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Daily News Roundup: Thursday, 21st December 2023

Posted: 21st December 2023

BANKING

Revolut on track to exceed £1.5bn revenue in 2023

Revolut is projected to generate more than £1.5bn in revenue in 2023, according to an investor presentation seen by Bloomberg. Unaudited financials indicate that Revolut's monthly revenue averaged around £125m in the first half of 2023, putting it on track to surpass the £850m earned in 2022. The company's net interest income from its European business was reported to be triple the size of revenue from foreign exchange at the start of 2023. Revolut is adding approximately 300,000 users per week, with a total of nearly 40m customers globally. Despite delays in obtaining a UK banking license, Revolut remains determined to expand and recently appointed Francesca Carlesi as the CEO for its UK business. The company, valued at $33bn in 2021, is still behind schedule in filing its audited accounts for 2022, which are expected to be submitted in the coming days.

Lenders gearing up for ‘mortgage January sale'

Mortgage lenders are expected to cut rates further in January as falling inflation raises hopes that the Bank Rate will come down faster than expected next year. Following the inflation drop, swap rates have fallen with rates on long-dated loans expected to drop to between 3% and 4%. The cost of a five-year fixed-term mortgage has fallen below 4% for the first time since May. Brokers say lenders are keen to lower rates further to draw in business and capitalise on the expected jump in activity in January.

HSBC to boost funding for tech start-ups

HSBC will increase the size of its Growth Lending fund by £100m to £350m in 2024 to boost funding for tech start-ups. The fund, launched 12 months ago, provides finance access for high-growth UK tech businesses. To access capital, the companies must have strong equity backing, a proven sales track record, and a clear path to profitability. HSBC hopes to continue expanding the fund, demonstrating its ongoing commitment to the sector.

PRIVATE EQUITY

US private equity firm targets Actis

American private equity firm General Atlantic is in talks to acquire Actis, a British infrastructure investor, in a deal worth $12.7bn. The proposed takeover would increase General Atlantic's total assets under management to $89bn. Actis, which was spun out of CDC Group, the Government's development finance institution, in 2004, has become one of the world's largest emerging markets investors. The sale would likely result in a windfall for Actis's management. The American private equity firm is also considering a stock market listing, following in the footsteps of Blackstone, KKR, and Apollo.

Kin and Carta accepts higher cash takeover offer from Valtech

London-based technology consultancy Kin and Carta has accepted a new and higher cash takeover deal offer by private equity firm Valtech. Valtech, a newly formed company controlled indirectly by funds advised by BC Partners, will pay 130p per share to acquire Kin and Carta, formerly known as St Ives, valuing it at around £239m. Kin and Carta had previously accepted an improved Apax Partners bid of £203m.

INTERNATIONAL

Morgan Stanley in talks for new private credit fund

Morgan Stanley is discussing the possibility of allocating a portion of its balance sheet into a new private credit fund, which would include capital from external investors. The firm has held preliminary talks about injecting $1bn to $2bn of capital into the new vehicle. JPMorgan Chase previously set aside at least $10bn for its direct lending venture.

Citigroup to close global distressed-debt business

Citigroup is closing its global distressed-debt business as part of CEO Jane Fraser's overhaul. The business unit, which trades bonds and other securities of companies that are in or approaching bankruptcy, employs about 40 people. The company last week said it would close its municipal underwriting and market-making activities and unwind the unit in the first quarter. 

UniCredit offers voluntary retirement scheme to 510 employees

Italy's UniCredit has agreed with Italian unions to offer a voluntary early retirement scheme to 510 employees, partly offset by 255 new hires. Last year, UniCredit signed an accord with unions and booked €239m in charges to fund voluntary exits to be replaced by younger hires.

Workers at Wells Fargo ramp up union organising campaign

Workers at Wells Fargo, the fourth largest bank in the US, have launched a major union organising campaign, marking the largest union drive at a US bank in decades. Four Wells Fargo branches in New Mexico, Alaska, California, and Florida have filed for union elections since November.

