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Daily News Roundup: Thursday, 15th July 2021

Posted: 15th July 2021

BANKING

UK to see first Islamic international digital bank

The world’s first Islamic international digital bank is to be launched in the UK, with Boubyan Bank Group announcing that Nomo will offer bank accounts and financial management services for clients in Kuwait and the Middle East region. Nomo will be a brand name of the UK-based Bank of London and The Middle East (BLME). Adel Al-Majed, CEO of Boubyan Bank Group, said Nomo “is a fully licensed UK bank, offering a unique opportunity for customers to benefit from one of the most prestigious banking systems in the world.” Andrew Ball, CEO of BLME, said: “Digitisation will enable customers in the Middle East to open and enjoy the benefits of a UK bank account in the knowledge that it also meets their Sharia principles and beliefs.”

JPMorgan to lift office capacity caps in London

JPMorgan will look to lift a 50% capacity cap for its Canary Wharf office after pandemic restrictions are lifted on July 19. In a memo, the bank’s return-to-office task force said: “In the coming weeks and months, we will be adjusting for larger numbers of employees to be in the office at the same time.”

PRIVATE EQUITY

Bridgepoint staff set for IPO windfall

Private equity giant Bridgepoint could be valued at as much as £2.9bn in a stock market flotation, exceeding initial expectations when the firm first announced its listing plan last month. This could see a big windfall for staff, with the firm 80% owned by 144 partners and top executives. The remaining 20% is held by Dyal Capital. Bridgepoint, which started as the private equity division of NatWest and was split off from the bank after a management buyout in 2000, manages about €27.4bn of assets.

INTERNATIONAL

Bank of America revenue dips

Revenues at Bank of America fell 4% in Q2, with low interest rates hitting its net interest income. Overall revenue, net of interest expense, fell to $21.5bn. Net interest income fell 6% to $10.2bn. However, net income was up 173% to $8.96bn. Bank of America´s average loan book was up 0.02% during the second quarter compared with the prior period, and down 12% from the year-ago period. Deposits were up 14% to $1.9trn.

Wells Fargo posts $6bn Q2 profit

Wells Fargo had its most profitable quarter in two years in Q2, earning $6bn. The $1.38 per share rate exceeded analysts’ projections of 98 cents per share. Revenue came in at $20.2bn. The bank released $1.6bn from its loan-loss reserves, having set aside $8.4bn to cover potentially bad loans in Q2 2020. Net interest income fell 11%, mostly due to falling interest rates and lower loan balances.

Citi income climbs

Citigroup has reported higher than expected profits, with net income climbing to $6.19bn in Q2 from $1.06bn in the same quarter of last year. Sales were down 12% to $17.47bn. Investment banking revenues rose slightly to $1.8bn, advisory fees for deals surged 77%, while equity underwriting revenue rose 11%. Debt underwriting revenue slipped 21%. Q2 saw the bank take down $2.4bn of funds set aside in the middle of the pandemic to cover loans that might sour. 

Nordax makes an improved bid for NFH

Sweden's Nordax Bank has made an improved bid to buy Norwegian Finans Holding, the owner of Bank Norwegian, in a cash transaction valued at $2.23bn. The combined firm would have around 2m customers and overall lending of $7.52bn. If successful, the joint company would seek to expand into new European markets with a goal of becoming a leading pan-European niche bank, Nordax said.

AUTOMOTIVE

Coventry gigafactory plans submitted

Coventry City Council, in partnership with the operators of Coventry Airport, have submitted plans for an electric car battery plant that could create up to 6,000 new jobs directly. Planning permission to build the 5.7m square feet gigafactory at the airport will boost ambitions to keep automotive production at the heart of the West Midlands region, according to the joint venture. It is hoped the move will attract £2bn in investment, and if plans are approved, the site could be operational by 2025.

More electric cars could be produced under Transport Decarbonisation Plan

The latest Transport Decarbonisation Plan from the government is expected to include plans which could require manufacturers to produce a certain number of electric cars every year. This would differ from current regulations, under which car brands must ensure that sales comply with an average carbon emissions limit.

