BANKING
Banks prepare for new bounce back loans boom
Following the decision by the Chancellor to extend the deadline for applications for bounce back loans and permit top-up loans from November to January, banks are bracing for a flood of small business customers seeking access to the cash. NatWest estimated that about 100,000 businesses, or a third of its existing bounce back loan scheme (BBLS) customers, could be eligible for a top-up. Meanwhile, concerns have been raised over the high interest rates charged on debt accrued through the coronavirus business interruption loan scheme (CBILS), which can be as high as 14.99%, and big businesses are calling for the corporate financing facility (CCFF) to be extended for five years. The Guardian reports on concerns that, if the number of BBLS accredited lenders shrinks, there will be a sharp rise in small businesses unable to access funds this winter.
Reduced risk appetite causes borrowing rates to rise sharply
Interest rates for riskier borrowing hit multi-year highs during the pandemic, with economists warning that rate cuts were failing to filter through to borrowers. The average interest rate on overdrafts for households has leapt 10 percentage points since February, while costs on high loan-to-value mortgages have risen as much as 140 basis points. Sanjay Raja, Deutsche UK economist, says policymakers at Threadneedle Street may need to intervene to ease credit conditions for borrowers. The Sunday Telegraph notes that a Bank of England survey found lenders were bracing for a sharp rise in mortgage defaults in the fourth quarter.
Time for challenger banks to focus on profitability
The Telegraph reports on how challenger banks are dumping expensive campaigns to lure new customers and focusing on achieving profitability as some experts suggest investor patience is starting to wear thin. Lending is the next obvious step for fintechs if they want to increase revenue, says David Brear, the CEO of fintech consultancy 11:FS. “If all of them don't have fully fledged lending products in the market by the middle of next year, I'll eat my hat.” But Brear adds that the culture at many digital banks is “socialistic” and so for some employees a shift into lending could “jar a little bit.”
Negative interest rates could see lending cut, Broadbent warns
Ben Broadbent, a deputy governor of the Bank of England, has warned that negative interest rates could put pressure on banks’ balance sheets, causing them to cut lending in an attempt to protect margins. “Then the question is: are those pressures enough to mean that these mitigating effects - the downside risks of cutting rates below zero - outweigh the benefits?” Mr Broadbent said in a presentation organised by the Bank. The Times notes that the central bank’s monetary policy committee has given mixed signals on where the Bank is leaning on the issue.
Payment holidays extended
The payment holidays for mortgages, personal loans, credit cards and car finance offered to those needing financial help during the pandemic have been extended for a further six months. UK Finance said that about 162,000 mortgage holders were deferring payments last month. The Financial Conduct Authority said lenders had been told they had to offer sustainable and tailored support to customers and that it would consider feedback calling for the six-month limit to be extended.
Capita creates savings app for employees
Outsourcing firm Capita has created a personal finance app for its 45,000 employees that they can use to pool their savings to access the best rates. The app, managed by software company Level, has a "sweep" function, allowing users to automatically transfer funds from their monthly salary into a savings account.
Barclays ordered to repay millions on timeshare loans in Malta
The Financial Conduct Authority has ordered Barclays to repay millions of pounds in interest on improperly sold timeshare loans in Malta. A further investigation could force the bank to reimburse debt payments in full.
Co-op halves losses to £68m
The Co-operative Bank has reported a £68m loss for the first nine months of the year, down from nearly £119m a year earlier. The bank said on Friday that it had taken an impairment charge of £16.7m, largely because of the impacts of COVID-19.
PRIVATE EQUITY
Berkshire Hathaway rides to $30bn profit on back of investment portfolio
Berkshire Hathaway reported an 82% increase in profits from a year ago to $30bn for the third quarter driven by the company’s investment portfolio, which swelled by $25bn for the period.
Private equity firms circle Reebok
Private equity firms Permira and Triton have shown an interest in US sports outfitter Reebok, as its corporate parent Adidas looks to end the relationship.
Myners joins board of Zouk Capital
Private equity firm Zouk Capital, which invests in the sustainable economy, has appointed the former City minister Paul Myners to its board.
INTERNATIONAL
Goldman Sachs plans to move $60bn in assets from UK to Germany
Goldman Sachs is planning to shift between $40bn to $60bn from the UK to its subsidiary in Frankfurt ahead of the end of the transition period, after which time the City will be stripped of its EU passporting rights. The Telegraph notes that JP Morgan is planning to move around $230bn worth of assets from the UK to Frankfurt before the end of this year while Barclays last year triggered plans to shift £166bn (€190bn) into its Irish subsidiary.
Deutsche Bank rebuffed ECB over call for action on leveraged finance
A request by the European Central Bank that Deutsche Bank suspend key parts of its leveraged finance operation over risk management concerns was rejected by the lender, which described the demands as “impractical”.
Erdogan ousts head of Turkish central bank after lira plunge
Recep Tayyip Erdogan has fired Murat Uysal, the governor of Turkey’s central bank, and replaced him with a former finance minister after a record slump in the lira in recent months.
WhatsApp gets green light to launch payments service in India
Facebook has announced that WhatsApp has been approved to launch its payments service across India after satisfying regulatory demands.
CONSTRUCTION
Redrow plans to reinstate dividend
Redrow is pressing ahead with plans to exit the London market as the developer focuses on the post-pandemic changes in consumer behaviour, adding that it will reinstate its dividend at its half-year results.
