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Daily News Roundup: Monday, 21st November 2022

Posted: 21st November 2022

BANKING

Nationwide ups bad debt provision

Nationwide has revealed a sharp rise in its provision for bad loans, with its credit impairment charges rising to £108m in the six months to September 30. In the same period last year, it put £34m aside to deal with non-payments. The lender, the UK’s biggest customer-owned mortgage provider, saw total mortgage balances rise to almost £204bn at the end of September, with this up from just under £200bn in early April. While it has yet to see a significant increase in arrears, Nationwide pointed to a deterioration in economic outlook” and warned that “some future increases are expected” on arrears due to “affordability pressures.” Nationwide reported that half-year profits have increased from £850m to £980m.

OneBanks seeks cash for new bank kiosks

The community banking service OneBanks is seeking to raise £1.3m from Crowdcube investors to help fund plans to build a national network of pop-up banking kiosks. OneBanks is bidding to operate up to 15 of the shared banking hubs that industry body UK Finance and cash machine network Link want to open as part of an initiative supported by 10 of the largest banks.

Tandem poaches finance chief from rival Atom

David McCarthy, who resigned after eight years as chief financial officer of Atom Bank in September, is joining Tandem Bank in the same role. Additionally, Wahid Ali, a former executive at Royal Bank of Scotland and official at the Prudential Regulation Authority, has been recruited as its chief risk officer.

PRIVATE EQUITY

Astatine revives float plans

American private equity firm Astatine Investment Partners is reviving a plan to list an investment company on the London stock market. The investment company, which will be called AT85, will focus investments on transport and logistics, utility-related assets and digital infrastructure. Astatine set out plans for a similar vehicle a year ago but the share sale was abandoned when fund managers baulked at some elements of its plan.

INTERNATIONAL

Looser rules would lower borrowing costs, traders say

An international body of bond traders has warned Britain’s regulators that rules put in place following the financial crisis are hampering the ability of banks to act as shock absorbers in the bond market. The International Capital Market Association’s senior director Andy Hill argues that forcing banks to hold bigger capital buffers to increase their resilience, although a good thing in itself, has left them less able to intermediate and act as market makers. The knock-on effect is the volatility seen in UK gilt markets recently and higher borrowing costs for the Treasury.

Ex-Bundesbank chief Jens Weidmann set to join Commerzbank

Jens Weidmann, the former president of Germany’s central bank, is to become chair of Commerzbank next year in a move the FT describes as a “crucial vote of confidence in a bank that has long been seen as a takeover candidate.” Commerzbank’s current chairman, Helmut Gottschalk, has decided against another term when his current one expires at the company’s AGM in May 2023.

MSCI investors at risk of exposure to Xinjiang allegations

Leading asset managers, including BlackRock, HSBC, UBS and Deutsche Bank, are exposed to funds that include companies accused of being complicit in the repression of Uyghur Muslims in China, a new report claims.

Santander boss hits out at bank windfall taxes

The executive chair of Santander, Ana Botín, has criticised windfall taxes on banks stating they would vastly reduce their lending capacity, harming the economy.

FINANCIAL SERVICES

L&G bosses to be questioned over pensions crisis

Bosses at Legal & General are set to be questioned next week over the pension scheme crisis that prompted an emergency £65bn bond market intervention by the Bank of England. Chief executive Sir Nigel Wilson and Sir John Kingman, L&G’s chairman, will face questions from the House of Lords industry and regulators committee on the use of liability-driven investment (LDI) by pension funds. The pair will face questions over the role L&G has played in the increasing prominence of LDI strategies, their regulation and the changes it might make to its promotion and operation of the funds, particularly those using significant leverage.

Phoenix boss calls for further pension rule changes

The chief executive of Phoenix Group has urged the Government to go further with reforms to pension and insurance rules so cash locked up in Defined Contribution pension schemes can be invested into illiquid assets. Andy Briggs said that overhauling EU-era Solvency II rules, announced last week by ministers, was a positive start but further reforms were needed. He added that pension savers would benefit too, perhaps by 0.7% a year, from the improved yield on investments into infrastructure.

