CYBG to rebrand as Virgin Money
Clydesdale and Yorkshire bank owner CYBG is set to be renamed as Virgin Money in a major rebranding to “disrupt the status quo” of UK banking. The rebranding process will be rolled out to Yorkshire Bank in 2019 and Clydesdale in 2020, with the entire business re-branded as Virgin Money by the end of 2021. The announcement was made at a capital markets day, where the company said it would focus on growth in business and unsecured consumer lending, rather than the mortgage market where margins have been under severe pressure. Boss David Duffy commented: “We have a clear ambition to disrupt the status quo with the new Virgin Money. The new group combines the ethos of Virgin, with its distinctive and brilliant customer experience, with CYBG’s technology, product expertise and know-how. Despite the ongoing Brexit headwinds and continued competitive pressures, the strength of the newly combined group gives us every confidence we will deliver our targets.” The FT’s Matthew Vincent comments that CYBG must hope that Richard Branson’s Virgin brand lends credence to its offering. James Moore in the Independent debates whether the rebranding will lead to Virgin Money becoming the Aldi of retail banking – he remains unconvinced.
Lloyds’ boss is worth his pay
Stuart Sinclair, chairman of the remuneration committee at Lloyds Banking Group, has told MPs that CEO Antonio Horta-Osório is a “winner” with “charisma” who deserves his controversial pension perks and pay deal. Mr Sinclair said that staff at the bank did not resent his pay deal, which last year saw him collected £6.27m. Mr Sinclair added that he had worked at a lot of companies where there was “bitter resentment” over executive pay, “but I don't really see it at Lloyds”. Mr Horta-Osório rejected an accusation by Frank Field, the chair of the cross-party committee, that he was being greedy when the average Lloyds employee was paid £37,000. The Lloyds boss said that while he was mindful there was more to do, the bank was already taking action to address inequalities and reward staff. These included bigger percentage pay for the lowest paid workers, a total of £600 of shares awarded to all staff over the past three years and paying the real living wage across the UK. Commenting on the pay disparity at Lloyds, the Guardian’s Nils Pratley suggests that the pay ratio between Mr Horta-Osório and the median earner at the bank is high even by banking standards.
Big banks delaying Brexit asset moves
Bloomberg reports that despite regulatory pressure to do so, big banks including Goldman Sachs and Standard Chartered are continuing to delay the transfer of capital outside of the UK to other EU countries. Other lenders including Citigroup have only shifted part of the assets they were planning to relocate due to Brexit. According to people familiar with the situation, executives said they cannot be forced to transfer the capital as the UK is still in the EU and clients still want to do business in London. Sources added that Standard Chartered was also counting on using the “temporary permissions regime” which has recently been extended to October.
Hollinrake criticises banks over ‘dirty tricks’
Kevin Hollinrake, co-chairman of the all-party parliamentary group on fair business banking, has claimed that unnamed banks have orchestrated a “dirty tricks” campaign against him by revealing details of an alleged conflict of interest. Mr Hollinrake said that the banks were surreptitiously challenging his “personal integrity” through alleged briefings with two news organisations, which are said to relate to a lending dispute between the estate agency Hunters and Clydesdale Bank. According to the Times, at least two banks are said to believe that the personal dispute is enough to question Mr Hollinrake’s position on a steering group set up to deliver a dispute resolution scheme for small businesses.
Britain must act to save banking from decline
Writing in the FT, Bob Wigley, the chair of UK Finance, says a new formal body needs to be created to co-ordinate regulation and foster midsized institutions.
Weidmann softens stance on Draghi’s stimulus policies
Jens Weidmann, a frontrunner to replace Mario Draghi, has softened his stance on the ECB’s bond-buying programme in a bid to ease fears about his suitability for the helm.
Poland’s crisis-hit Idea Bank to fire hundreds of staff
Polish mid-tier lender Idea Bank has announced it plans to cut its workforce by half this year to cut costs and boost profits.
Founder Group’s legal spat imperils Credit Suisse move in China
The FT reports that a dispute between Peking University and Founder Group, a Beijing-based conglomerate, is threatening Credit Suisse’s joint venture with the firm.
Berkeley Homes upbeat despite fall in pre-tax profits
Housebuilder Berkeley Homes, which has launched 11 new developments this year, has unveiled plans to launch more amid a fall in pre-tax profits - which fell 20.7% to £775.2m in the year to April 30. Revenue rose 4.1% to £2.95bn, from £2.84bn the previous year, and chief executive Rob Perrins, said it is “vital” for Britain’s next Prime Minister to “drastically reduce the bureaucracy and time surrounding planning applications.”