CONSTRUCTION

Barratt Developments issues update

Housebuilder Barratt Developments has announced that it has secured reservations for 14,334 homes with a total value of £3.47bn at the end of last month. Chief executive David Thomas commented: “Whilst these are still uncertain times, we enter the new financial year in a strong position and remain focussed on our medium-term targets, including delivering 20,000 homes a year.” Profit before tax, after adjusted items, is expected to be as much as £812m.

FINANCIAL SERVICES

FCA will not block Provident’s compensation scheme

The Financial Conduct Authority (FCA) has criticised Provident Financial’s plans to cap compensation for customers of its failed doorstep lending arm, but said it would not oppose the lender in court. Provident has set aside £50m under a scheme of arrangement to reimburse customers who were mis-sold loans. The City watchdog has said it does not support the scheme, arguing that it offers consumers significantly less than they were owed. The FCA, in a letter to Provident Financial, said it has “significant concerns about schemes of arrangement being used to circumvent paying customers their full redress entitlement”. Despite its criticism, the FCA said it does not plan to formally oppose the scheme in court as the alternative is insolvency, which would leave customers with no compensation. Provident will appear at a High Court sanction hearing on July 30 that will determine whether or not the scheme is approved. Provident chief executive Malcolm Le May welcomed the FCA’s decision not to appear in court to oppose the sanction of the scheme, adding that the firm believes the scheme is “fair and in the best interests” of consumer credit division customers. The scheme will be put to a vote at a creditors’ meeting on July 19 and requires more than 50% approval and backing from creditors accounting for 75% of the overall value of claims.

Watchdog ‘still learning’ on digital challenges

Financial Conduct Authority (FCA) chief executive Nikhil Rathi says the City watchdog is still learning when it comes to dealing with digital entrants to financial services and online crime. Speaking at a Global Counsel event, Mr Rathi was asked if the regulator possessed the proper framework and firepower to adequately regulate digital entrants to the market. He said that big tech firms entering financial services they must meet applicable standards, but added that the FCA is learning, saying: “Where we need to update frameworks, we will”. He went on to say that the watchdog has been “very clear” that it feels online advertising should be in the Online Safety Bill, saying: “some legislative ballast behind us on that particular issue would make a significant difference”. Mr Rathi also discussed the Digital Regulation Cooperation Forum, an initiative formed by the Information Commissioner's Office and Ofcom designed to ensure co-operation on online regulatory matters and platforms. He said: “The speed with which digital technology is changing our sector necessitates regulatory collaboration.”, saying sharing information, tools and services is vital in tackling digital economic crime.

BlackRock’s quarterly profit soars

BlackRock reported a 28% jump in second-quarter profit yesterday as investors poured more money into the company's funds, boosting its assets under management (AUM) to new highs. BlackRock's AUM jumped to a record $9.49trn in the second quarter from $7.32trn a year earlier. The company's adjusted net income rose to $1.55bn, or $10.03 per share, in the three months ended June 30, from $1.21bn, or $7.85 per share, a year earlier.

Scottish SME finance demand outstrips supply

A study by the British Business Bank suggests that demand for finance among small businesses is exceeding the level of supply across Scotland. The poll saw 71% of the Scottish business advisory community say demand outweighs supply, while 84% of the accountants, lawyers and business finance advisors quizzed believe there are gaps in the supply of finance through all stages of company growth and development. Just over 85% of respondents said smaller businesses would require additional debt finance over the next 12 to 18 months due to the pandemic, while 79% said the same about growth stage equity or venture capital. While 45% of UK respondents said the small business finance ecosystem offers adequate support for start-ups, north of the Border the rate hit 63%.

