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Daily News Roundup: Monday, 29th October 2018

Posted: 29th October 2018

RBS makes £160m Brexit provision

RBS has set aside £160m to cover an increase in bad loans that could arise in the event of zero or negative growth following a “bad Brexit”. It is the first bank to undertake such a measure. CEO Ross McEwan said that there was "a lot more uncertainty in the marketplace at the moment and that's what this is reflecting". The announcement served to overshadow the bank’s positive financial results, with shares falling 4.7% on Friday morning. It reported a “modest” profit of £448m for the third quarter, as it continues its recovery ten years after the financial crash. BBC News’ Douglas Fraser looks at what has changed at the bank, what challenges remain, and questions whether it is ready to move on. “It's almost as if this is a normal bank, at long last,” he writes. However, RBS still has legacy issues, particularly in Scotland. Its NatWest brand, which now accounts for most of its presence south of the border, is performing significantly better than the RBS brand.

Hard Brexit could cost UK banks £4bn

Research by JP Morgan has predicted that a no-deal Brexit could cost UK banks £4bn in profits due to significant payouts to deal with bad debt. The analysis predicted pre-tax profits at Lloyds and RBS would slip by 8% and 6% respectively in 2019, and further still in 2020. RBS announced on Friday it has set aside £100m to cope with such a hit. Barclays’ profits could be 2% higher in 2019, and then dip 5% in 2020.

Barclays fraud charges dismissed

Barclays will not be brought to trial over a £6bn emergency rescue package it received from Qatar during the financial crisis in 2008. Barclays was able to avoid seeking a bailout from the UK government as a result of the deal. In 2017 the Serious Fraud Office charged Barclays with conspiracy to commit fraud and the provision of unlawful financial assistance in after it emerged the state of Qatar had later used a £2.3bn loan from Barclays to invest back into the bank. The charges have now been dismissed.

London bank traders cleared of forex fixing

Three former London-based traders have been acquitted of conspiring to fix prices in the foreign exchange market. Richard Usher, Rohan Ramchandani and Christopher Ashton, who used to work for JPMorgan Chase, Citigroup and Barclays respectively, were cleared of all wrongdoing by a New York jury. The case marks a serious setback for the US Department of Justice and the UK’s FCA, which have so far extracted over $10bn in fines over the alleged scandal.

NatWest reveals new fintech accelerators

NatWest is to launch new fintech accelerators in London, Manchester, Bristol and Edinburgh in April, with the hope of supporting up to 80 fintech firms with a technology mentor and access to government contacts. As partners on the project Dell will offer IT advice, while law firm Pinsent Masons will offer participants legal advice.

Lloyds ordered to equalise pensions

Lloyds will have to pay out up to £150m to redress historical gender inequalities in pension payouts, after the High Court ruled in favour of three women who noticed their pensions were lower than male colleagues. Other UK PLC pension schemes could be forced to do the same, at an estimated national cost of £15bn to £20bn.

CYBG-Virgin deal testament to sector stability

Jayne-Anne Gadhia, CEO of Virgin Money, has declared that the lender’s £1.7bn acquisition by CYBG is testament to how much the banking sector in Britain has improved in the decade since the financial crisis. "It shows how strong it is, really. You know, we've got two very successful organisations with limited overlap in terms of products able to contemplate joining forces and becoming more than just a challenger bank," she said.


Market downturn slams stockpicking hedge funds

So-called “long-short” equity hedge funds have endured the worst monthly performance since August 2011, and possibly the worst since October 2008 after Friday’s turbulence among tech stocks, Credit Suisse estimates.

Woodford’s flagship fund halves in size in 17 months

The Woodford Equity Income fund has halved in size since its peak in summer 2017, from £10.2bn to £5.13bn. Founder Neil Woodford remains “very confident” that his investments will pay off.