Deutsche Bank doubles capital in Indonesia

Deutsche Bank has announced that it is doubling its capital for its business in Indonesia to $645m. This marks the bank's third capital increase in the Asia Pacific region this year.

FINANCIAL SERVICES

UK to sign post-Brexit financial services deal with Switzerland

The UK will today sign a new financial services agreement with Switzerland. The deal is expected to make it easier for financial companies to offer cross-border services relating to insurance, banking, asset management and capital market infrastructure. Chancellor Jeremy Hunt will travel to Bern to sign the mutual recognition deal. “The Bern Financial Services Agreement is only possible due to new freedoms granted to the UK following its exit from the EU,” the Treasury said. “The agreement will enhance the UK and Switzerland’s already thriving financial services relationship.” David Henig, UK director at the European Centre for International Political Economy, said the deal may well prove to be better than the equivalence framework with the EU that Britain would have had were it still a member.

MEDIA & ENTERTAINMENT

Warner Bros and Paramount plot megamerger

Warner Bros Discovery and Paramount Global are in early talks to merge. The deal would see the owner of HBO channels and CNN team up with the studio behind the Mission Impossible films and CBS News. Warner chief executive David Zaslav and Paramount chief Bob Bakish discussed a possible deal in New York this week. But talks are at an early stage and a deal may not happen, sources told the FT. The deal would bring together two of Hollywood's "Big Five" studios, with Warner and Paramount's combined market value standing at $38bn (£30bn).

REAL ESTATE

UK house prices fall at fastest pace in more than a decade

Figures from the Office for National Statistics show that average UK house prices declined by 1.2% in the 12 months to October 2023, down from a revised fall of 0.6% in September. This marks the biggest annual decline since October 2011, but it is much less than most analysts were predicting this time a year ago. Analysts said the relatively modest decline was because fewer homes were being put up for sale, preventing supply from getting too far ahead of demand. Prices in London fell the most, down by 3.6% year-on-year, although homes in the capital remain the most expensive at £515,500, on average. In England, prices declined by 1.4% to £306,000, on average. In Wales, prices slid by 3% while Northern Ireland and Scotland saw prices rise by 0.2%. The northeast was the only region in England to generate an increase, albeit one of only 0.2%.

Santander buys 20% of US real estate portfolio for $1.1bn

Santander has acquired a 20% stake in a US real estate portfolio for $1.1bn from the Federal Deposit Insurance Corporation (FDIC). The FDIC will retain the remaining 80% in a joint venture with the bank. Under the deal, Santander will service 100% of the assets in the portfolio. The portfolio consists of $9bn worth of New York-based multifamily real estate assets previously held by Signature Bank. The acquisition is expected to be accretive starting in 2024 and will consume approximately two basis points of Santander Group CET1, to be paid back within three years.

ECONOMY

UK inflation falls to 3.9% in November

Inflation fell in November to 3.9% from 4.6% in October, according to the Office for National Statistics (ONS). This is the lowest rate of price increases for more than two years with a fall in petrol prices the chief driver of the surprise fall. Slowing prices for food and household goods also contributed. Most economists had expected inflation to fall to 4.3% last month. The drop will likely put more pressure on the Bank of England to cut interest rates, which remain at a 15-year high of 5.25%. Goldman Sachs advanced its expectation on the timing of interest-rate cut by the Bank to May from June, while maintaining the size of cut at 25 basis points per meeting until the policy rate reaches 3% in May 2025.

OTHER

UK business confidence slips in December

British businesses became more downbeat about the economic outlook in December, with the biggest monthly decline in confidence in more than a year, according to the Lloyds Bank Business Barometer. The survey fell by seven points to 35% from November's 21-month high of 42%, marking the largest monthly fall since August 2022. Lloyds Bank's survey showed hiring intentions cooled but the proportion of companies planning to raise salaries rose. "Businesses are also balancing cost pressures with a challenging labour market," said Hann-Ju Ho, senior economist at Lloyds.

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