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Daily News Roundup: Monday, 3rd August 2020

Posted: 3rd August 2020

BANKING

NatWest sets aside £2.9bn for bad loans

NatWest has reported a pre-tax loss of £770m in the first half of the year, having set aside £2.86bn in anticipation of loans turning bad due to the coronavirus pandemic. The bulk of the impairment charges came in Q2 when NatWest, which was known as RBS until July, put £2.06bn aside. It said it expects total impairment charges for the year to be in the range of £3.5bn - £4.5bn. The £770m loss compares to pre-tax profit of almost £2.7bn in the same period last year. NatWest chief executive Alison Rose said: “Our performance in the first half of the year has been significantly impacted by the challenges and uncertainty our economy continues to face as a result of COVID-19.” However, she added that the bank “has a robust capital position, underpinned by a resilient, capital generative and well diversified business.”

Increased impairment charges drive TSB loss

TSB has reported a £66m pre-tax loss as credit impairment charges increased by £87.5m in the first half of the year. The bank reported a loss before tax of £65.5m, compared to a pre-tax profit of £21.1m in H1 2019. It saw customer lending increase 0.6% to £31.3bn in the period, while customer deposits increased 9% to £32.9bn. TSB says it has reduced its operating expenses to £418.2m and accelerated its digital banking strategy. Chief executive Debbie Crosbie commented: “We had a strong start to the year, but the external environment changed significantly when COVID-19 struck.” She added that the bank’s balance sheet and capital position “remain strong”, despite the “challenging context”.

Watchdog seeks input on repayment holidays

The Financial Conduct Authority (FCA) has called for input on how firms should treat consumers who are coming to the end of their second mortgage payment deferral. With the FCA considering extending guidance on payment deferrals for mortgage and consumer credit products beyond October 31, it is seeking the views of mortgage providers, consumer groups and credit providers. With repayment holidays being offered amid the coronavirus crisis, the FCA says firms have provided more than 1.8m mortgage payment deferrals and 1.6m personal loan and credit card payment deferrals.

First-timers face higher rates

A number of banks have increased their rates on high loan-to-value (LTV) mortgages, despite the Bank of England interest rate holding at a low of 0.1%. Several lenders have increased rates for those who can only provide a deposit of 10%, with first time buyers set to be the hardest hit as they typically borrow 90% or more of a property's value. HSBC and Co-op intermediary Platform have increased rates on fixed rate 90% LTV deals, while Skipton has increased the rate on three residential deals at 85% LTV and TSB has done so for certain 80% and 85% LTV deals. David Hollingworth of London & Country Mortgages said: “In historic terms, these are still very low rates, but lenders are having to chop and change because of the challenges they're facing.”

Access concern as some branches remain shut

A number of bank branches that shut during the coronavirus lockdown have yet to reopen, while many have opened with reduced hours. About 2,280 bank and building society branches shut between April and June, according to the Financial Conduct Authority and the Payments Systems Regulator. Figures show that 48 Barclays branches remained shut last week, as did 38 branches of RBS and NatWest, 35 of Santander, 26 of Lloyds, 17 of TSB and 12 of HSBC. Addressing concern over a lack of access to services, UK Finance commented: "The vast majority of bank branches have now reopened ... with a range of alternative services, including telephone, online and mobile banking."

Staff set to stay home, despite PM’s 'back to work' call

Despite today marking the first working day since Prime Minister Boris Johnson’s 'work from home' guidance came to an end, analysis suggests that many employees will not be returning to the office this week - or anytime soon. British Chambers of Commerce research suggests 62% of employers expect their staff to remain working remotely for the foreseeable future, saying some or all workers will be working from home for the next 12 months. NatWest is allowing 50,000 staff to work from home until 2021, while Virgin Money expects the majority of staff to work remotely “for at least the remainder of this calendar year.” Lloyds CEO Antonio Horta-Osorio has said people should continue working from home until the end of September.

Nationwide limits bank of mum and dad support

Nationwide Building Society says buyers seeking lower-deposit mortgages must come up with at least three-quarters of the deposit from their own savings, with help from family members to be restricted to 25%. The cap applies on lending to first time buyers at 90%, but inheritance is exempt and treated as the applicant's own savings. The lender says asking applicants to provide 75% of the deposit “demonstrates that someone is able to save and manage their finances.”

Online appeals to switchers

Almost 100,000 people moved their bank accounts between April and June. Of these, 43% said they did so to access better online banking, while 38% cited customer service and 36% said apps drew them to their new bank.

Monzo reviews crime controls

Monzo is reviewing the quality of its financial crime controls, having launched an investigation after a review by the Financial Conduct Authority.

PRIVATE EQUITY

Venture capital deals increase in Scotland

Analysis shows that the value of venture capital investment deals almost doubled in Scotland in the second quarter. While the UK saw deals with a combined value of £2.6bn in Q2, compared to £2.8bn in Q1, £62m was invested through deals north of the Border – up from the £32m invested in Q1.

Accel revenue climbs

Accel reported UK revenues of £34m in the year to December, up from £27m the previous year. The venture capital firm, which has backed start-ups including Monzo, made profit of £14.5m in the UK.

Thyssenkrupp closes elevator sale

Thyssenkrupp has closed the €17.2bn sale of its elevator division TK Elevator to a consortium led by Advent and Cinven.

INTERNATIONAL

JPMorgan poaches Credit Suisse dealmaker in expansion to take on Goldman

JPMorgan Chase has hired Credit Suisse’s Andy Lipsky, appointing him vice-chairman of investment banking. Meanwhile, Anu Aiyengar, global co-head of M&A, says JPMorgan is looking to overtake Goldman Sachs.

