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Daily News Roundup: Monday, 26th October 2020

Posted: 26th October 2020

BANKING

Barclays boss to stay after profits boost

Jes Staley has vowed to stay on as the boss of Barclays for two more years after the bank reported a fall in provisions for bad loans in Q3 and a surge in revenue at its trading arm. Barclays took £608m of credit impairment charges in the three months, well below the £3.7bn set aside in the first half of 2020 and less than the £1bn that analysts had forecast. Quarterly net profit rose to £611m, from a loss of £292m last year, way above analysts’ estimates of £201m, while revenue fell 6% to £5.2bn, beating expectations of £4.8bn. Fixed-income revenue surged 23% and equity trading revenue rose by 40%. Overall pre-tax profits at the investment bank rose 13% to £1bn. Shares closed almost 7% higher at 111.5p. Mr Staley’s previous ties with financier and convicted sex offender Jeffery Epstein are being probed by regulators and activist investor Ed Bramson could yet resume efforts to unseat Staley after withdrawing his campaign earlier this year. Mr Staley said there were numerous talented internal candidates to succeed him, but “I am not quite ready to push off the dock yet”.

Investment banks swell bonus pools

The Mail on Sunday claims investment banks are setting aside huge sums for bonuses after profiting from market turmoil brought on by the pandemic, and from fees from helping struggling firms to raise emergency funds. Barclays has boosted this year's bonus pool for bankers by 9% to £745m while the pot for pay and bonuses at Goldman Sachs for the first nine months of 2020 is up 16% on the same period last year to £8.3bn. It’s a similar story at Morgan Stanley and UBS, the paper reports. Former City Minister Lord Myners comments: “To pay significant bonuses in the knowledge you've got [loan] losses coming would be foolhardy in the extreme. In the circumstances of shareholders not getting dividends, it would look even less acceptable for banks to be paying significant bonuses.” Meanwhile, the Times reports that banks and regulators are in discussions about lenders paying dividends again next year, providing their loss-absorbing capital buffers remain strong and they continue to extend credit to the real economy.

Investors call for HSBC break up

HSBC investors are growing increasingly frustrated at a perceived lack of action from chairman Mark Tucker as the bank faces pressures from the US on its response to China’s national security law imposed on Hong Kong and from Beijing on its decision to help US investigators probing Huawei. One long-standing investor says the bank needs to explain why it is not splitting itself up. “They need to explain why this is not a logical solution.” Another institutional money manager gives a blunt assessment: “The board has lost control.”

Lloyds Bank tells most of its staff to work from home until spring

Lloyds Bank has told employees to stay away from the office for at least the next five months following Government guidance urging employees to work remotely if they can. Staff are still serving customers at its 890 branches but around two-thirds of Lloyds employees are working from home. Catherine McGuinness, chairwoman of the City of London’s policy committee, said the impact of remote working on businesses and the economy “will be phenomenal if we’re not careful.”

UK banks raise rates to stifle home loan boom

Lenders in the UK are increasing interest rates on many new home loans, if not withdrawing them completely, in an attempt to dampen demand for borrowing in a buoyant post-lockdown housing market.

Banks look to debt collectors to recover bounce back loans

UK Finance is working on creating a centralised debt collection body to recover of tens of billions of pounds of government-backed small business loans as banks prepare for wave of defaults and fraud cases.

Bank of son and daughter open for business

Buckinghamshire Building Society has launched a new mortgage that allows children to help family members who have fallen behind with their repayments, by adding their names and income to their parents' or grandparents' home loan.

TSB offers lifeline for first-time buyers

TSB has relaxed its lending rules for first-time buyers to help them secure a mortgage. The lender unveiled a range of mortgages for first-time buyers that use an easier stress test than for home-movers.

Post Office in £16m move to own ATMs

The Post Office has announced that 600 free-to-use cash machines at branches around the country are to close. However, it will invest £16m in around 1,400 machines which it will own and operate and which will be fitted with the latest technology.

Fraudulent coronavirus loan applications going unreported

Less than 0.5% of fraudulent claims for coronavirus support loans have been reported to the police, according to figures from the national Action Fraud service.

PRIVATE EQUITY

Permira-backed Lowell pays up in £1.6bn junk bond sale

Leeds-based debt collector Lowell Group sold £1.6bn worth of junk bonds, at an elevated interest rate, as part of a refinancing plan that included a £600m equity injection by its owner Permira.

Risky PIK deals pitched by private equity to yield-hungry investors

The FT reports on the re-emergence of high risk payment-in-kind bonds, which allow companies to pay interest using more debt, the issuance of which is an indication of a “frothy” market, according to analysts.

Chris Hohn blasts BlackRock and Vanguard over climate change

Hedge fund manager Christopher Hohn has called on big asset managers to challenge companies on global warming, accusing BlackRock and Vanguard in particular of being ineffective on the issue.

INTERNATIONAL

One step forward, two back for Goldman Sachs’ reputation

The Telegraph considers the reputational damage Goldman Sachs is suffering as a result in its involvement in the 1MDB scandal which saw billions of dollars siphoned from the Malaysian fund. Goldman earned $600m in fees for selling bonds on behalf of 1MDB. Since it was described as a “great vampire squid” in the after math of the financial crisis, Goldman has been trying to restore its image, only for the corrupt practices linked to the 1MDB scandal to undo much of PR work done over the past few years.

Jack Ma rails against global financial rules ahead of $30bn Ant Group IPO

Jack Ma, the founder of Alibaba, has criticised global financial regulators during a conference in Shanghai, describing the Basel Accords as “like an old people's club”. Mr Ma argued for China to design its own framework more suited to innovation and development.

