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Daily News Roundup: Thursday, 13th January 2022

Posted: 13th January 2022

BANKING

Banks told to quantify climate risks properly by BoE

The Bank of England (BoE) has said banks in the UK should be "ambitious" in properly quantifying risks from climate change or face intervention by regulators if they fall short. In a letter to bank CEOs about its supervisory priorities for the coming year, the BoE said banks should also pay particular attention to how they incorporate climate-related risks into business strategies, decision-making and risk-taking. "Furthermore, we will keep a range of supervisory tools under review for use where we deem progress to be insufficient," the letter said. The BoE said most banks were focused on the business opportunities presented by climate change even though it also presents an increasing business risk that is foreseeable and requires action now. "From 2022, we will incorporate supervision of climate-related financial risks into our core supervisory approach," the letter said.

Lords highlight “significant risks” of CBDC

A report from the House of Lords Economic Affairs Committee on Thursday warned that the introduction of a central bank digital currency (CBDC) could pose “significant risks” in the UK. “These risks include state surveillance of people's spending choices, financial instability as people convert bank deposits to CBDC during periods of economic stress, an increase in central bank power without sufficient scrutiny, and the creation of a centralised point of failure that would be a target for hostile nation state or criminal actors.” The report also said the British parliament and not the Bank of England must decide whether to introduce a state-backed digital currency.

Tandem announces Oplo deal

Challenger bank Tandem has acquired Blackpool-based consumer lender Oplo, which has lent over £900m to mainstream customers since it launched 10 years ago. Together with Oplo, the bank will have £1.2bn in assets – including £230m of green lending.

PRIVATE EQUITY

Blackstone nears $6.5bn deal to buy Crown casino group

Blackstone has revised its offer for Crown Resorts which the Australian casino operator said it is now considering. The bid values Crown at about A$8.9bn (US$6.5bn). Australian billionaire James Packer stands to pocket about $3.1bn in return for the 37% of Crown held by his private investment company, Consolidated Press Holdings.

INTERNATIONAL

Morgan Stanley to boost bonuses of top performers

Morgan Stanley is reportedly increasing the bonuses of its top performers by 20%. It is understood that equity underwriting and M&A advisory bankers at the American bank are in line to see among the biggest bonus hikes on Wall Street after the divisions delivered strong performances last year. Staff in Morgan Stanley's M&A and equity capital market divisions are expecting bonuses up at least 15% on the previous year and, in some cases, up 20% or more, according to reports. The bonus payouts at Morgan Stanley are expected to be lower than those at Bank of America, which is planning to increase the bonus pool for investment bankers by more than 40%.

German banks asked to build buffers as property market heats up

German regulator BaFin has asked the country's banks to set aside around €22bn ($25bn) of extra capital by next year as the economy has largely recovered from the pandemic and a growing property bubble threatens the stability of the financial sector. Regulators cut extra buffer requirements to zero at the onset of the crisis but property prices soared on the back of record low rates and the market is now 10% to 30% overvalued, leaving lenders especially vulnerable to a price correction, the Bundesbank said. Responding to these warnings, BaFin raised the countercyclical buffer to 0.75% by February 1, 2023 from 0%, while a supplemental 2% buffer will be introduced for residential mortgages.

UniCredit among suitors for Otkritie Bank

Reuters reports that UniCredit is among potential suitors looking at Russia's Otkritie Bank. Russia's central bank, which owns Otkritie following a 2017 bailout, is looking to divest its stake either through a sale or a bourse listing. With €45bn in assets, Otkritie is Russia's seventh-largest bank and a merger would increase five-fold UniCredit's risk-weighted assets in the country. The news saw shares in UniCredit fall 1.9% against a flat Italian banking index.

Credit Suisse hires investment banking advisory heads

Oliver Tucker has been appointed by Credit Suisse as head of its new investment banking advisory in Britain, while Philippe Guez took up the equivalent role in France earlier in January. The moves come after the bank embarked on a restructuring in November which it said would focus more resources within the investment bank on advisory services for entrepreneurs and the ultra-wealthy clientele of its flagship wealth management business.

FINANCIAL SERVICES

Financial services enjoys steady growth

A survey of financial firms by the CBI found the sector grew for the third quarter in a row in the last three months of 2021 and at their fastest pace since mid-2017. However, CBI Chief Economist Rain Newton-Smith said that although volumes and profitability growth across the financial services sector remain buoyant, the softening of optimism due to the near-term concerns over COVID-9 needed to be closely watched. In the first three months of 2022, firms expect activity to remain robust and at a strong pace, the survey found. Additionally, some 40% of firms were prepared for new rules on disclosure of climate-related financial data, which come into force from April 2022, while 14% said they were not ready, and the remaining companies reported that they were fairly or very prepared.

