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Daily News Roundup: Thursday, 19th September 2019

Posted: 19th September 2019

BANKING

Banks sign up to responsible banking code

UK Finance has announced that British banks will implement UN-backed “responsible banking” principles that will influence lending and company behaviour. UK Finance chief executive Stephen Jones is set to tell attendees at the banking trade body’s annual dinner: “Environmental risk and opportunity is beginning to reshape the way we look at business planning and economic growth … A broad base of stakeholder interests, from regulators, to investors, employees and customers are increasingly challenging banking and finance to find more innovative and sustainable ways in which to operate.” The United Nations Environment Programme Finance Initiative principles will be launched during the UN General Assembly in New York next week.

Metro warns over accounts scandal hit

Metro Bank says it could face a “significant” bill after the Financial Conduct Authority and Prudential Regulation Authority widened their investigations into a £900m accounting scandal at the challenger bank. A bond prospectus from Metro warned of the risks associated with possible action from regulators, saying the probes may result in “criminal and/or civil liability for the bank” or suspension of its regulatory permissions. It added that “making redress and the cost of any regulatory sanctions may involve significant expense”. The regulators are looking at reporting standards, systems, controls and governance over the accounting scandal which saw loans given incorrect risk weightings.

UK firms top fintech rankings

Challenger banks Monzo and Revolut have made the top three of the annual FinTech 50 list, a ranking of Europe’s most influential banking start-ups. Monzo and Revolut were ranked second and third respectively, with Onfido – a UK fintech firm that has developed identity verification algorithms – coming out on top. Five British firms made it into the top 10 of the list, which is compiled by a panel of experts from firms including Standard Chartered, UBS, and Mastercard. Among the UK firms included on the list are currency transfer start-up Azimo and challenger bank Starling Bank.

Outdated rules are holding back financial innovation

Orogen Group CEO Vikram Pandit says that while digitalisation has played a part in banking, the industry “has not fundamentally changed”. He believes digital currencies could bring reform by prompting “21st century regulation”.

PRIVATE EQUITY

Cobham sale to be probed

Business Secretary Andrea Leadsom has ordered an investigation into the proposed £4bn sale of defence contractor Cobham to Advent International. The Competition and Markets Authority will examine the takeover and has until October 29 to conclude its investigation. Ms Leadsom said: “Following careful consideration of the proposed takeover of Cobham, I have issued an intervention notice on the grounds of national security.” Since the Enterprise Act of 2002, the Government has made 16 interventions on takeovers under one of three grounds - national security, media plurality and financial stability.

PE boss: Brexit means bargains

Jonathan Gray, president and COO of Blackstone, says Brexit has made Britain the best place among developed countries to buy companies and other assets at bargain prices. Mr Gray said: "We still like the UK as a place to invest long term. Long term, we have a positive view on the UK.”

INTERNATIONAL

Federal Reserve cuts rates

The US Federal Reserve has cut interest rates for the second time since 2008. It has lowered the target range for its key interest rate by 25 basis points to between 1.75% and 2%. Seven members of the Federal Reserve Open Markets Committee, which sets the rates, voted in favour of the cut, while two members wanted to hold the rate steady and one wanted a steeper cut.

UBS says rate cut could see charge rethink

UBS is considering charging more corporate clients in Switzerland for cash holdings if the Swiss central bank drops rates. While SMEs have been exempt from charges large businesses are liable for over any cash holdings exceeding their operational purposes, UBS’ head of corporate & institutional clients Alain Conte said the bank may need to rethink this if rates are trimmed. Although many economists expect the Swiss National Bank to hold its policy rate at -0.75%, one in three say it could follow the European Central Bank and make a cut.

China lenders look to boost capital by issuing perps

China’s banks are issuing domestic perpetual bonds as part of an effort to shore up the nation’s financial system, with around $114bn worth of debt issued or in the pipeline.

Turkish banks told to write off $8bn bad loans

Turkey’s Banking Regulation and Supervision Agency has told the country's banks to write off more than $8bn worth of bad loans.

Deutsche Bank faces ECB scrutiny over securities

Deutsche Bank could face a European Central Bank investigation after it failed to apply for the necessary approval to buy and sell its own debt between 2014 and 2017.

AUTOMOTIVE

Pendragon posts loss

Car dealership Pendragon saw a pre-tax loss of £32m for the first six months of 2019, compared to profit of £28m in H1 2018, warning that Brexit uncertainty is hitting consumer confidence. The firm has announced that around 300 jobs will be lost and more than 20 showrooms are to close.

Ineos to create 1,000 jobs and boost UK car industry

Ineos has announced that it will assemble a new off-road vehicle in Bridgend, Wales, while parts will be made in Portugal, creating 1,000 jobs across the two new facilities.

