BoE warns over lending to indebted firms
The Bank of England’s Financial Policy Committee (FPC) has warned that the growth of new lending to already indebted firms, through leveraged-loans, has parallels to the subprime mortgage boom which ended with the global financial crisis. Minutes from the FPC’s latest meeting also reveal warnings over the rise in loans with weaker covenants attached, and that EU authorities must ensure clearing houses can continue to function in the event of a no-deal Brexit: “There had been considerable progress in the UK to address these risks, but only limited progress in the EU,” the FPC asserted.
Cunliffe: Cushion for no-deal in place
Sir Jon Cunliffe, deputy governor of the Bank of England, has said that the UK has done “all it can” unilaterally to cushion the blow of a no-deal for banks and financial firms. He said that British authorities had made significant efforts through the likes of banking stress tests and a temporary permissions regime to prepare the financial sector for a cliff-edge exit. Sir Jon added that Brussels may offer a temporary waiver to EU-based financial institutions to minimise the disruption to British companies.
Cyber body to be created
A new body is being created by a collaboration of British banks, insurers and securities exchange to help defend the financial system against the growing threat of cyber-attacks. The new Financial Sector Cyber Collaboration Centre is scheduled to be launched early next year. It has been developed by UK Finance, with help from the National Crime Agency and the National Cyber Security Centre. Stephen Jones, CEO of UK Finance, commented: “Cyber is like Nato, an attack on one is an attack on all. Let's redouble our efforts to collaborate, not compete, in this critical area and support the development of the Financial Sector Cyber Collaboration Centre.”
Robots on the rise within banks
Akshaya Bhargava, the former boss of Barclays wealth management, has claimed that all banks will be using AI within the next five years as institutions prepare for the great $30trn wealth transfer from baby boomers to millennials. Mr Bhargava, who is set to launch AI fintech platform Bridgeweave, said financial institutions will have to adapt as wealth passes to the next generation - who may expect a faster, more digital service - over the next 20 years.
Fintech’s face tough challenge
Simon Duke in the Times charts the challenges that fintech firms face in trying to challenge the UK’s big banks. He suggests that Goldman Sachs’ decision to launch Marcus in the UK, and Barclays plans to offer a current account to customers of its American digital bank, will shake the fintech firms out of their complacency. He ends by saying that public investors appear to have taken a downbeat view of fintech, which is a blow to the sector but also a welcome dose of reality.
US threatens to bar EU banks from exchanges
Christopher Giancarlo, head of the US Commodity Futures Trading Commission, has said EU banks will be barred from accessing US futures markets unless Brussels amends plans to restrict all euro-based derivative clearing to within the EU after Brexit. He said EU plans to amend European Market Infrastructure Regulation “unprecedented and wholly unacceptable”.
Danske Bank forced to resume CEO search
Danske Bank is set to resume its search for a new CEO after a Danish regulator rejected its internal candidate for the job. Jacob Aarup-Andersen, 40, the Danske board’s choice to take over the helm of Denmark’s biggest bank, was rejected on the grounds that he wasn’t experienced enough. Analysts have said the decision will force the bank to look for an external appointment.
Credit Suisse appoints Palmer to EMEA role
Credit Suisse has appointed former UBS banker James Palmer as vice-chairman of EMEA investment banking and capital markets.
Lyft onboards top tier banks to lead its IPO
Ride-hailing app Lyft has hired JP Morgan, Credit Suisse and Jefferies as underwriters for its forthcoming IPO. Set for an early 2019 debut, Morgan Stanley and Goldman Sachs were ruled out as underwriters due to their affiliation with Uber's upcoming float.
Flybe shares slide on profit warning
Shares in Flybe have fallen by more than a third after the airline issued a profit warning, blaming poor demand, a weaker pound and higher fuel costs. The airline said in a trading update it now expects a full-year pre-tax loss of £22m before - far higher than analysts had expected. It has taken a £29m hit from weak sterling and a rise in fuel prices. However, the overall loss would be closer to £12m due to a £10m windfall from ending an onerous lease.
Hard Brexit could ground planes
Ryanair boss Michael O'Leary has warned that a hard Brexit could potentially ground planes for up to three weeks. He warned recently that the EU had not issued assurances to the UK that an agreement would be in place to allow flights to continue after March 2019.
Barratt confident on strong forward sales
Housebuilder Barratt has posted a positive trading update, noting a rise in forward sales and rising confident of the year ahead. Though reservations per active outlet per average week slipped, as did new developments, total forward sales in the 15 weeks to mid-October were up 12.4% on the prior year - at a value of £3.1bn.
Construction of new homes at six-year low in London
Figures from Molior London show both the number of new home building starts and sales of new-builds in the capital have dropped to their lowest level in six years.
Foreign investment flocks to London
A report from the City of London Corporation has found that London has attracted more foreign investment in financial services in recent years than any other financial centre, even with Brexit on the horizon. The report found that London had attracted 55 foreign direct investment projects in the financial services sector, more than double the number attracted by cities such as New York, Paris and Frankfurt.
UK’s biggest trust launch unveiled
Terry Smith’s new Smithson Investment Trust has raised £822.5m in the UK's biggest trust launch, knocking Neil Woodford's Patient Capital Trust off the top spot. Mr Smith said: “Our thesis that many of the existing small and mid-cap funds in the market are anachronistic by being overly home biased and that there was a gap for a quality small and mid-cap global equity fund appears to have been borne out by a wide range of investors subscribing for the Smithson offer.”
Pirc rallies Ashmore shareholders
Proxy advisor Pensions & Investment Research Consultants (Pirc) has joined Institutional Shareholder Services in advising Ashmore Investments’ shareholders to oppose new proposals over concerns that chief executive Mark Coombs could take greater control of the firm.
Firms struggling to recruit staff
Research by the recruitment firm Robert Half has suggested that four out of five SMEs are struggling to attract staff with the relevant skills. Matt Weston, UK managing director at Robert Half, said: "Technology and digitalisation is rapidly changing the UK business landscape. This, coupled with Brexit uncertainty, means businesses must adapt their recruitment strategies to ensure they are equipped with the right talent to keep up. However, the skills desired within certain roles remain specialist and unobtainable without presenting a competitive offer.”
UK house prices grow at slowest rate for five years
Figures from the ONS and Land Registry have revealed that UK house prices grew at the slowest rate in five years in August. The average price of a UK home increased by 3.2% in the year to August, to £232,797, in the lowest annual rate of growth since August 2013.
Asos overcomes expansion costs
Shares in Asos jumped yesterday after it posted a 26% rise in full-year sales, which hit £2.4bn from £1.9bn a year earlier. Profits in the year to August 31st were up 28% to £102m, just ahead of expectations. CEO Nick Beighton noted the firm had achieved its earnings increase “despite bearing material transition costs due to our investment programme” – a strategy seeing it spend around £250m annually on new warehouses and systems.
Falling inflation lowers rate rise potential
The consumer price index (CPI) fell to 2.4% in September, from 2.7% the previous month, the Office for National Statistics has said, data which is likely to dissuade the Bank of England from raising interest rates before Brexit in March 2019. The falling price of meat and chocolate helped reduce some of the pressure on cash-strapped consumers.