Politicians call on Facebook to pause Libra
Politicians have called on Facebook to put on hold plans to launch its own cryptocurrency, only a day after the idea had been revealed. Maxine Waters, chairwoman of the House of Representatives' financial services committee in Washington, called for a delay to Libra until regulators had fully examined the plans. Meanwhile, a leading cryptographer has claimed that Libra has a “fundamentally bad design” which could allow personal data to be shared with third parties. Peter Todd, a cryptography expert and early developer of Bitcoin, said the technology suffers from a "fundamentally bad design for what they claim to be doing, but a good design if you want to mine data and exert control”. Elsewhere, Robin Pagnamenta writes in the Telegraph that regardless of whether it succeeds, Facebook’s digital coin project may turn out to be just a part of a tidal wave of innovation which promises to disrupt the traditional financial services industry forever. He adds that Margrethe Vestager, Europe's antitrust chief, is unlikely to be an early adopter of Libra.
Woodford challenged over performance 18 months ago
Hargreaves Lansdown has admitted that it first confronted fund manager Neil Woodford about the level of unquoted, hard-to-sell assets in his now-suspended Equity Income Fund over 18 months ago. Despite its concerns, Hargreaves continued to recommend the fund on its top “best buy” list for clients. Meanwhile, Chris Hill, CEO of Hargreaves, revealed yesterday that his company learnt of breaches by Woodford only when Andrew Bailey, head of the FCA, disclosed them on Tuesday. Hargreaves had asked that Woodford Investment Management inform it of any breaches. However, a spokesperson for Woodford Investment Management retorted: “The agreement with Hargreaves Lansdown was to inform them of any month-end breaches only. Consistent with all clients, Woodford provided month-end data for investors and at no time was there a month-end passive breach.” In a letter to the Treasury Select Committee, Mr Hill said that a total of 291,520 Hargreaves customers had £1.6bn of investments trapped in the fund.
Direct Line teams up with Starling
Direct Line Group has partnered with digital bank Starling to allow current account customers to apply for home insurance. The partnership means Starling Bank customers are now able to securely connect their accounts with Direct Line Group's home insurance brand Churchill.
Royal London names new chief executive
Mutual life insurer Royal London has named Barry O’Dwyer as its new chief executive. The former senior executive at Prudential and Standard Life joins in September.
LEISURE AND HOSPITALITY
Whitbread reports drop in sales
Whitbread, the owner of Premier Inn, has reported a drop in sales in the first quarter due to ongoing Brexit uncertainty. The company said UK like-for-like accommodation sales growth fell by 4.6%. Total like-for-like revenue per available room in the UK fell 6% in the quarter due to “weaker business and leisure confidence”. Whitbread chief executive Alison Brittain said: “We have delivered a resilient performance in the first quarter despite more challenging market conditions and we continue to make good progress with our efficiency programme, which is helping to partially offset another year of high industry cost inflation.”
Factory output slows
According to the latest industrial trends survey from the CBI, factory output almost ground to a halt in the three months to June. The business lobby group said that a net balance of 2% of businesses reported an increase in output during the period. This was down from 14% the previous month, when manufacturers were lifted by Brexit-related stockpiling. The CBI said that ten out of sixteen sub-sectors experienced growth. Chemicals, food, drink and tobacco were resilient, while car manufacturing struggled. Order books also deteriorated in the quarter. The balance of manufacturing businesses reporting higher-than-usual orders fell to -15% in June, down from -10% last month.
London dragging on UK house prices
London continues to drag on UK house prices, according to data by the Office for National Statistics (ONS), with the capital enduring the lowest annual growth out of any region with prices falling 1.2% over the year to April 2019. Prices across the UK rose an unadjusted 0.7% month-on-month in April, the first rise in eight months, taking the average property price to £229,000. In England, the East Midlands saw the strongest annual house price growth in April, with a 2.9% increase. Regionally, Wales saw the strongest growth in the UK of 6.7% in the year to April, followed by Northern Ireland at 3.5%, Scotland by 1.6% and England by 1.1%. Northern Ireland remains the cheapest country in the UK to purchase a property, with an average house price of £135,000.
Bank set to hold interest rates
The Bank of England is expected to hold interest rates again today, with economic growth slowing sharply after a stock-building boost at the start of 2019. The MPC is expected to keep rates at 0.75%. Data released yesterday showed that inflation had fallen to a target of 2% in May, down from 2.1% in April, a development that could give the Bank more breathing space to keep rates unchanged. Core inflation, which excludes more volatile food and energy prices, dropped to 1.7% - the lowest figure since early 2017.
Hoban calls for action on digital skills
The former City minister Mark Hoban has called for urgent action to address the skills crisis facing the financial services sector. According to a report chaired by Hoban, the sector does not spend enough on training, lacks diversity, and its values and culture are not well perceived. The report suggests that greater investment in training and system-wide change is needed to address the problem of Britons lacking the skills to work in the sector.