Sabadell rejects Co-op’s £1bn bid for TSB
Spain's Banco Sabadell said on Saturday its board had rejected an offer from Co-operative bank for its British subsidiary TSB. Co-operative Bank reportedly made a £1bn offer for TSB earlier this month but Sabadell indicated that it was not keen to enter into formal discussions at this stage. However, the approach has reignited speculation that Britain’s smaller banks could be on the brink of a wave of mergers.
Goldman Sachs wants ringfencing threshold raised to £100bn
Goldman Sachs is reportedly lobbying for a relaxation of UK ring-fencing rules which currently mean banks with more than £25bn on deposit from savings and current account customers cannot use the funds in their investment bank and trading arms. The US bank wants the threshold raised to £100bn, warning that without the change it would have to delay launching a current account through its digital Marcus brand.
Banker bonuses could be biggest since before 2008
Experts believe bonuses for City bankers could be the highest this Christmas since before the financial crash. Bonus pots have been flooded by a slew of deals and easy financing and one investment banker thinks bonuses could increase by 50% on last year. Earlier this month Dealogic data showed that investment banks in the Square Mile have posted revenues of more than £4.1bn so far this year from work on listings, takeovers and capital raisings - nearly double the £2.2bn reported during the same period last year.
Sainsbury’s Bank ends sale talks
Sainsbury's has called off the potential sale of its banking operation after concluding that talks with suitors had failed to result in an offer that would be good value for shareholders. Sainsbury's said it intends to continue to focus on simplifying the banking operation and “remains comfortable” with profit forecasts for the division.
UK insurer Rothesay prepares to offer 25-year mortgages
Rothesay, the UK’s largest pensions insurance specialist, is set to launch 25- and 30-year fixed-rate mortgages in a move aimed at offering long-term certainty for borrowers. Rothesay Life, which boasts more than £60bn of assets, is planning a tie-up with a British bank to fund longer-date mortgages.
Peers call for private equity inquiry
During a debate in the House of Lords, peers called for regulation of the private equity industry and an end to so-called “carried interest” – which is subject to capital gains – a rate of 28% rather than 45%. Labour's Lord Sikka said: “The typical business model of private equity includes high leverage, financial engineering, tax abuse, pension dumping, job losses and asset stripping.” He continued: “When will the Government commission an independent inquiry into the impact of private equity's destructive practices on all stakeholders?” Crossbench peer Baroness Wheatcroft also attacked the tax breaks offered by carried interest. However, Business minister Lord Callanan warned that regulation could discourage overseas investors from investing in the UK.
CMA warns over private equity ownership of care homes
The Competition and Markets Authority (CMA) has warned that private equity ownership of care homes is putting children at risk. CMA chief executive Andrea Coscelli said: “We are concerned this is a failing system. The levels of debt carried by private equity-owned firms is a real concern.”
Just 10 big EU banks short of capital
The European Commission has said fewer banks than expected will have to raise extra cash as a result of the overhaul of capital regulations known as Basel III. The European Banking Authority predicted last year that major European lenders would need to increase capital by €52bn, but the Commission now believes just 10 out of 99 banks will need to raise €27bn collectively. Meanwhile, Carolyn Rogers, secretary-general of the Basel Committee for Banking Supervision, said the new rules needed to
be implemented “consistently and as soon as possible.” Her comments came after draft plans show that Brussels is suggesting giving European banks a two-year extension to an internationally agreed deadline.
Bank of Ireland buys KBC's Irish assets
Bank of Ireland has agreed to buy practically all of KBC’s performing assets after the Belgian financial group confirmed it would leave the Irish market. Exits by KBC and NatWest look set to further strengthen Bank of Ireland and main rival Allied Irish Banks' grip on their home market.
UniCredit walks away from rescue of Monte dei Paschi
UniCredit and Italy’s Ministry of Economy and Finance have called off negotiations for the acquisition of troubled lender Monte dei Paschi di Siena (MPS). The Treasury is now expected to pursue a standalone plan for MPS, which is likely to include a further capital increase.
Citigroup introduces miscarriage and menopause leave
Citigroup has revised its employment policies so that UK staff who lose a pregnancy at any stage can now take paid leave, while those going through menopause can work flexibly or take a sabbatical.
Goldman Sachs lures bosses with performance targets
Goldman Sachs has granted a performance-based share pot worth $30m to CEO David Solomon, and $20m in stock for John Waldron, providing the bank hits share price targets over the next five years.
Renault doubles estimate for lost production as chip crisis deepens
Renault said last week that it would produce almost 500,000 fewer vehicles this year, a much bigger reduction in output than the 220,000 lost vehicles it predicted at the start of September.
Treasury to urge regulators to promote competitiveness
The Times reports on a mooted push by the Treasury to charge City regulators with giving competition equal prominence to safety and soundness when making key decisions. A consultation paper on the future of regulation post-Brexit is being finalised by the department. Caroline Wagstaff, chief executive of the London Market Group, which represents insurers and reinsurers, comments: "This is a once-in-a-lifetime opportunity for elected politicians to decide what kind of financial services sector they want for the future. It's time for the Government to make some bold decisions about policy."
