BANKING
FCA cautioned over Revolut
Regulators are being urged to look very closely before granting Revolut a banking licence. While the fintech firm recently suggested it was set to be granted a licence by the Financial Conduct Authority and Prudential Regulation Authority, concerns have been raised over its long-delayed 2021 accounts. While the delayed results revealed Revolut’s first ever profit, of £26m, its auditor said around three quarters of its turnover could not be verified and may have been mis-stated. There will also be heightened scrutiny across the financial sector due to the recent turmoil that hit Silicon Valley Bank and Credit Suisse. Gary Greenwood, banking analyst at Shore Capital, commented: “I would be amazed if the regulator would give them a banking licence in their current situation,” going on to say Revolut “do seem to be a little accident prone at the moment.”
Trade body: Digital banks need support
Britain's digital banks will need support to help them cope with the market fallout from the collapse of Silicon Valley Bank, fintech trade body Innovate Finance has warned. Investor confidence in the global banking sector has been shaken by the failure of the US lender and UBS’ emergency rescue of Credit Suisse. Janine Hirt, CEO of the trade body, said industry, government and regulatory bodies must work together to protect customers and businesses amid "a concern that there may well be more disruption coming our way from across the finance ecosystem.” She added that neobanks “are not immune to the current market conditions, and it is important that steps are taken to ensure they have the support over the course of the coming weeks and months.”
Small firms embrace open banking
Research by Open Banking Limited reveals that at least 750,000 SMEs now integrate their bank accounts with third-party services to reduce the cost of transactions and help to manage cashflow. The number of “open banking” payments more than doubled last year to 68m with small firms adopting the technology more quickly than consumers, Open Banking said. Richard Newman, of the body, said more small businesses were taking advantage of the option because it “makes life easier and means less time can be spent on paperwork”.
Recent bank rescues a ‘game changer’ for financial regulators, City bosses say
The collapse of Credit Suisse and several US banks will trigger a sea change in global banking regulation and trigger an overdue debate on the sustainability of fractional reserve banking, City bosses told the FT. Separately, China’s top lenders have all reported that they have escaped from the financial crisis in the US and Europe unscathed.
Metro Bank draws up plans for orderly wind-down
Metro Bank will next month put a proposal to shareholders to create a 'clean' holding company for a so-called 'bail-in' if the lender fails. The move would bring the challenger bank in line with Britain's largest lenders and comes on the back of Bank of England demands to ensure taxpayers are not left on the hook for bank failures.
INTERNATIONAL
Swiss prosecutor opens probe into Credit Suisse takeover
The Swiss Federal Prosecutor has launched an investigation into the forced takeover of Credit Suisse by UBS, brokered by the Swiss government two weeks ago. The prosecutor is looking into possible breaches of Swiss criminal law by government officials, regulators and bank executives. There were “numerous aspects of events around Credit Suisse” that warranted investigation, the prosecutor’s office said, which needed to be analysed to “identify any crimes that could fall within the competence of the [prosecutor]”. Meanwhile, Credit Suisse is facing an investor revolt at its AGM on Tuesday. Shareholders of both Credit Suisse and UBS were denied a vote on the $3.25bn takeover but Swiss citizens are also likely to protest alongside investors amid anger over the demise of the 167-year-old institution. And as US investors prepare legal action against Credit Suisse, the US Senate committee concluded on Friday that the bank had violated its 2014 plea agreement with the US government and concealed more than $700m from tax authorities, and said the Swiss bank continued to help wealthy Americans avoid taxes.
Luxembourg thrives in post-Brexit landscape
The Telegraph’s Jeremy Warner looks at how Luxembourg has boomed despite having to dispense with its strict bank secrecy laws and low tax rates. The Grand Duchy has attracted a stream of bankers, insurers and fund managers from the UK looking to serve their European clients from a continental base. Luxembourg has not sought to compete with the City, says Yuriko Backes, the Grand Duchy's finance minister, but it has been able to attract business through its “relative stability and predictability” as well as its balanced system of governance.