CEOs: Cyber-attacks biggest threat to financial services growth

A poll of financial services CEOs shows that they consider cyber-attacks the greatest threat to growth prospects in the industry, with 56% saying cybercrime presents the biggest challenge. This put digital crime ahead if the pandemic (51%) and over-regulation (50%). The number pointing to cyber threats as a key concern marks a jump on the 33% who flagged it as a primary challenge in 2016. The survey also saw 36% of global CEOs say they are very confident about their company’s prospect over the next 12 months.

HEALTHCARE

Pfizer told to produce evidence of need for third shot

Pfizer has been asked to provide further evidence a third coronavirus vaccine shot can boost antibodies and protect against virus mutations. 

LEISURE & HOSPITALITY

Chancellor urged to extend furlough scheme for the travel sector

Rishi Sunak has been urged to extend the furlough scheme for travel sector workers, with 77 MPs and peers writing to the Chancellor to warn that the industry is facing a “cliff edge” as the furlough scheme comes to an end in September while travel restrictions will continue. The letter to Mr Sunak was arranged by MP Henry Smith, chairman of the all-party Future of Aviation group. Office for National Statistics figures show that 57% of air transport workers remain on furlough.

Tui tells staff to spend a day a month in offices

Travel operator Tui has told staff they only need to go into the office for one day a month in a move to a permanent flexible working model that managing director Andrew Flintham believes will “enhance our culture and organisational productivity” and allow staff “to have a great work-life balance." Tui said the change would apply to its 3,000 office staff.

REAL ESTATE

House prices climb 10%

The average property price climbed by 10% in the year to May, with Office for National Statistics data showing that the typical value hit £254,624 as the stamp duty holiday drove demand. The figures, which are based on sales that have been completed and registered, show that homeowners making a move saw the biggest increase in prices, paying an average of £296,872 – 10.7% more than in May 2020. First-time buyers also saw an increase, paying an average of £213,336 in May – 9.5% more than May last year. Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said that while price growth has hit “dizzying heights” not seen since before the financial crisis, “this could be as good as it gets for a while”. “We’re not expecting precipitous falls, but rises are unlikely to be as steep in the coming months”, she added, noting that this may be a “blessed relief for buyers.”

ECONOMY

Inflation hits 2.5% in June

Office for National Statistics (ONS) figures show that inflation continued to rise in June, with the Consumer Price Index (CPI) rising to 2.5% last month. The figure exceeds May’s 2.1% and analyst forecasts of a 2.2% climb. It also marks the highest level since August 2018. On a monthly basis, the CPI rose by 0.5% in June, up from a 0.1% increase recorded in June 2020. The increase recorded in June was driven by higher food and fuel costs, the ONS said. ONS deputy national statistician for economic statistics Jonathan Athow said the rise in prices was “widespread”, adding that while some of the increase “is from temporary effects … much of this is due to prices recovering from lows earlier in the pandemic.” Outgoing Bank of England (BoE) chief economist Andy Haldane last week suggested said that inflation was on track to hit 4% - double the Bank’s 2% target level. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, believes inflation is likely to reach 3%, but not much higher and "ease quickly in 2022", adding that interest rates are set to remain at the current record low of 0.1% "throughout next year". Ruth Gregory, UK economist at Capital Economics, suggested that inflation could climb as high as 4%, saying: “We expect it to continue its upward trend over the summer”. Joseph Little, global chief strategist at HSBC Asset Management, believes that while inflation is likely to continue to increase this year, “transitory factors” such as supply-demand imbalances are likely to unwind in 2022, taking the rate back closer to the BoE's target level. James Sproule at Handelsbanken says concern about inflation “is set to be the backdrop for the second half of the year”, while Sanjay Raja at Deutsche Bank expects the CPI to peak at 3.9% in November.

OTHER

Online investment fraud up 50% during pandemic

Online investment fraud shot up by 50% during the pandemic as savers lost £535m. The number of cases reported to Action Fraud climbed to 20,989 in the 12 months to April, according to data analysed by Which?. This meant the average would-be investor who fell victim to one of the bogus opportunities was scammed out of more than £25,000.

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