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Daily News Roundup: Monday, 24th January 2022

Posted: 24th January 2022


Legacy IT systems hold back big banks

Traditional bank bosses are frustrated by problems with getting new technology in place, a survey for the Standard reveals. The difficulty with replacing legacy systems is hampering growth as upstart fintechs grab an increasing share of the personal account market. Figures from the Financial Conduct Authority reveal that around 8% of personal current accounts are now held with a digital challenger bank, up from just 1% in 2018. The survey shows 40% of bank executives fear they are falling behind competitors on innovation; 55% said a lack of formal guidance from regulators is holding them back and 60% think neo-banks will one day overtake traditional tier-1 banks. Steve Newson, of Starling Bank, said: “High Street banks struggle to update legacy IT systems because they don’t have an engineering culture. They have IT departments that are a support function, not at the core of what they do.”

Close Brothers enjoys loan book value rise

Close Brothers has reported positive half-year growth in banking and asset management stating that in the five months to the end of December its loan book had increased by 2.9% to £8.7bn, driven by new business in asset and motor finance and improved use of invoice finance. Total AUM grew by £1bn to £18bn over the period and operating profit are expected to be "broadly in line" with the first half of last year at £10.6m.

Lloyds looks to loosen lending on green homes

Lloyds is considering making stress tests on new loans for energy-efficient homes less stringent. The bank has reportedly started small trials in its Halifax business, rewarding buyers of homes with an energy performance certificate (EPC) grade C or above. A City source told the Telegraph: "There is a huge shift when it comes to mortgages and how lenders are looking at affordability. Because their homes are more efficient, their outgoings should be lower, and lenders are considering taking that into account for affordability, so it'll just be a slightly better stress test."

HSBC adds pronouns to staff name badges

HSBC staff in Britain can, for the first time, request that their preferred pronoun is added to their name badge. Stuart Haire, HSBC UK’s head of retail banking, said that "it's vitally important that everyone feels they can be themselves in the workplace. When someone is referred to with a pronoun that doesn’t align with their identity, it can make them feel alienated and have a wider and long-lasting impact on them as a person". The Telegraph suggests the move is likely to persuade the bank's high street rivals to follow suit.

Shawbrook starts talks on £2bn sale

Shawbrook, the challenger bank owned by BC Partners and Pollen Street Capital, has entered talks with pension funds and private equity firms about a £2bn sale. Last month it was revealed that Shawbrook was also considering a stock market listing.

Poot takes on risk role at Virgin

Glasgow-headquartered Virgin Money has brought in Susan Poot to replace Mark Thundercliffe as group chief risk officer as the organisation accelerates its digital first strategy. Poot joins from ING Bank, where she spent more than 20 years in a number of commercial and risk roles.

Mortgages follow rise in bank costs

With borrowing rates increasing for banks, lenders are increasing the cost of mortgages and subsequently their affordability criteria, the Sunday Times reports. The paper notes that two-year swap rates have gone from 0.8% in November to 1.2% in anticipation of more rises in the Bank of England base rate.


Blackrock launches renewables investment platform

As part of efforts to improve its sustainability credentials, Blackrock has launched a platform to invest in and lend to renewable energy companies. The "Sustainable Resources Platform" will be a part of Blackstone Credit, the private equity giant's credit investment arm.

Private equity sidesteps IPO parade by borrowing billions

Records seen by the FT reveal how a group of private equity firms have raised more than $9bn by selling debt, rather than going public or borrowing against their portfolio companies.


US banks brace for further Brexit demands from ECB

As the European Central Bank enters the final phase of its review into foreign banking hubs the Sunday Telegraph reveals that Goldman Sachs and JP Morgan have together increased their EU workforce by 1,800 people as a result of Brexit. Rivals Morgan Stanley and Bank of America Merrill Lynch have added 300 and 500 roles respectively through relocations and new hires. The ECB may increase pressure on some banks to increase their workforce on the continent as its desk-mapping exercise enters its final phase, sources say. Some have been accused of setting up shell hubs and relying too much on their London operations.

Chime lines up Goldman Sachs for IPO

Fintech start-up Chime Financial has asked Goldman Sachs to help it with preparations for an initial public offering in New York. The challenger bank will likely be valued at a substantial premium to its valuation of $25bn from an August funding round, sources say.

Morgan Stanley pays James Gorman $35m in 2021

Morgan Stanley CEO James Gorman was paid $35m for his work over 2021, up $2m from a year earlier, with the bank’s directors citing his “outstanding individual performance and record firm financial performance.”

Brussels faces threat of legal challenge over sustainable finance rules

The European Commission is facing legal action over its so-called green “taxonomy” rules by EU governments that do not want nuclear power or natural gas to be labelled as green investments.


Renault, Nissan, Mitsubishi to unveil 2030 EV plan this week

Renault SA, Nissan Motor Co and Mitsubishi Motors Corp plan to triple their investment to jointly develop electric vehicles (EVs). The three are expected to announce on Thursday a plan to invest more than €20bn ($23bn) over the next five years on EV development, according to sources. By 2030, the alliance is expected to produce more than 30 new battery EVs underpinned by five common platforms.

Britishvolt’s UK battery factory project secures government funding

UK-based battery manufacturing start-up Britishvolt has announced plans to build a £1.7bn Gigafactory in Northumberland. Britishvolt said it has also agreed a long-term partnership with investment firm abrdn and European logistics real estate manager Tritax that will deliver £1.7bn in private funding. The UK Government has committed about £100m through its Automotive Transformation Fund.


