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Daily News Roundup: Thursday, 16th February 2023

Posted: 16th February 2023

BANKING

Barclays profits fall

Barclays’ pre-tax profits fell 14% to £7bn last year, compared to £8.2bn a year earlier. City analysts had expected earnings of £7.2bn but the bank was hit by a steep fall in fees from deal-making at its investment banking division. Pre-tax profits at its corporate and banking division were down 23% at £4.3bn. Barclays set aside £1.2bn for bad loan provisions and took a £1.6bn hit from litigation and conduct charges. The report also shows that Barclays' UK arm posted a 7% increase in pre-tax profits to £2.6bn, with this boosted by rising interest rates. Meanwhile, the bank has docked the pay of some top executives by a combined £1m following a fine from US regulators and an over issuance of investment products in the US. CEO CS Venkatakrishnan saw his bonus cut by £403,000, while Finance Chief Anna Cross saw her compensation reduced by £166,000. Barclays' overall bonus pool for 2022 dipped 8% to £1.8bn from £1.9bn. Reflecting on the bank’s performance, Mr Venkatakrishan said the overall results were “very gratifying” but noted he was “determined” that compliance issues “will not happen again.”

Atom Bank boss backs London for IPO

Mark Mullen, chief executive of Atom Bank, has suggested that the digital lender will select London for an eventual initial public offering, saying: “We are focused on putting the bank in a position where we can list and our assumption, our plan, is to do so in the UK.” He said that “there need be no ambiguity whatsoever” over the firm’s “default assumption” that it will float in the capital, adding: “The only plan we’ve ever made ourselves would be based upon listing in London.” Atom last year reiterated an ambition to go public, saying a £30m funding round in November, which valued the firm at £460m, would boost efforts for an IPO. 

PRIVATE EQUITY

TPG's Q4 earnings drop 26%

Private equity firm TPG has posted a 26% year-on-year decline in distributable earnings. After tax, distributable earnings fell to $227m, down from $307m a year ago. TPG said its net profit from asset sales fell to $95m in Q4, down 62% from the $251m seen a year ago. It generated a net income of $23.6m under generally accepted accounting principles, down 43% from $41.2m in Q4 2021. While TPG’s private equity funds appreciated 2.2% in the fourth quarter, the private equity funds of Blackstone, Carlyle and Apollo appreciated by 3.8%, 1% and 5.4%, respectively, while KKR's private equity funds were flat.

INTERNATIONAL

SEC plans tougher rules custody rules on assets

The US Securities and Exchange Commission (SEC) has proposed changing rules protecting client assets held by investment managers. It would introduce new requirements for investment advisers, who can only maintain custody of client funds or securities if they meet requirements to protect the assets. The SEC's draft proposal would expand these requirements to any client assets, including digital assets not currently deemed funds or securities. SEC chair Gary Gensler said: “Though some crypto trading and lending platforms may claim to custody investors’ crypto, that does not mean they are qualified custodians.” The SEC has also adopted rules tightening the time-frame for stock trades in an effort to reduce risk that could mean heavy losses for retail investors. It will shorten the time between when a securities order is placed and when a trade concludes.

Spanish banks take windfall tax to High Court

Spanish banking associations have lodged court appeals against the government's windfall tax, saying it distorts competition. In a bid to raise €3bn to fund cost-of-living support measures, Spain approved a temporary levy on banks in December. The Spanish Banking Association and CECA - an association of former savings banks - have lodged two appeals before Spain's High Court.

AVIATION

Flybe rescue talks fail

Flybe is to be wound down and sold off in parts after administrators were unable to strike a rescue deal. Talks with potential bidders stalled over regulations around landing slots and any buyer's ability to operate the airline. Flybe collapsed last month for the second time in three years, having fallen into administration in March 2020 as the pandemic hit the travel market. Flybe relaunched less than a year ago after being bought out of administration by Cyrus Capital.

