Digital banks scramble to achieve sustainability
Since the Prudential Regulation Authority (PRA) last month demanded that digital banks turn their attention to making a profit rather than relying on investor capital, start-up lenders have been scrambling to do deals and grow income. A consultation paper last month outlined how the Bank of England could impose tougher capital requirements when it finalises rules later this year, warning that start-ups had often “underestimated the development required to become a successful and established bank” and often lost “the longer-term focus of becoming a sustainable business” after gaining regulatory authorisation. The Sunday Times notes that losses doubled at Monzo last year hitting £114m; Starling Bank is on track to make a monthly profit by the end of the year while Revolut saw operating losses triple to £107m last year.
Lenders introduce raft of new borrowing restrictions
The Times’ Kate Palmer reports on fresh hurdles for first-time buyers as lenders attempt to limit the number of risky borrowers on their books. Banks and building societies are declining mortgages to those with deposits gifted by family members, buyers with small deposits and those who have been furloughed or work in sectors at high risk of job cuts, for example. UK Finance says lenders fear the ability of borrowers to keep up repayments in the future and are factoring in a sharp fall in house prices next year. Palmer says landlords are also facing restrictions, with banks favouring properties with high efficiency ratings and limiting lending to portfolio landlords.
High street banks begin to evolve opening hours
TSB is to reduce access to its over-the-counter service in a trial that will see 14 branches shut counters at 2pm and staff shifted to advice roles and instructing customers on how to use digital services. Separately, Lloyds Banking Group is to tailor opening times to individual branches depending on demand. Elsewhere, Royal Bank of Scotland has launched Banking My Way, an initiative designed to help vulnerable customers who need additional support by allowing them to request bespoke assistance.
Monzo and Starling top customers survey
A survey of more than 19,000 people carried out on behalf of the Competition and Markets Authority (CMA) has found that customers of Monzo and Starling Bank are the most likely to recommend their current account to friends and family. The digital banks knocked the previous winner First Direct from the top spot for overall service while the poll also resulted in Virgin Money appearing for the first time. Monzo and Starling also came top for their online and mobile banking offerings with 89% and 88% of customers respectively saying they would recommend the services.
JP Morgan set to launch UK retail arm
JPMorgan Chase & Co is planning to launch its online British retail bank in the first quarter of 2021. Operating under its Chase brand, the lender will compete with the Goldman Sachs Marcus brand and start-ups including Monzo and Starling.
ATM chief urges action to boost ATM numbers
The boss of ATM operator Cardtronics is calling for fairer funding of the UK’s cash machine network to ensure continued access to cash. Marc Terry says banks must agree to a reasonable interchange fee claiming that lenders are orchestrating a “massive anti-cash campaign […] and we need to fight back”
Zopa launches first savings accounts
Peer-to-peer investment company Zopa will begin selling a range of fixed-term savings accounts today, with a one-year fixed-rate deal paying 1.05% and a two-year deal paying 1.15%. Three and four-year deal will pay 1.26% rising to 1.3% for five. There is a minimum deposit of £1,000.
Asda suitors prepare bids
Two retail veterans are assisting private equity firms in their respective bids for Asda. Rob Templeman, a former Debenhams chief executive, is understood to be aiding Apollo Global Management, while Paul Mason, a former Asda boss who once led Matalan, is linked to Lone Star Funds. Walmart, Asda's current owner, is likely to retain a minority stake and net about £6.5bn from the sale.
Chinese banks to post fall in first first-half profit
Some of China’s largest banks, including Industrial and Commercial Bank of China, China Construction Bank, and Bank of China are set to post their first drop in first-half profits since the global financial crisis, hit by a surge in bad debt and higher loan-loss provisions due to the coronavirus pandemic, analysts and official data indicate.
Hong Kong/investment banking: Chinese wall
The FT’s Lex considers how mainland banks in Hong Kong could benefit from US sanctions and unease over Beijing’s national security law by growing their share of deals from foreign banks.
Rolls-Royce set to report £1bn half-year loss
Rolls-Royce is expected to report a £1bn-plus loss at its half-year results this week after being severely battered by the coronavirus pandemic. The company burnt through £3bn of cash in the first half as demand for air travel collapsed and has initiated programme to cut 9,000 staff
A quarter of listed financial services companies issued alerts this year
New research reveals that UK-listed financial services companies have issued more profit warnings so far this year than in the whole of last year. Forty-two were issued in the first seven months of 2020, with 36 of these citing the effects of the pandemic. Retail-focused companies such as banks, finance and credit services and non-life insurers were suffering the worst, with 50% issuing alerts, while investment banking, brokerage firms and asset managers fared better with 15% of such companies issuing warnings.
FCA moves to minimise compensation for its failings
The Financial Conduct Authority has been accused of attempting to minimise liability for its failings with a new cap on the compensation available from its complaints scheme, ahead of the publication of three independent reviews into its competence. Antony Townsend, the independent complaints commissioner, said the proposals "represent an explicit fettering of compensation for direct financial loss".
