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Daily News Roundup: Monday, 23rd March 2020

Posted: 23rd March 2020

BANKING

BoE puts work on hold and delays stress tests

Supervisors at the Bank of England’s (BoE) Prudential Regulation Authority will review their work plans and cancel “non-critical data requests, on-site visits and deadlines” to allow firms to focus on coronavirus-related challenges, while work on an assessment of banks’ liquidity has been suspended in a bid to reduce pressure on lenders as the crisis continues. The BoE’s decision to cancel stress tests comes after the EU said it will cancel its health check of leading lenders. Meanwhile, the Prudential Regulation Authority said that new capital rules from the Basel committee due to be phased in may also have to be pushed back.

UK banks reassure investors as coronavirus impact grows

Britain’s big lenders are confident that their balance sheets can withstand the hit of coronavirus, as they focus on preparing for an influx of demand from customers in financial difficulty. UK Finance chief executive Stephen Jones said: "Banks, building societies and credit unions are committed to supporting all customers, and are working closely with government and regulators to ensure that everyday banking services remain available, while also dealing with the impact of Covid-19 on the wellbeing of their own employees who are working tirelessly during these unprecedented times.”

FCA blocks repossessions from virus-hit customers

The Financial Conduct Authority (FCA) has told mortgage lenders to treat homeowners fairly as challenges related to the coronavirus continue. The FCA has warned firms they must grant customers who request one a mortgage payment holiday of three months if they are struggling with Covid-19. It has also banned repossessions unless the homeowner has agreed to the measure, with this applying to all new instances of arrears, while any existing repossession orders must be halted. Lenders must also ensure there are no fees applied to customers and that customer credit scores are not damaged by the payment holiday. Christopher Woolard, the interim chief executive of the FCA, said the regulator will continue to review its rules as the coronavirus crisis develops.

Small firms set to see £250k loans

Banks are set to pledge interest-free loans of up to £250,000 for small businesses, with it reported that Chancellor Rishi Sunak's emergency coronavirus loans will initially take the form of overdrafts that could be available within 48 hours. The Mail on Sunday says SMEs will be able to borrow a quarter of a million pounds from one of 40 lenders without having to secure the loan against assets. Small firms will be able to apply for loans of up to £5m under the Government's business interruption loans programme, but these are expected to take longer to arrange and may need to be secured against assets. Figures show that pressure on firms brought about by the current climate saw loan applications rise last week, with Lloyds seeing a 16% increase and Co-op Bank recording a 20% jump in small business loan applications.

BoE cuts result in low mortgage rates

Nationwide has withdrawn all its tracker mortgages, while other lenders continue to provide such deals as emergency cuts to the Bank of England Bank Rate result in some of the lowest interest rates ever seen in the market. HSBC is offering a two-year tracker loan which charges 0.64% above the Bank Rate of 0.1%.

HSBC boosts interest-free overdraft buffer

HSBC is to ramp up its interest-free overdraft buffer to £300 as it looks to help customers whose finances have been affected by coronavirus. The bank is introducing a temporary £300 interest-free buffer on overdrafts for customers with its Bank Account and Advance Accounts for a period of three months.

We’re about to find out how smart the big banks have been

Robert Armstrong, writing in the FT, analyses how the coronavirus will affect the financial industry, noting that it is an opportunity for them to prove the stability of their businesses.

PRIVATE EQUITY

Pimco, Amundi, Ashmore bond funds battered by turbulent markets

Popular bond funds run by Amundi, Ashmore and Pimco have been hit by the turbulence in fixed income markets, suffering performance losses of up to 33% in one month alone.

INTERNATIONAL

Deutsche Bank warns of coronavirus impact

Deutsche Bank has warned that the economic fallout from the coronavirus pandemic may affect its ability to meet financial targets. It detailed that forecasts in its annual report didn’t factor in the impact of Covid-19, and that it would provide an outlook update when it reports first quarter earnings in April. Separately, Deutsche Bank has nominated Deutsche Börse chief executive Theodor Weimer for its supervisory board, in a move that makes him a candidate to succeed chairman Paul Achleitner.

BoA boosts hiring and pay

Bank of America's consumer division has hired 1,700 people in critical support roles this month, with a surge in customer service demand due to concerns about the coronavirus. It is also set to boost pay and overtime pay for front-line workers in branches, call centres and operation centres.

Banks in talks with Fed on further steps to boost lending

US banks are seeking assurances from the Federal Reserve that any emergency lending to clients hit by the Covid-19 crisis will not see them penalised for temporarily breaching liquidity rules.

Force global banks to suspend bonuses and payouts

Sheila Blair, former chair of the FDIC, argues for all global systemically important banks to suspend discretionary bonuses, dividends, and share buybacks to free up trillions of dollars of additional lending capacity.

Solomon earns $27.5m

Goldman Sachs boosted the pay package for chief executive David Solomon to $27.5m in 2019, a 20% increase.

AUTOMOTIVE

Carmakers dust off Brexit plans to deal with factory shutdowns

Every major car plant in the UK is set to close in the coming days in response to the coronavirus pandemic. Carmakers will restore emergency measures drawn up to cope with Brexit, including letting warehouses to stockpile parts, as they prepare for weeks of plant downtime.

