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Daily News Roundup: Thursday, 24th August 2023

Posted: 24th August 2023

BANKING

NatWest under fire for Rose payout

The outgoing CEO of NatWest is in line for a £2.4m pay package this year despite resigning for divulging details about Nigel Farage’s banking status to a journalist. Farage had complained about his account with NatWest’s private banking subsidiary Coutts being closed down. Dame Alison admitted that she’d indicated to a BBC journalist that the decision had been taken for commercial reasons but a dossier on Farage revealed Coutts had closed the account due to his political views. The bank revealed on Wednesday that Rose was seeing out her 12-month notice period on her contract, making her eligible for the £2.4m plus a bonus of up to £2.9m and stock worth £6m. When he learned of Dame Alison’s exit package, Farage said he thought it must be some “sick joke” adding: “Surely you can’t break client confidentiality, surely you can’t breach virtually every important rule in the FCA codebook, and you can’t then lie about it after you’ve briefed the BBC and still receive a £2.43m payout, and yet that’s exactly what’s happened to Alison Rose.” Senior Tories have criticised the payout suggesting the Government, NatWest’s largest shareholder, should step in and block the award.

Nationwide, HSBC and Santander cut mortgage rates

HSBC and Nationwide have both announced further rate reductions, offering respite for mortgage borrowers. HSBC is slashing rates across its two-year to 10-year fixed rates for both residential and buy-to-let mortgage products, while Nationwide is reducing selected fixed rate deals by up to 0.40 percentage points. Mortgage rates have been on a downward trajectory in recent weeks, with all six of the UK's largest lenders, including NatWest, Lloyds Banking Group, and Barclays, having slashed rates. HSBC's cheapest five-year fix is aimed at remortgage customers with at least 40% equity, charging 5.44%, while Nationwide's cheapest five-year fix for first-time buyers is 5.44% with no fee. Santander has also reduced selected mortgage rates, offering a five-year fix at 5.2%, the cheapest on the market.

Scrapping the bonus cap won’t help the City

A Bank of England and Financial Conduct Authority consultation on a proposal to remove curbs on bankers’ bonuses is due in coming weeks, but experts doubt the move will help attract more top-level bankers to the UK. "Removing the cap isn't going to attract more top bankers to the UK because their pay will be more uncertain," Luke Hildyard, director at the High Pay Centre think tank said. Others say making changes to a bank's bonus structure will likely prove controversial and reputationally risky.

PRIVATE EQUITY

Venture capital funds prop up young companies as inflation bites

Some £664m across 345 investments was deployed by UK-based VCTs last year, according to the Venture Capital Trust, up by 8% year-on-year as they sought to support portfolio companies in their fight against inflation.

INTERNATIONAL

US regulators impose tougher disclosure rules on private funds

The Securities and Exchange Commission has approved new rules requiring private equity, venture capital and hedge funds to provide investors with standardised performance reports and increased disclosure on expenses. The regulator's five-member panel voted 3-2 to implement the new rules, which also prohibit giving some investors preferential treatment over redemptions and portfolio exposure and requires funds perform annual audits. "Investors, large or small, benefit from greater transparency, competition and integrity. It's not as if some state pension fund benefits from opacity," SEC Chair Gary Gensler told reporters after the panel's vote.

Morgan Stanley fined £5.4m for breaching energy market transparency rules

The energy regulator, Ofgem, has fined Morgan Stanley £5.41m for breaching energy market transparency rules. Traders at the investment bank used WhatsApp messages on personal mobile phones to discuss energy market transactions, which violated the rules requiring the recording and retention of electronic communications. This is the first fine issued in Britain under these rules. Last year, Morgan Stanley was fined $200m by US regulators for record-keeping failures.

Banks agree near $500m settlement in stock-lending lawsuit

Goldman Sachs, Morgan Stanley, JPMorgan Chase and UBS have paid almost $500m to settle allegations they colluded to obstruct the development of exchanges that could have lowered costs in the stock lending market.

CONSTRUCTION

UK construction companies go under at fastest rate in a decade

Persistent cost inflation, a slowdown in housebuilding and delays to government infrastructure projects have led to UK construction firms going bust at the highest rate in a decade.

FINANCIAL SERVICES

BlackRock reports continued decline in support for ESG proposals

New York-based asset manager BlackRock has reported a further decline in its support for shareholder resolutions on environmental and social themes. In its annual stewardship report, BlackRock stated that it supported 7% of 399 shareholder proposals on environmental and social issues, down from 22% in the previous cycle and 47% in the cycle before that. The report cited poor crafting of the measures and called many of the proposals over-reaching or lacking economic merit. BlackRock also mentioned that it supported directors 89% of the time and highlighted progress made by boards in reducing directors serving at too many companies. BlackRock has faced criticism from conservative politicians in the US for its emphasis on sustainability issues, but the report did not address how the criticism may have influenced votes this year.

Liontrust chief accused of desperate tactics in fight for GAM

Liontrust Asset Management has been reported to the Swiss Takeover Board after investors accused its CEO, John Ions, of transmitting “false rumours and information” to try and scupper their rival offer for GAM. NewGAMe and Bruellan, which hold an estimated 10% stake in GAM, have claimed Liontrust’s bid “significantly undervalues” the company and contains unappealing execution contingencies. They put forward a partial cash counter offer in July. In an escalation of the rivalry, NewGAMe have reported Ions to the regulator over emails he sent to shareholders falsely claiming a key third party manager would sever ties in the event NewGAMe was successful.

Apollo sued over $570m tax payout to top executives

A lawsuit filed in Delaware contends that $570m in payouts to top Apollo executives to cover personal tax bills stemming from a restructuring were unjustified and should be paid back.

HEALTHCARE

Roche stock rises after inadvertent drug update

An interim analysis published accidentally on Roche’s website showed the immunotherapy drug tiragolumab, when taken with Roche’s established medicine Tecentriq, increased overall survival time for patients. The disclosure sent the Swiss pharma group’s shares up as much as 5%.

MANUFACTURING

Kemi Badenoch seeks cash for UK ‘advanced manufacturing plan’

The Secretary of State for Business and Trade is working with the Treasury on developing a long-term plan to promote advanced manufacturing in the UK as global competition heats up.

RETAIL

House of Fraser to close two more stores

Frasers Group has confirmed plans to close two further House of Fraser department stores next month as the retail titan continues to focus on its Sports Direct and Flannels flagships. House of Fraser will close the doors to its store in Solihull on 28 August and its branch in Guildford on 30 September. Separately, Frasers Group has increased its stake in online fashion retailer Asos to 18%, up from 16.9%. Asos's shares closed up 1.2% at 378.25p.

ECONOMY

UK economic activity slides as interest rate rises hit demand

The UK economy is on course to shrink between July and September and could tip into recession, a closely-watched survey suggests. The S&P Global/CIPS UK Purchasing Managers' Index (PMI) found that rising interest rates and weaker household spending led to a sharp drop in demand for goods and services in August. The PMI figures triggered a fall in sterling with the swap market now pricing in a peak interest rate of 5.8%, down from the 6% previously expected. The PMI index fell to 47.9 in August, down from 50.8 in July and the lowest level in two and half years. Anything below 50 marks a contraction. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey was indicative of GDP declining by 0.2% over the third quarter so far. He added that a renewed economic contraction “already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival.” 

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