FCA restricts Travel Insurance Facilities

Travel Insurance Facilities, the UK’s biggest supplier of travel insurance, has been stopped from operating its emergency assistance service and handling claims for new customers amid growing scrutiny of the company’s practices. The Financial Conduct Authority has ordered the company to “secure all books and records”. It has also demanded that the firm “preserve all information and systems” relating to regulated activities, claims and complaints. Travel Insurance Facilities, known as TIFgroup or TIF, operates several well-known brands, including Alpha, Flexicover and Insurancewith, and provides cover for many other brands found on comparison websites. In total the company operates under 79 different trading names.

Visa survey finds small firms are eying crypto

Nearly 25% of small businesses in nine countries around the world plan to accept digital currencies as a form of payment in 2022, a survey by Visa has found. Additionally, some 13% of consumers in those countries expect retail stores to begin offering crypto payments this year and beyond. Almost three-quarters of businesses surveyed worldwide reported that accepting new forms of payments is "fundamental" to their business growth. "I think more people are feeling more confident with crypto," said Jeni Mundy, Visa´s global head of merchant sales and acquiring, adding that for many smaller companies that are moving into new forms of digital payments, adopting crypto may be a natural evolution.

State Street calls for a women on every board

State Street is demanding all portfolio companies worldwide have at least one woman on their boards. The asset manager’s CEO Cyrus Taraporevala told directors in a letter that the new policy expands on previous actions to push boardroom diversity. Ben Colton, a stewardship leader for the division, said while many companies claim they cannot find qualified female director candidates, they actually just need to broaden their board nomination processes. "We think it's not a pipeline issue, it's an access issue," Colton said in an interview.

Payments company founder worth $20bn

Checkout.com has surpassed Revolut as the UK's most valuable privately held technology business after securing $1bn in funding from a string of international investors. Swiss-born founder and chief executive, Guillaume Pousaz, is believed to be worth $20bn following the fundraising. The company said it would use the funds to strengthen its balance sheet and invest in new initiatives.

LEISURE & HOSPITALITY

Whitbread warns of cost inflation

Whitbread has warned that it expects cost inflation for the hospitality sector to reach between 7% and 8% over the coming months. Alison Brittain, CEO of the Premier Inn owner, said higher labour costs, rising energy bills and increased construction costs for its new hotels are putting pressure on the FTSE 100 company.  Whitbread said that demand at its hotels and restaurants was dampened in December and during the festive period by fears over the spread of the Omicron COVID-19 variant. The company's food and beverage sales were 17.2% lower in the six weeks to 6 January than during the same period in 2019, as consumers stayed at home and many Christmas parties were cancelled.

REAL ESTATE

Tougher regulation for property valuers

The Royal Institution of Chartered Surveyors has accepted a series of recommendations for improving standards among property valuers. The tougher regulation was called for by an independent review into the sector, which found evidence of conflicts of interest. Surveying firms will have to employ a “valuation compliance officer” to ensure that valuations are made objectively and they will be governed by a new regulatory panel. The changes follow concerns that stores and shopping centres were being valued too optimistically.

RETAIL

Sainsbury’s profits to beat expectations after bumper Christmas

Sainsbury's has said that it will report better-than expected profits for the year to April, following strong grocery sales over the Christmas period. The supermarket group said that third-quarter like-for-like sales excluding fuel fell 4.5%; grocery sales were down 1.1% year-on-year in the three months to January 8th, but were up 6.6% on the same period in 2019-20, before the pandemic impacted trading. The group also said that Argos benefited from “stronger margins supported by transformational operating cost reductions”, while Sainsbury’s Bank was “performing ahead of expectations”. Sainsbury's is now forecasting a full-year 2021-22 underlying profit before tax of "at least" £720m, compared with its previous outlook of "at least" £660m, and the £356m it made in 2020-21. The group said its profit upgrade reflected investment and higher operating cost inflation being offset by cost savings and stronger-than-expected grocery volumes, driven in part by increased in-home consumption.  

ECONOMY

IFS: Poorest Brits suffer most from cost of living woes

Less wealthy Brits will have more of their income eroded from the cost of living crisis than their wealthier compatriots. Analysis by the Institute for Fiscal Studies (IFS) shows poorer households tend to spend almost three times as much of their budgets on gas and electricity. This will result in them absorbing a roughly 7% shock to their income this year from inflation. “Many households on middling incomes, and especially those with particularly high energy costs, will not find it easy to adjust to extra costs upwards of £500 per year,” the IFS added. Brits in the top of the income distribution will be saddled with just over 5% inflation this year.

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