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Daily News Roundup: Thursday, 16th January 2020

Posted: 16th January 2020


TSB brings in IBM for IT overhaul

TSB owner Sabadell has hired IBM for a €1bn overhaul of its computer systems. This comes after the lender was hit by an IT meltdown following a botched computer upgrade in 2018 which left almost two million customers locked out of their accounts. The 10-year deal with IBM was agreed in December and gives the computer firm control over the running of TSB’s ATMs, digital banking and high street branches, channelling them through the same cloud platform. The bank has also pledged to open an "IT centre of excellence" this April in Edinburgh, creating 100 jobs. TSB is investing £120m in technology over the next three years as part of a strategic plan announced in November.

Citi guilty of age discrimination

Citigroup has been found guilty of age discrimination by a tribunal in London over the dismissal of 55-year-old banker Niels Kirk. Mr Kirk, a managing director for energy banking, was unfairly dismissed in November 2017, judge John Goodrich ruled, having heard that the worker had been told by his boss: “You are old and set in your ways.” Manolo Falco, global co-head of banking, denied using the phrase. Citi said it would appeal, arguing that the age gap between Mr Kirk and his successor was small. Citi told the court that of 51 managing directors in its European corporate banking unit, 15 were aged over 50 and three were over 55.

Fintech could help the unbanked

Benjamin Barnard, Policy Exchange’s head of technology policy, argues that new financial technology, already the fastest growing sector of the London economy, could help the 1.23m people in the UK who don’t have a bank account and the millions who struggle to access affordable loans. He argues that the government should open up the “Help to Save” scheme to multiple providers, create a fund to help people who have Post Office Card Accounts transition to more advanced accounts and also provide those on Universal Credit with a banking voucher which they could redeem at a provider of their choice. The positive regulatory environment has already helped new firms like Monzo, Revolut and Starling create 76,500 new jobs, he asserts, a number set to grow to 105,500 by 2030.

Vanquis Bank beats expectations

Provident Financial says its credit card business, Vanquis Bank, performed “modestly above expectations” in the fourth quarter, adding that it expects to report full-year results in line with market expectations. The company also said that its consumer credit division also had delivered results in line with its plans.

Bank secures improved performance

Secure Trust Bank expects to report an improved performance in 2019. The challenger bank said it delivered revenue and loan book growth in the second half of 2019. H1 2019 saw it report a pre-tax profit of £18.1m, against £15.1m previously.


Clipper private plan abandoned

Sun Capital has confirmed that it will not make a formal bid for Clipper Logistics, despite having worked with founder and executive chairman Steve Parkin to explore a possible takeover bid for the delivery group. The private equity firm said it had failed to agree a price with Clipper’s board. Under UK takeover rules, Sun and Mr Parkin cannot reopen talks for six months unless another suitor comes forward.

KKR raises $2.2bn

KKR has closed its second Next Generation Technology Growth fund at $2.2bn. The fund’s predecessor - KKR’s Next Generation Technology Growth Fund – closed at $711m in December 2016. The investment firm said the latest fund will be dedicated to technology growth equity investment opportunities in Europe, North America and Israel, adding that it will invest over $265m of capital into the fund alongside investors including pension funds and insurance firms.


Goldman Sachs Q4 profit falls

Goldman Sachs saw Q4 profits fall 25.8% to $1.7bn – although revenues rose 25.4% to $9bn. The decline in profits came as it set aside $1.1bn in anticipation of settlements in the 1MDB scandal. CEO David Solomon said settlement talks over the matter with US and Malaysian authorities are "progressing and remain active". The bank’s new consumer and wealth management division, which includes online bank Marcus, the Apple credit card, United Capital and Goldman's traditional wealth management business, saw revenues rise 1%.

BoA sees dip in profits

Bank of America reported a dip in fourth-quarter profits, with lower interest rates contributing to the fall. Net income came in at $7bn, down 3.9% from Q4 2018, while revenue was down 1.4% to $22.4bn. Revenue in the bank’s consumer division, its biggest business, fell 5% to $9.5bn. The bank's quarterly interest income fell more than $900m year over year, from $17.84bn to $16.93bn.

EU banking regulator nominates new executive director

The European Banking Authority’s (EBA) board has nominated Central Bank of Ireland's Gerry Cross as its new executive director. Mr Cross, who is currently director of financial regulation for policy and risk at the Central Bank of Ireland, is set to succeed Adam Farkas, who last year stepped down from his role at the EBA to become the chief executive at banking lobby group the Association for Financial Markets in Europe.


Rivals question Flybe rescue

Rival operators are challenging the Government-backed rescue of Flybe which enables the struggling airline to delay handing over a £106m air passenger duty bill. While Business Secretary Andrea Leadsom defended the move to safeguard UK regional connectivity, Willie Walsh, the outgoing boss of British Airways owner IAG, called the deal a "blatant misuse of public funds". IAG has filed a complaint to the EU, suggesting the rescue deal may have breached state aid rules, while Ryanair has written to Chancellor Sajid Javid to voice concerns.


Persimmon sales fall

Persimmon said total group revenue last year was £3.65bn, down 2.4% on the previous year. The drive to increase customer satisfaction also saw new home legal completions for the year drop 4% and new housing revenues decline 3.5% to £3.42bn. Though it has a total forward sales value of £1.35bn, the housebuilder now expects the group’s pre-tax profit to be in line with market expectations.