AVIATION

Airbus: Plane numbers to double

Airbus has forecast that there will be twice as many planes in the sky by 2038 than there currently are. The aircraft maker expects there to be demand for 47,680 aircraft by 2038, compared to the current global total of 23,000, with the figures including both passenger and freight planes.

FINANCIAL SERVICES

Lloyd’s back in the black

Lloyd’s of London has posted a half-year profit of £2.3bn, swinging from a £1bn loss last year. Lloyds chairman Bruce Carnegie-Brown said the market still had “a job to do” to improve underwriting returns after profits from this segment fell from £500m to £100m. Lloyds will later this month publish findings from a Banking Standards Board survey of its 45,000 participants, which it launched in a bid improve its working environment on the back of sexual harassment allegations. CEO John Neal has promised to improve diversity, saying: “I’m absolutely determined that we achieve far better gender equality, not just in the corporation but in the market itself.”

Square's new Terminal enters retail space

Payments outfit Square has revealed its new payments platform Terminal, which it hopes will be a "one-stop-shop" for getting businesses online and taking card payments. The firm, headed by Twitter’s Jack Dorsey, has integrated hardware and software into one device that businesses can use to manage their payments. After a one-off cost of £199, sellers pay 1.75% per card payment, or 2.5% per online transaction, with no monthly fees.

Wall Street banks look to sell more research to companies

A dip in demand from asset management clients and new regulations on research charges have prompted Goldman Sachs and Morgan Stanley to look to selling research services to corporate clients.

UK ‘unicorn’ TransferWise taps business demand to lift profits

Fintech firm TransferWise saw pre-tax profits climb 29% to £10.1m in the 12 months to March 31, while revenues rose 53% to £179.1m. Customer deposits climbed from £148m to £830m.

City of London stockbroker Cenkos reshuffles board

Stockbroker Cenkos Securities has announced that head of equity capital markets Paul Hodges and natural resources head Joe Nally are to step down from the board. They will remain on the executive committee. Cenkos said that a smaller board would bring it “into line with current regulatory and good corporate governance practices”.

REAL ESTATE

Price growth slows in July

Annual UK house price growth in July slowed to its worst rate since September 2012, according to data from the Office for National Statistics. UK house prices grew just 0.7% in the year to July, taking the average to £232,710. Almost half of all UK regions suffered a decline, with the North East seeing the sharpest fall at 2.9%. Separately, the Royal Institution of Chartered Surveyors reported that new buyer enquiries improved slightly in July, but not enough to boost demand.

RETAIL

Kingfisher profits hit

Kingfisher has reported falling profits and sales, as weaknesses in its B&Q chain held back the firm’s turnaround efforts. Overall statutory pre-tax profit for the six-month period dropped 12.5% in the six months to July 31st, to £245m. At B&Q, sales declined 3.2%; they rose 5.1% at Screwfix, but were down 0.7% on a like-for-like basis in the UK and Ireland. Kingfisher is in the fourth year of a five-year programme that was designed to boost earnings.

ECONOMY

Inflation slows to lowest in three years

UK inflation fell to its lowest point in three years in August, the Office for National Statistics (ONS) has said, after prices rose by an annualised rate of just 1.7% - well below the Bank of England’s 2% target. “Games, in particular computer games, accounted for 0.15 percentage points of the fall,” said Andrew Wishart, UK economist at Capital Economics. Cheaper clothes, toys and petrol also helped to pull inflation down to its weakest annual pace since December 2016. Clothes prices are down 0.9% year on year as retailers continue to discount, with women’s shoes and children’s clothes in particular getting cheaper. Economists had expected the ONS to publish a reading of 1.9%.

Europe faces eight more years of negative rates, JPMorgan finds

Analysis from JPMorgan Asset Management suggests that Europe faces another eight years of negative interest rates and that, despite central banks loosening monetary policy, the likelihood of a global recession is increasing.

OTHER

Card spending overtakes cash payments

New data has revealed that credit card spending overtook cash payments in 2018 in terms of value of sales made. Total sales rose by 4% to £381bn last year, with debit card payments representing almost 57% of this. Credit and charge cards accounted for 21.5%, but cash's share fell to 20.4%, or just over £77bn, down from 22% in 2017. Banks and retailers have said the death of cash is being driven by changing behaviour but consumer groups suggest access to real money - caused by free-to-use cash machines being axed - is a problem. Gareth Shaw, of Which?, called for “legislation that guarantees people can ... access cash for as long as it is needed.”

MPs press Javid over BoE appointment

The Commons Treasury Select Committee has written to Chancellor Sajid Javid asking him to confirm a timetable for appointing a new Bank of England governor. This follows reports that Mark Carney's successor may not be named until after a general election, and that he may be asked to stay on if Brexit is delayed.

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