AVIATION

Virgin Atlantic pushing for government bail-out

The Telegraph reports that Virgin Atlantic may be alone in its pursuit of a bail-out from taxpayers, with rival airlines boosted by the Government’s pledge to cover a proportion of wages for ailing firms. Virgin Atlantic has called for a £7.5bn cash injection for the airline industry from the taxpayer, prompting Willie Walsh, boss of British Airways owner IAG, to suggest the industry should “look at self-help” before calling on the Government to provide state aid.

FINANCIAL SERVICES

Insurers scramble for cover as coronavirus escalates

The insurance industry could face its biggest shake-up in 20 years following the coronavirus. Experts say the biggest impact on insurers will not be the raft of claims but the collapse in value of assets they hold on their balance sheets to make sure they can pay out. Routinely insuring against pandemics of this scale would be unaffordable for most businesses, said a spokesman for the Association of British Insurers (ABI). British insurers paid out £22m a day to businesses last year but Covid-19 has thrown up unprecedented challenges that no domestic insurance market could meet, they added.

CMC raises forecast in response to trading volume growth

Trading platform CMC Markets has boosted its annual earnings target for the fourth time in less than six months, with shares up 16.11% to 156.75 on the FTSE small-cap index. Net operating income ahead of market consensus was reported at £219m, with profit before tax of £72.9m.

Hedge funds seek targets to short

Short-selling positions more than tripled last week to the highest level since records began just over seven years ago, as hedge funds scoured the London market for vulnerable companies to bet against. Bank of England governor Andrew Bailey urged those shorting companies to “just stop what you’re doing,” warning it is not in the interest of Britain’s economy or its people.

Investec in profit warning

The coronavirus pandemic has presented challenges for Investec, which has warned that operating profit for the year to 31 March 2020 is expected to be 7% to 14% below the previous year’s.

LEISURE AND HOSPITALITY

Pubs and restaurants told to shut

Prime Minister Boris Johnson has told cafes, pubs and restaurants to close as part of efforts to tackle coronavirus. Those offering take-away food have been told they can continue to operate, however. Nightclubs, theatres, cinemas, gyms and leisure centres have been told to close "as soon as they reasonably can". Mr Johnson said the situation will be reviewed on a monthly basis.

MANUFACTURING

Steel industry ‘on the edge’

Britain’s steel producers have warned the industry is teetering on the edge of collapse, with work drying up amid the coronavirus pandemic and apparently little prospect of government financial support.

MEDIA AND ENTERTAINMENT

BT talking with ministers about tracking outbreak

BT chief executive Philip Jansen has revealed that the company is working with government officials on plans to use its technology to help track and manage the Covid-19 outbreak. BT, along with other mobile operators, would provide data from mobile phones which could be used in conjunction with the latest NHS figures to help decide on changes to restrictions on travel and businesses, for example.

REAL ESTATE

Rightmove and Zoopla launch rival campaigns to win custom

Rival property portals Rightmove and Zoopla are implementing new policies as the coronavirus outbreak continues, with Rightmove cutting charges for agents, developers and commercial customers by 75% and Zoopla allowing estate agents to advertise on the portal for free for nine months if they leave Rightmove. This comes as house viewings face a dramatic slowdown amid the pandemic and sales begin to fall through. Meanwhile research firm Capital Economics has predicted a 40% decline in property transactions and mortgage approvals in the second quarter.

RETAIL

Blackstone ups bet on UK ecommerce warehouses

Blackstone is to buy 22 logistics sites across the UK in a £120m deal as the coronavirus pandemic has led to a rapid rise in online shopping.

SPORT

CVC could score bigger league stake?

Premiership Rugby clubs are reportedly bracing themselves for an emergency buyout by CVC if the league is hit by the loss of revenue caused by coronavirus. it is believed that CVC, which previously snapped up a 27% stake in the Premiership for £230m, could look to use the weakened market to increase its share.

F1 teams to help produce 20,000 ventilators

UK-based Formula One teams McLaren, Williams, Red Bull, Renault, Racing Point, Mercedes and Haas are set to mobilise their workforce to produce life-saving ventilators that will be required by the NHS in the fight against coronavirus.

ECONOMY

Government to pay employees’ wages

Chancellor Rishi Sunak has announced that the Government will pay the wages of employees unable to work due to the coronavirus pandemic, paying 80% of the salary of staff retained by their employer up to £2,500 a month. The move, which covers gross pay, will be backdated to the start of March and last for three months. Mr Sunak also announced that VAT payments will be deferred until the end of June, while self-assessment income tax payments for July 2020 are to be deferred for six months. However, economists have warned that the Covid-19 outbreak could still result in almost a million job losses in the UK.

GDP faces 5% fall

Morgan Stanley has warned that GDP will fall by 5.1% this year following a deep recession in the first six months, adding that even if H2 is strong, the UK faces the worst recession in a century. Capital Economics economist Andrew Wishart believes the UK deficit will widen to at least 8% of GDP in 2020-21, with tax receipts declining while the Government spends heavily on measures to support workers and businesses.

OTHER

London-listed firms told to delay preliminary results

The Financial Conduct Authority (FCA) has told companies listed on the London Stock Exchange not to publish preliminary results for at least the next fortnight. The instruction, contained in a letter sent to regulated companies over the weekend, has prompted speculation that a full markets shutdown could follow.

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