RBS profits treble to £792m
RBS has reported a 206% rise in first-quarter profits, to £792m, as the taxpayer-owned bank continues its recovery. The figure compares to a £259m profit in the same period of 2017. The bank’s operating costs between January and March were 18% or £442m lower than the same period in 2017. RBS added that the trend towards internet and mobile banking continued in the first quarter, with branch counter transactions down by 7%, and the use of cheques and cash machines down by 17%. The figures also showed that RBS booked £209m in restructuring costs and £19m in conduct and litigation charges. CEO Ross McEwan said: “This is a good set of results, showing the progress we are making, despite a more competitive market. Our income is up, costs are down and our capital has strengthened again.” The bank also announced that Patrick Flynn, the former CFO of ING, will join the bank as a non-executive director. Meanwhile, the Federation of Small Businesses has warned that RBS’s ongoing programme of branch closures would hurt small businesses and vulnerable customers.
TSB faces growing criticism over IT issues
TSB is facing further criticism for attempting to rush through an IT system upgrade of 1.3bn customer records in one go, which “flew in the face of best practices” and led to over a week of outages to vital banking systems – which were still only at half capacity over the weekend. The Telegraph’s Ben Marlow claims that the meltdown could have been avoided, as TSB was “advised not to attempt a giant upgrade of its IT systems”, whilst the Sunday Express has claimed that, despite the bank offering to waive certain fees and charges, customers may still be left out of pocket. The role of the Financial Conduct Authority and Prudential Regulation Authority in overseeing the upgrade is also likely to come under scrutiny, as TSB chief Paul Pester has said they were involved in the plans “from day one”. It is also likely that TSB will pursue a multimillion pound legal dispute with its Spanish parent, Sabadell, as the software that caused the issues was installed by its technology offshoot, Sabis. Elsewhere, the Independent’s Ben Chapman says a “small amount of faith in UK boardrooms” would be restored if TSB chief executive Paul Pester loses his bonus over the IT fiasco that has engulfed the bank.
Overdraft charges would be cut under Labour
High street banks could face restrictions on what they charge customers who become overdrawn, according to plans due to be announced by the Labour party. In a move to extend restrictions on payday lenders to include current account overdrafts, Labour will call for banks to be banned from charging more in interest than a customer had initially borrowed. The cap would also apply to charges for declined payments, daily fees and interest payments.
RBS invites small firms to leave
Royal Bank of Scotland has begun writing to its small business customers, inviting them to switch to another bank. As part of the bank’s £45bn taxpayer-funded bailout, it is being forced to provide £350m for rivals to offer incentives to customers to switch (the subject of the letters), as well as £425m for a “capability and innovation fund” to help other banks and finance firms to expand their services for small companies.
HSBC and Standard Chartered add to strong UK bank profits
HSBC will this week report profits of $5.5bn, according to consensus data collected by S&P Global Market Intelligence. Meanwhile, Standard Chartered will also reveal its first-quarter results, with analysts predicting revenues of $3.95bn, the highest quarterly figure since the second quarter of 2015. The lenders will likely be buoyed by favourable conditions for their investment banking arms.
Barclays braced for AGM showdown with Bramson
Barclays is preparing for a potential showdown with corporate raider Ed Bramson at this week’s AGM. Speculation is rife that Mr Bramson will attend the event in London, and that he could publicly call for a shake-up of the bank.
Announcement due on business banking body
The Sunday Times reports that the Treasury is set this week to name the independent body that will oversee a handout of funds intended to boost competition in the small business banking market.
Metro Bank to meet with Royal London Asset Management
Metro Bank is to hold its first meeting with Royal London Asset Management, one of the shareholders critical of the multimillion-pound scandal involving payments sent to a firm owned by the bank’s chairman’s wife. “We reached out, saying we’d like to speak to them because, of course, I speak to all my shareholders,” said chief executive Craig Donaldson.
Deutsche to focus on Europe and reduce operations in US
Deutsche Bank has abandoned its ambition to become a global investment bank by reducing corporate finance and trading in the US to focus on Europe.
ECB lags behind Federal Reserve and Bank of England in raising rates
The European Central Bank kept monetary policy on hold as Mario Draghi conceded a “moderation” in growth. Analysts expect interest rates will be held until later in 2019.
Natixis appoints François Riahi as chief executive
The French investment bank Natixis has named François Riahi as its new chief executive. He replaces Laurent Mignon, who will head up parent bank BPCE.
Berlin and Paris in push to reinforce eurozone banks system
Olaf Scholz, Germany's finance minister, has pledged make a deal with France on a common backstop for the eurozone's banks, after Paris and Berlin began to plan a package of reforms.
China eases curbs on foreign investment
China will now allow foreign investors to take majority control of local securities firms after President Xi Jinping instigated more financial reforms amidst a trade row with the US.