Bovis Homes expecting record profits

Housebuilder Vistry Group is expecting Bovis Homes to deliver record profits for last year - above analyst consensus of £181.6m. The company completed the £1.1bn purchase of two Galliford Try businesses earlier this year, acquiring Linden Homes and Galliford’s partnerships and regeneration business, and Bovis completed a total of 3,867 new homes in 2019, up from 3,759 in 2018. The number of private homes completed rose from 2,567 in 2018 to 2,678 last year, with 1,189 affordable housing units.


FCA flagged concerns with fund supervisors

The Financial Conduct Authority (FCA) uncovered issues with fund supervisors seven years before they were implicated in the collapse of the Woodford Equity Income fund, where it was suggested corporate directors failed to rein in fund manager Neil Woodford. The watchdog wrote to supervisors responsible for making fund managers follow rules in 2012 and 2014, highlighting a number of concerns and demanding the firms take action - while opting to keep the details private. The FCA is understood to have, in previous reviews, found issues in the way some supervisors conducted due diligence on the appointment of new fund managers and the quality of risk management frameworks, with concerns also raised over the oversight of funds and the understanding of their charging structures.

BlackRock’s quarterly profits rise 40%

BlackRock has reported a 40.3% rise in quarterly profit and its strongest ever inflows as investors poured more into the investment firm’s exchange-traded funds. Net income at BlackRock jumped to $1.3bn (£999m) in the three months ending 31 December, up from $927m a year earlier. The company ended the quarter with $7.43trn in assets under management, up from $5.98trn at the end of 2018.

Assets under management at Ashmore near $100bn

Asset manager Ashmore has reported a 7.1% increase in assets under management, which jumped $6.5bn in the three months to December 31 to $98.4bn. The company said a combination of net inflows and positive market movements were behind the increase.


UK box office revenue tops £1.25bn

UK cinemas pulled in more than £1.25bn last year, figures from industry body Cinema First show, with this marking the third consecutive year that UK box office revenue has exceeded £1.25bn. Cinema admissions exceeded 176m in 2019, a slight dip on the 177m recorded in 2018. Meanwhile, cinema chain Everyman saw record revenue of £65m in 2019, with the total up 25% on 2018.

Ten Entertainment bowls a solid game

Tenpin bowling firm Ten Entertainment struck its eighth consecutive year of growth last year after investing in alley refurbishments. In a trading update, the firm said 70% of its 45 bowling alleys were now benefiting from cost efficiencies created by its new technology re-engineering programme. Total sales growth for the year was 10.2% for the year, with like for like sales jumping 8% to £84.1m in 2019.


House prices climb

Office for National Statistics data shows UK house prices increased at their fastest pace in two years in the year to November - even before a widely expected election bounce. Average prices were up 2.2% in November last year, compared to a 1.3% jump in the year to October. The average UK house price climbed to an all-time high of £235,000.

New mortgages fell in November

The number of first time buyer mortgages dropped in November last year, according to the latest figures by UK Finance, following a surge in house purchase activity in 2018. There were 30,620 new first-time buyer mortgages completed in the month, down 10.5% compared to the same month the year prior, while homemover mortgages dropped 10.6% year-on-year. The research also found that there were 6,300 new buy-to-let home purchase mortgages in November, a decline of 4.5%. Remortgages in the buy-to-let sector fell 5.1% to 15,000.


Greggs in tie-up with Just Eat

Greggs has agreed a deal with takeaway company Just Eat that will see the bakery chain launch a delivery service. The service is launching in Birmingham and Bristol this week, before expanding to Manchester, Leeds, Sheffield and Nottingham, with the two firms hoping for a nationwide rollout by the end of the year.


Inflation falls in December

Inflation fell to its lowest for more than three years in December. The rate dropped to 1.3% last month, down from 1.5% in November, with December’s inflation rate the lowest since November 2016. Analysts suggest the data increases the chances of a cut to interest rates, with inflation below the Bank of England's (BoE) target of 2%. Melissa Davies, an economist at stock broker Redburn, said: “Very soft UK inflation data for December leaves the door wide open for a Bank of England rate cut on 30 January.” Michael Saunders, one of the rate setters on the BoE's Monetary Policy Committee, has called for interest rates to be cut to combat the risk of the UK getting stuck in a “low inflation trap.” Mr Saunders, who voted for cuts in November and December, said: “It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the 2% inflation target". Daniela Russell, head of UK rates strategy at HSBC, commented: “We still think a rate cut in May is most likely in terms of timing, but the risk of an earlier move is rising.”


Survey highlights financial ignorance

A new survey on personal finance from credit card and loan provider Vanquis has found that only one in three British people know the rate of VAT and fewer know how much you can invest in an Isa. The survey also found that 80% of people could not identify the correct definition of an annual percentage rate (APR) and nine in ten did not know the rate of NI contributions for an employed, basic-rate taxpayer. The question which stumped the most people was how much can usually be borrowed on a mortgage as a multiple of income – with only 5% correctly identifying the figure as 4.5 times the borrower’s earnings.

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