BANKING
NatWest sees £4bn profit in 2021
NatWest has reported pre-tax profits of £4bn for 2021, with this up from a £351m loss it made the previous year. The bank's net lending, including loans made via government support programmes, climbed 2.8% to £352.3bn, while full year net profits for 2021 reached £2.95bn. This has prompted the taxpayer-owned bank to initiate an on-market share buyback of £750m. Noting concern over the cost of living crunch, CEO Alison Rose said NatWest is “acutely aware of the challenges that many people, families, and businesses continue to face,” but noted that the bank is “not seeing a rise in the number of customers needing specialist help at this time.” Considering the climate for the lender, Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said: “Lending levels and therefore net interest margins are being buoyed by heightened mortgage demand.” NatWest also announced that it is to start paying cash bonuses to its top bosses, with the bank planning to overhaul its pay policy. Separately, NatWest has said it will end its relationships with a group of coal companies and stop lending to certain oil and gas groups as part of its commitment to tackling climate change. James Close, the bank’s head of climate change, said the changes would be enforced “as soon as is practicable” and that the number of companies affected was “relatively small...dozens and less”. A lack of “credible” decarbonisation plans was cited as the reason for cutting ties.
Mortgage guarantee scheme sees slow uptake
Figures from the Treasury show that the Government's mortgage guarantee scheme was used by 6,535 buyers between its launch on April 19, 2021 and September 30. The initiative sees the Government guarantee the portion of a 95% loan-to-value mortgage over 80% – meaning the lender would be compensated if a buyer stopped paying. While the mortgage guarantee scheme was open to all buyers, the data shows that 84% of those who took advantage were first-time buyers. Yorkshire Building Society analysis of UK Finance figures shows there were 408,000 first-time buyers in 2021 and crunching this data alongside the Treasury numbers shows that the Government's scheme would have supported less than 4% of the first-time buyers snapping up a home in the first five months of the initiative.
Unions question banker bonuses
Unions have spoken out following reports that City bankers will see a record £4bn in bonuses as the big four banks – NatWest, Lloyds, Barclays and HSBC – report profits of £34bn. TUC General Secretary Frances O’Grady called the bonuses “an insult to working families across Britain,” while Gary Smith, leader of the GMB union, said they were a “kick in the teeth” for those who struggling to pay bills amid the cost of living crunch. Jack Leslie, of the Resolution Foundation think-tank, added: “The Government should look to tax income more efficiently and fairly, with better taxation of wealth a key area for improvement.” The FT also says bankers are set to come under fire over bonuses, with huge payouts expected amid a backdrop of soaring inflation, falling real wages and a cost of living crisis.
Lloyds plans to install former HBOS executive to lead probe into fraud at HBOS
The Mail on Sunday’s Emma Dunkley reports that Lloyds is set to appoint Simon Amess, a former HBOS banker, to oversee the bank's side of a review into the HBOS Reading fraud scandal. Ms Dunkley says that while it is understood that Mr Amess will not be involved in assessing claims, his inclusion risks angering victims still waiting for compensation over a scam involving staff at HBOS Reading and consultants between 2003 and 2007.
Metro Bank in the market for credit card deal
Metro Bank is looking for a deal in the credit card market, with the challenger bank understood to have looked at the Sainsbury's Bank credit card book when the lender was up for sale last year,
INTERNATIONAL
Credit Suisse rejects claims of due diligence failings
Credit Suisse has denied claims it has lax due diligence systems after a data leak revealed accounts opened with the bank had been used by clients involved in an assortment of serious crimes. A whistleblower leaked data on more than 18,000 bank accounts, holding more than $100bn, to the German daily Süddeutsche Zeitung over a year ago. The newspaper has been working with the Organized Crime and Corruption Reporting Project and several media partners to evaluate the data. It said the information points to the bank having accepted “corrupt autocrats, suspected war criminals and human traffickers, drug dealers and other criminals” as customers. A spokesman for the bank said: “Credit Suisse strongly rejects the allegations and insinuations about the bank’s purported business practices,” adding that 90% of the accounts were either closed or in the process of being closed. The whistleblower source said in a statement: “I believe that Swiss banking secrecy laws are immoral. The pretext of protecting financial privacy is merely a fig leaf covering the shameful role of Swiss banks as collaborators of tax evaders.”
Prudential fears Covid curbs will force next CEO to start outside Hong Kong
Prudential's interim CEO Mark FitzPatrick says the firm’s next permanent chief executive may have to start the role from outside Hong Kong as the region’s coronavirus restrictions bring an "element of friction".
CONSTRUCTION
Rule change needed to resolve retirement home supply issues
McCarthy Stone has urged the Government to introduce rules to ensure 10% of new housing is specifically designed for pensioners as Britain’s biggest retirement housebuilder reveals that demand for older people's homes is four times higher than supply.
FINANCIAL SERVICES
Providers question FCA’s personal pension cash ‘warning’
Providers have raised concerns about Financial Conduct Authority (FCA) proposals which suggest issuing a cash warning for personal pensions. The FCA proposals say personal pension providers should warn savers that are holding too much cash and prompt them to consider investing in other assets to grow their pot as much as possible. In responses to the City watchdog’s consultation Improving outcomes in non-workplace pensions, both Aegon and AJ Bell have criticised the regulator’s proposals. Aegon does not think 'warnings' is the right term, suggesting 'alert' is more apt. Steven Cameron, pensions director at Aegon, said: “At times of heightened market volatility, there’s a risk a ‘warning’ prompts customers, particularly those without access to advice, to move from cash into investments just before a market fall. While it’s to be hoped any such losses will be short term, the pros and cons need to be set out in a balanced way.” Meanwhile, Tom Selby, head of retirement policy at AJ Bell, said while he agreed with the FCA’s intention, he has concerns about the way in which the regulator would implement the warnings. He also believes providers “should have flexibility to create their own investment solutions designed for the types of non-advised customer that use their products.”
