BANKING
Default warning points to £10bn losses for lenders
Banks could see losses of up to £10bn as support measures rolled out amid the coronavirus crisis start coming to an end. There are concerns that as payment holidays on loans come to an end, this will hit borrowers who face the prospect of job losses. Barclays research shows banks have granted payment holidays on loans worth more than £250bn and have paused payments on 17% of mortgages, 8% of personal loans and 2% of credit cards – as well as granting a break on interest charges for 27m overdrafts. The study shows that, if a quarter of customers default, Lloyds faces estimated losses of £1.7bn, £137m, £242m and £165m on mortgages, credit cards, personal loans and motor finance respectively, although it has the best prospects of all lenders due to the quality of its loan book. Nationwide, RBS and HSBC stand to lose £1.1bn, £989bn and £742m, respectively, while Virgin Money faces losses of £368m. Meanwhile, the Guardian reports that UK Finance and the British Business Bank are preparing a code of conduct for pursuing businesses that default on taxpayer-backed loans. Loans granted under the coronavirus business interruption loan scheme and bounce-back loan scheme for SMEs have a 12-month repayment-free period, and this will run out in spring 2021 for the first batch.
Banks without dividends 'not investible'
RBS chairman Howard Davies has warned that UK banks are "not investible" after lenders were pushed to scrap dividends to see them through the coronavirus crisis. He suggested the Bank of England (BoE) must lift curbs on dividend payouts by the autumn as banks "could not suspend payouts to investors indefinitely." He added that the “framework of capital regulation needs to be re-established … because we can't stay just in this kind of suspended animation in terms of what we can distribute." In March, the BoE effectively barred lenders from returning cash to investors through dividends and share buybacks this year, doing so to ensure banks have enough firepower to support the economy through the coronavirus crisis.
Four in five caught out by bank scams
Research by TSB shows that four in five people are tricked by scam bank messages. The study saw 2,000 people presented with texts and emails from companies such as banks and mobile phone operators, half of which were fake. Only 18% of people could correctly identify all of the messages which were scams, with this falling to 9% among those in the 18-24 age bracket. Those who could not spot the scams failed to identify red flags including spelling mistakes, links to unofficial websites and correspondence asking for personal details. It was found that 37% of people would respond to at least one of the fake messages.
Lockdown hits ATMs
About 12% of bank branches and cash machines have closed during the COVID-19 lockdown, with the closures driven by staff shortages, social distancing and a fall in demand for cash. Many ATMs inside airports, pubs and shops closed, according to network operator Link. With most closures in areas that are not heavily populated, less than 1% of the population lost access to cash. Analysis shows there were 28.4m cash withdrawals in the last week of June compared to 53.8m in the same week last year, a 47% fall. Elsewhere, cash machine maker Diebold Nixdorf expects the coronavirus crisis to result in cash transactions falling by 30% over the whole of 2020 and by up to another 10% in 2021.
Zopa to offer rates based on credit ratings
Peer-to-peer lender Zopa is to become the first lender to offer lower credit card interest rates to those who have better credit ratings. It is set to release a credit card with interest rates as low as 9.9%. CEO Jaidev Janardana commented that while many app-based banks, such as Monzo and Starling, have created attractive current account features, challengers have so far steered clear of credit cards as they do not have the lending experience Zopa does.
Booker joins start-up
Niall Booker, a former Co-operative Bank CEO who has also held senior roles at HSBC, has become chairman of start-up digital lender Monument. The new bank, which has applied for a banking licence, will lend up to £2m to customers through an internet-only application, targeting wealthy customers that have traditionally opted to bank with the likes of Coutts, C Hoare & Co, Hampden & Co and Weatherbys.
Banks told to safeguard HK staff
HSBC and Standard Chartered have been warned they must safeguard workers in Hong Kong after backing a law which allows police to arrest dissidents. Lisa Nandy, shadow foreign secretary, said the banks had a "particular responsibility to their employees in Hong Kong given they added their weight to the Chinese government at a time when the rest of the world was trying to prevent this from happening".
Co-operative Bank sees online issues
Co-operative Bank’s business customers have criticised a new online banking service which has been branded "unusable". The lender said the platform was encountering "issues" and apologised, blaming the problems on high demand from its existing customers and new clients during the coronavirus pandemic.
PRIVATE EQUITY
Venture capitalists call for rethink on aid rules
The Venture Capital Trust Association says members could invest around £500m in early stage small businesses being hit by the coronavirus crisis if regulations were relaxed, boosting firms and saving jobs.
Masmovil buyers secure leveraged loan
Cinven, KKR and Providence have secured a €2bn loan towards the proposed acquisition of Spanish telecoms firm Masmovil. The seven-year loan is the first leveraged loan completed after the COVID-19 crisis.