UBS boss plays down concerns over size
The incoming CEO of UBS, Sergio Ermotti, has sought to ease concerns about the size of the bank after its takeover of Credit Suisse. UBS will have $1.6trn in assets and more than 120,000 staff, but even so, “we won't be at the top of the classification for international banks in terms of size,” Ermotti told Italian media. "We have a good position thanks to our activities, and our greater critical mass at a global level will certainly give us another advantage. The question of excessive size does not arise," added Ermotti.
UniCredit shareholders back CEO Orcel’s pay package
UniCredit shareholders including BlackRock, Allianz and Parvus have backed a remuneration package that could see CEO Andrea Orcel earn €9.75m, despite Glass Lewis and ISS warning this could be excessive.
AUTOMOTIVE
Lord Bamford demands rethink of net zero ban on cars
Britain’s plan to ban all new non-hybrid petrol and diesel cars in 2030 should be revisited, the chairman of JCB has said. He is urging the Government to acknowledge that the internal combustion engine can be used in the future with new carbon-neutral petrol alternatives. Lord Bamford said: “If e-fuels can be made to work in a carbon neutral way in cars, the internal combustion engine certainly has a future. Governments should be wary of outlawing engines, when the root cause of the problem is the fossil fuels we currently put in the fuel tank.”
Price cut boosts Tesla sales
The move by Elon Musk to slash the price of Tesla’s most popular models sent sales surging in the first three months of the year. The carmaker delivered 422,875 vehicles in the first quarter, surpassing Tesla’s previous record of 405,278 at the end of last year, and up 36% on the same quarter last year.
FINANCIAL SERVICES
Threadneedle Street orders lenders to shore-up defences against hackers
UK lenders, insurers and market infrastructure companies have been told by the Bank of England to firm up their defences against severe cyber attacks amid fears hackers will attempt to plunge the financial system into crisis. In a letter to executives, Sarah Breeden, head of financial stability at the Bank, said: “Firms will be expected to show that they are testing against severe but plausible scenarios… and this testing should become more sophisticated over time.” She continued: “Firms are expected to demonstrate through testing that they are able to remain within impact tolerance or, when they are unable to do so, to invest and take action to improve their operational resilience.”
Revised UK vetting rules to exempt tens of thousands of finance staff
A source close to the Treasury has told the FT that an overhaul of finance rules will likely see the Senior Managers & Certification Regime narrowed to exclude tens of thousands of individuals.
LEISURE & HOSPITALITY
Energy prices and cost of living crisis an existential threat to pubs
The average energy bill for a pub will rise by £18,400 a year this month when the Energy Bill Relief Scheme ends, the British Beer and Pub Association (BBPA) has warned, putting many pubs at risk of closure. More than 4,800 licensed premises closed last year due to the cost of living crisis with the majority of those being independently owned. A UKHospitality survey found businesses expect an 82% rise in their energy bills when state support comes to an end this month. It could mean many struggling pubs are forced to close. Emma McClarkin, chief executive of the BBPA, is calling on the Government to reform business rates and reduce the "unfair tax burden" on the sector.
MANUFACTURING
Rolls-Royce appoints first female finance chief
Rolls-Royce has appointed its first female finance chief, with Helen McCabe to take over from Panos Kakoullis later this year. She joins from BP, where she had previously worked alongside Tufan Erginbilgic, who was named CEO of Rolls-Royce earlier this year. The boardroom shake-up will also see Rob Watson become president of the civil aerospace division, having previously run Rolls-Royce’s electric aviation operations. The incumbent head of civil aerospace, Chris Cholerton, will become group president and will oversee the group’s submarine division and serve as the interim boss of the company’s small modular reactor unit until a permanent appointment is made. Adam Riddle has been appointed president of defence and will also lead the company’s North America division.