Funeral plan market set for regulation shake-up
People who have bought plans promising to cover the cost of their funeral may see them voided amid a Financial Conduct Authority (FCA) crackdown designed to stamp out rogue providers. Currently, the sector is monitored by the Financial Planning Authority but the FCA will regulate the industry as of July and in an effort to ensure that only fit and proper companies are allowed to operate in the sector, only authorised providers will be able to sell plans. The Mail on Sunday reports that dozens of firms have failed to submit an application to be authorised, while three have submitted an application only to withdraw it. These firms are likely to close down and either try to sell their books of customers to rivals or return money to clients. While industry insiders and financial experts welcome the new regulation, they have warned that some providers will close as they fail to get authorised or choose not to apply for authorisation as they know they will not be approved. In some instances, it is noted, customers could be left with underfunded plans. The reform of regulation of the sector will empower customers to take complaints to the Financial Ombudsman Service if they are unhappy with the initial response from their provider. They will also have the protection of the Financial Compensation Scheme if their plan provider goes bust.
Fundsmith defends stance after being stripped of ethical rating
While the £26bn Fundsmith Equity fund had been classified as having met EU rules on ESG standards, fund rating agency Morningstar stripped Fundsmith — alongside 1,600 other funds valued at about £885bn in total - of their ethical status and warned that they were misleading investors. Morningstar criticised companies that had “light touch and business-as-usual approaches” towards meeting ESG rules, saying it had “legitimately raised concerns that asset managers are greenwashing their product ranges”. Fundsmith said it does not agree with the greenwashing accusation, insisting: “If anything, we underplay our established and thorough approach to ESG, which we see as a vital part of the investment process and has led to Fundsmith becoming a signatory of both the Financial Reporting Council’s UK stewardship code and the UN’s principles for responsible investing.”
Retail investor platform PrimaryBid wins SoftBank backing
PrimaryBid, a start-up that allows UK retail investors to buy shares in stock market listings, has been valued at up to $700m following a fundraising led by SoftBank and Hedosophia.
FCA chief faces backlash over reforms
The FT details how the prospect of strike action over pay reforms and pressure to be tougher on enforcement has left FCA chief Nikhil Rathi struggling to keep the regulator on course.
LEISURE & HOSPITALITY
Pret warns of collapse
Pret A Manger has warned that it could collapse as a result of the decline in workers going into the office. The coffee shop chain filed accounts earlier this month highlighting "uncertainties" that may cast "significant doubt" over its ability to continue trading, citing "unpredictability of consumer behaviour", the possibility of new restrictions, and the ability to keep paying its debts. Pret, which heavily relies on the trade of office workers and commuters, plunged to a £396m loss in 2020 following the forced closure of many of its shops, compared to a profit of £1.9m in 2019. Last month, the company doubled the size of an emergency cash reserve to £200m.
REAL ESTATE
Segro raises dividend after online shopping boom
Warehouse group Segro has raised its full-year dividend by 10% to 24.3p, on the back of a "highly successful" 2021. The real estate investment trust was boosted by the rapid growth of online shopping and the additional paperwork and customs checks imposed after Brexit, reporting a 20% increase in adjusted pre-tax profits to £356m. The value of its portfolio also grew by nearly 29% to £18.4bn.
Homeowners overpaying mortgages amid rising interest rates
Around £335m was overpaid on mortgages between January 1 and February 13, according to Santander – 50% more than over the same period last year. Graham Sellar from Santander said: "As we look at the prospect of more increases to interest rates and further rises in the cost of living, it's no surprise that more people are looking at where they can put their money now to keep the future costs of owning their home lower."
RETAIL
January retail sales climb 1.9%
The latest figures from the Office for National Statistics (ONS) shows that retail sales volumes were up 1.9% in January. This marks the largest monthly increase since April 2021 and follows a 4% drop recorded in December. ONS director of economic statistics Darren Morgan noted that January was “a good month for garden centres, department and household goods stores”. Supermarkets saw a drop in sales to below their pre-pandemic level for the first time, according to the ONS data, while the proportion of online sales fell to 25.3% from 27% in December. Despite the decline, the proportion of sales made online remains above the pre-pandemic level of 19.8% posted in February 2020. The ONS figures also point to a sharp increase in the value of goods, showing that over the three months to the end of January the amount sold increased by 3.1% while sales values rose by 9.9%. Karen Johnson, head of retail, wholesale, and healthcare at Barclays, commented: “Many retailers saw something of a spending boom during the course of the pandemic, but now it looks like the dust from this explosion is finally beginning to settle.” She added: “Looking ahead, the outlook is uncertain,” noting that interest rate rises and increasing costs are “front of mind across the industry”.
ECONOMY
Rate rise set to follow sales rebound
The Bank of England may be set to raise rates again next month after retail sales bounced back in January. With Office for National Statistics showing that retail sales were up 1.9% last month after falling 4% in December, Neil Birrell of asset management company Premier Miton said the rebound was “likely” to help convince the Bank of England that the economic recovery “will be able to cope with more interest rate rises.”