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Daily News Roundup: Monday, 25th April 2022

Posted: 25th April 2022


UK lenders braced for disappointment

The Observer’s Kalyeena Makortoff looks ahead to next week’s results from Britain largest banks, which are forecast to be a disappointment as lenders revise up their expected loan loss provisions. Barclays, for example, is expected to put aside £299m for potential defaults, up from £55m a year earlier, which is likely to contribute to a potential 45% slump in profits to £1.3bn, according to average analyst estimates. HSBC is likely to put aside $934m (£715m) compared with the $435m it released at the start of 2021. This will lead to pre-tax profits being slashed by more than a third to $3.7bn, according to consensus estimates. An end to the investment banking boom will also affect profits at Barclays and HSBC while UK-focused banks including Lloyds and NatWest are likely to suffer from tighter lending criteria.

FCA flags concerns over challenger banks’ financial crime defences

The Financial Conduct Authority has said the financial crime controls employed by challenger banks should be improved after a “substantial” increase in suspicious activity reports filed last year. Digital banks should be collecting more data about where their clients are making their income and what their jobs are so they can better spot criminals and money-launderers, the FCA said. Sarah Pritchard, who heads the market division of the City regulator, said that there cannot be a “trade-off” between getting customers to come into the fold and the checks that all banks need to do.

Barclays urged to go ahead with share buyback

Investors are urging Barclays to push ahead with a £1bn share buyback after it reports its first-quarter results next Thursday. Profits are likely to be lower due to a drop in trading activity and a worsening economic outlook, but also because of an error in issuing more structured products in the United States than it had permission for from regulators. A top shareholder in Barclays said: "There's a lot of pessimism and disgruntlement in the share price. I'm not saying all that gets solved with the announcement of a buyback, but I think maybe that will be one step along the path to redemption."

OakNorth would probably list in London, boss says

Emma Dunkley interviews OakNorth’s CEO Rishi Khosla for the Mail on Sunday. He says the bank’s mission is to help entrepreneurs and small businesses and boats about helping create 30,000 new jobs in the UK. OakNorth reported a 73% jump in pre-tax profits last year to £134.5m. Khosla lauds a Government-commissioned plan to overhaul the stock exchange by allowing entrepreneurs to keep greater control of their company – a move that could persuade him to list OakNorth in London.

NatWest offers 40-year mortgages

NatWest is offering customers mortgages up to the age of 75, as the rising retirement age and surging house prices mean many are working and paying off their home loans for longer. Customers applying to the bank via a mortgage broker, and existing customers switching products, are now able to apply for terms of up to 40 years, up from 35 previously. In addition, the maximum age at repayment will be increased from 70 to 75 – though the borrower must still be working.

Last bank closes on Isles of Scilly

Lloyds will shut its last branch on the Isles of Scilly on Monday leaving residents with a two-day round trip by ferry to their nearest branch in Cornwall. Lloyds blamed dwindling customer numbers for the branch's closure.

Goldman Sachs bankers see bonuses soar

Bonuses handed out to bankers at Goldman Sachs averaged £180,000 for last year, a rise of 70% following a wave of lucrative dealmaking in the City.


CVC bosses anxious about scrutiny float would bring

The Sunday Times profiles private equity firm CVC ahead of a possible float on the Euronext exchange in Amsterdam this year or next. The paper notes that CVC’s senior team “is in a state of high anxiety” at the prospect of greater scrutiny a public share sale would bring. The decision to opt for Amsterdam rather than London is partly driven by a desire to avoid publicity, some observers contend, while one City adviser claims management “are beyond paranoid ... about being written about, exposed, castigated for making the money they’ve already made, let alone the money they’re going to be sitting on.”

Blackstone takes aim at publicly listed real estate vehicles

Private equity giant Blackstone has taken four listed real estate companies private since the start of 2020 and is likely to take more private as public real estate companies continue to trade at a discount.


Banks holding valuable positions after Russian stocks hit by sanctions

Investors in index swaps based on Russian stocks could lose out on profits from the positions they took after banks including JPMorgan Chase, Goldman Sachs, HSBC and BNP Paribas shifted related bets on to their own books after FTSE Russell and MSCI removed Russian stocks from their indexes. When conditions permit, the banks could cash out those positions for what some of the sources said may result in sizeable profits, a situation sources say has incensed some investors.


Renault considers 2023 listing for electric vehicle unit

Renault is exploring a stock market listing of its electric vehicle unit next year. The move would form part of a strategy to create separate units for EVs and combustion engine models.


Russia accused of stealing over 150 foreign-owned planes

State-backed Russian airlines have been accused of re-registering hundreds of foreign-owned commercial aircraft without the approval of their owners. Aviation consultancy IBA Insights, which compiled the re-registration figures, said the unilateral re-registration of the planes “violates international law” and its president Phil Seymour says the aircraft had effectively been “stolen by the Russian Federation”. Mr Seymour said that the re-registering of aircraft would likely trigger insurance claims by leasing companies. 

BA to base cabin crew in Madrid

British Airways is to open a cabin crew base in Madrid to combat staff shortages that have led to thousands of cancellations. The airline has never set up bases outside of the UK for short-haul flights, so the move underlines BA’s desperation to avoid last summer’s travel chaos.


Amex says business travel rebound is gaining momentum

American Express posted net income of $2.1bn (£1.62bn) for the quarter ended 31 March, compared with $2.2bn a year earlier after travel and entertainment spending rose by 121% on an adjusted basis. Overall spending volumes surged 30% across Amex’s network, and total revenue jumped 29% to $11.7bn, ahead of expectations. However, the company’s shares fell 1.2% before as expenses surged 34% in the quarter on higher customer engagement and compensation costs.

