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Daily News Roundup: Monday, 30th January 2023

Posted: 30th January 2023


Barclays announces further branch closures

Barclays has announced plans to close 15 more branches by May, adding to the 15 closures it announced earlier this month. The decision means high street banks have set out plans to close more than 100 branches this year. NatWest last week said 23 of its branches are set to shut, while Lloyds and Halifax have revealed plans to close more than 40. Analysis by consumer group Which? shows that more than 5,000 bank branches have been lost since January 2015, with closures coming at a rate of 54 each month on average. A Barclays spokesman said: "Our customers' behaviour has changed significantly in recent years, with the majority choosing online banking.” They added: “As we adapt, we are closing less well-used branches while investing in brilliant customer service and digital technology. We are maintaining our community presence with alternative options for customers who still require in-person support."

More banking hubs on the way as branches close

The recommended locations of nine new shared banking hubs have been announced. The hubs, which allow people from different banks to deposit and withdraw money, will open once suitable premises have been found. While plans for 38 of the shared branches have been outlined, only four have opened so far. John Howells, chief executive of ATM network operator Link, said: "Not everyone can or is able to go digital yet, so we're pleased to announce new cash services to support these communities." The hubs are designed to increase access to services as the number of regular bank branches declines. A total of 87 branch closures have been announced by high street banks including Lloyds and NatWest so far this year.

Barclays and Santander join mortgage price war

Santander and Barclays have joined Halifax, Nationwide and The Mortgage Lender in cutting mortgage rates as competition between lenders intensifies. Lewis Shaw, owner at broker Riverside Mortgages, said: “As predicted, the price war that started with Halifax and Nationwide reducing rates has begun to work through other mortgage lenders, all competing for good-quality borrowers.”


Goldman chief's pay cut 30%

Goldman Sachs has paid chief executive David Solomon £20m for 2022. This is 30% down on the £28m he took home in 2021 and comes after the investment bank reported a drop in profits, cut thousands of jobs and reduced staff bonuses. Mr Solomon's pay comprises a £1.6m base salary, a £5.6m cash bonus and £13m in restricted stock. Goldman’s compensation committee cited the “challenging operating environment” as a factor in deciding the CEO's pay.


Firms flouting consumer duty rules will face swift action

City lawyers have warned that the Financial Conduct Authority (FCA) is likely to take swift action against firms that fail to comply with new consumer duty rules designed to protect savers and retail investors. While the overhaul of consumer regulation is set to take effect at the end of July, the FCA last week warned that many firms were lagging behind, with a “risk that they may struggle to apply the duty effectively once the rules come into force.” Naomi Seward, partner and head of retail finance at law firm Eversheds Sutherland, expects the FCA “to take swift and comprehensive enforcement action” against firms if they fail to fall in line, while Peter Bevan, global head of financial regulation at Linklaters, said the watchdog “intends to intervene earlier and to make greater use of its supervisory and intervention powers in order to prevent harm and intervene before problems become systemic or practices become entrenched.” Simon Morris, a financial services partner with CMS, said the FCA would be monitoring the market for "early indications of consumer disadvantage” and requiring firms that are not up to scratch to “halt business immediately.”

ESG specialist calls for greater clarity from FCA

Specialist investment advisory firm Castlefield has urged the Financial Conduct Authority to provide clearer guidance on fund categorisation under the proposed labelling scheme for sustainable funds. Castlefield's investment management partner Ita McMahon said the firm is "broadly supportive" of the measures outlined in the FCA's Sustainable Disclosure Requirements consultation as they would bring "rigour" to the industry. However, she added that the regulator could have provided more specific guidance on the types of funds that would sit in each category. Ms McMahon said: "We encourage the FCA to consider the challenges that investors will face in obtaining and aggregating sustainability metrics.”

CMA asked to step in over ‘price comparison monopoly’

Money transfer firm Wise has been reported to the Competition and Markets Authority after removing a smaller, cheaper competitor from its price comparison tools. Wise has removed or delisted any mention of Atlantic Money’s cheaper service, a move the latter says creates a “murky price comparison monopoly.” Atlantic has written a formal complaint to the competition watchdog, arguing that Wise has shut out competition and is misleading customers.

Frasers Group to launch suite of financial offerings

Frasers Group is to launch a range of financial offerings under a new "Frasers Plus" brand. It will offer two main products: a buy-now-pay-later facility that will let customers pay for purchases over time, with Frasers Group covering the cost up front; and the ability to take a loan through the app that could be spent across the group's retailers. A senior City source said that Frasers Plus could offer loans of as much as £2,000, which could be pooled for purchases across all of the group's brands such as Sports Direct, Flannels, Evans Cycles, and House of Fraser. Technology developed by Tymit, a fintech start-up in which Frasers has a 20% stake, will be used for online payments.

