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Daily News Roundup: Monday, 5th December 2022

Posted: 5th December 2022

BANKING

Atom boss wants to disrupt mortgage market

Atom Bank chief executive Mark Mullen says the bank will continue to push into the mortgage sphere. He said: “The mortgage market remains dominated by the big banks because they have a capital advantage,” saying this allowed them to “essentially monopolise the most profitable and most stable part of the UK banking market and our ambition is to unpick that.” Mr Mullen added: “Mortgages are ultimately where the biggest opportunity to disrupt remains and it hasn’t been disrupted yet.” Predicting that technology is going to “suck more processes out of banks and put them in the palm of customers hands through devices, whether that be for mortgages, savings or investments,” he said: “We want to be leading that change.”

PRIVATE EQUITY

FTX collapse shows need for venture capital discipline

The collapse of FTX has led venture capitalists to revaluate their approach to investment. Cate Ambrose, the CEO of the Global Private Capital Association, says the cryptocurrency firm achieved its $32bn valuation through reckless bets by investors such as Sequoia Capital and Softbank and its implosion highlighted a lack of discipline among VC firms. “When there’s so much money out there and so much speculation […] irresponsible things get done,” she said. The FTX collapse comes as the VC industry suffers a downturn as interest rates rise and cheap capital dries up. The number of global VC deals plummeted to 7,817 in the third quarter of the year – the lowest level since the fourth quarter of 2017.

INTERNATIONAL

Fed suggests banks should manage climate-linked financial risk

The US Federal Reserve Board has joined other key banking regulators in proposing a plan for how large banks should manage climate-related financial risks. The proposal suggests that banks with more than $100bn in assets should incorporate financial risks related to climate into their strategic planning. The proposal marks the latest effort by policymakers aiming to protect against potential financial risks from climate change. The Fed's plan would require banks to consider climate-related financial risks in their audits and other risk management. They would also add climate-related scenario analysis to traditional stress testing, and assess whether they should include climate-linked risks into their liquidity buffers. The Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency have separately proposed their own plans.

UniCredit to reassess CEO pay

UniCredit will reassess the remuneration of CEO Andrea Orcel ahead of its 2023 general meeting, with Italy's second-biggest bank to assess whether its results warrant an increase. Noting that Mr Orcel had not asked for a raise, chairman Carlo Padoan said the bank's remuneration committee would make a recommendation to the board on the CEO's pay "incorporating views of investors and wider stakeholders." UniCredit's latest remuneration report said that the CEO's current pay structure and a regulatory ceiling capping variable pay at twice the fixed amount prevented the bank from rewarding over-performance when targets were exceeded.

Saudi Crown Prince eyes investment in CS First Boston

The Crown Prince of Saudi Arabia, Mohammed bin Salman, is reportedly set to invest $500m in Credit Suisse’s new investment bank. Bob Diamond‘s Atlas Merchant Capital is also looking to invest in CS First Boston, people familiar with the matter said.

FINANCIAL SERVICES

FCA proposes new rules on investing advice

The Financial Conduct Authority (FCA) is proposing new rules that would allow more banks, building societies and advisers to offer affordable advice to those looking to invest in an Isa. Savers with up to £20,000 to invest could get a form of streamlined advice under new rules that could be implemented in April 2024. Costs would be kept down by limiting the number of investments offered; lowering the level of qualifications that advisers are required to have; allowing savers to pay for advice in instalments; and letting professionals offer advice without analysing every aspect of the saver's finances first. The City watchdog has acknowledged that there is a risk of those with complex finances using the simplified service rather than seeking the more detailed advice they require. Meanwhile, Tom Selby, head of retirement policy at investment platform AJ Bell, has warned that advisers may have concerns over offering the cheaper advice, saying: “If something goes wrong, it is the firm offering the advice that will be on the hook.”

Insurers told to stop short-changing drivers

The Financial Conduct Authority (FCA) has issued a warning to insurers after it was found that some have been breaking rules by undervaluing customers’ cars when vehicles are written off. The watchdog said some consumers were offered a figure below the vehicle’s “fair market value” when their car was scrapped. Offering a price lower than fair market value is not allowed under FCA rules and the watchdog said it would take action against companies guilty of doing so. The steps it can take include public censure and issuing financial penalties. Sheldon Mills, the executive director of consumers and competition at the FCA, said: “We are watching the behaviour of firms closely and will act quickly to stop firms and prevent harm to consumers where we see it.”

Marshall Wace partners to share £720m payout

A group of 23 partners at hedge fund Marshall Wace are to share more than £720m after it generated its biggest ever annual profits. The investment firm saw revenues increase by 62% to more than £1.5bn, with this driven by a sharp rise in performance fees. The firm saw profits of £722.8m, with this up from £316m a year earlier.

£100m boost for British fintech

US-based technology investor TCV has led a £100m investment in UK challenger bank Allica. Allica was launched in 2020 to target SMEs and compete with the big four lenders of Lloyds, NatWest, HSBC and Barclays. It has lent £1.25bn so far and announced in September that it has become profitable on a monthly basis.

