Interest on BBLS capped at 2.5%
UK banks will not be allowed to charge more than 2.5% interest on emergency coronavirus business loans. The Treasury has also told lenders that the bounce-back loan scheme will be excluded from stringent consumer protection laws in order to speed up the delivery of money to small businesses, saying retrospective legislation will allow banks to skip affordability checks without being in breach of the Consumer Credit Act. The bounce-back loans offer 100% Government-backed loans capped at 25% of turnover. They are the only emergency loan programme to come with a standard interest rate, which comes after an initial 12-month interest and payment-free period. Executives from Lloyds, Royal Bank of Scotland, Barclays, HSBC and Starling will face the Commons' Treasury select committee today, detailing whether they have met the Treasury's deadline of launching the loans.
FCA tells banks to ensure rates are fair
The Financial Conduct Authority (FCA) has warned banks that they must pass on lower interest rates to mortgage customers. The watchdog has flagged the issue over concern that homeowners with loans from zombie banks may not have benefitted from lower interest rates if their variable rate is not directly linked to Bank of England rates, while other borrowers with variable-rate mortgages have seen monthly payments fall since the interest rate fell to a record low of 0.1%. The FCA said that mortgage prisoners being charged rates far higher than the market average would place “unjustifiable burdens” on finances. It told banks that where they have the power to set rates for mortgages, they should “ensure your exercise of that power is consistent with your duty to treat customers fairly.”
RBS profits halve
Profits at Royal Bank of Scotland halved in the first quarter after bank set aside £802m to cover bad debts caused by the COVID-19 crisis. The taxpayer-owned bank saw pre-tax profits fall to £519m in the first three months of 2020, compared with just over £1bn a year earlier. RBS said it has “significant exposures to many of the commercial sectors that are already being impacted by the COVID-19 pandemic, including property, retail, leisure, travel and shipping”. Meanwhile, RBS also announced it was winding down digital retail bank Bó, which it only launched in November. The technology will be folded into Mettle, its digital bank for SME business customers.
Monese halts global expansion
Digital bank Monese is planning a restructuring as it pulls back on expansion plans to cope with the fallout from coronavirus. The plans could see it shutter its Lisbon offices and while it plans to retain operations in London, Berlin and Tallinn it may consolidate in London and Tallinn. Having planned to enter the US, it is now understood to have opted to focus on its core European markets of France, Germany and the UK - as well as its technology platform.
Mortgage approvals fall
The number of mortgages being approved to home buyers dropped to a seven-year low in March. Figures from the Bank of England show that 56,161 mortgages were approved for house purchase in March – a drop-off of 24% compared with the previous month, and the lowest monthly total since 54,341 approvals were recorded in March 2013. Approvals for re-mortgaging fell by 20% to 42,600, the fewest recorded since August 2016, the Bank's Money and Credit report said.
Savers see low rates
Moneyfacts research for the Times shows that two thirds of the biggest banks do not offer an easy-access savings rate at better than 0.01%. Only Barclays, HSBC and TSB offer better rates, with accounts offering between 0.24% and 0.4%. The analysis also shows that only a third of mortgage lenders have passed on March’s cuts to the Bank of England base rate in full to borrowers, with two in five not cutting their standard variable rate (SVR) mortgages at all. Aldermore, Investec, Kent Reliance, M&S Bank, Paragon Bank, and Nottingham, Newcastle and Loughborough building societies have not changed their SVRs, while Coventry and Yorkshire building societies are among those to have only passed on some of the benefit.
Lloyds staff to receive shares
Lloyds will hand shares worth £200 to each of its staff to thank them for their efforts during the coronavirus crisis, with its workforce seeing a surge in calls as customers sought mortgage payment holidays, rescue loans and overdrafts.
Bank app usage surges
Analysis by market intelligence company Priori Data shows that the number of active users of banking apps from the nine leading high street banks has risen 32% during the COVID-19 lockdown, from 7.8m in March to 10.3m in April. Andrew Hagger from advice service Money Comms has voiced concern that with more people turning to digital services, more branches could close “sooner than they may have done”. Figures from Which? show that a third of bank and building society branches closed down between January 2015 and August 2019.
Buyout groups seek help in €17bn deal for Thyssenkrupp
Cinven and Advent are reportedly seeking investors to help fund the planned €17.2bn acquisition of Thyssenkrupp's lifts business and have spoken to Brookfield and the Canada Pension Plan Investment Board.
PE firm to buy Lufkin
Oilfield services provider Baker Hughes has agreed to sell its Lufkin rod lift unit to private equity fund manager KPS Capital Partners for an undisclosed amount. Reports earlier in the year which said Baker Hughes had retained advisers to sell the rod lifting business suggested the unit would likely be valued at around $200m.
Big US and European banks book $50bn in charges to cover bad loans
Banks are set to book more than $50bn of charges against bad loans in Q1, with US lenders boosting reserves by 350% year-on-year, while European banks have upped provisions by 269%.
Airlines question quarantine plan
With Transport secretary Grant Shapps saying the Government is considering implementing a 14-day quarantine for anyone arriving in the country, Airlines UK, which represents the likes of British Airways, Easyjet, Virgin Atlantic and Ryanair, said a quarantine would "completely shut off the UK from the rest of the world when other countries are opening up their economies". This, it suggested, "would effectively kill air travel".
Heathrow boss warns of redundancies
Heathrow airport CEO John Holland-Kaye has warned that it may soon follow British Airways in announcing mass redundancies. He has urged ministers to set out plans for how travel could resume but warned that social distancing at airports is "physically impossible". He suggested that insisting on set spaces between passengers on flights would reduce capacities by more than 50% and see prices “shoot up".