BNP Paribas beats expectations as investment banking revenues rise

BNP Paribas’ net income fell 6.8% to €2.3bn in Q2, exceeding analysts’ expectations of €1.5bn. Revenue rose 4% to €11.7bn, while its investment bank made €160bn for clients, a 91% year-on-year increase.

Challenger bank offers mortgages

Bunq has become the first European challenger bank to offer mortgages. The bank, which acquired a licence from the Dutch Central Bank in 2014, has expanded into 30 European countries. It has diverted about €100m of its users' deposits into a pot to fund the home loans.

Commerzbank eyes Landesbank veteran

Commerzbank is reportedly considering nominating Hans-Joerg Vetter, a former chief executive of Landesbank Baden-Wuerttemberg, to chair its supervisory board.

AUTOMOTIVE

Jaguar reports £413m loss

Jaguar Land Rover has posted a £413m loss as the coronavirus crisis “significantly impacted” trading. The firm said retail sales fell 42.4% to 74,067 in Q2 while revenue totalled £2.9bn, marking a 44% decline. It has pledged to cut another £1bn from costs in the year to March 2021, raising a target of £1.5bn to £2.5bn.

Fiat Chrysler defies gloomy forecasts by limiting losses

Fiat Chrysler saw a $1bn loss in Q2, with sales down 63% to 424,000 vehicles and revenues slipping 56% to €11.7bn.

AVIATION

British Airways owner seeks €2.75bn

British Airways owner International Consolidated Airlines (IAG) will seek to raise €2.75bn to bolster its balance sheet after the coronavirus pandemic hit the sector. Qatar Airways, a 25% shareholder, has committed to participating in the raise. IAG has reported a half-year loss after tax of €3.8bn, compared to a profit of €806m last year. It saw a €1.37bn operating loss in Q2 and a €1.9bn operating loss for the first half of 2020. In 2019 operating profit hit €1.1bn.

FINANCIAL SERVICES

Calls to regulate buy now, pay later companies

Campaigners have called for buy now, pay later companies such as Klarna to be covered by the same rules that apply to payday lenders. Labour MP Stella Creasy has written to the Financial Conduct Authority and the Advertising Standards Agency and wants buy now, pay later companies to be fully regulated. She said: "If it looks like a duck and quacks like a duck, it's a duck. It's clear that Klarna is a type of credit. Buy now, pay later schemes are being advertised as risk-free and promoted to younger consumers who have fewer assets to draw on if they get into difficulty".

Investors fork out millions for frozen funds

Analysis by AJ Bell shows that fund managers have accrued more than £33m in fees from frozen property funds. Managers of Legal & General’s £2.8bn UK Property fund - the largest of the frozen funds – are estimated to have taken £7.18m since mid-March. Funds managed by commercial property portfolios have slumped by about £5.8bn to £11.1bn over a year, according to Morningstar.

Pension withdrawals fall

HMRC figures show that £2.3bn was withdrawn from pensions in Q2, a 17% decline on the £2.8bn withdrawn in Q2 2019. The typical amount withdrawn per individual in Q2 2020 was £6,700, down 18% from the £8,200 average recorded in Q2 2019. The data also reveals that 340,000 individuals withdrew from pensions in the second quarter of the year, a 1% year-on-year increase but a decline on the 348,000 who took money from their pot in Q1. This decrease differs from the normal seasonal pattern that tends to see withdrawals rise in Q1 before peaking in Q2, which coincides with the beginning of a new tax year.

Questions over Link’s Woodford role

The Sunday Times reports that investors are becoming increasingly concerned about Link Fund Solutions’ oversight of the former Woodford Equity Income fund. The Financial Ombudsman Service has received 17 complaints against Link over the Woodford affair, relating to issues about “treating customers fairly”, and whether or not the company met its regulatory obligations.

LEISURE AND HOSPITALITY

Byron serves up rescue deal

Byron has gone through a pre-pack administration resulting in the sale of 20 of its 51 outlets to investment firm Calveton UK. The burger chain’s remaining restaurants will stay closed, with 651 employees made redundant. Meanwhile, sushi chain Itsu has announced plans to use a CVA to close two sites and cut rents on 53 of its 77 outlets.

REAL ESTATE

House prices jump in July

UK house prices saw their biggest rise in 11 years last month, with the market bouncing back as it reopened after the coronavirus lockdown. Nationwide said prices climbed 1.7% in July, the biggest increase since August 2009. Year-on-year, prices were up 1.5%. The average price of a home sold in July was £220,936, up from £216,403 in June.

ECONOMY

BoE to look to QE and negative rates?

Economists expect the Bank of England (BoE) to hold interest rates at 0.1% this week, forecasting that the Bank could launch a further stimulus package worth up to £100bn before cutting rates to below zero. Bloomberg analysis shows that money markets are beginning to price in a cut to negative rates in Q2 2021. Chris Williamson, chief business economist at IHS Markit, said that while he does not believe negative rates are imminent, the Bank “will need to produce more stimulus from somewhere”. Douglas McWilliams, deputy chairman of the independent Centre for Economics and Business Research, suggests a mixture of quantitative easing and negative rates may be required to keep the economy afloat.

King: Increasing QE would be 'premature'

Sir Mervyn King, a former Governor of the Bank of England (BoE), believes it would be premature for the Bank to expand the quantitative easing scheme too early. Speaking ahead of this week’s meeting of the Monetary Policy Committee (MPC), which sets the UK’s interest rates, Sir Mervyn said arguments for QE focus on whether there is a need to expand the money supply in order to boost economic recovery, but says this has not been an issue in recent months as the Government has been “trying to shut down the economy. It doesn’t want it to expand.”

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