BANKING
Banks lose guarantee on Covid loans worth more than £240m
The FT reports that banks have found errors in their own pandemic loan scheme vetting systems, leading to the Government removing the guarantee from more than 7,400 bounce back loans worth more than £240m. The news follows the resignation of Lord Agnew, a joint cabinet and Treasury minister, whose brief included counter-fraud. He stepped down on Monday, slamming the Government for its "woeful" efforts to control the risk of fraud. In an interview with the Times, Lord Agnew says: “The rapid rollout of the Government’s bounce-back loan scheme was an important intervention in the worst peacetime crisis since the Second World War, but the cack-handed implementation and catastrophic follow-through could be costing us hundreds of millions of pounds a month and no one seemed to care but me.”
Nationwide held TSB talks
It has been revealed that Nationwide held talks to acquire TSB, with Britain's biggest building society holding discussions with investment bankers advising TSB owner Banco Sabadell in 2020. Sabadell chief executive Cesar Gonzalez-Bueno last year scrapped the sell-off plan but did not rule out selling TSB in the future. The Mail on Sunday’s Emma Dunkley says Sabadell might look to offload TSB later this year following its recent strong performance. She says Nationwide would likely face competition from Co-operative Bank, which has twice tried to buy TSB. Ms Dunkley also notes that Debbie Crosbie, the recently departed CEO of TSB, is to take over as boss of Nationwide later this year, saying her knowledge of both lenders “would make her perfectly placed to lead a merger”.
The Post Office secures banking services deal
The Post Office has secured a deal with high street banks that will ensure customers can continue to access banking services at its 11,500 branches. The agreement means that customers, including small businesses, will be able to use the Post Office to do basic banking such as cash withdrawals and deposits. The deal, banking framework 3, will start in 2023 and remain in place for three years.
Paragon sees strong start to the year
Specialist lender Paragon enjoyed a strong start to its new financial year after seeing a surge in lending, driven by a big jump in demand for buy-to-let mortgages. Total new lending for the last quarter of 2021 increased by 36% to £708m compared to the same period in 2020. The challenger bank said performance had been in line with its expectations.
Amigo appoints interim CFO
Amigo Holdings has appointed Danny Malone as CFO on an interim basis. The move comes after the abrupt departure of finance chief Mike Corcoran earlier this week. Malone is a chartered accountant with “extensive experience across multiple financial services companies and banks at Board level, mostly operating in the non-standard consumer finance sector,” Amigo said in a statement.
PRIVATE EQUITY
CVC co-founder Steve Koltes to step down
CVC Capital Partners co-founder and co-chairman Steve Koltes is to step down from the role in October “to focus on his private interests”, the firm said. He will remain on CVC’s board as a non-executive director. The move comes the company works on plans for a stock market listing.
INTERNATIONAL
UniCredit’s 2021 profits beat guidance despite fourth-quarter loss
UniCredit has reported better-than-expected full-year revenues and underlying profit. The Italian bank said 2021 revenues came in at €18bn ahead of its guidance for more than €16bn, and underlying profit at €3.9bn. The increase in UniCredit’s earnings came as it reported a loss of €1.4bn for the final quarter of 2021, which was due to restructuring charges and costs related to the disposal of non-core assets. UniCredit also said it was no longer exploring a potential bid for Russian lender Otkritie Bank, citing tensions between Russia and Ukraine.
Goldman Sachs doubles CEO’s pay
Goldman Sachs doubled CEO David Solomon’s pay in 2021, with this coming after the firm reported record profits. The investment bank, which reported a net income of $21.64bn compared with $9.46bn a year earlier, handed Mr Solomon a $35m pay package for 2021 - up from the $17.5m he earned in 2020.
Credit Suisse changes bonus rules in a bid to retain senior staff
Credit Suisse has announced plans for a new bonus system that will see workers forced to repay some of their award back if they exit the company within three years. Around a fifth of the bank's staff will reportedly affected. However, the bank told staff they would receive a higher cash amount upfront.
FINANCIAL SERVICES
Bank official: Crypto requires proper regulation
Sarah Breeden, the Bank of England’s executive director for financial stability, strategy and risk, says that while cryptocurrency does not yet pose a risk to Britain’s financial stability, a common regulatory system is needed. Ms Breeden, who is also on the Bank’s financial policy committee, said the Bank is “keeping an eye on what is happening, gathering data and ensuring we know what the regulated financial firms we supervise are up to.” She said that the Bank was working with the Treasury, the Financial Conduct Authority and international partners to build a regulatory regime that “permits innovations to happen” as safely as possible. Ms Breeden added: “There is not a risk to financial stability from these assets yet, but we do need to get on, roll our sleeves up and do the hard work of making sure the regulatory regime will be able to manage the risks as use of these assets increases.”