Revolut shrugs off sector concerns

The Sunday Times profiles Revolut founder Nikolay Storonsky who the paper says has sold shares in his firm for about $250m over the years. Revolut is still waiting on its British banking licence, but it continues to grow as other tech companies around the world are slashing jobs. Industry sources believe the crypto boom of 2021 helped lift Revolut into profit and wonder whether this is still the case given that sector’s reversal of fortunes. But a company spokesperson said: “Due to our diverse revenue lines, we are fortunate that the recent downturn in the wider market has not affected us as much as other fintechs.”

L&G estimates £10m hit from liquidity crisis

Legal & General has said that it faces a £10m hit to pension revenues and profits amid a sell-off in the face of chaos in the UK pensions market. The company said its revenues in its pensions arm decreased after it had to sell higher fee products in order “to meet collateral requests”.

LEISURE & HOSPITALITY

Everyman chairman to step down

Paul Wise is to step down as executive chairman of cinema chain Everyman at the end of February. CEO Alex Srimgeour said Mr Wise had been “instrumental in building the Everyman proposition, growing the business and, most recently, navigating the challenges posed by the pandemic.” Philip Jacobson, currently a non-executive director, is set to take up the role of non-executive chairman.

REAL ESTATE

Up to 200,000 Brits could fall into negative equity

The Resolution Foundation has warned that up to 200,000 Britons could be at risk of losing their homes. The think-tank said that one in five homeowners under 34 will be left in negative equity due to sky-high mortgage rates and falling house prices. Sophie Hale, an economist at the Resolution Foundation, said: “The combination of rising mortgage costs and falling house prices risks dealing a double-punch blow to young homeowners as they struggle through the cost-of-living crisis.” She added: “If house prices were to fall by 9% as the Government's official forecasters predict, then over 200,000 homeowners could be plunged into negative equity, with young home homeowners most at risk.”

Landlord sales likely following tax crackdown

Analysts believe that a reduction in the tax-exempt allowance on capital gains is likely to see a wave of property sales before the thresholds start to fall next year. The point at which capital gains are taxed will be cut from £12,300 to £6,000 in April and then to £3,000 from April 2024, meaning investors, second-home owners and landlords will face higher tax bills. While stock market investors will be liable for more tax when they sell shares not held in Isas, second-property owners will pay £2,600 more tax.

RETAIL

Retail sales rebound in October

Office for National Statistics (ONS) data shows that retail sales volumes increased by 0.6% in October, outpacing the 1.5% decline seen in September and exceeding a 0.4% increase predicted by analysts. While food store sales dipped 1% in October, non-food store sales increased 1.1%. ONS director of economic statistics Darren Morgan said the overall increase in sales was “likely a rebound effect” after weak sales in September that came in part due to an extra Bank Holiday for the Queen’s funeral. He added: “Looking at the broader picture, retail sales continue their downward trend seen since summer 2021 and are below where they were pre-pandemic.” Richard Lim, chief executive officer at Retail Economics, said sales have been boosted as consumers bring forward Christmas purchases “to help spread the cost and manage budgets.” He warned that the “overall picture remains tough,” saying that “with inflation running riot … consumers are having to spend more but are getting less back in return.” 

ECONOMY

Hunt did nothing to boost growth, CBI says

Tony Danker, the head of the Confederation of British Industry, said the Chancellor’s Autumn Statement did “nothing” to boost growth and that he hoped Jeremy Hunt intended a “part two” of the package to avoid another decade of low productivity. He told the BBC on Sunday: “That is the worry. Jeremy Hunt did some things which be very welcome, but he also made businesses and everybody pay more taxes. So the fear is there just wasn't enough there to say we can grow again…I don't think he did enough. I think he is going to have to come back with more on growth.”

Hunt on course to miss fiscal targets - Deutsche Bank

A senior economist at Deutsche Bank believes the Office for Budget Responsibility’s forecasts for growth to bounce back after 2024 are too optimistic and Jeremy Hunt will fail to achieve his fiscal goal of starting to reduce Britain’s debt in 2027/28. Deutsche Bank’s lower growth forecasts would mean less tax revenue for the Treasury and therefore more borrowing to plug the gap, breaking the Chancellor’s new fiscal rule to cut the debt to GDP ratio within five years.

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