REAL ESTATE
House prices see biggest annual fall since 2009
House prices fell at their fastest annual pace for 14 years in March, according to figures from the Nationwide. Prices fell 3.1% year-on-year, with this the steepest annual decline since July 2009. March’s reading means prices have now fallen for seven months in a row. Nationwide said the housing market hit a "turning point" last year, with activity remaining “subdued” following the market turbulence which followed the mini-Budget. Robert Gardner, Nationwide's chief economist, said: “It will be hard for the market to regain much momentum in the near term, since consumer confidence remains weak and household budgets remain under pressure from high inflation.”
UK commercial property dealmaking picks up in first quarter after record low
The first quarter of 2023 saw commercial property investment pick up after falling to a record low at the end of last year, but dealmaking was still half its 10-year average, according to CoStar.
RETAIL
Wowcher investigated over ‘misleading' urgency claims
The Competition and Markets Authority (CMA) has opened an inquiry into whether Wowcher misled consumers by using “urgency claims” to pressurise them into making purchases quickly. The competition watchdog last year said 71% of shoppers online encountered misleading sales tactics, identifying 21 potentially harmful practices. Sarah Cardell, chief executive of the CMA, said: “If we find that Wowcher is using misleading online selling tactics, we won't hesitate to take enforcement action, through the courts if necessary.”
ECONOMY
UK avoided recession in 2022
The UK economy performed better than previously estimated in the closing quarter of 2022, revised figures from the Office for National Statistics (ONS) show. While it was previously though that the economy was flat in Q4, a revised analysis shows it grew by 0.1%. This confirms that the economy avoided falling into recession in 2022. ONS director of economic statistics Darren Morgan highlighted that the telecommunications, construction and manufacturing sectors all fared better than initially thought in Q4 2022. The ONS also revised up its estimate for the economy's performance in the July-to-September quarter, saying GDP fell by 0.1% in Q3, compared with its previous estimate of a 0.2% decline. Chancellor Jeremy Hunt said the figures "show there's underlying resilience in the UK economy." Ruth Gregory of Capital Economics said the revised ONS figures show that high inflation took a slightly smaller toll on the economy than thought. Noting that much of the impact of higher rates was yet to be felt, she added: “We still think the economy will slip into a recession this year.”
Opec+ nations cut oil output by 1m barrels a day
Saudi Arabia and other members of the Opec+ group, which includes Russia, announced surprise oil production cuts of more than 1m barrels a day on Sunday, causing prices to leap 8% in Asia on Monday morning. Amrita Sen, director of research at Energy Aspects, said: “Opec+ have made a pre-emptive cut to get ahead of any possible demand weakness from the banking crisis that has emerged.” But Helima Croft, head of commodity strategy at RBC Capital Markets, pointed to wider geopolitical shifts to explain the move: “It’s a Saudi-first policy. They’re making new friends, as we saw with China…[Riyadh] was sending a message to the US that “it’s no longer a unipolar world.” Despite drastically cutting domestic supply and draining the reserves built up by President Trump, the Biden administration has been pushing for more production to keep prices down and prevent Vladimir Putin from earning more revenue to fund Russia’s invasion of Ukraine.
OTHER
Global dealmaking sinks in Q1
Global mergers and acquisitions activity fell to its lowest level in more than a decade in Q1, with rising interest rates, high inflation and fears of a recession hitting dealmaking. M&A volumes slumped 48% to $575.1bn in the first three months of the year, compared to $1.1trn during Q1 2022, according to data from Dealogic. M&A volumes dropped 44% to $282.7bn in the US, 70% to $81.87bn in Europe and 29% to $176.1bn in Asia Pacific. Anu Aiyengar, global head of M&A at JPMorgan Chase, said: “The first quarter had extraordinary levels of volatility and uncertainty - more than expected going into the year.” Brian Haufrect, co-head of M&A for Americas at Goldman Sachs said: “Having a well-functioning financing market is a critical ingredient for M&A. Market volatility has clearly been a challenge and weighed on deal volumes in the quarter.”