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Daily News Roundup: Monday, 7th January 2019

Posted: 7th January 2019

BANKING

Household debt continues to rise

New figures from the Bank of England show that Britons owe £72.5bn on credit cards, a 7.9% increase on a year ago. The data shows that each household in the UK now has an average of £2,688 unpaid on credit cards. If personal loans are included, each household has almost £8,000 of outstanding consumer credit. Consumer credit and other loans grew 7.1% in the year to the end of November, hitting £215.4bn. Separate figures from the TUC show that UK homes now owe an average of £15,385 to credit card firms, banks and other lenders. The TUC general secretary, Frances O’Grady, said: “Household debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red.”

TSB IT report delayed

TSB has failed to publish the first part of a long-awaited report into the IT meltdown it suffered when it tried to move its 5.5m customers on to a new IT system last April. The bank had hoped to publish the report on preparation for migration by December 25. A TSB spokesman said Slaughter and May, the law firm it commissioned to scrutinise the issue and the bank’s response, “is working expeditiously to deliver a report as soon as is practicably possible.”

US banks lead on bonuses and M&A deals

The Telegraph’s Lucy Burton looks at bankers’ incomes, saying political pressure and concerns over shareholder backlashes means UK and European banks are expected to increase bonuses far less than US rivals this year. Ms Burton also looks at a “widening gap” between US and European banks, saying US firms continue to secure work on Europe’s most lucrative deals. She cites Dealogic research showing that Goldman Sachs, JP Morgan and Morgan Stanley dominated the M&A rankings on both sides of the Atlantic in 2018, with Goldman advising on more M&A deals involving UK businesses than Barclays and Deutsche Bank combined.

Cable hits out at Green Bank plan

Sir Vince Cable has spoken out over the privatisation of the Green Investment Bank (GIB) after accounts filed at Companies House revealed an intention to transform it into a global green investor, moving its focus away from the UK. Liberal Democrat leader Sir Vince, who founded the bank in 2012 when he was Business Secretary, said: “This is absolutely not what the GIB was for ... It was never intended to be a global bank.” The GIB was last year sold to Australian bank Macquarie for £1.6bn and renamed it the Green Investment Group. Separately, chairman of the GIB’s board of trustees Peter Young recently said the trustees are “disappointed by the relatively low UK investment levels".

Former Barclays bankers face trial

Former Barclays chief executive John Varley and three former colleagues will stand trial this week on charges of committing fraud during the banking crisis in 2008. The case revolves around Barclays’ two fundraisings in the Middle East in June and October 2008, when the bank scrambled to tap private investors for £12bn. The FT notes that the Serious Fraud Office has made some last minute personnel changes to ensure the case is properly overseen. Mark Thompson, its chief operating officer, has been named as the official overseeing the case.

Older savers miss out on insurance perk

The Sunday Times reports that while many paid-for current accounts offer customers free travel insurance, most refuse to cover older holidaymakers. Only Ulster Bank offers over-80s a travel insurance add-on, while RBS and NatWest will only cover over-70s holding certain accounts if they pay a £75 annual fee. First Direct has an upper age of 69 on its paid-for current account, while Nationwide and Yorkshire Bank have a limit of 74. It is 79 at Barclays and Bank of Scotland.

Savings set for disruption

Chris Hill, chief executive at Hargreaves Lansdown, says innovative marketplace savings services are “taking the shackles off” the cash savings market by allowing savers to access all of their savings through one portal. He says technology means switching between different banks and accounts “becomes a joy”, while with banks and building societies competing for a person’s savings, users get much better rates. Mr Hill adds that with digital disruptors having already transformed a number of sectors, “savings should be next”.

Chetwood seeks to lure customers from big UK banks

Chetwood Financial, which is backed by Elliott Management, has received a full UK banking licence. The fintech lender said it would launch new innovative products.

Standard Chartered still on the hook over Iran deals

Standard Chartered is facing a further three months on probation with US authorities as it haggles over a £1.2bn fine for allegedly busting sanctions in Iran.

PRIVATE EQUITY

Britain misses out on big private equity deals

Research by Unquote Data, a European private equity specialist, has found that the value of higher-end private equity deals in Britain fell last year, despite a global increase, because investors are shying away from doing business in the country amid Brexit uncertainty. The value of private equity deals in the UK was down 34% last year, at €27.2bn, compared with 2017. Overall in Europe there were 959 private equity buyouts last year with a total value of €174bn.

Abraaj nears deal to offload K-Electric stake to Chinese

Abraaj is close to an agreement with the Pakistan government that will allow the private equity group to sell its 66% stake in K-Electric to Shanghai Electric Power.

INTERNATIONAL

Credit Suisse pledges cooperation in fraud probe

Credit Suisse has pledged to cooperate with a US investigation into a $2bn fraud which saw three former employees arrested last week. The bank said the suspects, Andrew Pearse, Surjan Singh and Detelina Subeva, "sought to hide these activities from the bank". It also said it was not a target of the US Justice Department indictment. Charges filed in the US claim the suspects helped officials in Mozambique secure dubious loans, with Mozambique's former finance minister Manuel Chang also facing charges.

Beijing to cut bank reserves

China's central bank is cutting the share of deposits that commercial banks must hold in reserve, a move that will pump $117bn into the banking system. The cut, which is designed to stimulate lending and lift the economy, is the fifth the People's Bank of China has actioned in the space of a year

UBS in talks to hire ex-BofA investment banking chief

UBS has been in contact with former Bank of America investment banking boss Christian Meissner over the possibility of taking a senior role that could put him in line to succeed chief executive Sergio Ermotti.

Banks cut US federal employees financial slack during shutdown

Banks in the US are offering borrowers affected by the partial shutdown of the government forbearance on loan payments and fees.