BTG Banner - Wc 13.02.23 - PLACED IN MIDDLE OF SUMMARY


FINANCIAL SERVICES

FOS complaints jump 17% year-on-year in Q4

The Financial Ombudsman Service (FOS) saw a 17% year-on-year increase in the number of complaints it received in Q4. It recorded 41,303 complaints between October and December, up from 35,342 during the same period in 2021. On a quarterly basis, there were 2,833 more complaints in Q4 than in the July to September period. Q4 saw 6,082 complaints about current accounts and 3,216 about credit cards, with motor hire purchase (2,987 complaints), vehicle insurance (2,769) and running account credit (2,493) making up the top five most complained about products. The FOS data shows that complaints had an uphold rate of 35% in the fourth quarter.

MJ Hudson CEO resigns

MJ Hudson has announced that chief executive Matthew Hudson has stepped down with immediate effect, with this coming just days after its auditor resigned saying it had "lost trust" in management. The asset management services firm last year warned it would not be able to complete its full-year audit in time due to continued discrepancies in its finances. It also suspended CFO Peter Connell.

Hargreaves Lansdown boss rejects founder’s strategy suggestions

Chris Hill, the outgoing boss of Hargreaves Lansdown, has defended his strategy in the face of criticism from the investment platform’s co-founder. Peter Hargreaves has criticised Mr Hill’s plan to push the business beyond its core platform into offering clients advice on their investments. Mr Hill’s successor, Dan Olley, is expected to continue to pursue this strategy even though Mr Hargreaves, who owns a stake of almost 20% in the company, has dismissed it as “rubbish.”

REAL ESTATE

Choice of mortgage products recovers

The number of mortgage products available has surpassed 4,000 for the first time since last August, according to Moneyfacts. It said 4,341 deals were available on February 1, compared with 3,643 products at the start of January. There were 2,258 deals left by October 1, down from 3,890 at the start of September 2022 following the mini-Budget. The choice of deals for borrowers with smaller deposits has also increased, with 149 products available in February for people with a 5% deposit, up from 132 in January. Product choice for people with a 40% deposit is at its widest in three years, with 606 deals available. The average shelf life of a mortgage product has increased to 28 days, up from 15 days in January. 

RETAIL

Morrisons’ debt sold at a discount

Morrisons’ debt has been sold off at a steep discount after losing market share to the likes of Aldi and Lidl last year. Banks have offloaded a tranche of the supermarket’s debt at 85 cents on the euro to hedge funds in the latest cut-price debt deal since the company was taken private in October 2021. Apollo Global Management was one of a number of hedge funds that bought into a sale covering €500m worth of debt. The arrangement came as Moody’s downgraded the supermarket’s credit rating for the third time.

ECONOMY

Inflation falls for a third consecutive month

Office for National Statistics (ONS) data shows that inflation fell for the third month in a row to 10.1% in January, dipping from the 10.5% recorded in December. Despite the decline, inflation remains well above the Bank of England's target of 2% and has been at 10% or higher for five straight months. Grocery prices are currently one of the main drivers of inflation, climbing 16.7% in the year to January, with food inflation at a 45-year high. However, a continued drop in petrol and diesel prices helped bring overall inflation down. Grant Fitzner, chief economist for the ONS, said there were signs costs facing businesses were "rising more slowly", but warned that "business prices remain high overall." Chancellor Jeremy Hunt warned that the "fight is far from over" in regard to rising prices, adding that it is why the Government "must stick to the plan to halve inflation this year, reduce debt and grow the economy." Commenting on the inflation data, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the fall in inflation gave the Bank of England the flexibility to keep its interest rate at 4%, rather than increase it again. Ruth Gregory, deputy chief UK economist at Capital Economics, suggested the data shows “domestic inflationary pressures are fading,” adding that this “suggests that the end of the Bank of England’s tightening cycle just got a bit closer.”

OTHER

FTSE 100 hits 8,000 points milestone

The FTSE 100 has passed 8,000 points for the first time yesterday, with the index of the 100 largest companies listed on the London Stock Exchange hitting 8,003.65 points. The share index edged down again later in the day before closing at 7,997 points. Overall, the FTSE 100 saw a gain of 0.55% on Wednesday. Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said renewed optimism that inflation has peaked helped drive positive sentiment, suggesting that “recent momentum has been astounding in its speed, and highlights that the outlook for UK plc has turned a corner.” However, she cautioned: “The likely outlook for now shows a relatively clear path back to more normal fiscal environments, but as the last few years have shown, destabilising obstacles can appear with very little notice."

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