Pathways fail to entice investors
An initiative designed to protect investors' nest eggs from being ravaged by inflation has failed to attract much interest. The ‘investment pathways’ experiment was designed to make it easier for investors who do not take financial advice to do the right thing with their pensions. The Financial Conduct Authority designed the pathways project because it was worried that investors who did not know what to do with their money risked making bad decisions that could leave them worse off in retirement. But one year on, several providers reveal that few investors have been enticed down these pathways. AJ Bell says that of the customers on its platform taking income from a pension fund, less than 0.6% put their money into an investment pathway, while Interactive Investor says that one in 100 of its customers opt for an investment pathway. Tom Selby, head of retirement policy at AJ Bell, says the experiment should act as a lesson for future regulatory interventions, which need to better take account of the needs of different types of investors.
FCA reform call
Jeff Prestridge in the Mail on Sunday reflects on the news that staff at the Financial Conduct Authority could go on strike over cost cuts and plans to abolish staff bonuses, with trade union Unite saying the plans set out by FCA chief executive Nikhil Rathi will result in a “bargain basement” regulator. Mr Prestridge argues that a regulator primarily funded by the financial firms it regulates – and indirectly by the public as buyers of the products these firms sell – should not be paying staff bonuses, saying: “Value for money is the name of the game, not bonuses.” He goes on to suggest that reform “is exactly what the FCA is desperately in need of”, pointing to a series of financial scandals over recent years, saying they indicate “a regulator that has lost its way.”
HEALTHCARE
Oxford Biomedica agrees US tie-up with Homology Medicines
Oxford Biomedica has announced it will form a viral vector manufacturing business with US-based Homology Medicines and will acquire an 80% stake in the new firm. The FTSE 250 company will pay Homology £97m in cash for the stake and has agreed to make a £37m capital injection into the new business, called Oxford Biomedica Solutions.
MANUFACTURING
De La Rue investor calls for sale or break-up after profit warning
Crystal Amber has criticised De La Rue’s management after a profit warning this week. Richard Bernstein, the head of the activist investor, urged the board to consider a break-up or sale of the British currency printer.
MEDIA & ENTERTAINMENT
Activist takes aim at Vodafone
Activist investor Cevian has taken a stake in FTSE 100 telecoms firm Vodafone. Analysts suggest the move could put pressure on Vodafone chief executive Nick Read and may see the firm forced into big corporate takeovers or sales. Karen Egan, senior telecoms analyst at research firm Enders Analysis, said Cevian could call for Vodafone to sell down its stake in the phone masts business Vantage Towers. Matthew Howett, an analyst at Assembly Research, said Cevian may call for Vodafone to shore up its UK business, where, unlike BT and Virgin Media O2, it lacks a fixed-line network of its own. It is noted that in 12 of Cevian’s 16 investments, it has secured itself a seat on the board.
REAL ESTATE
Demand for flats surges as price growth slows
The pace of property price growth across the UK has started to slow, figures from Zoopla have revealed. Average prices increased by just 1% in the three months to December 2021. The average price tag of a home coming up for sale is now £242,000, still £25,500 more than at the start of 2020. Demand for flats outside London has reached the highest level for five years, and demand for family houses outside London is four times higher than the five year average. In total, demand from buyers was around 49% higher in the month to 16 January than over the same period from 2018 through to 2021. Terraced, semi-detached and detached homes now average £289,500, while flats average £175,700, up 8.8% and 2.2% respectively.
ECONOMY
BoE set for first back-to-back rate hike since 2004
The Bank of England’s (BoE) Monetary Policy Committee (MPC) is set to increase interest rates from 0.25% to 0.5% this week, a move that would mark the first back-to-back increase since June 2004, with the Bank having already lifted rates from 0.1% to 0.25% in December. Analysts expect a further series of increases through 2022 that will see the interest rate hit 1.25% by year end. This would be the highest level since early 2009. The BoE is looking to rein in inflation, which reached 5.4% in December and is forecast to pass 6% - far beyond the Bank’s 2% target. Laith Khalaf, head of investment analysis at AJ Bell, said: “The Bank of England can’t control the major factors that will push inflation up in the immediate future … But a February rate hike would help persuade the market that the Bank really means business, and help to stave off embedded inflationary expectations that could spark a dreaded wage-price spiral.” Steffan Ball, chief UK economist at Goldman Sachs, said the MPC would probably vote 9-0 to hike borrowing costs and could lift interest rates to as high as 1.25% by November.
Rates rise will see mortgage repayments climb by £700
Analysis by Moneyfacts says mortgage holders' repayments will rise by nearly £700 a year if the Bank of England doubles its base rate as expected this week. The Bank’s Monetary Policy Committee (MPC) is expected to double its base rate to 0.5%. Economists believe MPC members will vote 8 to 1 in favour of the rate increases, a move that would mark the first back-to-back increase since 2004. Moneyfacts estimates that the average borrower's annual repayments will increase by £687 to £13,904.64. Pantheon Macroeconomics’ chief UK economist Samuel Tombs said: "The MPC almost certainly will revise up its forecast for CPI inflation for 2022 and 2023, in response to the near-term pick-up and further increase in energy prices." Meanwhile, UK Finance has said one in four mortgage borrowers on variable rate deals will be hit if the Bank increases interest rates from 0.25% to 0.5%. Households could see a jump of almost £600 over the next couple of years, UK Finance said, detailing that an increase would mean an additional £24 a month for the average borrower on a £200,000 two-year tracker deal. This will see a further £580 across the entirety of the deal.