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Daily News Roundup: Monday, 21st December 2020

Posted: 21st December 2020

BANKING

NatWest buys Metro Bank’s mortgage portfolio

NatWest is set to buy Metro Bank’s £3bn mortgage portfolio in a deal which will see 13,000 customers transferred over to the lender. The £3.1bn purchase price represents a 2.7% premium on the gross book value. Alison Rose, the chief executive of NatWest, said: "Growing our mortgage book is an important strategic priority as we build a bank that delivers sustainable returns for shareholders. The addition of this loan book will supplement the strong organic growth that we continue to achieve." Metro Bank said the sale of part of its residential mortgage portfolio will provide the bank with further lending capacity."

Lloyds scraps bonuses

Lloyds Banking Group has scrapped bonuses for this year due to the impact of the coronavirus pandemic, but said most staff will get above-inflation pay rises. The bank told staff across its Halifax, Lloyds and Bank of Scotland brands that it had made an early announcement on bonuses in light of the challenging economic outlook. The bank has seen profits slide 85% in the first three quarters, hitting £434m. A Lloyds spokesman said: "This decision on bonuses in no way reflects the hard work and commitment our people have made throughout this extraordinary year." Meanwhile, the Telegraph notes that traders and key staff at investment banks are in line for rises to their bonus after a record performance, with JPMorgan and Goldman Sachs potentially handing out rewards 15% to 20% higher than last year, while Barclays is considering a 10% boost for traders.

New year delivers mortgage price war

Banks have ended four months of mortgage rate hikes, kicking off a price war. A Bank of England report revealed “some signs of easing” in the home loans market after lenders made it more difficult to get a mortgage earlier this year. Research by the Mail on Sunday shows Barclays has cut rates by up to 0.16% on its 75%, 80% and 85% mortgages. Nationwide and Yorkshire Building Society have also cut rates on 85% mortgages. Overall, the average cost of a two-year fixed-rate mortgage fell from a peak of 1.85% in October to 1.83% in November for borrowers with a 25% deposit, according to separate data from analysts Bloomberg. The rate had climbed from a low of 1.38% in April after the market was rocked by the pandemic and a surge in demand driven by the stamp duty holiday. The average rate for a five-year fixed-rate mortgage levelled off at 2.02% in November, having risen from 1.66% in March.

Bank bosses skipped fraud meetings

The Sunday Times reports that many banking CEOs have missed formal meetings about fraud with the Chancellor and Home Secretary. Treasury and Home Office records, plus minutes and agenda notes, show that the chief executives of Lloyds Banking Group, HSBC and Barclays all attended an Economic Crime Strategic Board in January last year - but Santander sent its chief legal officer, Nationwide sent a board member and Royal Bank of Scotland sent its chief risk officer. A July 2019 meeting with the Chancellor, Home Secretary, Attorney General and CEO of the Financial Conduct Authority saw just HSBC and Nationwide’s CEOs take part. The bosses of Lloyds, Aldermore, Starling, Barclays, RBS, and TSB all attended individual meetings with the Treasury minister John Glen in October and November 2019, with these talks covering a wide range of issues.

Barclays' retail bank chairman steps down

Sir Ian Cheshire is standing down as chairman of Barclays Bank UK in January and will be replaced by Crawford Gillies. Sir Ian will remain on the board until the AGM in May. Sir Ian said the decision to step down was due to the increased time required to help the bank recover from the Covid-19 crisis.

Barclaycard to increase minimum credit card payments

Barclaycard is increasing minimum credit card payments for its 8m customers in January. It said the new monthly minimum is capped compared with what customers repay at the moment and those who exceed the cap would be excluded from the charge.

PRIVATE EQUITY

FountainVest Partners raises $1.6bn

Chinese private equity firm FountainVest Partners has raised $1.6bn to reach the first-close of its new private equity fund. The firm, which is led by former Temasek and Goldman Sachs dealmaker Frank Tang, is said to be looking to raise $2.8bn in its fourth dollar-denominated fund, with a hard cap set at $3.2bn.

INTERNATIONAL

Former Exxon chief Lee Raymond to retire from board of JPMorgan Chase

Former ExxonMobil CEO Lee Raymond has resigned from the board of JPMorgan Chase. He had been under pressure to step down from activists and investors over his links to the fossil fuel industry.

AVIATION

IAG to acquire Air Europa

IAG has reportedly agreed a €500m deal to acquire Air Europa, with the owner of British Airways having previously pursued a €1bn deal for the budget operator.

FINANCIAL SERVICES

FCA issues ten fines in 2020

The Financial Conduct Authority (FCA) has issued just ten fines to individuals and firms this year, the lowest total since its creation in 2013, with combined penalties totalling £183.6m, its third lowest total tally. The number of fines compares with 21 in 2019 and a record 48 in 2013, with an average of 29 a year over the previous seven years. The near £184m in total penalties compares with £392m in 2019 and the high of £1.47bn in 2014 – a year that saw several banks hit with fines exceeding £100m over the attempted rigging of foreign currency markets. The average annual total for penalties since the FCA’s formation has been £508m. Simon Morris, a partner at City law firm CMS, notes an “enormous logjam in enforcement”, saying he gets the impression that the enforcement department is “very overworked and insufficiently staffed." An FCA spokesperson insisted that outcomes for consumers are key, not fines, highlighting that the City watchdog has notched up 171 enforcement outcomes in 2020 so far, noting that alongside the fines, it has cancelled the permissions of 132 firms, prohibited 15 individuals and commenced criminal proceedings against five people.

