest are starting to offer products this week and Virgin Money will do so next month.
Staveley launches appeal over Barclays ruling
Financier Amanda Staveley has launched an appeal after losing a lawsuit in which she sued Barclays. Ms Staveley’s private equity firm PCP Capital Partners sued the lender for £660m claiming it was given less favourable treatment than other parties in an emergency £7.3bn fundraising in 2008.
Morgan Stanley sees record results
Morgan Stanley reported record results after a boom in dealmaking doubled its investment banking revenues. Overall net revenue rose by 61% in Q1, hitting $15.72bn, while profit rose by 150% to $3.98bn. The bank also disclosed a hit from last month's implosion of Archegos Capital Management, with the quarterly report noting a credit loss of $644m and trading losses of $267m caused by "a credit event for a single prime brokerage client".
KBC eyes Irish exit
Belgian-owned KBC Bank Ireland plans to quit the country and is in talks to sell its loans and deposits to Bank of Ireland. Irish Finance Minister Paschal Donohoe called the decision regrettable, particularly as it comes so soon after NatWest's decision to withdraw Ulster Bank from the Irish banking sector.
BNPL regulation on the horizon
Plans to regulate Britain's £2.7bn buy now, pay later industry will reportedly be released in the coming weeks, with a consultation on draft regulation expected to be published in early May after an amendment to credit legislation was passed in parliament. The regulation is expected to cover the marketing and ease of use of platforms which enable consumers to spread the cost of their online shopping using credit. It comes after a Financial Conduct Authority review of the sector found it posed “significant potential consumer harm”. The review called for the sector to regulated “as a matter of urgency”. Regulating such platforms will allow borrowers to take complaints to the Financial Ombudsman Service. An amendment to the Financial Services Bill passed in Parliament will allow ministers to change which companies are exempt from the Consumer Credit Act, with the legislation in its current form not covering buy now, pay later providers.
Vanguard slashes the price of financial advice
Vanguard, the world's second largest asset manager, is aiming to shake up the financial advice market with the launch of a cut-price service. The US firm will charge 0.79% a year for financial advice – including the cost of the investment funds and platform fee. Traditional financial advisers charge an initial fee of 2.4%, followed by 1.9% a year in fund and advice costs on average, according to the Financial Conduct Authority.
Pru customers waiting months for pensions
Savers looking to cash in their pensions with Prudential have been waiting up to four months for a bank transfer and have lost out on valuable tax breaks after the pensions giant upgraded its IT systems. Prudential moved its 5m customers on to a new system in November 2020. Staff, many of whom are working from home, have since struggled to process simple requests for pension withdrawals. They are insisting on sending paper forms instead of using a secure messaging service, leaving customers waiting months for a bank transfer.
Revolut lines up fundraising
Money transfer app Revolut is planning a fundraising that would value it at up to £10.8bn. Revolut, which is in the process of applying for a banking licence in the UK, has lined up specialist fintech investment bank FT Partners to advise on an equity investment later this year.
Fintech Wise in talks with regulators over direct UK listing
Fintech firm Wise is in discussions with the Financial Conduct Authority over going public via a direct listing, a form of listing that has become increasingly popular in the US.
Elliot to drive GSK CEO switch?
A top-20 GlaxoSmithKline shareholder has suggested the pharmaceuticals firm’s CEO Emma Walmsley may be forced out due to pressure from activist investor Elliott Management. Elliott, which has taken a stake in GSK, is known for initiating shake-ups at companies.
LEISURE AND HOSPITALITY
Issa brothers eye Caffe Nero after Leon deal
The Issa brothers’ EG Group, which recently bought Asda for £6.8bn, has bought around £140m of Caffe Nero’s debt from private equity firm Partners Group via investment bank Morgan Stanley. The move puts the brothers in a strong position for a takeover if the coffee chain defaults on senior ranking debts due to be repaid in 2022. In a separate move, EG has bought healthy fast-food chain Leon for £100m.
House prices hit new high
House prices have jumped to a record high in April, with figures from Rightmove showing that the average asking price has risen by 2.1% to £327,797, an increase of £6,733 from March. The surge was driven by a shortage of houses on the market, with Rightmove’s monthly survey showing that the stock of properties available to buy has fallen to the lowest level the firm has recorded. The average number of days to sell a property has dropped to a record low of 45 days, while the proportion of houses selling within a week of being advertised hit its highest-ever level in March, at 23%.
Sales surge as restrictions ease
Retail sales have surged thanks to the reopening of non-essential stores and hospitality venues. Analysis of about 80 medium-sized retailers' trading figures shows that total store sales were up more than tenfold last week compared with the same week last year, a period when Britain was under its first lockdown. The analysis also found that online sales increased by more than 49%. Elsewhere, data from Springboard shows that visits to high streets, retail parks and shopping malls rose by 90% from Monday to Thursday compared with the same days in the previous week.
European Super League announced
A group of twelve European football clubs have announced plans for a European Super League, with Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham to join AC Milan, Atletico Madrid, Barcelona, Inter Milan, Juventus and Real Madrid as the founding clubs. The teams will take part in midweek games while continuing to compete in their respective national leagues. A statement outlining the plans says the inaugural season is intended to commence “as soon as practicable", with it anticipated that a further three clubs will join before the first games kick off. Five other teams will join the league annually according to their domestic achievements.
Recovery optimism boosts FTSE 100
The FTSE 100 has passed the 7000 mark for the first time in more than a year as optimism around a global economic recovery increases. The index has not hit the milestone since the latter part of February 2020, with the coronavirus pandemic hitting investors and panic selling driving the FTSE 100 down to 4,993.9 in March last year. Friday’s trading saw the index finish 0.5% up, with the 36.03 point gain taking it to 7019.53. The FTSE 250 also rose, gaining 0.2% to hit a record high of 22,522.18. Russ Mould, director at AJ Bell, said hitting the 7000 mark “represents a massive milestone in recovering from the terrible pandemic.”
British households hit harder by pandemic
Analysis by the Resolution Foundation suggests that British households have been hit harder by the pandemic than those in France and Germany. Despite similar levels of average working-age income, income inequality is greater in Britain, with the poorest fifth of households 20% poorer than their counterparts in France, and the richest fifth 17% richer in Britain. The study found that a combination of lower incomes among Britain’s lowest bracket of earners, comparatively low levels of private savings, and a less generous social security safety net meant that UK households were “particularly exposed to economic shocks” such as the coronavirus outbreak. Dan Tomlinson, senior economist at the Resolution Foundation, said: “High levels of inequality in the UK mean our low-income families are poorer, have fewer savings and are more likely to have financial debt.”