Julius Baer to withhold millions in bonuses from two former CEOs

Julius Baer will withhold millions of francs in bonuses from former chief executives Boris Collardi and Bernhard Hodler over a South America money-laundering scandal their tenures both encompassed.

Pandemic makes world’s billionaires - and their advisers - richer

Private banks have enjoyed a pandemic-driven boom with the assets of the world’s super rich soaring after wild market moves and a sharp increase in the value of tech and healthcare stocks.

AVIATION

Lufthansa to ground more planes as pandemic bites

Lufthansa is preparing to ground more planes than expected and cut working hours during the winter as a surge in coronavirus infections reduces demand.

Private jets take off as wealthy flyers seek to avoid virus

The number of people using private jets for the first time has soared as the wealthy seek to reduce the risk of catching coronavirus from passengers on regular flights.

CONSTRUCTION

Lone Star swoops on care home builder

American buyout firm Lone Star has struck a deal to buy McCarthy & Stone for £630m, with bosses at the Bournemouth builder recommending investors back the bid. Shares in Britain's biggest builder of retirement homes leapt by nearly 40% on Friday after the proposed acquisition was announced.

FINANCIAL SERVICES

Brussels offers UK less on financial services than Japan

City leaders are calling on the EU to offer Britain at least what they’ve agreed with Japan in terms of financial services arrangements post-Brexit; amid complaints the sector has been neglected in talks. Catherine McGuinness from the City of London Corporation said it was “extraordinary” that ministers appear to be spending so much time on fishing rather than financial services. She went on to say that building future EU-UK relations would have to be a long-term project, with any trade deal now serving only as a foundation for further discussions.

Law firm ready to launch Woodford payout claim

Harcus Parker, one of five law firms looking to obtain compensation for investors who lost money in the break-up of investment fund Woodford Equity Income, is set to launch a multi-million pound class action by the end of the year. The litigation specialist is expected to be the first firm to proceed with a claim against the fund's authorised corporate director Link, after confirming it has the necessary funding in place.

LSE tie-up with Refinitiv set for next year

In a third-quarter update, the London Stock Exchange said it was now expecting approvals for its £20bn merger with Refinitiv to be delayed until the first quarter of next year. LSE reported strong numbers for the third quarter. Income rose 2% to £600m, and so far this year is up 6% to £1.8bn.

HEALTHCARE

Boots to offer new 12-minute COVID-19 test

The Mail reports on a new testing service to be offered by Boots which could be available within two weeks. The high-speed swab test has proved 97% accurate in trials. The service will be able to provide results in just 12 minutes and is aimed at those who have no symptoms but are seeking peace of mind.

Vaccine deal allows AstraZeneca to make 20% above costs

The contract struck between AstraZeneca and Oxford University allows the drugmaker to make as much as 20% on top of the cost of goods for manufacturing the jab.

Financial Times

MANUFACTURING

Manufacturers urge government to provide support

The manufacturing industry body Make UK says many of its member fear trading will not return to normal for more than a year with half of the industry’s business already having cut jobs and one in five planning to make redundancies. Make UK is calling on the Government to waive business rates and boost investment with tax reliefs, “especially in the light of the absence of any revamped industrial or economic strategy to boost growth”.

MEDIA & ENTERTAINMENT

WPP chief lays ground for a digital renaissance

The chief executive of WPP has said there were elements of remote working that proved more efficient and productive, citing a TV commercial that the company made for a client in 16 days which pre-pandemic may have taken 16 weeks. The adjustments forced by the coronavirus are paralleled in Mark Read’s determination to take the advertising giant in a new direction, making WPP more agile through sell-offs and making it more digitally-focussed. “I would describe our previous strategy as acquisition led,” he says.

REAL ESTATE

More property funds set resume trading

Aberdeen Standard Investments has said the suspension of dealings in Standard Life Investments UK Real Estate and Aberdeen UK Property will be lifted in just over three weeks. They were introduced in March in the wake of the national lockdown.

RETAIL

Sales are up, but consumers may now hold back

New figures from the ONS show retail sales were up 1.5% between August and September, a 4.7% rise year on year and the fifth month running that sales have climbed. Third quarter sales climbed 17.4% compared to the three months before, a record quarterly rise, with internet orders accounting for 27.5% of sales, up from 20.1% in February. However, with consumer sentiment down this month, analysts expect spending to fizzle in the months ahead as the furlough scheme ends and unemployment rises.

ECONOMY

Renewed restrictions put recovery in peril

Business growth slowed in October with services suffering a sharp slowdown due to coronavirus restrictions, according to IHS Markit’s purchasing managers’ index (PMI) survey, which slipped to 52.9 from September’s 56.5. Demand for manufactured goods remains strong while property-related services were boosted by strong sales. The survey also showed that employment continued to fall for the eighth consecutive month. Paul Dales at Capital Economics said the findings support “our view that GDP will stagnate, if not contract, in the last three months of the year.” He added: “If the economy is heading for a double-dip, at least the second leg down will be smaller than the first.”

OTHER

Danske T&Cs amount to 80,000-word document

Belfast-based Danske Bank has won the wooden spoon for the longest terms and conditions in the banking and insurance sectors. Fairer Finance found Danske's T&Cs are the longest in any sector, coming in at 80,382 words – over 3,000 words longer than JK Rowling's first Harry Potter book. Danske combines T&Cs for all its personal banking products within the same document.

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