BANKING
UK Government to issue first green bonds
The Debt Management Office, which raises money for the UK Government, will issue its first green bond in just over two weeks to help to pay for the transition to net zero carbon emissions. The bond would be sold in the week beginning September 20, although it has yet to disclose the size of the issue. The Sunday Times notes that the Government has committed to raising at least £15bn in green gilts by April. Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC and JP Morgan will act as joint bookrunners for the sale. As part of a package of measures under the Government’s green financing framework, the UK is also issuing the world’s first retail green bond through National Savings & Investments, fixed for three years. Buyers will be able to invest between £100 and £100,000. Additionally, it will be mandatory for companies and banks to disclose their climate-related risks.
Emergency loan scheme reversed growth in alternative lending
Analysis by Innovate Finance has found that the pandemic had reversed years of growth among alternative lenders and resulted in large banks significantly increasing their market share. The fintech industry body said the emergency Bounce Back Loan Scheme saw £47.3bn worth of state-backed credit channelled to more than 1.5m companies. However, because non-bank lenders and small banks do not have access to cheap wholesale capital they struggled to access the scheme. Innovate Finance has now called for a new wholesale finance scheme and for reduced capital requirements for small and medium-sized banks, saying rules designed to tackle risk-taking by large banks were hurting smaller lenders.
Self-employed no longer left out of mortgage deals
Banks and lenders are no longer ruling out the self-employed for mortgages if they have taken government support during the pandemic. Halifax has said it will no longer ask workers if they had taken Self-Employment Income Support and would make eligibility calculations based on income over the past two years. Previously, business owners who said they had taken loans had found it hard to get a mortgage. Meanwhile, NatWest removed its ban on self-employed borrowers who had taken government grants last month, as long as the loans had not been in the past three months. HSBC has also stopped comparing business earnings with those from before the pandemic and will work out an average income over the past two years. Similarly, Santander is assessing income based on 2019-20 figures, instead of last year's.
Crosby: Social media giants profiting from fraud
The chief executive of TSB has hit out at social media companies accusing them of profiting from fraud. Savers were cheated out of £135.1m through investment scams last year, up 42% on the year before, figures from UK Finance show. Debbie Crosby told the Mail on Sunday: “Fraud is the next pandemic – it's the fastest-growing crime. So much fraud has begun with social media companies hosting advertisements that are fraudulent.” She goes on to demand a legal obligation on tech firms to vet advertisers, take down scam sites and be officially measured on how quickly they do this. Crosby adds that TSB has a 98% refund rate for victims of scams and calls for rivals to publish their level of protection and reimbursement.
Bailey tells BoE staff they can work at home all week
The Governor of the Bank of England has told staff they will not be required to go into the office at all, reversing a plan for hybrid working that would have seen employees compelled to go into the office at least once a week. The move by Andrew Bailey has left some workers at Threadneedle Street frustrated, with younger workers losing out on dealmaking and networking opportunities along with mentoring by their more experienced colleagues.
Big banks pay less than 15% tax on profits
Analysis of leading European banks conducted by the independent EU Tax Observatory, has found that about £17bn, or 14% of their total profits, is being booked in tax havens. Banks said to enjoy a particularly low effective tax rate on their profits, of less than 15%, include Barclays, HSBC and NatWest. The effective tax rate is calculated as the ratio between aggregated tax paid and profit posted, across all jurisdictions.
PRIVATE EQUITY
Bridgepoint went public. Executive rewards stayed private
The FT reports on how private equity firm Bridgepoint can avoid revealing the amount of money executives receive in “carried interest” payments, a 20% share of profits in the funds their firms raise and invest. The paper notes that the Financial Conduct Authority requires UK-listed companies to disclose the total pay of senior managers “for services in all capacities to the issuer and its subsidiaries”. The Mail’s Alex Brummer also comments on the issue, pointing out that Bridgepoint regards companies in which it has invested as separate entities so there is no need to declare income. This is “a peculiar form of accounting” he continues, which “should be a matter for regulators at the Financial Conduct Authority and Financial Reporting Council.”
