Bank of England warned over climate change investments
MPs have warned the Bank of England that it risks creating a “moral hazard” if it continues to buy bonds from companies with high emissions. Philip Dunne, who chairs the Environmental Audit Committee, has written to BoE Governor Andrew Bailey and said its rapid response to COVID-19 was “admirable”. However, he warned that the central bank's actions were not lining up with global ambitions to limit climate change to 1.5C, as in the Paris Agreement, or the UK’s hopes to slash its emissions to “net zero” by 2050. Mr Dunne also called on the Bank to require companies getting taxpayer support through the Covid Corporate Financing Facility to publish climate-related financial disclosures. The Bank of England said in response “work to consider how best to take account of climate considerations in our corporate bond portfolio is already under way” and that climate change is a “strategic priority”.
Top five UK banks could lose £1bn a year to negative rates
Britain’s five biggest banks could lose £1bn a year in profits if the Bank of England cut interest rates to -0.15%, a quarter point drop. Raul Sinha, banks analyst at JP Morgan Cazenove, estimates an 11% fall in their annual profits. NatWest would be hardest hit, followed by Virgin Money and Lloyds Banking Group. Barclays and HSBC UK would be least affected, Mr Sinha said. The Bank of England is expected to publish its findings of a review into whether high street lenders are operationally ready for negative rates, including a cost-benefit analysis, alongside updated economic forecasts on February 4th.
Banks crack down on bounce back loan fraud
Hundreds of business accounts have been raided by banks including HSBC, Barclays, NatWest and Lloyds Banking Group after they were linked to suspected bounce back loans fraud, the Mail on Sunday reports. The National Audit Office warned last year that £26bn could be lost to loan fraud and the Treasury last week warned banks of the importance of fraud checks. A letter to one customer from HSBC, seen by the paper, revealed it had “formally terminated” a bounce back loan agreement and demanded that the customer “repay immediately all monies advanced to you.” The bank told the customer that a clause in the agreement meant it did not need permission to dip into the firm's current account to recover some of the cash.
MPs to question HSBC bosses on Hong Kong crackdown
HSBC's chief executive Noel Quinn and the bank’s compliance chief Colin Bell will have to explain to MPs next week why the lender has frozen the accounts of pro-democracy activists in Hong Kong. The bank backed Beijing's controversial security law for the former British colony last year which criminalises anti-government movements in Hong Kong. HSBC has come under fire for freezing accounts of activists at the behest of Hong Kong police. The Sunday Telegraph reports that documents handed to MPs show a Chinese HSBC executive accused of sexual assault was protected by his status as a senior Communist Party official.
Fintech review calls for £1bn start-up fund
A review of the fintech sector commissioned by Rishi Sunak is to recommend the creation of a £1bn fund to fuel investment in fast-growing start-ups. Led by Ron Kalifa, the former boss of payments processor Worldpay, the report is expected to say that the fintech fund would not only address the financing gap affecting some companies but would also help keep them in Britain and eventually guide them towards listing in London.
Monzo tops customer service table
The latest customer satisfaction surveys show challenger banks continue to lead traditional lenders, the Sunday Times reports, with Monzo, Starling and First Direct topping the overall satisfaction table.
Top hedge funds reap biggest gains in a decade during pandemic
Research by LCH Investments has revealed that the top 20 hedge funds managers made $63.5bn of gains for investors during last year’s coronavirus-driven market turmoil. Meanwhile, Laurence Fletcher in the FT looks at the challenges facing investors hoping to pick this year’s hedge fund winners.
BlackRock’s sustainability ‘report card’ one year from Fink’s annual letter
One year on from BlackRock’s pledge to put sustainability at the heart of its investments, the FT looks at the progress the asset management group has made so far.
Morgan Stanley pays James Gorman $33m for ‘record year’
James Gorman, the CEO of Morgan Stanley, will receive $33m in total compensation for 2020, a 22% increase over 2019’s $27m. The decision was based on the firm’s performance and the chief executive’s progress in implementing a long-term strategy, the bank said.
Deutsche probes alleged mis-selling of investment banking products
An internal probe at Deutsche Bank is examining whether staff may have mis-sold sophisticated investment banking products to clients in breach of EU rules, and then taken a share of the profits.
Europe’s bank bosses under pressure
The FT suggests Europe’s bank bosses are struggling to shake off past crises and with earnings season kicking off this week a new intake of executives will be under intense scrutiny.
Pandemic halves VW’s profits
Profits at Volkswagen will be nearly 50% lower for 2020 that the year before, coming in at about €10bn guidance suggests. VW said that COVID-19 meant that it had burnt through a net €6bn of cash last year.
Qatar Airways gains five-star COVID-19 safety rating
Qatar Airways has become the world's first long-haul airline to receive a maximum five-star 'COVID-19 Airline Safety Rating' from the UK-based air transport rating agency Skytrax. Meanwhile, Edinburgh Airport has become the first airport in the UK to be awarded a four-star 'COVID-19 Airport Safety Rating'. Heathrow, Gatwick, Stansted and Manchester airports all have a three-star rating.
