BANKING
Monzo narrows its losses
Challenger bank Monzo reported a net loss of £116.3m for the year to February, compared to a loss of £119m in the same period last year. The fintech firm said revenues more than doubled to £355.6m amid a 34% increase in deposits, which hit £6bn, while the bank's lending book trebled to £759.7m. Card spending by Monzo customers increased from £24.4bn to £33.6bn, representing an increase of 38%. Monzo is now Britain’s seventh largest lender by customers, with a base of 7.4m active users. Over 1.6m customers signed up to the firm in the year to February. The bank has increased its provisions against bad loans from £14m to £101m. Staff costs were up 35% to £175.3m, with the company adding 553 staff, talking its headcount to 2,432 by the end of February. Reflecting on the bank’s performance, Monzo chief executive TS Anil said it had been a year of “phenomenal growth” for the firm, adding: “We’re a stand-out player in banking and tech – and we’re firing on all cylinders to achieve our ambitions.” Mr Anil also said plans to list the company were "some ways down the road." Noting that the company had not ruled out floating in New York rather than London, he insisted: "It's too early to talk about the time or location for a listing.”
PRIVATE EQUITY
Dealmakers score carried interest windfall
The UK's top private equity executives earned around £2.7bn in 2020/21, according to analysis from law firm Macfarlanes. A group of 255 dealmakers benefited from carried interest, the profit made by executives on successful deals. This comes amid debate around the tax status of carried interest. It is currently taxed as capital gains – at 28%, compared to the 45% top rate of income tax. This means the Treasury is missing out on around £600m a year. While Labour has said it will close the carried interest loophole, Macfarlanes has warned higher taxes on carried interest risked sparking an exodus of dealmakers. The Macfarlanes report said 2,550 executives made £3.4bn in carried interest in 2020/21 - and paid £952m in tax.
INTERNATIONAL
Credit Suisse axes China bank plan
Credit Suisse has reportedly scrapped plans to set up a locally incorporated bank in China, avoiding a potential regulatory conflict arising from its merger with UBS. UBS, which is acquiring Credit Suisse, already has a locally incorporated bank in China.
FINANCIAL SERVICES
FCA makes 'final call' to switch off Libor
The Financial Conduct Authority (FCA) has announced that market participants have a month to stop using Libor. While firms had been given permission to continue using dollar Libor in new contracts on a limited basis, the FCA has confirmed that this will end on July 1. “Firms must continue to actively transition contracts that reference Libor to appropriate, robust reference rates, and we continue to expect firms to deliver demonstrable progress,” the financial services watchdog said in its "final messages" on the rate. The Libor interest rate reflected the cost of lending between banks and was used in pricing mortgages, derivatives, credit cards and student loans. However, it was hit by a scandal that saw banks fined for trying to rig the rate.
Prudential finance boss resigns as conduct 'fell short' of standards
James Turner, Prudential's finance chief, has resigned from the insurer after an investigation into his conduct “relating to a recent recruitment situation.” “The group sets itself high standards and Mr Turner fell short on this occasion,” Prudential said in a statement. Chief executive Anil Wadhwani added: “We expect all our colleagues to adhere to the highest professional standards and behaviours.” The firm said that Mr Turner will remain “available” to the insurer for four months to support a “smooth transition” to his replacement, Ben Bulmer, chief financial officer of Prudential’s insurance and asset management business.
Regulator finds 'potential shortfall' of WealthTek client money
The Financial Conduct Authority (FCA) has frozen the assets of WealthTek’s principal partner after identifying a potential shortfall of £ 81.4m in client money. The FCA ordered WealthTek to cease operations in April and the City watchdog is currently carrying out a regulatory and criminal investigation into both WealthTek and its principal partner, John Dance. The regulator is looking into potential regulatory breaches relating to client money and custody assets, as well as criminal offences of fraud and money laundering. The FCA said it is working closely with administrators from BDO and is aware of the potential shortfall of £71.7m in custody assets and £9.7m in client money.
MEDIA & ENTERTAINMENT
Channel 4 boss could receive record annual pay of £1.4m
Channel 4’s Alex Mahon could receive the highest annual income for a chief executive in the broadcaster’s history. Ms Mahon, who was awarded the maximum bonus payout possible by the corporation’s remuneration committee for 2021, could receive almost £1.4m in total remuneration for 2022 if she is deemed to have hit the top performance targets. She was paid £1.196m in 2021, with this up from £991,000 in 2020. In 2021, Channel 4 made a record £1.2bn in revenues. Its board rewarded Ms Mahon by upping the maximum annual bonus payout from 50% to 80% of base salary in 2021.
REAL ESTATE
Commercial property price dip could hit banks
Royal Bank of Canada (RBC) has warned that the European banking sector could be dealt a blow by the weakening outlook for commercial real estate. RBC analyst Anke Reingen says European banks are “likely to take some hits from the worsening sector outlook.” Since the beginning of March, the MSCI European real estate index has fallen by nearly 10%. Ms Reingen says issues are likely to emerge as loans come up for refinancing, noting that around 30%-40% of commercial real estate loans come off the end of fixed interest contracts within the year and will have to be refinanced at higher rates. She highlighted that the average loan-to-value (LTV) ratio for a European bank sits at around 50%. “Even a 40% commercial real estate price decline would leave LTVs below 100%,” she added.
Property sales decline in April
Data from HMRC shows that the number of houses sold in the UK has fallen by almost a third. The 67,220 homes sold in April marks a 29% decline on March’s total and is 32% down on April 2022. Andrew Montlake, managing director of the mortgage broker Coreco, said that while buyers have been “returning and getting used to the new mortgage rate environment,” the fact that loan rates are starting to increase again “will undoubtedly have an effect on buyer affordability, mortgage choice, and therefore transaction levels going forward.”
Airbnb hands hosts’ income records to HMRC
Airbnb hosts face a tax probe amid a crackdown on holiday let owners who fail to declare their incomes. The online platform has been forced to share details of all of its users’ proceeds with HMRC as part of an investigation into missing tax receipts, handing over hosts' earnings data going back as far as 2017/18. Property owners who failed to pay income duties could face criminal prosecution and penalties of up to 30% of the tax owed.
RETAIL
Amazon’s UK unit pays no corporation tax
Amazon's main UK division has paid no corporation tax for the second year in a row. Amazon UK Services, which employs more than half of the group's UK workers, received a tax credit of £7.7m in the year to the end of December. The Government's super-deduction scheme allowed companies to offset 130% of investment spending on plant and machinery against profits for two years from April 2021. Amazon booked a credit of £1.13m under the scheme in 2021.
ECONOMY
Stride warns of ‘bumpy and difficult’ inflation battle
Work and Pensions Secretary Mel Stride says the fight to halve inflation by the end of the year will be “bumpy and difficult.” He told LBC Radio that while he believes Bank of England action on interest rates and the Government’s fiscal policies will prove successful, “it’s going to be bumpy, it’s going to be difficult.” He added that despite the challenges, “we are going to stay the course and get inflation down.” The Bank of England’s Monetary Policy Committee is expected to raise interest rates from 4.5%. While inflation fell from 10.1% in March to 8.7% in April, experts at Goldman Sachs expect it to stay above the Bank’s 2% target into 2026.
OTHER
Business confidence falls in May
Sentiment among British businesses declined in May, with firms concerned over the economy and their trading prospects. Lloyds Bank's Business Barometer fell to 28% in May from 33% in April, marking the first decline in three months, while optimism over the economy fell by six points to 22%. More than half of companies polled by Lloyds declared an intention to increase prices in the coming 12 months, while hiring intentions fell to 24% in May from a ten-month high of 27% in April.