Inflation change could cost pension savers £73k each
Government plans to shift away from the Retail Price Index (RPI) when calculating inflation to a variant of the Consumer Prices Index that includes owner-occupier housing costs, known as CPIH, could result in 10m savers having 20% wiped off the value of their "defined benefit" pension schemes. The Government is consulting with the UK Statistics Authority on the change which could come into force in 2025.
Wirecard break-up begins as it sells off UK and Brazil businesses
Wirecard has agreed to sell its UK payment card technology business to Visa-backed UK start-up Railsbank. The sale of its Brazilian offshoot also marks the beginning of break-up of the collapsed German payments company. The UK deal requires the approval of the Financial Conduct Authority.
Cazenove wins ESG investing Olympics
Schroders’ wealth management arm, Cazenove, has won a £33.5m ESG investment mandate after beating 60 other investment firms in a competition run by three major charity groups.
UK’s SFO charges three over £100m Cayman fund collapse
The Serious Fraud Office has charged three men in relation to the collapse of Axiom Legal Financing Fund, a £100m Cayman Islands investment scheme in which 500 investors lost money.
Hedge fund Gammon gains 600% with well-timed bets on volatility
Gammon Capital has been ranked as one of the world’s best performing hedge funds after racking up a 600% gain so far this year, following well-timed bets on volatility during the coronavirus crisis.
Amigo Loans founder seeks to return as chief
James Benamor, the founder of Amigo Loans, is calling on the company to make him chief executive so he can return to lead an international expansion.
LEISURE & HOSPITALITY
Travel firms plead for government help
The UK's travel industry has reached a "critical point" and is calling for further support to stem job losses. Measures to curb the pandemic have already led to the loss of around 39,000 jobs, said travel industry trade body Abta. About 65% of travel firms have had to make redundancies or start a consultation process. Abta said the industry desperately needs "tailored support" or many more jobs would be lost.
Manufacturing output edges up
Activity in the UK's manufacturing and service sectors during August grew at the fastest rate for nearly seven years, according to the IHS Markit/CIPS composite PMI, which gave a preliminary reading of 60.3, the highest figure since October 2013. A figure above 50 indicates expansion. Meanwhile, the CBI's industrial trends survey for August edged up to -44, from -46 last month, the best reading since March, but well short of the -35 expected by economists and far below the -14 long-run average.
Eurozone industry fears rebound from virus crash will be shortlived
Economists fear a resurgence for manufacturing over the summer will fizzle out as pent-up demand is fulfilled and confidence remains depressed by the coronavirus pandemic.
MEDIA & ENTERTAINMENT
BT on takeover alert
BT has instructed Goldman Sachs to update its strategy for defending a takeover amid speculation its plunging share price has made the telecoms giant vulnerable to a bid. BT’s share price has plunged by 48% this year, to close on Friday at 101.8p.
Restructuring experts prepare for fresh wave of UK company failures
The FT reports on how specialists across accountancy, investment banking and law are preparing for a fresh wave of corporate distress in the autumn, when government furlough and loan schemes come to an end.
Investors in property funds must prepare for fall in assets
Analysis by the data company Morningstar has found that people who invested in property funds that have since been frozen have seen the value of their savings dwindle by more than £338m in four months. Experts warn investors to brace themselves for a further sharp reduction in value.
Pent-up demand drives surge in property sales
July saw a jump in property sales, according to official data, but levels were still well below those seen last year. Figures from HMRC showed sales in July were up 14.5% on June as pent-up demand boosted activity. However, sales were still 27.4% lower than last July.
Retail sales climb
Retail sales rose above pre-pandemic levels in July, according to ONS figures, with volumes up 3.6% between June and July and sales now 3% higher than February.
Williams F1 sold
Williams Grand Prix Engineering has been sold to US private equity firm Dorilton Capital for £136m. Williams, which was the last independent team in Formula One, has been struggling to compete with rivals such as Mercedes and Ferrari.
Global dividends suffer worst quarterly fall since 2009
A report from Janus Henderson shows global dividend payments plunged by a fifth in the second quarter of the year - a $100bn drop which is the worst fall since 2009. The fund manager said that in the best-case scenario, it expected dividends to fall by 19% on an underlying basis this year, or 25% in its worst-case. It had previously forecast falls of up to 35%.
UK public sector debt goes above £2trn
Public sector debt has exceeded £2trn for the first time following extraordinary borrowing measures by the Government to support the economy during the coronavirus pandemic. Total debt hit £2.004tn in July, £227.6bn more than last year, the Office for National Statistics (ONS) said.
Covid-crippled property markets ring the alarm for banks
The FT’s John Plender reports on the threat to banks from a commercial property market in crisis, asking if central banks and financial watchdogs have underestimated the risk to the financial system.
City employers plan for lasting switch to remote working
The FT reports on how banks, asset managers, insurers and accountants in the City of London are expecting to spend far less time in the office in the future.