Opinion: How will the City evolve post-Brexit?
Oliver Kamm contemplates the future of the City in the Times, asserting that there could be a resurgence of the more corrosive culture that it had been hoped the banking industry was moving away from. Across the UK, the financial services sector will be damaged by Brexit, believes Kamm, but the City will “remain significant and perhaps dominant in activities such as foreign exchange and securities trading, asset management, law, accountancy and other fields.” Kamm continues: “Hampering the City, let alone driving its activities from these shores through isolationism or bad policy, won't help improve the economic position of poor communities in London or any other part of Britain. Yet its prominence in our economy, which I'm certain will be reinforced by Brexit, is not an unalloyed gain and the tax revenues it provides come at a cost.”
FCA tells insurers to make Covid payouts quickly
Insurers have been told by the Financial Conduct Authority not to create further obstacles for companies trying to make claims under business interruption policies after the Supreme Court this month found in favour of policyholders. The test case brought by the regulator was expected to affect up to 370,000 firms, which had bought cover from up to 60 different insurers. In a letter to insurance chief executives, Sheldon Mills, a director of the FCA, said the Supreme Court’s decision will mean more policyholders will have valid claims and some settled claims will have to be revised up.
Financial scam compensation bill to cost £1bn next year
The Financial Services Compensation Scheme (FSCS) is forecasting a £1.04bn compensation bill for financial service companies over the 2021-2022 period, marking a 48% rise on last year's figure. The increased bill comes as the FSCS said it expects a 72% rise in claims, driven in part by the collapse of London Capital & Finance, but also due to increased business failures as a result of the pandemic and failures in the pension sector.
Aviva's MD joins Lloyd’s in new chief of markets role
Lloyd's has hired Patrick Tiernan to fill the new role of chief of markets. Tiernan, who will fill the position once he has seen out his current stint as managing director at Aviva, will oversee performance and distribution at the world's leading insurance marketplace.
MEDIA & ENTERTAINMENT
Carlyle buys majority stake in Jagex
Carlyle Group has snapped up a majority stake in the Cambridge games developer Jagex. The firm had revenues of £111m last year and profits of £49m on the back of its fantasy online role playing game RuneScape.
UK borrowers trapped by foreign investors
The Sunday Times reports on the 250,000 homeowners who are trapped in mortgages sold off by UK Asset Resolution and have ended up in the hands of US private equity firms, hedge funds and outside the orbit of the FCA. There seems to be little help for these mortgage prisoners, says the paper’s Kate Palmer, as few banks have changed their criteria to allow them to switch more easily and enjoy lower payments.
Sales for 2020 show largest annual fall since records began
Office for National Statistics (ONS) figures show that although there was a slight rise in retail sales in December (0.3%), the figure for 2020 as a whole saw sales down 1.9% making it the largest annual fall since records began in 1996. Clothing sales plummeted by more than 25% as non-essential retail was closed for much of the year due to coronavirus restrictions. But online spending surged by 46.1%, the highest annual growth in a decade.
John Lewis repays £300m Covid funding and raises FY guidance
John Lewis has repaid £300m that it borrowed from the Bank of England’s coronavirus pandemic loan scheme earlier than scheduled after Christmas sales held up despite lockdowns.
Boohoo set to acquire Debenhams brand
The acquisition of the Debenhams brand by fast fashion retailer Boohoo is expected to be announced in the next few days. Sources say the cut-price deal will result in the closure of the group’s remaining department stores.
Government borrowing in December was third highest month on record
The UK Government borrowed £34.1bn last month, the highest December figure on record and the third-highest borrowing figure in any month since records began in 1993. Government borrowing for this financial year has now reached £270.8bn, which is £212.7bn more than a year ago, the ONS said. The OBR has estimated that borrowing could reach £393.5bn by the end of the financial year in March. The increase has led to a steep rise in the national debt, which now stands at £2.13trn. The UK's overall debt has now reached 99.4% of GDP - a level not seen since the early 1960s. Rishi Sunak, the Chancellor, said the borrowing binge was the “fiscally responsible thing to do” but cautioned that "we should look to return the public finances to a more sustainable footing" once the recovery begins.
Latest PMI figures induce double-dip fears
The latest Purchasing Managers' Index (PMI) survey from IHS Markit/CIPS found a "steep slump in business activity" during January as lockdown measures continued and warned that "a double-dip recession is on the cards". The survey came in with an overall reading of 40.6 - the lowest for eight months. A figure below 50 implies contraction. Separately, new data is expected to show on Tuesday that unemployment is at its highest level in nearly five years. The ONS will say the unemployment rate has risen from 4.9 to 5.1% in November, analysts predict. This is despite the Government's job support schemes. With the furlough scheme coming to an end at the end of April, some believe the unemployment rate could hit 7% by the middle of the year.
Hedge fund Element warns of deep economic blow from new virus strain
The head of markets at Element Capital, Colin Teichholtz, has warned that the impact of the new Covid strain on the European economy is being underestimated by investors and policymakers.