MANUFACTURING

Need for cyber-security increases for manufacturers

A survey by manufacturers organisation Make UK reveals two in five manufacturers have been a victims of cyber-crime over the last 12 months with one in five reporting a substantial financial loss, ranging from £50,000 to £250,000, as the result of an attack. Stephen Phipson, chief executive of Make UK, said: "Cost remains the main barrier to installing cyber protection, [but] the need [for it] makes mounting a defence essential."

REAL ESTATE

Prices could fall by a fifth, says Rightmove founder

Rightmove founder Harry Hill expects a slump in the housing market that could see prices fall by up to a fifth. Saying that he is “nervous” about a “potentially deep recession” and how the economy would emerge, he told the Mail on Sunday: “My view on the housing market is that it's going down in every direction. Transactions are going to go down. Prices are going to go down.” “The only question is by how much? Intuitively it feels like double figures on both, starting now,” he added. Mr Hill said that if a recession sees trade and business deteriorate, “we could see 20% price reductions.” Mr Hill said most homeowners are unlikely to be plunged into negative equity, noting that the housing market has had “a brilliant run” in recent years, meaning most property values remain well above purchase prices.

RETAIL

Record returns after Black Friday

Online retailers have had record volumes of goods returned after the Black Friday shopping weekend, according to ReBound, which specialises in clothing returns. While Barclaycard Payments shows that Black Friday and Cyber Monday sales were up 3.2% on last year, ReBound said returns were 8.4% higher in the week after Black Friday than a year ago. Laura Garrett of ReBound said: “How quickly after Black Friday that we saw the big spike come in is quite a surprise,” adding: “Normally it would take 12 days and we would expect it to occur towards the end of the first week of December." Noting that returns across November are “already significantly higher than last year,” Ms Garrett said the pace of post-Black Friday sales is “indicative of people being much more precious over their money and wanting their refunds back really quickly.”

Asos' interim CFO steps down

Asos has announced that interim chief financial officer Katy Mecklenburgh will leave the online retailer, despite having only taken over the role from Mat Dunn in October. Ms Mecklenburgh will stay in post for six months in line with her notice period before joining IT infrastructure group Softcat in 2023. She will replace Softcat’s current CFO, Graham Charlton, who is set to become CEO of the group next August.

SPORT

UEFA opens formal investigation into Juventus

UEFA has opened a formal investigation into Italian club Juventus for potential breaches of their Club Licensing and Financial Fair Play regulations. The investigation will look at information provided in the five financial years up to and including 2022. Last week saw the entire board of Juventus quit, with the club facing charges relating to false accounting and market manipulation, as well as an investigation by the Turin Public Prosecutor's Office.

ECONOMY

CBI warns that UK is about to fall into year-long recession

The latest economic forecast from the Confederation of Business Industry predicts Britain's economy will shrink 0.4% next year as inflation remains high and companies put investment on hold. The expected 0.4% fall in GDP is a downgrade from its previous forecast of 1% growth set in June. Business investment is expected to slump by 9% below pre-Covid pandemic levels by the end of 2024. CBI director-general Tony Danker warned: “[Companies] see potential growth opportunities, but a lack of ‘reasons to believe’ in the face of headwinds are causing them to pause investing.” To combat this, the CBI called on the Government to make Britain's post-Brexit work visa system more flexible and give greater tax incentives for investment. "We will see a lost decade of growth if action isn't taken. GDP is a simple multiplier of two factors: people and their productivity. But we don't have people we need, nor the productivity," Danker said.

BoE policymaker in recession and rates warning

Bank of England rate-setter Swati Dhingra has warned that higher interest rates could lead to a deeper and longer recession. Ms Dhingra, who last month called for half-percentage-point increase in interest rates while most of her colleagues opted for a 75 basis-point increase to 3%, said the Bank could deepen an expected recession if it pushed up borrowing costs further. She has warned that “you do see a much deeper and a longer recession with rates being much higher." Ms Dhingra, a member of the Bank’s Monetary Policy Committee, also suggested that there were few signs that demands for higher wages risked a wage-price spiral, highlighting that while a wage-price spiral would mean wages coming in above inflation, real wages are currently falling. Noting Bank of England surveys suggesting a fall in investment and employment over the next two years, she warned: “The economic slowdown is here."

OTHER

Bank of England sells £1.4bn of gilts

The Bank of England has sold £1.412bn of long-dated and index-linked gilts, taking the total volume of gilts it has sold since starting to unwind emergency purchases last week to £3.65bn. This marked the Bank’s third sale in the space of a week, with officials looking to unwind the £19.3bn of purchases it made when it stepped in to stabilise the bond market after prices slumped following September's mini-Budget.

Dividends up 7% to £347bn

The Janus Henderson Global Dividend Index shows that global dividend payouts rose by 7% to £347bn in Q3. As many as 90% of companies monitored by the investment house increased their dividends – or held them steady.

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