Eurozone is learning to deal with failed banks, regulator says

The FT carries an interview with Elke König, who heads the Single Resolution Board, which was set up to handle how the eurozone handles bank failures.

Investment banks muscle in on Europe’s ETF battle

The FT examines how global lenders have increased their staffing and technology to gain a trading edge in Europe’s fund market.

AUTOMOTIVE

Car sales expected to fall

The Society of Motor Manufacturers and Traders is expected to report today that new car registrations in Britain fell by 7% last year to below 2.37m. The drop comes after a near-6% decline to 2.54m in 2017. The decline is being blamed on a combination of uncertainties about the future of diesel, Brexit and wider economic concerns.

AVIATION

Compensation rears up as bête noire for Ryanair

The FT says senior figures in aviation are calling for reform to regulations over compensation, highlighting that the Civil Aviation Authority is taking enforcement action against Ryanair over flight disruption last summer.

Airbus under spotlight with race to hit delivery target

Airbus is facing a test of its credibility this week when it reveals whether it has reached a target to deliver around 800 aircraft last year.

FINANCIAL SERVICES

More firms look at leaving as Brexit approaches

A new report has found that one in three financial services companies in Britain is considering or has confirmed plans to relocate its operations because of Brexit. The report found that 36% of the UK’s financial services firms are deliberating or finalising plans to move. The figure rises to 56% for banks and brokerages. The report also suggested that as many as 7,000 jobs could be relocated to Europe in the near future and that 2,000 European roles had been or would be created by financial services firms in response to Brexit.

Fresh doubts over thousands of pension transfers

The Financial Conduct Authority has revealed nearly 5,000 pension transfers have been carried out by companies that later quit the market after the regulator uncovered problems with their advice.

Rothesay eyes UK arm of Swiss Re

Rothesay Life is said to be considering a £3.5bn takeover bid for the UK arm of insurance firm Swiss Re. It is reported that Rothesay approached Swiss Re over a potential offer for its ReAssure unit, with it not known whether a formal bid will be made.

Pension mis-selling pay-outs double in 2018

Data from the Financial Services Compensation Scheme shows the pay-outs to savers wrongly advised to give up company pensions exceeded £40m in 2018, up from £37.5m in 2017 and £20m in 2016.

FinnCap boss seeks to tackle City’s culture

Sam Smith, the founder and CEO of FinnCap, has spoken out over the “awful” working culture in big City firms and said the industry has a “long way to go” to get women into the boardroom. Smith said that having progressive maternity policies and encouraging flexible working is key to increasing the number of women in Britain's boardroom. “For me, it's about the culture in the firm and wanting to have a diverse workforce - it's not just about putting a few women on the board,” she explained.

Natixis aims to join asset management push into China

Natixis Investment Managers is seeking acquisition or partnership possibilities as it looks to break into China’s asset management market. UBS forecasts that annual fees for running Chinese mutual funds will reach $42bn by 2025.

Fund managers brace for revenue squeeze

Analysts are predicting that an expected slowdown in revenue growth will force more asset managers to pursue mergers and acquisitions to “build scale” to create larger businesses.

More credit unions go bust

Nine credit unions went bust last year, the highest number of collapses since 2010 when 10 went into default. It brings the total that have gone under in the past decade to 73.

HEALTHCARE

Alphabet’s Verily raises $1bn

Verily, Alphabet’s life sciences arm, has raised $1bn from external investors. Verily drew investment from backers including private equity firm Silver Lake. The firm said it would use the new money to invest in “strategic partnerships” and develop its business globally, adding that it could potentially make acquisitions.

LEISURE AND HOSPITALITY

LDC backs Zip World

Adventure company Zip World has secured investment from LDC, valuing the company at £45m. Zip World said the funding would help it to expand across the UK and overseas.

MANUFACTURING

Administration for Monarch engineering arm

Monarch Aircraft Engineering, owned by Greybull Capital, has fallen into administration. The engineering arm of collapsed airline Monarch said its aircraft maintenance services business was unsustainable. Operations will be largely transferred to Morson Group. Flybe has stepped in to secure around a third of the 182 staff roles which have been saved.

REAL ESTATE

Nationwide: House price growth slowest in nearly six years

UK house prices grew at an annual pace of 0.5% in December, compared to 2.6% in 2017, according to Nationwide Building Society – the slowest annual rate since February 2013. Northern Ireland saw the biggest house price rises, up 5.8%. Prices in Wales climbed 4%, in Scotland they were up 0.9% and in England they rose 0.7%. Across the UK, the average house price stood at £212,281 in December, down from £214,044 in November.

November mortgage approvals at seven-month low

The number of mortgage approvals fell 5% to a seven-month low in November, to 63,728 from 66,709 the previous month, according to new figures from the Bank of England. Mortgage lending rose by £3.5bn in the same month, lower than the £4.1bn recorded in October but in line with averages since 2016.

ECONOMY

Sluggish services growth points to stagnant economy

Sluggish growth in the UK’s dominant services sector suggests the economy barely expanded in the final three months of last year, with business confidence also falling to its second lowest level since March 2009. Services companies reported a “subdued end” to 2018, according to the latest business survey from IHS Markit.

OTHER

Euro needs reform to survive another crisis

Twenty years on from the launch of the euro, the Economist says the currency needs reforming if it is to survive the next 20 years. It says political will meant that just enough was done to ensure that the euro survived the debt crisis.

Biometrics is the future for credit card security

The Telegraph interviews Ajay Bhalla, Mastercard’s global head of cyber security. In the piece, Bhalla predicts that the future of financial services will be in AI and securing payments with biometric technology, using fingerprint and face scanners.

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