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Daily News Roundup: Monday, 22nd November 2021

Posted: 22nd November 2021

BANKING

Nationwide profit more than doubles

Nationwide Building Society’s profits more than doubled in the six months to September 30, hitting £853m compared to the £361m recorded in the same period last year. The bank has been boosted with money it had set aside for soured debts but ultimately did not need to use, releasing £34m when last year it took a £139m charge against expected bad loans. Nationwide broadly maintained its share of the mortgage market, lending £18.2bn, giving it an 11.4% market share, compared with £12.7bn a year ago - a 12% share. Chief financial officer Chris Rhodes commented: “During the pandemic, strong demand for mortgages, coupled with macro-economic uncertainty, led to higher margins on mortgage lending. This resulted in significantly higher income, and a very strong overall financial performance.” Nationwide, which operates about 650 UK branches, has pledged to keep at least one in every town or city until at least 2023. Sara Bennison, Nationwide’s chief product and marketing officer, said it had closed 5% of its branches in the last five years compared with an average of 30% by high street rivals.

Kensington to launch 30-year fixed-rate mortgage

Kensington Mortgages has teamed up with insurance firm Rothesay to launch long-term fixed rate mortgages. The specialist lender will this week offer 3% deals for 30 years. The Mail on Sunday suggests the move could encourage more insurance firms to move into mortgages as they seek out higher income.

L&G sells off Metro shares

Legal & General has continued the selloff of its investment in Metro Bank over recent weeks, coinciding with the decision by Carlyle to walk away from talks to take over the challenger bank. An L&G spokesman said it is "part of an ongoing wider reduction of a large basket of stocks across index funds" and not an active decision.

Revolut lets teens use Apple Pay

Revolut is letting its teenage customers make contactless payments using their iPhone or Apple Watch arguing that doing so “adds an extra layer of safety”. In the UK, Revolut Junior has more than 200,000 users. The company says Apple Pay will soon also be available to Junior users in the US, Australia and Singapore.

PRIVATE EQUITY

KKR invests in 4,000 build-to-rent flats

American private equity group KKR is funding the construction of 4,000 luxury flats in the UK. KKR is investing £610m alongside Apache Capital Partners, a property investment firm, to build on sites in Birmingham, Brighton and Hove and London. It also will look at other "core cities". The flats will be built by Moda Living, which is owned by the Caddick family, who also own Headingley cricket ground. Moda will find sites and will take them through planning and development.

Apollo running rule over M&S

The Sunday Times reports that private equity company Apollo has discussed a bid for Marks & Spencer in recent months, believing its shares are being weighed down unreasonably by the impact of Covid. Apollo believes the market had also failed to attribute enough value to M&S's 50% share of Ocado's retail business, which it bought for £750m in 2019.

KKR makes €33bn buyout offer for Telecom Italia

KKR has launched a more than €33bn offer to take Telecom Italia private. The US buyout fund already holds a 37.5% stake in Telecom Italia’s “last mile” network.

INTERNATIONAL

Sanctions breach continues to haunt Standard Chartered

Institutional investors have accused Standard Chartered of making misleading statements about breaching US sanctions against Iran. The bank has been hit by multiple fines over its dealings with Iranian firms and this new legal claim revolves around allegations that investors bought Standard shares at “artificially inflated” prices as a result of “untrue or misleading” statements regarding sanctions breaches. More than 100 UK and US trustees, retirement funds and other investors have joined the class action which was lodged with the High Court in September. Neill Shrimpton, a partner at Brown Rudnick, who is leading the claim, said: “Our clients are institutional investors who take Environmental, Social and Corporate Governance seriously. They have legitimate concerns about the serious breakdown in ESG at Standard Chartered that has led to a loss in shareholder value. Our clients seek accountability and compensation for that loss.”

Colm Kelleher to succeed Axel Weber as UBS chair

Former Morgan Stanley president Colm Kelleher has been announced as the next chair of UBS, succeeding Axel Weber when he steps down next year. UBS also said it would nominate Lukas Gaehwiler for election to the UBS board as vice chairman.

Former Aegon CEO to succeed Paul Achleitner as Deutsche Bank chair

Alex Wynaendts is set to succeed Paul Achleitner as Deutsche Bank chair next year. Wynaendts retired as CEO at Aegon last year and is currently a Citigroup board member.

AVIATION

Air freight booms amid rising shipping costs

Rising shipping costs have led businesses to turn to air freight to get goods delivered with Willie Walsh, the director-general of the International Air Transport Association, saying the sector is experiencing a “permanent shift” towards cargo. “There's a huge surge in demand for products all around the world that can't get serviced by sea freight,” says Dan Morgan-Evans, global director of cargo at Air Charter Service, an aircraft brokerage. “It would take something mighty to make it busier than what we're doing at the moment.”

FINANCIAL SERVICES

FSCS chief: Inconsistent compensation limits a 'challenge'

Financial Services Compensation Scheme (FSCS) chief executive Caroline Rainbird says the difference in compensation awarded by the lifeboat fund and the Financial Ombudsman Service presents a challenge. The Ombudsman can award a maximum of £355,000 for complaints while the FSCS is restricted to £85,000. Ms Rainbird said the disparity is confusing to people “as potentially one customer could receive a higher award from an ombudsman decision.” She noted that the number of customers with losses over the FSCS’s compensation limit increased by 15% last year. This, she said, highlights the “point around the challenge of inconsistent compensation limits.” Speaking at City & Financial Global’s FCA Consumer Duty Virtual Summit, Ms Rainbird also pointed to how the FSCS is collaborating with regulatory and industry partners on identifying cases of phoenixing, scams and poor and bad practice.