Grayscale makes fresh push for SEC approval to become bitcoin ETF

Crypto investment vehicle Grayscale has again appealed to the US securities watchdog to allow it to convert its $40bn Bitcoin Trust into an exchange traded fund, citing the approval given to Teucrium earlier this month.


Fundraising takes Cambridge venture investor to $1bn of assets under management

Cambridge Innovation Capital has raised £225m to invest in early stage life sciences start-ups, bringing it to $1bn in assets under management.


Sale of Center Parcs under review

Brookfield Property Partners, the owner of Center Parcs, has hired Barclays to explore its options for the holiday village chain, which could fetch £4bn.

PureGym plans for expansion

PureGym has said it intends to use a recent £300m investment from KKR to double in size to more than 1,000 clubs over the medium term.


Britain could be lead supplier of eco-fuel

The UK could become a world-leading supplier of aviation fuel made from leftover cooking oil and other waste, according to the Global Britain Commission. The commission said if Britain gained just a 10% share of the global Sustainable Aviation Fuel (SAF) market the industry could earn £17bn a year by 2050. Heathrow’s chief executive John Holland-Kaye said the SAF industry “is going to get huge. It’s one in which we could have a first mover advantage.”


EU lawmakers seal deal on new online content rules

European Union lawmakers have struck a deal on new legislation that will force Big Tech companies to do more to police content on their platforms. The Digital Services Act (DSA), which will also see companies pay a fee to regulators monitoring their compliance, will prevent companies such as Facebook and Google from targeting minors with online advertising and ban manipulative techniques that force people to click on content. Companies will also be required to disclose to EU regulators how they are tackling disinformation and propaganda in order to curb the spread of fake information. Those who breach the rules face fines of up to 6% of global turnover and bans from operating within the EU. 

BBC to start betting on risky start-ups

As part of efforts to wean itself off licence fee funding, income from which has fallen after the fee was frozen for two years, the BBC is to launch venture capital arm that will target fledgling businesses with new and emerging technologies. BBC Venture, which will sit under the corporation's research and development arm, will explore working with its commercial unit to help secure new income streams.


Banks pushing 'green' loans onto landlords

The number of green buy-to-let deals – which offer cheaper loans to investors who have or will make energy efficiency upgrades – has tripled in the past eight months. There were 369 such mortgages at the end of March, up from 118 in August last year, according to data from Mortgage for Business. it comes as banks have been forced to encourage landlords to undertake eco upgrades after the Government set targets they must meet by 2025. They account for one in six buy-to-let deals on offer to private landlords and one in five deals available to investors who use a limited company. The mortgages offer larger loans or cheaper rates so landlords can improve a property's "Energy Performance Certificate" rating.

Tower block developers scale back London projects over higher costs

The mounting cost of doing business in London is deterring developers from building new tower blocks in the capital, with applications for buildings of 20 storeys or more down 13% on 2020 figures.


UK retail sales take hit as cost of living crisis intensifies

The Office for National Statistics (ONS) said sales volumes fell 1.4% in March - faster than the 0.5% drop in February - although they remain 2.2% above pre-Covid levels of February 2020. ONS director of economic statistics Darren Morgan said: “Retail sales fell back notably in March, with rises in the cost of living hitting consumers’ spending. Online sales were hit particularly hard due to lower levels of discretionary spending. Fuel sales also fell substantially, with evidence suggesting some people reduced non-essential journeys, following record high petrol prices, while food sales continued to fall, dropping for the fifth consecutive month.” Emma-Lou Montgomery, associate director at Fidelity International, warned: "The UK is teetering on the edge of a recession and that’s before inflation hits eight percent or higher later this year. Some of the country’s largest and well-known retailers are warning the worst is yet to come and that’s with households already struggling to meet increased energy, food and fuel costs."


Labour calls for emergency Budget

Labour leader Sir Keir Starmer has urged the Government to hold an emergency Budget to bridge the "yawning chasm" left by the Government's approach to the cost-of-living crisis. Labour has called for the National Insurance increase to be scrapped, for a cut to business rates for SMEs, and for more money to be invested into insulating homes, with a "one-off windfall tax" on oil and gas company profits to fund further support for households struggling with rising bills. The Government insists it is "already providing £22bn worth of support this year", and that there will be "a number of ways we can help households through this difficult time that don't rely on using taxpayer funding and don't push up debt even higher".

Russian sanctions to cost UK economy £6bn

Government analysis of the sanctions issued against Russia in the wake of its war in Ukraine estimates the measures will cost the UK economy £6bn over the next nine years. At the beginning of the month, Foreign Secretary Liz Truss announced an export ban on items including luxury goods, oil refining goods and quantum computing while the imports of some iron and steel products were also banned. According to the analysis, the total value of the goods exported to Russia covered by the sanctions was £775.9m in 2021, representing 27.9% of all UK exports to Russia that year.


Weaponisation of finance spurs evolution of global trade

Tom Rees examines in the Telegraph how the sanctions on Russia over the Ukraine conflict have accelerated a splintering of the global economy, with Russia, China and India brought closer together and the US dollar facing extinction as the global reserve currency. IMF chief economist Pierre-Olivier Gourinchas said last week that the war “increases the risk of a more permanent fragmentation of the world economy into geopolitical blocks with distinct technology standards, cross-border payment systems, and reserve currencies.” This “tectonic shift” would be a disaster for the global economy, he claimed. Others are sceptical that such a major transformation is in the works, but Paul Donovan, chief economist of UBS Global Wealth Management, believes the global economy is going through a localisation process. As world trade “is likely to become less global over time” the concept of a reserve currency will become less important and central banks won't need to hold so much in foreign exchange reserves. “A localisation process is something which doesn’t necessarily split the world into two, it splits the world into 196.”

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