Semiconductor shortage hits LSE
Shares in the London Stock Exchange were down 6% on Friday after the group said supply chain problems had delayed the delivery of some technology hardware it had ordered.
AmEx beats profit estimates on spending recovery
American Express shares were up on Friday after the company reported higher-than-expected profits, driven by an increase in consumer activity.
GP service Babylon in US listing
Babylon, the virtual GP service used by the NHS, raised about $460m as part of Friday’s listing on the New York Stock Exchange. British-Iranian founder Ali Parsa’s 30% stake is now worth about $1bn. Babylon forecasts 84% of its targeted $320m revenues this year will come from the US, compared with 9% in the UK.
LEISURE & HOSPITALITY
Go Ape adopts employee-owned model
Outdoor adventure company Go Ape is being sold into an employee ownership trust after the founders decided that staff should be trusted with the future of the business. The company has generated earnings before interest, taxation, depreciation and amortisation of £15m on a turnover of £40m during the current financial year. This compared with ebitda of £6m on a £21m turnover in the previous 12 months.
Chancellor to launch £1.4bn fund to attract more overseas investment
In his budget announcement on Wednesday, Rishi Sunak will launch a £1.4bn fund to attract more overseas investment into the UK economy, with sectors such as life sciences and electric vehicle production key targets. International companies with “strategically important” investment proposals will receive grants towards their schemes.
MEDIA & ENTERTAINMENT
German publishers face paper shortage
A paper shortage in Germany means publishers are competing with construction firms and cardboard manufacturers for limited supplies, leading the industry to urge shoppers to buy books now in case they run out in the run-up to Christmas.
Super cheap mortgage deals will 'disappear in the next month'
Experts are predicting that sub-1% mortgage rates will completely disappear in the next month. The Bank of England has hinted heavily at an interest rate rise next month and mortgage lenders have started pulling their cheapest rates from the market. The number of fixed-rate sub-1% mortgages has fallen by almost a third in the past two weeks, from 131 to 93, according to Moneyfacts. Samuel Tombs, of consultancy Pantheon Macroeconomics, said: "There has been a rapid reassessment of how quickly rates will rise. Lenders do not have the scope to absorb this, so they will have to pass the cost of a base rate rise on to borrowers,” he said.
Goldman confident in British home rental sector
Goldman Sachs is committing to invest in Britain’s build-to-rent sector, finalising an agreement to buy hundreds more rental properties over the next three years. Goldman will buy 700 family homes from Urban & Civic, a developer that specialises in sorting out planning and building of large-scale sites.
Retail sales fall again
Figures from the Office for National Statistics show retail sales fell 0.2% in September. Although this was down on the 0.5% rise predicted by analysts, sales are still 4.2% higher than they were in February last year, before the first lockdown. However, it is the sixth month in a row that retail sales volumes have now fallen, marking the longest period of consecutive monthly falls since the series began in February 1996. If the 2.9% increase in fuel sales is excluded, retail sales were down 0.6% on the month.
Missguided and Matalan hurt by supply chain crisis
Matalan has drafted in debt restructuring experts ahead of crucial refinancing talks in the new year. The discounter is sitting on a debt pile of almost £500m, with £348.7m maturing in 2023. Meanwhile, fast-fashion retailer Missguided is working with restructuring experts to raise extra funds after suffering the results of surging shipping costs and labour shortages.
Bank puts markets on alert over interest rate rise
Tim Wallace reports in the Sunday Telegraph on the increasing number of comments coming out of the Bank of England which point to interest rate rises coming soon. Wallace wonders whether this is Mark Carney-esque forward guidance, as we can see lenders are removing super-low rate mortgages and the market is pricing in rate rises. But Wallace reckons the Bank risks losing credibility if, after multiple hints, it does not raise rates this year. Andrew Goodwin at Oxford Economics says: “The most important thing is that the MPC’s decision-making is transparent and that any change of direction is clearly explained”. Jill Treanor in the Sunday Times covers the same topic, citing James Smith, economist at ING, who says: “We’re the only developed market economy which is considering both tightening monetary policy quite rapidly and also scaling back fiscal support quite rapidly as well.”
Services drives economic growth
The UK economy picked up speed again in October with IHS Markit’s flash composite purchasing managers’ index hitting 56.8 for the month, up from 54.9 in September and the highest reading since May. Growth was driven by the services sector, whose activity outpaced manufacturing output by the widest margin since 2009. Chris Williamson, IHS Markit’s chief business economist, said the recovery, “is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases.” He added: “Growth is also being accompanied by an unprecedented rise in inflationary pressures, which will inevitably feed through into higher consumer prices in coming months.”
Al Gore urges overhaul of global finance to cut greenhouse gases
In an interview with the FT, Al Gore said an overhaul of the banking, asset management and accounting industries is crucial if countries are to achieve the target of reaching net zero emissions by 2050.