MPs criticise FCA over LCF failings

The Treasury Committee has criticised the Financial Conduct Authority (FCA) over failings that were identified in an investigation into that collapse of London Capital & Finance. The report by Dame Elizabeth Gloster warned the FCA had "significant gaps and weaknesses" in its policies and practices. Mel Stride, chairman of the Treasury Committee, said the report exposed a "litany of failings" at the FCA. He said that the committee will “look at the detail of this important report thoroughly” and will also consider any wider implications for the regulatory regime. He added: “We must now see what lessons can be learnt … to ensure that we have a proactive regulator."

Payday lender loses 25k customers

Payday lender Morses Club has seen pre-tax profits hit due to the coronavirus pandemic, saying a decline in customer numbers during the six months to August 29 had been considerably steeper than expected. Restrictions on lending to new customers in place from March until mid-July meant it saw 25,000 fewer new customers.

LEISURE AND HOSPITALITY

Landlords approve Leon's rescue plan

High street restaurant chain Leon has secured backing from its landlords to implement a rescue plan which will save 670 jobs. The company announced this evening that 90% of creditors approved the company voluntary arrangement proposals, which will allow Leon to switch to turnover-rents during the coronavirus pandemic.

REAL ESTATE

Average house price climbs £13k in 2021

Analysis from Halifax shows that the average UK house price climbed by £13,316 in 2020. The report shows that the average UK home was valued at £239,927 at the start of 2020, fell to £237,00 after the first national lockdown and then jumped to £253,243 by the end of last month, with the stamp duty holiday driving activity. The increase in prices record between the end of June and the end of November marks the fastest five-month jump since 2004.

Searches for furlough-friendly mortgages soar

Searches for furlough-friendly mortgages soared throughout November following the extension of the Coronavirus Job Retention Scheme. Searches for mortgage products suitable for furloughed borrowers rose 230% between October and November, according to Legal & General Mortgage Club. It recorded 577 searches for furlough-friendly mortgages in November, up from 175 searches in October.

Extra £62bn of housing sales agreed this year

A post-lockdown surge in activity has contributed to an increase in property sales in 2020, with analysis from Zoopla showing an extra £62bn has been spent on homes this year. The property platform estimates that overall sales have increased from about £238bn in value in 2019 to £300bn this year, with increased demand driven by the stamp duty holiday for homes under £500,000.

RETAIL

Retail sales down in November

Retail sales fell in November, with the first decline in six months coming on the back of the closure of non-essential shops amid England’s second national lockdown. Office for National Statistics (ONS) data show that sales were down 3.8% last month when compared to October. Despite the month-on-month decline, sales were up 2.4% on November 2019. Year-on-year, online sales were up 74.6% on November 2019. Sales made online accounted for 31.4% of retail sales last month – up from a 28.6% market share in October.

Bidders show interest in Arcadia

Administrators are believed to have received around 30 expressions of interest ahead of today’s deadline for bids for collapsed retail group Arcadia. Mike Ashley's Frasers Group and fashion chains Next and Boohoo are said to be among potential bidders for Sir Philip Green's retail empire, which owns brands including Topshop, Burton and Miss Selfridge.

ECONOMY

Analysts expect November borrowing to hit £31bn

With the Office for National Statistics (ONS) this week set to disclose the scale of Government borrowing in November, economists expect economic support rolled out to deal with tightened coronavirus restrictions will have driven up borrowing. Analysts at Investec forecast that public sector net borrowing will hit £31.4bn for November, about £26bn higher than the same month last year and up on October’s £22.3bn. In the current financial year, borrowing has increased by an average of £24.2bn compared with the corresponding month in the previous year. If this pace continues, the UK's deficit would reach £346bn over 2020/21. Investec analysts expect Chancellor Rishi Sunak to address concerns over fiscal sustainability with "a selected rise in taxes at some stage".

Former LSE chief in debt warning

Xavier Rolet, former boss of the London Stock Exchange, has warned that companies are now “so awash with debt that central banks simply can't control it”, saying that this poses a major risk to the long-term economic recovery. He believes the issue could see ministers come under pressure to consider debt cancellation programmes.

OTHER

Business confidence climbs

UK business confidence has risen by the biggest month-on-month total in more than four years, climbing 17 percentage points to -4% in December, according to the Lloyds Bank Business Barometer. The reading is the highest since March, when the economy had yet to see the impact of the coronavirus pandemic. Corporate optimism increased, driven by a more upbeat outlook for the wider economy, confidence in which rose 23 points to -5%. Confidence in trading prospects climbed 11 points to -3%. The Lloyds report also shows that 32% of the 1,200 firms surveyed expect to cut staff next year, while 22% plan to increase numbers. Lloyds economist Hann-Ju Ho said: “The news of the vaccine progress has bolstered this month’s confidence figures, more than offsetting uncertainties around the UK’s new trading relationship with the EU.”

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