Bini-Smaghi: Italy going into a wall

The chairman of Societe Generale, Lorenzo Bini-Smaghi, has warned that Italy is on the brink of a financial crash that will have knock-on effects for the rest of Europe. He told Avvenire: "Italy is going straight into a wall. The economy risks tipping into recession in the fourth quarter. The banks have already cut loans over the summer, as soon as the spreads began to rise. The Italian government has not understood this.” He estimates the budget deficit for 2019 will be 3.5% of GDP, considerably higher than the 2.4% estimate that Brussels has already rejected as too high.

AIB CEO quits amid pay row

Bernard Byrne has stepped down as CEO of Allied Irish Bank amid a dispute with the government over how much top executives can be paid at banks bailed out during the financial crisis. Ten years after the crash AIB has called for restrictions to be lifted. Byrne will take charge of Dublin stockbroker Davy.

Deutsche Bank chief attacks manager excuses over bank failures

Deutsche Bank CEO Christian Sewing expressed frustration with top managers last week, telling them not to use speculation of a Commerzbank takeover as an excuse for the bank’s poor performance.

Banks urged to ready for no-deal Brexit

Elke König, head of the Eurozone’s Single Resolution Board, warned banks they shouldn’t expect any leniency in meeting regulatory standards after Brexit, so they should prepare themselves for possible effects.

Paytm founder accuses aide of extortion

Vijay Shekhar Sharma, the founder of Indian fintech giant Paytm, has accused Sonia Dhawan - a long-trusted aide who helped him build the company - of trying to blackmail him for $2.7m.


Dyson: a British inventor pivots to Asia

The FT looks at Dyson’s plans to produce its electric cars in Singapore, saying the city-state is not a cheap option for manufacturing, but has strong trade links with China.


Rolls-Royce misses engine delivery targets

Shares in Rolls-Royce were dented on Friday after the company announced it would deliver fewer of its Trent 7000 engines to Airbus than expected this year. Previously it had said 550 of the large engines would be delivered in 2018, but now predicts it will only complete 500 of those orders before the end of December. Its stock fell by as much as 13%, but recovered to end trading down by 2%. Airbus also saw its stock slip by 1.8%.


Bailey warns on emerging markets

The head of the Financial Conduct Authority has warned that turmoil in emerging markets poses a serious risk to Britain’s financial system. Andrew Bailey said the potential for a meltdown in heavily indebted emerging economies was top of a list of external threats to the UK.

Treasury exploring no-interest loan scheme

The chancellor Philip Hammond is set to to reveal plans to create a zero-interest loan scheme to help people on low incomes, in an effort to tackle high-cost “problem debt”. The government would work with banks and debt charities to develop the service.


NHS trust to work with private provider

Care UK, the biggest provider of outsourced health services to the NHS, has agreed a groundbreaking deal to provide all the orthopaedic operations for University Hospitals Plymouth NHS Trust.


Estate agents must report suspected money launderers

As he launched the latest phase of the government’s Flag It Up campaign, security minister Ben Wallace has warned estate agents they have “a moral and legal duty” to report clients they suspect are using illicit gains to buy property. Last year just 710 reports were submitted by estate agents, while 5,036 reports were submitted by accountants and 2,660 were provided by legal professionals.


Jobs could be cut at Asda

Asda is to consider changing employees' roles and working hours, in a move which could see 2,500 job cuts. Asda has agreed to merge with rival Sainsbury's and union representatives said the news would not put workers' minds at rest about the merger and pledged to fight any job cuts. The GMB union said cutting the workforce made no sense and it would "fight tooth and nail for every single job".


Hammond to splash out in Budget

Philip Hammond will use today’s Budget to announce £30bn of investment in transport infrastructure, £1bn for social care and extra funding for Universal Credit. Hundreds of millions of pounds will also be pumped into installing superfast broadband in some of the most remote areas of the country. He also plans to bring forward income tax cuts to the month after Brexit - a year earlier than planned. The move would benefit more than 30m taxpayers.


Chief economist calls for economy Minecraft

Andy Haldane, chief economist at the Bank of England, says a Minecraft-like computer game should be developed for economists to test out financial policies on large groups of players. He believes economists rely too heavily on theoretical models, scarcely running experiments before putting ideas into action, unlike scientists in other disciplines.

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