FINANCIAL SERVICES
Review of listing structures aims to motivate more London floats
Lord Hill, former British commissioner to the EU and a non-executive director of the Treasury, is in line to lead a review into stock market listing rules as the Chancellor seeks to attract more tech start-ups to the City after Brexit. UK start-ups such as online fashion retailer FarFetch have picked the US over London, the Sunday Telegraph reports, with companies saying it is not just the listings regime that is attractive but the ease with which they can sell themselves to investors. Proposals likely to be considered by the review include reducing the minimum number of shares that must be sold publicly as part of a premium listing, and allowing dual-class share structures. The paper suggests both moves could raise questions over governance and control.
Lloyd’s boss ‘frustrated’ at lack of partnership on Covid
Lloyd’s of London CEO John Neal has expressed his frustration that more progress had not been made on forming a partnership between insurers and the Government to cover further losses likely to be suffered by businesses in the coming months.
Last-minute fundraising expected ahead of rule change
A relaxation of fundraising rules comes to an end in three weeks, prompting the City to brace itself for a second wave of companies seeking funds from the market.
Scottish Widows applies ethics pressure
Edinburgh-based pensions and investment group Scottish Widows is to sell £440m worth of shares in companies with questionable policies over issues such as climate change and weapons manufacturing.
Amigo Loans on hold
Sub-prime lender Amigo Loans will not restart lending until next year after the Financial Conduct Authority said the company needed to make further progress on resolving complaints.
Funds cut cash holdings to pre-pandemic levels
Fund managers have cut their cash positions back to their pre-coronavirus levels, leading some to worry if they could cope with a fresh surge of investor redemptions.
LEISURE & HOSPITALITY
Pizza Express appoints Leighton as chair amid restructuring deal
Pizza Express has appointed former Asda boss Allan Leighton as chairman and secured a deal to reduce its debt pile by £400m. Leighton, who is also chairman of the Co-operative Group, will work alongside former Wagamama boss David Campbell, who has been made CEO.
MANUFACTURING
Hovis bought by private equity firm Endless after bidding war
Premier Foods has agreed a £37m deal to sell British bread maker Hovis to private equity firm Endless. It follows a rise in bread sales during the pandemic.
PROFESSIONAL SERVICES
No 10 explores ‘Crown Consultancy’ to stem billions going to private firms
The UK Government aims to reduce its dependence on outside experts by creating an in-house unit dubbed the “Crown Consultancy”, which would recruit young graduates to work alongside civil servants.
REAL ESTATE
Average house price exceeds £250,000 for the first time
The cost of the average UK home has risen to more than £250,000 for the first time, according to the Halifax, with prices in October up 7.5% on a year ago. However, the lender said the economic fallout from the COVID-19 crisis would put "downward pressure" on prices in early 2021.
Westfield threatens chains including Pret over rent arrears
Shopping centre landlord Westfield has threatened Pret A Manger, Hugo Boss and toy retailer The Entertainer with legal action over unpaid rent, just as England enters a second lockdown.
RETAIL
Edinburgh Woollen Mill and Ponden Home collapse
Two retail chains owned by Philip Day have fallen into administration putting 2,900 jobs at risk. The Edinburgh Woollen Mill and Ponden Home chains collapsed on Friday after consultants failed to find buyers for the businesses.
SPORT
UAE businessman Sheikh Khaled agrees deal for Derby County
United Arab Emirates’ businessman Sheikh Khaled bin Zayed Al Nahyan has agreed a deal to buy Championship side Derby County.
UK sport in need of government support, says broker Lansdown
Bristol City owner Stephen Lansdown, the co-founder of Hargreaves Lansdown, has said sports team owners should not bear all the losses resulting from Covid and that the state should provide more support.
ECONOMY
Unsustainable debt may stifle recovery
The Business Growth Fund is set to take stakes in growing SMEs to boost their survival chances during the pandemic, with the first investments of the £15bn National Renewal Fund expected to be made in the first quarter of 2021. But Stephen Welton, head of the BGF, warned the legacy of the pandemic could "materially affect the economy for generations". He said: "We're going to face the perfect storm of company failures, so increasing insolvencies and unemployment, combined with zombie companies that can survive but are just surviving to pay interest. Those two together will completely handicap the economy in terms of its ability to recover." Separately, Sir Adrian Montague, head of the TheCityUK Recapitalisation Group, estimates that unsustainable corporate debt in the UK will hit £70bn by the end of March 2021 placing a "heavy drag" on the recovery.
Third-quarter GDP expected to have risen by 15.5%
The Chancellor’s "eat out to help out" scheme launched in August drove a rise in consumer confidence and with it GDP between July and September, analysts believe. Andrew Goodwin, chief UK economist at Oxford Economics, said without this increase in hospitality spending the 2.1% month-on-month growth in August would have been closer to the modest rise he expects took place in September, of 0.9%. Goodwin expects the continued reopening of the economy in July and the return of pupils to school in September will have pushed third-quarter GDP up by 15.5%.
OTHER
Campaigners call for action over access to cash
Campaigners are calling on the Government to introduce legislation safeguarding access to cash withdrawals on the high street, as more bank branches and fee-free cash machines are culled in response to the pandemic.