Royal London lines up ‘full-blown’ merger bid for LV

The Mail on Sunday reports that Royal London is planning to propose a full-blown merger with rival insurer LV if the latter’s members vote against a £530m sale to Bain Capital next month. The takeover by the US firm has been hit by a backlash after LV members were offered £100 in return for losing their 178-year status as a mutual. Royal London’s new plan for a merger would reportedly allow LV members to keep their mutual status as part of Royal London. LV is expected to explain in a statement to the Stock Exchange that the loss of mutual status would be followed by far greater value for investors in future years - but only if they accept the Bain deal.

FCA seeks crypto expertise

The Financial Conduct Authority (FCA) has put out a £500,000 tender for help with the regulator’s crypto surveillance efforts as it struggles with the growing number of crypto-asset businesses operating in the UK. The watchdog has been forced to delay registering exchanges, placing most on a temporary register instead. Amid fears over the use of cryptocurrencies in money laundering and terrorist financing, the successful candidate will train FCA staff on blockchain and coach officials about how they can spot criminals transferring money via decentralised financial networks.

Visa hits back at Amazon over claims its fees are too high

Amazon’s decision to ban UK-issued Visa credit cards from its platform has been described as “odd” and “unfortunate” by the credit card company’s CEO Al Kelly who hopes negotiations over payment processing costs will be resolved.

MANUFACTURING

Johnson Matthey to build £50m hydrogen Gigafactory

Johnson Matthey has won £12m in funding from the Department for Business, Energy and Industrial Strategy to put towards a £50m hydrogen fuel cell Gigafactory. The Hertfordshire plant would produce proton exchange membranes — essential components in hydrogen fuel cells.

MEDIA & ENTERTAINMENT

Dacre will not apply for Ofcom role

Paul Dacre has pulled out of the contest to become chairman of media regulator Ofcom. The former Daily Mail editor, who saw his initial application rejected, says he will not reapply, despite the process being re-run after the initial interviews failed to deliver a candidate. With Ofcom set to be handed new powers to regulate social media companies as part of the Government's draft online safety legislation, Mr Dacre said the watchdog faces an "awesome challenge" in trying to regulate "omnipotent", "ruthless" and "amoral" large tech firms "without damaging freedom of expression".

Netflix to reveal viewing numbers

Netflix is to reveal its viewing numbers for the first time, launching a website revealing its most-watched TV shows and films. Rather than measuring how many people viewed each show or film, the rankings are based on the number of hours each title has been collectively streamed on Netflix.

REAL ESTATE

Inflation and rate rises could cool the housing market

Nationwide Building Society believes rising inflation and an expected increase in interest rates could prompt a “cooling” of the housing market. Chief economist Robert Gardner, who said the housing market is currently “remarkably robust” despite incentives such as the stamp duty holiday coming to an end, said there are a few things that could moderate housing demand in the coming quarters, noting possible supply issues before suggesting: “If you look at rising inflation squeezing household budgets a little and if interest rates rise, then that is likely to exert a cooling influence as well.” Despite this, he added: “If the recovery holds up, then activity is likely to remain pretty solid.”

RETAIL

Retail sales up 0.8% last month

ONS figures show that UK retail sales rose 0.8% month-on-month in October, bringing a five-month run of falling or flat sales to an end. Clothing sales reached their highest level since the start of the pandemic, coming in at just 0.5% below pre-pandemic levels, while second-hand stores also saw sales rise. ONS chief economist Grant Fitzner said: “After five months of no growth, retail sales picked up in October. Although sales overall are above pre-pandemic levels, it remains a mixed picture." Helen Dickinson, chief executive of the British Retail Consortium, said retailers “will be relieved by the improvement in sales as they enter the final straight in the run up to Christmas.”

ECONOMY

Government borrows £18.8bn in October

Official data shows that the Government borrowed £18.8bn in October, the second highest monthly figure since records began in 1993. The total came in higher than analysts’ forecasts, with experts expecting October’s public sector borrowing to fall to £13.8bn from the £21bn recorded in September. Borrowing this financial year stands at £127.3bn, with this £103.4bn down on the same period a year ago. The data also shows that tax receipts climbed 6.2% to over £65bn last month, while the debt-to-GDP ratio remained historically high at 95.1%. The interest the Government pays on what it borrows was up because of rising inflation, with interest payments tripling in October from a year earlier to £5.6bn. Chancellor Rishi Sunak, who last month set out new fiscal rules aimed at keeping debt on a sustainable path in his Budget, said: “It is right that we now strengthen our public finances for future generations.”

OTHER

Stockbroker offers staff unlimited leave to stop burnout

Workers at London stockbroker Finncapp will have unlimited holiday from next year to try to prevent staff burnout. Employees will have to take a minimum of four weeks leave plus two or three days every quarter. Chief executive Sam Smith said the company really started to notice how much mental health strain employees were under in February this year. "People were fed up and had no resilience left because of having been in the pandemic for a long time," she said.

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