Direct Line boss quits

Insurance firm Direct Line is seeking a new chief executive following the resignation of Penny James, who is leaving with immediate effect. Jon Greenwood, who was Direct Line’s chief commercial officer, will serve as acting chief executive officer until a permanent replacement is found. The change at the top comes just over a fortnight after the firm issued a warning over profits and scrapped its dividend. Analysts at Citigroup had suggested that management credibility could be under pressure, with bosses only having reassured the stock market about the dividend in November.


Bayer investor calls for swift replacement of CEO

Investor Deka has called for German drugmaker Bayer to replace CEO Werner Baumann ahead of his scheduled departure. Ingo Speich, head of sustainability and corporate governance at Deka, said: “Bayer needs a new strategic positioning, which cannot be credibly accomplished under Werner Baumann.” He added that there is “a window of opportunity” for Chairman Norbert Winkeljohann to act before April’s AGM, warning: “He has to seize that opportunity, otherwise the pressure on him will increase as well.”


Housebuilders are calling for revival of Help to Buy

The Home Builders Federation (HBF) has called for the revival of Help to Buy as part of efforts to ignite the slowing housing market and avert a dramatic plunge in the supply of new homes. Britain's housebuilders are urging the Chancellor to reintroduce help for first-time buyers in the March Budget. The HBF, in a submission to the Treasury ahead of the budget, will argue that the average deposit of a first-time buyer in 2021/22 was £43,693, "an amount that for many, is simply unachievable". The industry wants a new, targeted home ownership scheme for first-time buyers.

Property prices fall in January

New data from Nationwide is expected to show that house prices fell for a fifth month in a row in January. Increasing borrowing costs and the weak economy are deterring buyers and the market expects house prices to follow December's 0.1% decline with another fall. Andrew Wishart, senior property economist at Capital Economics, believes 2023 is likely to be the "most difficult year for the housing market since 2008", as demand will not pick up until the Bank of England starts cutting its base rate. He says house prices could drop by a further 10.5% and sales volumes may fall by 30%.

Average non-London rent climbs 9.7%

The average asking rent outside of London has hit a record of £1,172 per month, according to data from Rightmove. This means rent prices rose by 9.7% in 2022. Rightmove predicts rents will rise by another 5% this year unless there is a “significant” increase in the number of homes available to rent. In London, average asking rents rose by 5.8% in Q4 alone, taking average asking rents for new tenants to a record of £2,480 a month. This marks a 15.7% increase on the year before.


Shop occupancy rates improve

A report from the British Retail Consortium (BRC) and Local Data Company (LDC) has revealed that the number of shops lying vacant on British high streets fell during the final three months of 2022. The overall occupancy rate improved to 13.8%, marking a 0.1 percentage point improvement on the July-September period and a 0.6 percentage point increase compared to the same period last year. The data also marked the fifth consecutive quarter of falling vacancy rates in the wake of the COVID pandemic.


Central banks set to raise rates

The Bank of England (BoE), the US Federal Reserve and the European Central Bank (ECB) are all expected to hike interest rates this week, with officials set to continue efforts to tame soaring inflation. The BoE is forecast to lift rates 50 basis points to 4% in what will be the tenth successive rise. However, analysts think this may mark the end of steep increases, with Sanjay Raja, senior economist at Deutsche Bank, saying he expects the Bank’s Monetary Policy Committee to “lay out the groundwork for a downshift in the pace of hikes going forward.” In the US, the Fed is expected to add 25 basis points to rates. Investec economist Ellie Henderson believes future increases will be less steep, saying it is “now clear that we are heading into the final stages of that fight, with less aggressive blows needed to coax inflation lower.” Meanwhile, markets predict that the ECB will up rates by 50 points.

BoE to forecast shallower and shorter recession

The Bank of England is expected to upgrade its outlook for the economy this week. While its current forecast is for a recession that lasts eight quarters and includes a peak-to-trough fall in GDP of 2.9%, the Bank is now expected to say the downturn will be shorter and shallower than previously forecast. Paul Dales, chief UK economist at Capital Economics, says data for the economy has been more upbeat since the Bank’s November forecasts. The Bank had expected GDP to fall 0.5% in Q3 and 0.3% in Q4. However, GDP actually fell 0.3% in Q3 and may have avoided contraction in the closing quarter of 2022. Sanjay Raja, senior economist at Deutsche Bank, expects the Bank to halve the length of the recession to four quarters, while economists at Barclays expect the extent of the downturn to be halved, to 1.5%.


Business confidence climbs

The latest Lloyds Bank Business Barometer points to increased optimism among British businesses, with confidence hitting its highest level in six months in January. Edging closer to the long-term average of 28%, overall confidence among UK companies increased by five points to 22%. Hann-Ju Ho, a senior economist with Lloyds Bank Commercial Banking, said: “Firms are clearly more optimistic about the wider economy and this is driving the increase, helped by precursory signs and other cost pressures may be easing." He added that while it is still a tough environment for business as high energy costs remain a concern, there are “precursory signs and other cost pressures may be easing."

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