INTERNATIONAL
Wells Fargo commercial chief to retire
Perry Pelos, the chief executive officer of Wells Fargo’s commercial banking unit, will retire in April. Kyle Hranicky, the head of the firm's middle marketing banking unit, housed within the commercial banking unit, will succeed Mr Pelos, effective immediately.
Global dealmaking set to break records after frenzied summer
There has been a surge in dealmaking over August with $500bn of transactions made globally, up from $289bn in the same month last year, and $275bn in 2019.
AVIATION
Causeway a headache for Rolls, but nothing more
Rolls-Royce has come under pressure from US-based shareholder Causeway Capital Management to offload its power systems unit and focus entirely on aerospace and defence. Portfolio manager Jonathan Eng also questioned whether the directors were the right people to steer the group when “sticky situations” arose. But others argue diversification protects Rolls while Causeway bought in to Rolls in 2019 and they are “underwater and probably just frustrated”.
CONSTRUCTION
Berkeley warns of construction cost inflation
Berkeley has issued a warning over construction cost inflation on Friday stating that the homebuilder was mindful of ongoing supply chain and labour market issues due to Brexit and the pandemic. The company said it expects pre-tax profit for the year ending April 30, 2022 to be at par or ahead of the corresponding year-ago period.
Vistry ties bosses' pay to carbon cutting efforts
Executive pay at Vistry will be linked to sustainability targets from next year onward, the housebuilder has confirmed. The company has also said it will hand over its first net-zero carbon homes this year, which it hopes to become the standard by 2030.
FINANCIAL SERVICES
Treasury urged to reveal buy now, pay later regulation
The Treasury is refusing to confirm when it will publish rules regulating the buy now, pay later industry in Britain, which took £2.7bn in payments last year from borrowers using services such as Klarna, Clearpay and Laybuy. In February John Glen, the Treasury minister, wrote to Chris Woolard of the FCA, whose review had concluded that pay-later credit had grown rapidly and the Government needed to take "swift action to bring these products into regulation". Glen said: "I intend to take forward legislation as a matter of priority." Clare Moriarty, the chief executive of Citizens Advice, said: "While we welcome the Treasury's pledge to regulate, we need to see action. Every day that passes without these rules being brought in leaves consumers unprotected and unaware."
Covid-related life insurance payouts exceed £125m
COVID-19-related insurance claims for group life policies reached £125.6m for the first half of the year, compared with £93m for the whole of 2020, according to industry body, Group Risk Development (Grid). The Office for National Statistics said that about one in five deaths among the working population were due to Covid. Katherine Moxham from Grid said: “Life assurance is one of the most affordable employee benefits, and this would have been hugely valued by those that have been affected.”
HEALTHCARE
EU ends dispute with AstraZeneca over vaccine deliveries
The European Commission and AstraZeneca have reached a settlement over delayed COVID-19 vaccines, meaning the Anglo-Swedish drugmaker will no longer face crippling penalties for delivery failures. Under the settlement, AstraZeneca will have until the end of the first quarter of 2022 to finish its deliveries to the EU, after missing a deadline to deliver the doses by the end of June.
LEISURE & HOSPITALITY
Zahawi confirms mandatory vaccine passports for night clubs
Nadhim Zahawi, the UK’s vaccines minister, has confirmed that the Government will require mandatory Covid certification for those attending night clubs or other large events. The FT notes opposition to the plans from the Night Time Industries Association, which has warned vaccine passports could “cripple the industry”.
Plans for outdoor hospitality welcomed
The Government has launched a consultation over plans to make permanent some of the changes for outdoor hospitality introduced during the pandemic. The proposals would allow street markets to open all year, while pubs, cafes and restaurants would also be able to keep new structures such as marquees and additional seating.
MANUFACTURING
America could retaliate if UK blocks US takeovers, Melrose boss warns
The CEO of Melrose Industries, Simon Peckham, has said the Government should not intervene in US takeovers of British companies arguing that the UK must protect its reputation as an open, trading economy. His comments come as a range of strategically important UK firms are snapped up by US private equity groups. But Peckham says instead of blocking foreign takeovers of UK companies, the Government should be encouraging British companies to buy up firms abroad.
