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Daily News Roundup: Monday, 23rd November 2020

Posted: 23rd November 2020

BANKING

Nationwide profits increase despite uncertain housing market

Nationwide Building Society has recorded higher half-year profits despite registering much larger impairment charges and with the coronavirus still causing housing market uncertainty. The lender saw its reported post-tax profits rise by £47m to £281m in the six months to September 30 as its deposits increased by £1.2bn and it opened over 250,000 new current accounts. Gross mortgage lending was significantly down on the same time last year though, falling £3.6bn to £12.7bn. Nationwide is also bracing for customers to struggle to repay loans after putting aside £139m for bad debts due to the pandemic. The mutual, which has received more than 100,000 calls from members every month since the pandemic erupted in March, doubled its provision for loan losses from £57m a year ago.

Treasury: Banks best placed to chase coronavirus loans

The Treasury insists banks should be responsible for chasing up and restructuring loans made to struggling businesses during the coronavirus crisis, despite City lenders calling for government help in dealing with the issue. With analysis suggesting that around £35bn of lending could become unsustainable, lobby group TheCityUK had called on ministers to offer support, saying a ‘UK Recovery Corporation’ could turn risky debts into more manageable forms like tax liabilities. Responding to a Treasury Committee report highlighting the issue, the Treasury said: “We remain of the view that accredited lenders, not the government, are best placed to support borrowers [to] repay government-guaranteed loans.”

Sainsbury’s retreats from financial services

The Telegraph reports on Sainsbury’s decision to bow out of banking as supermarkets across the sector fail to break the stranglehold of big banks and face declining margins and tougher regulation. Clive Black, an analyst at Shore Capital, estimates that Sainsbury’s has spent £1.4bn on its bank, but like Tesco, Sainsbury’s never managed to crack the core current account market it needed in order to reach scale.

Six in 10 have banking apps

Research by Mastercard shows that 59% of people have a mobile banking app on their phone, with this more than the number who said they had social media apps installed (50%). Among the over-65s, 44% said they had a mobile banking app. The report suggests apps have been embraced as the COVID-19 pandemic has made accessing bank branches harder.

Wooden bank card set for launch

An eco-friendly bank card called TreeCard is set to be launched in the UK early next year. The Mastercard debit card is made from sustainable British cherry wood, with a plastic inner made using recycled plastic bottles. The company has pledged to spend the majority of its profits from retail fees on planting trees. A mobile app will track spending, give transaction notifications and show the customer's tree-planting effect in real time.

JP Morgan appoints CEO for UK digital bank

JP Morgan has made Sanoke Viswanathan, previously chief administrative officer overseeing technology and operations in corporate and investment banking, chief executive of its forthcoming digital bank. The UK online venture is due to launch early next year.

Cynergy partners with Google for new banking service

Google has teamed up with Cynergy Bank to provide a mixed digital and personal banking service, the Times reports. The aim is to establish and develop a presence in the market for small business owners and professionals.

Lenders urged to start providing the enhanced support

The Financial Conduct Authority (FCA) has confirmed updated guidance to financial services firms setting out the enhanced support that should be available to consumers experiencing payment difficulties as a result of the pandemic.

Extinction Rebellion calls for “financial disobedience”

Extinction Rebellion is urging supporters to take out mortgages and loans with the intention of defaulting on payments in an attempt to force banks to take further action towards reducing carbon emissions.

PRIVATE EQUITY

Concerns raised over sale of Co-op to Cerberus

Andrew Bailey is being asked to intervene in talks between Cerberus and the Co-op Bank amid allegations about the US private equity giant’s "aggressive" behaviour. Kevin Hollinrake, the Tory MP who co-chairs the All-Party Parliamentary Group on Fair Business Banking, said in an email to the Bank of England Governor last week that Co-op Bank's customers were often attracted to its "reputation of ethical and sustainable practices", meaning that the sale of the bank to a "vulture fund would be of particular concern".

INTERNATIONAL

Deutsche Bank on the lookout to expand its payments business

Deutsche Bank’s fledgling payments processing venture “Merchant Solutions” is eyeing potential targets and partners as the lender seeks to become a dominant force in digital payments.

Beijing warns of crackdown on misconduct after bond defaults

Beijing has warned it will “severely” crack down on illegal behaviour on bond financing after several high-profile defaults by state-owned companies.

CONSTRUCTION

House building falls by a third

Housebuilders are set to deliver a third fewer new homes this year, with some of the decline attributed to the impact of the coronavirus crisis. Britain's seven largest house builders – who account for 43% of the country’s new housing supply - have reported property completion figures that are down by 35% on average from a year ago. A survey from the Home Builders Federation and development finance provider Close Brothers Property Finance saw 44% of developers identify the pandemic as a barrier to new completions, while 83% cited delays in securing planning permission or discharging conditions as a factor.

Working from home shift rocks office projects

Construction of new offices in central London has fallen by 50% over the last six months, according to a new survey, with developers saying weak demand for office space was putting them off starting new projects.

