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Daily News Roundup: Thursday, 23rd July 2020

Posted: 23rd July 2020

BANKING

RBS needs more than a lick of paint

Several commentators reflect on Alison Rose’s decision to change the name of the Royal Bank of Scotland to NatWest Group. The bank’s CEO hailed the change as an "historic day" for the bank, enabling it to "move on" and "align our group name with the brand under which the majority of our business is delivered". But Tony Mackay, a professor of economics in Inverness, believes the change “marks a fall in the stature and standing of Scottish finance” while Ian Fraser, the author of Shredded: Inside RBS, The bank That Broke Britain, says RBS could lose customers north of the border as the name NatWest “does more than jar with Scottish sensibilities.” The Telegraph’s Ben Marlow describes the rebranding exercise as “pointless” and “displacement activity” undertaken because Ms Rose cannot actually move on from the financial crisis and state ownership while the Government still holds on to its stake, the sale of which could be postponed for at least another five years. “It's the corporate equivalent of scratching your head when you're confused.”

Close Brothers' banking arm loan book reports fall

Close Brothers Group’s banking division saw its loan book fall 2.3% to £7.47bn in the 11 months to 30 June 2020, even as securities division Winterflood reported significantly higher trading. The group stated: “While early indications of a return to activity following the easing of lockdown restrictions are encouraging, the effects of COVID-19 on the UK economy remain highly uncertain. Nevertheless, our proven business model and long track record of navigating a wide range of economic cycles leave us well placed to respond to the challenges and opportunities ahead.”

City watchdog warns banks over bonuses

The Financial Conduct Authority (FCA) has warned banks not to splash out on bonuses insisting that any payouts must reflect the impact of the COVID-19 pandemic. The FCA said: “We expect you to ensure remuneration policies and practices remain aligned with long-term business plans, if these are under review or undergoing change.”

Mobile banks set to make return

Mobile banking services will return to rural communities in Scotland, operators have promised, after they were withdrawn due to the coronavirus lockdown. The Bank of Scotland is already phasing its van back into some towns and villages, but the Royal Bank of Scotland has said it is awaiting further government guidance.

Bank Street loses its last bank

Barclays has announced that it will be closing its branch on Bank Street in Newquay, Cornwall, meaning the town centre will be without a bank for the first time since the late 1800s. Councillor Geoff Brown called the news a "hammer blow" to businesses.

PRIVATE EQUITY

CVC exerting growing influence on rugby

A Daily Telegraph article notes that a list of the top 50 most influential people in rugby union includes Nick Clarry, a managing partner at CVC who oversees private equity activities in the sports, media and entertainment industries. Sarah Mockford, editor of Rugby World is quoted as saying that "Nick Clarry may not be a familiar name in rugby circles, but he represents CVC's growing investment – and influence – in the sport. The pandemic has underlined that rugby's current model is not sustainable and thus investment from companies like CVC is crucial to the future of the sport.”

Silver Lake strikes latest French deal with €700m purchase from Goldman

US private equity group Silverlake has agreed to buy Paris-based financial services broker Meilleurtaux from Goldman Sachs for €700m.

INTERNATIONAL

Former Wirecard CEO rearrested in Munich

The former CEO of collapsed German payments company Wirecard, Markus Braun, has been rearrested in Munich along with two other unnamed former executives. Munich prosecutors now suspect Wirecard knew it had been lossmaking since 2015 and that its management conspired together in an organised commercial fraud of around $3.7bn. The fintech firm collapsed into insolvency after admitting last month that more than $2bn in funds supposedly held on its behalf was missing and probably never existed. Jan Marsalek, the company’s former chief operating officer, has vanished but is wanted under an international arrest warrant.

Coronavirus claims take Swiss Re to $1.1bn loss

Swiss Re reported a net loss of about $1.1bn in the first half of the year, driven by claims related to the coronavirus pandemic. The company said Covid-related claims and reserves totalled $2.5bn in the first six months. Bloomberg notes that Lloyd’s of London has estimated that the insurance industry will suffer about $203bn in losses from the pandemic this year.

EU banks should heed lessons of 2008 crisis

European banks should be alert to the threat of massive loan losses as a result of the coronavirus crisis, the FT says, and recognise losses in a timely manner so regulators can act.

UniCredit sells non-performing loans worth €1.5bn

As Italian lenders reduce exposure to bad debts before an expected wave of Covid-era defaults, UniCredit has sold non-performing loans worth €1.54bn.