MEDIA & ENTERTAINMENT
Serious Fraud Office probes telecoms giant O2
The Serious Fraud Office is investigating telecom company O2 over “possible violations of anti-bribery laws and regulations”, the Telegraph reports. Confirmation of the probe was revealed in a quarterly financial statement from the company. O2 said it had recorded an accrual in its 2019 account on the basis of its estimate of the potential outcome of the investigation, but was unable to provide more details.
Reddit lines up $15bn New York listing
Online message board operator Reddit is looking for advisers to explore an initial public offering in New York early next year. The social media network was valued at $10bn in its latest funding round last month, in which it raised $700m to fund growth
REAL ESTATE
Lloyds faces court battle over mortgages tied to property value
Bank of Scotland, now part of Lloyds, is defending itself against claims from 150 homeowners who argue the shared appreciation mortgages they agreed with the bank in the late 1990s were “fundamentally unsuitable” for consumers and “inherently unfair” under the terms of the 1974 Consumer Credit Act. The mortgages permitted borrowers to take out a loan against their house provided the bank received a percentage of the equity growth when the property was sold. However, the claimants argue that the percentage of equity taken by the bank was “grossly excessive” and the products have “trapped [them] in their homes until their deaths”.
RETAIL
Morrisons’ results unlikely to dampen bidders' enthusiasm
Morrisons is set to publish its half-year results on Thursday, alongside an update on the £7bn takeover offer from US group Clayton, Dubilier & Rice, which counts former Tesco boss Sir Terry Leahy among its senior advisers. The Observer comments that despite profits likely to remain under pressure, the retailer remains attractive for private equity thanks to its large property portfolio and a variety of options for future growth, including online. It notes that the group’s strength is its substantial property portfolio, which includes 85% of its supermarkets.
Asda to open more than 200 petrol station stores
Asda has announced plans to open nearly 230 convenience stores at petrol stations. In the first formal update since the supermarket was sold to petrol station billionaires Mohsin and Zuber Issa and TDR Capital, the company said 28 of its new “Asda on the Move” stores would open this year, with a target of reaching 200 by the end of 2022. They will be rolled out at petrol forecourts controlled by EG Group, the Issa brothers' business.
ECONOMY
Services sector falls back to six-month low
Staff shortages, supply chain issues and lower demand from consumers meant a loss of momentum for the UK service sector last month, according to the latest IHS Markit/CIPS Services PMI, which fell from 59.6 to 55.0 during the month. Although the index is still above the 50 mark that separates growth from contraction, it registered its lowest reading for six months. “The service sector lost momentum for the third consecutive month as the impact of looser pandemic restrictions faded in August,” said Tim Moore, economics director at IHS Markit. “Many businesses suffered constraints on growth due to staff shortages, self-isolation rules and stretched supply chain capacity.” However, business optimism edged up to a three-month high during August. Duncan Brock, group director at the Chartered Institute of Procurement & Supply commented: “Brexit continued to make its mark and supply shortages and logistics difficulties will pile on the pressure in the coming months but service companies remained buoyant about future opportunities."
Inflation set to surge this autumn
Business leaders have warned that the UK is facing a “perfect storm” of worker shortages and problems with global supply chains that would lead to a surge in inflation within months. UK shop prices rose last month, with retailers warning the cost of filling up the trolley will climb further if disruption continues. Meanwhile, gas and electricity prices have soared to record highs, transport costs have rocketed and factory input prices were up nearly 10% in the year to July.
OTHER
Britain’s financial governance – run by Goldmans?
The Independent’s Chris Blackhurst says the appointment of Huw Pill, a former Goldman Sachs employee at the Bank of England as chief economist is not a good look. Blackhurst points out that Pill reports to Ben Broadbent, deputy governor for monetary policy and ex-Goldman Sachs. Broadbent was appointed by Mark Carney, the previous governor and ex-Goldman Sachs. The Chancellor is ex-Goldman Sachs and if current governor Andrew Bailey should be displeased with the BBC’s coverage of the Bank, he can complain to Richard Sharp, formerly of the Bank’s financial policy committee and now the corporation’s chair and ex-Goldman Sachs. “JPMorgan, Deutsche, Citigroup, Morgan Stanley and the rest might as well not exist where the Bank of England is concerned,” Blackhurst concludes.