Ban on red diesel will cost businesses millions

Government plans to restrict the use of red diesel could cost construction and manufacturing businesses in Northern Ireland up to £25m per year. From April, red diesel will only be allowed for use in agriculture, rail transport and non-commercial heating. The construction and manufacturing industries will have to switch to "white" diesel instead.


USS introduces climate “tilt” to £5bn of investments

The UK’s biggest private pension fund, the Universities Superannuation Scheme (USS), will shift £5bn of its investment in equities from BlackRock to LGIM, which will invest it according to a climate transition index developed by Solactive, a German company. The move will provide USS with an initial 30% fall in emissions associated with the investment along with a cut in management costs. Solactive will also ensure that portfolio carbon emissions fall by 7% every year thereafter. Although the move affects a small slice of the scheme’s £82bn in total assets, 40% of which is held in equities, a spokesperson said more of the portfolio was expected to be moved to climate-aware indices in future. “We think this is a significant first step,” said Simon Pilcher, the chief executive of USS Investment Management, which manages the pension scheme’s money. “Our conviction though is that for that total decarbonisation to happen, it is the underlying companies and the way in which the world operates that have to change. So we are not going to exclude our way to net zero. We have to help the businesses in which we invest.”

Aviva Investors will vote against directors who fail on ESG

Aviva Investors has pledged to vote against the election of directors at companies where their commitments on climate change, biodiversity and human rights fall short of its expectations. In a letter to 1,500 companies in 30 countries CEO Mark Versey urges leaders to put measures in place to deliver and track progress on key environmental, social and corporate governance issues. He says: “We will hold boards and individual directors accountable where the pace of change does not reflect the urgency required.” Versey also argues that it is “essential that executive compensation structures and performance targets meaningfully reflect sustainability goals.”

Aviva drawing up plans to return up to £5bn to shareholders

Aviva is drawing up plans to return up to £5bn to shareholders as boss Amanda Blanc prepares to unveil her new growth strategy for the insurer. Aviva is buying back £1bn of shares and has said it will return at least another £3bn, potentially through a special dividend. But analysts are now expecting the total payout to be closer to £5bn. Barrie Cornes, analyst at Panmure Gordon, said: “We think Aviva could do a £4bn capital return in addition to the £1bn buyback. We would prefer to see a special dividend.” The move comes after the Anglo-Swedish investment firm, Cevian Capital, upped its holding in Aviva from 5% to more than 6%. The activist investor has been pushing for Aviva to hand back £ 5bn in excess capital to shareholders and cut costs more aggressively.

Cryptocurrency adverts face crackdown

Misleading cryptocurrency adverts are facing a crackdown after the Financial Conduct Authority revealed plans to take over their regulation. The regulator said adverts for cryptocurrencies will be treated in the same way as other financial promotions. The FCA also revealed it is looking into replacing the banal “your capital is at risk” warning on adverts with wording that is more effective.


Unilever bosses warned against further big deals

Unilever investors have indicated to boss Alan Jope that his job will be in jeopardy if he attempts any more large acquisitions. Investors are reportedly irked by Unilever’s multiple failed bids for Glaxo Smith Kline’s consumer health business, moves they say were damaging to the consumer goods giant’s credibility. Meanwhile, several papers report that Nelson Peltz’s activist hedge fund Trian Partners has acquired an interest in Unilever, adding to the pressure on Jope.


M&C Saatchi boosted as FCA drops accounting investigation

The Financial Conduct Authority has dropped a probe into M&C Saatchi’s bookkeeping with no further action to be taken. Accounting irregularities were first uncovered in 2019 and the regulator launched an investigation in January 2020. In December 2019, the company admitted that “adjustments” needed to its books totalled £11.6m – almost double a previous estimate of £6.4m - forcing it to issue two profit warnings. News that the probe had ended combined with upgraded profit forecasts sent shares up over 5% and should help the company fend off a recent takeover approach.

Fairbairn joins race to head Channel 4

Former CBI director-general Dame Carolyn Fairbairn is among a handful of contenders shortlisted to become Channel 4's next chairman, Sky News has learned. One person close to the search for Channel 4's new chair said Dame Carolyn had 'the ideal CV' for the post.


Morrisons begins search for new CEO

Clayton, Dubilier & Rice, the private equity owners of Morrisons, have hired headhunters from Skill Capital to find a replacement for David Potts, who has led the grocer since 2015. The leading internal candidate for Potts’s job is chief operating officer Trevor Strain.


Bank adviser warns action needed to stem rising inflation

Bank of England Monetary Policy Committee member Catherine Mann said on Friday that the central bank may need to act to counter growing expectations that prices will continue to rise through 2022. She told delegates at the Official Monetary and Financial Institutions Forum that monetary policy needs to “temper the 2022 expectations for wage and price increases to prevent them from being embedded in the decision-making of firms and consumers”. Andrew Goodwin, economist at Oxford Economics, said the speech contained “a clear message that multiple interest rate hikes are on the way”. Separately, Sir Charlie Bean, a deputy governor for monetary policy throughout the financial crisis, has warned the central bank must "move faster" with future increases in order to bring it under control.


Horta-Osório also broke Covid rules going to Euros final

António Horta-Osório, who was forced to quit as Credit Suisse boss for going to the Wimbledon tennis finals last summer, at a time when the UK's COVID-19 restrictions required him to be in quarantine, also attended the final of the European Championship it has emerged. The Swiss bank had organised corporate hospitality at both events, but Mr Horta-Osório took family members to both events after other guests were unable to use the tickets. In his resignation statement earlier this week, Mr Horta-Osório said: "I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally. "I therefore believe that my resignation is in the interest of the bank and its stakeholders at this crucial time," he added.

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