Norwegian Air boss helps short-sellers
Bjorn Kjos, the boss of Norwegian Air and its biggest shareholder, is believed to have been lending some of his shares to traders betting on a downturn in its fortunes. The airline has been under fire from short-sellers over fears regarding its large debt and precarious finances.
UK and EU regulators to assess hard Brexit impact
The Bank of England and the European Central Bank have announced they will work together on a plan to minimise impact on the financial markets should the UK leave the EU without a deal. The working group will be headed by BoE governor, Mark Carney, and Mario Draghi, president of the ECB, and will be tasked with ensuring vast and vital markets including derivatives trading and insurance contracts are not put at risk by inadequate planning for Britain leaving the bloc. Brussels officials emphasised that the move was to prepare a contingency plan for a worst-case scenario, and not an indication that negotiations were in danger of breaking down.
Investors withdraw money from European shares
Investors are selling out of European shares at the fastest rate since the referendum, as they lose confidence in the region. A survey of professional investors by Bank of America Merrill Lynch shows that the past five consecutive weeks have seen investors' money flow out of Europe, choking off all the flows into European stock market funds so far this year.
EU steps back from tough new fund management rules
The EU is no longer proposing that national regulators should wait for approval from the European Securities and Markets Authority (Esma) before granting delegation rights to individual asset managers.
Bridgepoint explores sale of UK’s biggest NHS outsourcer
Private equity firm Bridgepoint is understood to be exploring the sale of Care UK, Britain’s largest private provider of NHS services. The 114-strong care home division is already being bid for.
Robots have already taken over 66,000 jobs
Oxford University researcher Carl Frey has claimed that each robot working in Britain’s factories has cost the equivalent of 3.6 jobs. Frey’s research, which was focused on the vehicle and train manufacturing industries, implies that the 18,500 robots deployed in the sector have already displaced about 66,000 posts.
MEDIA & ENTERTAINMENT
Sorrell paid £13.9m for final year in charge
Former WPP chief executive Sir Martin Sorrell took home £13.9m for his last year in charge of the advertising group – far below the £70m he took home in 2015 and the £48.1m he received in 2016. Last year Sir Martin received no bonus, compared to £3m in 2016. Meanwhile, Eric Salama, the CEO of Kantar, has been sounding out backers for a potential £3.5bn management buyout of WPP's data and market research division.
Sage pushes subscriptions
Software developer Sage will seek to reassure investors this week that it has consigned its recent woes to the past, after it was forced to cut its growth forecast in January. The firm is moving customers to buy subscriptions to its accountancy software, rather than relying on one-off sales.
UK mortgage lending falls sharply
Mortgage lending by Britain's high street banks was £20.5bn in March - 2.3% lower than the same month last year, according to UK Finance. Meanwhile, the annual rate of house price growth climbed higher in April, after two consecutive months of decline, according to Nationwide. Elsewhere, new figures have shown that more than two-thirds of Londoners using the Help to Buy subsidy have taken out the maximum possible loan after the government doubled its size from 20% in February 2016.
Record forward sales boost Miller Homes
Miller Homes is expected to report a 22% jump in its pre-tax profits for 2017. Revenue increased by 19% to £675m thanks to an increase in the number of homes built, up from 2,380 in 2016 to 2,698, and a 4% rise in the average selling price to £239,000. Pre-tax profits hit £109.3m, up from £89.3m a year previously.
Sainsbury’s confirms tie-up with Asda
Sainsbury's has confirmed that it plans to merge with Asda, which is currently owned by Walmart. The supermarkets said that grocery prices would fall in both chains as a result of the merger. Sainsbury’s CEO Mike Coupe said that the deal would lead to no store closures and no job losses in stores. Mr Coupe - who will lead the new combined group - said he believed the two supermarkets were “the best possible fit”. The Times reports that lawyers, professional services firms and investment banks could share more than £100m in fees from the proposed merger.
UK economy slows
The ONS has reported that the UK economy grew at its slowest rate since 2012 in the first quarter of the year. GDP growth was 0.1%, down from 0.4% in the previous quarter, driven by a 3.3% fall in construction output and a 0.2% drop in the manufacturing sector. Consumer-facing industries, including retail, were also down amid an ongoing spending squeeze caused by higher inflation and slow wage growth. The figures cast further doubt over a Bank of England interest rate hike in May.
Deal expectations hit 18-year high
The number of UK businesses looking to pursue mergers or purchases of other companies is at the highest level in 18 years, according to research. The finding comes after announced M&A deals surged to an 11-year high at the start of 2018, totalling $120bn (£87bn) in the first quarter in the UK. Business leaders also reported bullish attitudes towards global growth, with 86% of those questioned saying they expect the economic outlook to improve. However, feelings about the domestic economy are less positive, with only 68% of UK executives expecting improved growth in the UK.