Barratt to restart construction
Barratt Developments will restart work on construction sites from May 11, with social distancing measures implemented. The housebuilder said it will restart building work across 180 of its construction sites, representing 50% of its sites. Sites in Scotland would remain closed, along with show homes and sales centres.
Watchdog seeks clarity over business interruption insurance
The Financial Conduct Authority (FCA) is seeking clarity on the inability of some insurance customers to obtain compensation for disruption amid the coronavirus crisis, with the regulator taking several cases related to business interruption insurance to court to resolve uncertainty faced by policyholders. The City regulator said the COVID-19 pandemic has “altered the value of some insurance products”. The FCA expects firms to assess their policies and consider refunding premiums, pausing them or changing the way benefits are delivered.
Hargreaves overhaul includes new Wealth Shortlist
Hargreaves Lansdown is scrapping its Wealth 50 best-buy list, just 16 months after it was launched, and overhauling its fund recommendations. Hargreaves is to introduce a Wealth Shortlist, with the choice of funds for the list to be overseen by a new independent panel separate from the company’s existing product governance committee.
Overtaxed pension savers reclaim £600m
Figures from HMRC show that savers charged too much tax when dipping into pension pots have reclaimed £600m so far this year. The data shows that more than 10,000 people were overtaxed when they took money out of their pension, to the tune of an average £3,141 each. HMRC says the number of people making pension withdrawals increased 23% from January to the end of March, with 348,000 people withdrawing money. The average amount accessed was £7,100, a 3% dip, year-on-year.
Hiscox sued over lockdown insurance
Two groups – the Night Time Industries Association and Hiscox Action Group - have joined forces to pursue legal action against insurer Hiscox in a row over coronavirus payouts. The groups, representing about 500 businesses covered by Hiscox, say firms were sold business interruption insurance policies that would supposedly pay out for closures stemming from a disease but some claimants are now being told their policies do not cover the pandemic.
LEISURE AND HOSPITALITY
Landlords reject Travelodge rent cut proposal
A group of 82 landlords has written to Travelodge rejecting its request for a rent cut on some its hotels until the end of next year. If hotels were not open by July, the company had asked for an 80% cut this year and 50% next. The landlords rejected the plan, claiming that the hotel operator is taking advantage of the coronavirus crisis to cut bills that it can afford to pay, and instead suggested deferring rent due for the quarter and a move to monthly payments for the rest of the year.
McDonald’s plans to reopen 15 restaurants
McDonald’s is planning to reopen 15 of its UK restaurants for delivery only on May 13, with a limited menu, after closing sites all of its 1,270 sites in March amid the COVID-19 pandemic. The delivery services will be provided by Just Eat and Uber Eats. Rivals Burger King and KFC are already preparing to relaunch takeaway services this week.
Record low for manufacturing
UK manufacturing collapsed in April, with the IHS Markit/CIPS Purchasing Managers' Index recording a score of 32.6 from March’s 47.8 - the lowest level since the survey began 28 years ago. Duncan Brock, group director at CIPS, said: "There is no comparable time in history to make predictions against, but, as production ramps up again in the Far East, the sector remained optimistic that, in a year's time, the operating environment will resemble some new normality."
MEDIA AND ENTERTAINMENT
Virgin Media and O2 in UK merger talks
The owners of Virgin Media and O2 are in talks to create a combined cable and mobile operator. Virgin Media is part of US-listed Liberty Global, while O2 is owned by Spain's Telefonica.
House prices set for post-lockdown rebound
Nationwide has forecast that house prices could rebound after the coronavirus lockdown eases. Data from Nationwide shows that UK house prices grew 3.7% year-on-year in April, the strongest rate of growth since February 2017, while month-on-month analysis shows a 0.7% increase, with the average UK home worth £222,915 in April compared to £219,583 in March. The increase in April came despite the coronavirus-prompted lockdown as Nationwide’s data reflects mortgages approved in April but submitted earlier.
Amazon warns it will not turn a profit this quarter, despite sales boom
Amazon revenues reached £60bn in the first three months of 2020, equating to over £26m per hour. However, a 26% year-on-year rise in sales did not turn into profit due to coronavirus-related costs bringing profit down by 29% to 32bn.
Premier League clubs facing insurance hike
Premier League clubs face an increase on their insurance policies to ensure squads are covered for coronavirus, while Duncan Fraser, head of sport at broker Howden, says some firms could exclude the illness from cover.
Long lockdown will shrink economy by a fifth
Analysis by consultancy firm Capital Economics suggests Britain’s economy will shrink by a fifth during 2020 if a full lockdown has to remain in place for a year. It calculates that each additional month of full quarantining would knock 1.5 percentage points off annual growth. Capital Economics said keeping restrictions in place until April 2021 would see the economy contract by 19.6%. Maintaining a full lockdown until the end of June will shrink the economy by 12% over 2020, while an immediate end to the restrictions would still see the economy shrink by 8.2% during 2020.
Consumers pay off debt and increase savings in lockdown
According to Bank of England figures, consumers paid off £3.8bn in debt in March, while credit card spending was down by 0.3%, compared to the previous year. UK businesses borrowed a record £34.1bn. Households also saved over £13bn over the month.
Taskforce targets debt-laden companies
A taskforce put together by industry lobby group CityUK will look at ways to recapitalise companies that come out of the coronavirus pandemic laden with debt. Formation of the group came after Lloyds chairman Norman Blackwell asked Bank of England governor Andrew Bailey to consider a situation where banks are unable to lend because customers’ debt-piles are too high