FINANCIAL SERVICES

City should have been championed in Brexit talks

The Lord Mayor of London, William Russell, has accused the Government of “missing the point” of the City as a key national asset after failing to champion financial services in Brexit talks. Russell said the Government's approach to financial services in the talks was “disappointing” as the Square Mile faces up to the loss of passporting rights and regulatory equivalence from January. He said the City “would have loved to have had more representation”, claiming that the UK’s financial sector has been a victim of its own success. A Treasury spokesman said the Government planned to “renew the UK's position as the world's pre-eminent financial centre”. The spokesman added: “By bolstering the dynamism, openness and competitiveness of the sector, we will ensure the UK moves forward as an attractive and well-regulated market, leading the world in pioneering new technologies and shifting finance towards a net-zero future.”

FCA withdraws Lanistar warning

The Financial Conduct Authority (FCA) has withdrawn its consumer warning against fintech Lanistar after the firm agreed to update its marketing materials to confirm that it is not currently in business. The City watchdog had been concerned that Lanistar had not been authorised to operate but the firm says it is launching registrations and not currently offering any banking services. The fintech, which says it will offer the world’s most secure card, told the FCA that it will not be providing financial services or products without authorisation, adding that its future services would be made by partnering with regulated companies, such as Mastercard.

HEALTHCARE

Pfizer and BioNTech submit Covid vaccine for US approval

Pfizer and BioNTech became the first pharmaceutical companies to apply for regulatory approval of a coronavirus vaccine after submitting their COVID-19 candidate for emergency authorisation in the US on Friday.

LEISURE AND HOSPITALITY

Pubs and restaurants bear brunt of new Covid restrictions

Pubs and restaurants will bear the brunt of a new Covid tier system so that shops, cinemas and gyms can reopen under plans to be announced by Boris Johnson today. The prime minister will confirm that a revised tier system will replace the current lockdown on December 3. All shops will be allowed to open in all tiers, but hospitality businesses in Tier 3 will only be allowed to offer takeaways, while those in Tier 2 will only be able to serve alcohol with “substantial meals”. Kate Nicholls, chief executive of UK Hospitality, said the news was “far worse than anyone could have anticipated”.

MANUFACTURING

De La Rue in talks over biometric Covid certificates

Passport maker De La Rue is among the companies in talks with ministers about supplying Britons with secure certificates to prove they have been vaccinated and are not carrying coronavirus. De La Rue could also pick up contracts for its authentication division, providing security seals and stamps for COVID-19 test kits and vaccines, the Sunday Telegraph reports.

REAL ESTATE

City firms turn to WeWork

Banks and professional services firms are understood to be in talks with WeWork about transferring operations to the company’s flexible office spaces as more staff work from home during the pandemic.

RETAIL

Retail sales rise by 1.2% in October

Figures from the Office for National Statistics show that retail sales rose in October, with sales volumes climbing 1.2% compared to September to deliver the sixth consecutive monthly increase. Year-on-year, October’s sales were up 5.8% on October 2019. While instore sales fell 3.3% year-on-year as some regions were placed under tougher restrictions due to coronavirus case numbers, online sales were up 52.8% on last October.

Landlords approve Clarks CVA

Creditors to Clarks have given the green light for a restructuring plan of the shoe retailer, clearing the path for a £100m private equity deal that will take the 195-year-old firm out of family ownership for the first time. Clarks announced that its CVA, which was launched earlier this month, has been approved by more than 90% of its creditors, including landlords.

Pets at Home set to reveal £73m profit

Pets at Home expects to record a profit of "around £73m" for the full year with trading for the half-year to September exceeding expectations following a recent boom in pet ownership driven by the pandemic.

ECONOMY

Treasury set to borrow almost £500bn this year

The Office for Budget Responsibility is expected to confirm this week that the Treasury will borrow almost £500bn this year, more than double the £227bn gilt sales in the year after the financial crisis. The Treasury’s Debt Management Office committed to at least £385bn in gilt sales by the end of November, already more than double its original March pre-Covid £156.1bn estimate for the entire financial year. Antoine Bouvet, senior rates strategist at ING, said: “The total figure could well rise above the £500bn market depending on the length and take-up of the furlough scheme, among other factors.” Meanwhile, Paul Johnson, the director of the Institute for Fiscal Studies, said he did not see “any possibility of the books being balanced this decade, if not for longer”.

OTHER

FRC calls for end to easing of pre-emption rules

The Financial Reporting Council (FRC) says listed companies will have to resume first-refusal rights for existing shareholders when they raise capital, bringing an end to a relaxation of pre-emption rights rolled out in March. The FRC-based Pre-Emption Group has said the relaxation in pre-emption rights, which was designed to speed up capital-raising for companies hit by the pandemic, will not be extended beyond the November 30 deadline. This means that as of December, firms will have to revert back to giving existing shareholders first refusal to new share issues.

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