INTERNATIONAL
Commerzbank chair and CEO to quit in Cerberus row
Commerzbank chairman Stefan Schmittmann is resigning amid the bank’s dispute over its strategy with private equity group Cerberus, its second-biggest shareholder. CEO Martin Zielke has also offered to stand down, saying: “I would like to open the way for a fresh start.”
HSBC to invest further in China
HSBC is ramping up its operations in China, making investments in its wealth management and insurance operations in the country.
MEPs rebel against bank watchdog in protest at gender balance
EU lawmakers have voted against French regulator François-Louis Michaud becoming the European Banking Authority’s executive director, with the vote seemingly reflecting concerns over a lack of gender balance in financial policymaking.
Cyprus watchdog fines Commerzbank
Cyprus's securities regulator, the Cyprus Securities and Exchange Commission, has imposed a €650,000 fine on Commerzbank due to the German banks role in transactions carried out by Cyprus Popular Bank that may have broken laws prohibiting a company from purchasing its own stock.
AVIATION
Air France set to cut jobs
Air France-KLM plans to cut more than 7,500 jobs at its French arm, with 6,560 staff at Air France set to lose their jobs alongside 1,020 at regional carrier Hop over the next three years.
FINANCIAL SERVICES
FCA looks to extend high-cost credit payment holidays
The Financial Conduct Authority (FCA) has proposed an extension of the freeze on high-cost credit payments that would see the pause, which is due to end this month, extended for a further three months to October 31. The extension, which would see a further payment deferral or reduced payments, would involve firms offering high-cost credit including motor finance and rent-to own, buy-now pay-later schemes and pawnbrokers. Under the plan, those yet to request a payment holiday would be able to do so until the end of October 31, with opting to do so not affecting credit ratings.
Hargreaves owns 25% stake in best-buy fund
Hargreaves Lansdown managers own a quarter of a fund that it included in its latest best-buy list of products, prompting concerns about a conflict of interest. The Artemis Corporate Bond fund was one of 17 new funds in the Wealth Shortlist that has replaced Hargreaves’s Wealth 50 list. However, it has emerged that 25% of the £276m Artemis fund is owned by one of Hargreaves Lansdown’s own multi-manager funds — HL Multi Manager Strategic Bond.
Amigo sees complaints deadline extended
The Financial Conduct Authority (FCA) has extended a deadline for Amigo to deal with a backlog of around 9,000 customer complaints about high-interest loans. The FCA said Amigo will have until October 30 to go through past cases, an extension on its previous deadline of June 26. The firm said that the cost of addressing the problem would be “substantially higher” than a previous estimate of £35m.
LEISURE AND HOSPITALITY
Restaurant group on the menu for investment firm
The Times reports that Azzurri, the casual dining group behind the Ask Italian and Zizzi chains, may be put through a pre-pack administration to facilitate a sale of the business to an American investment firm. Azzurri is understood to be in negotiations over a sale to Towerbrook Capital Partners.
MANUFACTURING
Rolls-Royce reviewing balance sheet
Aerospace engineer Rolls-Royce is looking at options to strengthen its balance sheet and push toward recovery after the coronavirus pandemic. The firm is reportedly examining options including raising equity and disposals, with the sale of its ITP Aero unit said to be one of those being considered. The firm said its financial position and liquidity remained strong.
REAL ESTATE
Stamp duty holiday looks to boost home sales
Chancellor Rishi Sunak is expected to this week announce a temporary stamp duty holiday that will set a threshold between £300,000 and £500,000. The move, which will seek to reignite the housing market in the wake of the COVID-19 crisis, comes with Halifax data showing property values slipped 0.2% in May, a third consecutive monthly decline. HMRC data shows that April saw just 38,060 transactions completed, which is less than half the number seen in April 2019.
ECONOMY
Consumer confidence rising
UK consumer confidence is beginning to pick up, according to Growth from Knowledge’s (GfK) fourth flash report, which indicates that, with lockdown restrictions easing, confidence increased three points over the last two weeks to -27. The small rise, recorded between 18-26 June, comes after the index fell to its lowest ever level of -36 last month. The overall score is based on five measures, four of which improved over the 14-day period. The biggest rises were in the major purchase index, which climbed seven points to -25, and in the 12-month general economic situation, which rose six points to -42.
Services sector sees turnaround
The IHS Markit/Cips PMI for the services sector rebounded to a reading of 47.1 in June from 29 in May, which had followed an all-time low of 13.4 in April on a scale where any reading below 50 denotes contraction.
OTHER
Inheritance battles soar
Ministry of Justice figures show that the number of inheritance battles at the High Court hit an all-time high last year, with 188 cases brought by people claiming they were entitled to a share or a larger portion of an estate in 2019. This marks a 47% increase on the 128 claims made in 2018, with the Sunday Times saying there has been a greater incentive to challenge wills as increasing house prices over recent years have driven up the value of estates, while an increase in unmarried couples, who do not have automatic legal inheritance rights, may have contributed to the rise in case numbers.