AUTOMOTIVE

Tesla heads towards elite S&P 500 index

Tesla has reported its fourth consecutive profitable quarter putting the electric car maker on track to join the elite S&P 500 stock market index. The Californian company last night announced a profit of $104m in its second quarter with CEO Elon Musk stating the business had shown “strong resilience during these unprecedented times”. Tesla’s stock has leapt from around $233 last July to $1,365 today, an increase of around 585%.

Fiat Chrysler and Waymo in autonomous vehicle deal

Fiat Chrysler and Google sister company Waymo have reached agreement on a deal to scale up the former’s autonomous vehicle ambitions. Waymo will apply its technology to Fiat Chrysler’s Ram ProMaster van as part of the project.

AVIATION

Deal with unions means BA pilots face the axe

A deal agreed between British Airways and the pilots’ union Balpa will see up to 270 pilots face compulsory redundancy. Further job cuts will be met through voluntary severance and part-time working. An agreement for cabin and ground crew has yet to be reached as unions remain divided over job cuts and changes to working conditions. The airline was losing £20m a day at the peak of the pandemic and had proposed making up to 1,255 pilots redundant as part of 12,000 cuts across the business.

CONSTRUCTION

Housebuilders facing multiple obstacles as dividends cancelled

Housebuilding firms are facing challenges from a looming recession and possible mass unemployment, with all the major players in the industry except for Berkeley Group cancelling or suspending dividend payments. Peter Truscott, chief executive of Crest Nicholson, remarked: "Unlike previous downturns, which were accompanied by a surplus of housing stock, we see volumes of transactions more likely to bear the brunt of any weakness rather than price." Meanwhile Savills estimates that 171,000 new homes will be built in England in 2020, representing a decline of 44% from last year’s figure. Elsewhere, Countryside Properties is to launch a £250m share placing amid rising demand for affordable housing.

FINANCIAL SERVICES

FCA may force diversity if firms don’t show willing

Nikhil Rathi, the incoming head of the Financial Conduct Authority, told MPs on Wednesday that improving diversity in the financial services industry would be one of his top priorities. “I would have an expectation over the coming years to see boards, to see senior leaderships at major financial institutions working hard on these issues to deliver diversity and change culture,” Rathi said. “And if we are seeing that progress not happening then at some point it becomes a supervisory matter, and it may even become a matter that we would need to deal with in how we decide whether to approve an appointment or not.” Mr Rathi also indicated that he would like to see a more “interventionist” approach to cracking down on financial promotions of risky investments.

EU plans flurry of rule changes to boost market recovery

Brussels is planning a range of regulatory tweaks, including exempting asset managers from charge disclosures, changing limits on derivatives trading, relaxing Mifid rules and changing rules on using overseas benchmarks.

MANUFACTURING

Melrose preparing to sell US air conditioning arm

Melrose Industries is likely to sell its US air conditioning arm Nortek for up to $3bn as it prepares for another series of takeovers. Melrose chief executive Simon Peckham commented: “For this year the focus is on cost control and cash generation, but we have protected investment in innovation for the future.”

MEDIA & ENTERTAINMENT

Tiktok parent considering options as American ban looms

Tiktok could be sold to US investors and split from its Chinese parent firm Bytedance as a potential ban on the app in America is floated. Bytedance is believed to be exploring a range of options to address US national security fears around the app. This comes after India banned Tiktok and 58 other Chinese apps from the country earlier this month. Bytedance could potentially retain a minority stake in the platform if it is sold to a consortium of investors such as Sequoia, General Atlantic and New Enterprise Associates.

PROFESSIONAL SERVICES

Freshfields reports fall in net profit

Freshfields has disclosed net profit of £685m for the year ending 30 April 2020, down from £688m in the year earlier period. Average equity partner pay at the law firm slipped by £20,000 to £1.82m per annum. Meanwhile, Pinsent Masons grew revenue by 4% to £495.9m during the year to April declaring its financial performance "satisfactory".

ECONOMY

Johnson pledges to get economy back on track

Boris Johnson told MPs yesterday that he would get the economy back on an "even keel" well before the next general election in 2024. In a meeting with backbench Conservative MPs in the House of Commons, Johnson was reportedly “bullish” about covering the £200bn cost of responding to the coronavirus pandemic, provided lockdown was not lifted too quickly resulting in a spike in cases. Separately, the Government is to slash its aid budget by £2.9bn this year in line with an expected shrinking of the economy caused by the coronavirus pandemic.

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