BANKING
Metro Bank reveals profit miss
Metro Bank saw its shares fall more than 30% after it warned that pre-tax profits for 2018 would be £50m – a 138% year-on-year rise, but significantly below the £59m expected. The company blamed the slip on the final quarter when activity "softened". The bank also warned that mistakes in the way it had calculated the weight of some commercial loans and buy-to-let loans to major landlords would take a chunk out of its risk-weighted assets. Metro Bank revealed that assets increased 32% to £21.7bn in 2018, while its total loan book was up 48% to £14.2bn and deposits reached £15.7bn, an increase of 34%. CEO Craig Donaldson said the bank is “well positioned” to support its growth strategy.
Santander to close one-fifth of UK branches
Santander is to close 20% of its UK branches, risking the loss of 1,270 jobs, due to "changes in how customers are choosing to carry out their banking". The number of transactions taking place in branches has fallen by 23% over the past three years, it said, while over the same period transactions online and through its app have grown by 99%. Following the closure of 140 of its “less visited” branches, which will begin in April, the bank will have 614 in the UK. It plans to spend £55m over the next two years refurbishing 100 of the remaining branches.
Banks in reimbursement plan warnings
A steering group considering how to tackle authorised push payment (APP) fraud has published responses to a consultation. HSBC warned that a “reimbursement environment” posed the risk of reducing customer vigilance, while Barclays questioned a suggestion that payment service providers should accept liability in situations where blame cannot be attributed to a bank or customer, saying that “consumers may see very little benefit in protecting themselves online” while providers effectively take responsibility for criminal – or customer - behaviour. Santander believes that "smaller" payments should not be eligible for compensation, suggesting it should centre on "life changing" sums. Stephen Jones, chief executive of UK Finance, said a voluntary code will play a big part in tackling scams “so it is vital that we get it right."
Execs accused over hidden payments
Prosecutors claim that former Barclays chief executive John Varley, and other senior figures at the bank, paid Qatar £322m in secret fees to avoid a Government bailout that may have made it look “weak” and potentially put off investors during the financial crisis. Mr Varley is on trial with Roger Jenkins, formerly the executive chairman of investment management in the Middle East and Northern Africa, ex-wealth management chief executive Thomas Kalaris, and former European Financial Institutions head Roger Boath, with all four denying conspiracy to commit fraud by false representation in a case filed by the Serious Fraud Office.
BoE: Branch status efforts ‘on track’
The Bank of England’s (BoE) Sam Woods has told the Treasury Select Committee that 80 EU banks and insurers had applied for "branch status", with the Bank "broadly on track" with efforts to prevent European firms from moving UK branches after Brexit. The BoE expects 170 EU firms to apply for branch status.
Union fears Lloyds IT plan will hit jobs
Lloyds Banking Group is planning to move some back office IT functions to fintech start-up Thought Machine, with documents seen by the FT showing it has entered into negotiations with regulators about transferring the data of 500,000 customers from its Intelligent Finance brand. Mark Brown, general secretary of the BTU union, fears the move could see job losses, saying the new system “won't need anywhere near the number of people” involved in the current IT system.
BoE's Woods: Barclays CEO fine ‘the right response’
Bank of England deputy governor Sam Woods has praised the punishment handed to Barclays boss Jes Staley over the handling of a whistleblowing case last year. He told the Treasury Select Committee that a fine and public censure was the “correct response,” and “should send a message to everybody that whistleblowing is a live rail that you touch at your risk."
TSB IT probe ongoing - BoE
A Bank of England (BoE) and Financial Conduct Authority investigation into the IT meltdown that hit TSB last year is ongoing, BoE deputy governor Sam Woods has told the Treasury Select Committee. Noting that he had required TSB to set aside capital to cover an "unspecified" possibility of the IT project going wrong, he added: “Now that it has gone wrong and proved to be very expensive, it's a very good thing that we have that capital requirement in place.”
PRIVATE EQUITY
Apollo Global to acquire RPC
Apollo Global Management has agreed a £3.3bn deal to buy packaging maker RPC. The takeover was wrapped up hours before the expiry of a regulatory deadline for Apollo to make its intentions clear. Some RPC shareholders have questioned the deal, with David Cumming, chief investment officer at Aviva Investors, saying the price underestimates future earnings. “We do not agree with the justifications put forward by the board for their acceptance of an offer by Apollo,” he added.
INTERNATIONAL
Deutsche Bank cooperating with prosecutors
Deutsche Bank says it is cooperating with prosecutors as they investigate allegations of money laundering involving Danske Bank. Deutsche Bank said it has “received several requests for information from regulators and law enforcement agencies around the world” and has provided information. Meanwhile, in an interview with Die Zeit on the side-lines of the World Economic Forum in Davos, chief executive Christian Sewing addressed the possibility of a tie-up with Commerzbank, insisting that bringing profit back to Deutsche Bank was his “main task” and “anything else is beyond what I am thinking about."
CONSTRUCTION
Building blocked by financial constraints
A survey by the Royal Institution of Chartered Surveyors suggests that Q4 2018 saw almost no growth in commercial and industrial construction, marking the first standstill in six years. Around 80% of respondents cited financial constraints as the most significant impediment to building activity.
FINANCIAL SERVICES
FCA consults on crypto regulations
The Financial Conduct Authority (FCA) is consulting on existing guidance for companies that offer trading in crypto-assets amid fears that groups could be offering unauthorised services resulting in “substantial risks to consumers”. "This is a small but growing market and we want both industry and consumers to be clear what is regulated, and what isn't," said FCA executive director of strategy and competition Christopher Woolard.
Firms look to Luxembourg
According to a lobby group, Brexit is driving expansion in the financial services industry in Luxembourg. Luxembourg for Finance says 47 banks, insurers, wealth managers and investment firms plan to move some business activities there due to potential disruption from the UK exiting the EU. Meanwhile, the Dutch investment agency says it is in talks with over 250 UK-based companies as a result of the "great uncertainty" in Britain. Separately, analysis suggests that 36% of Britain's financial services companies are considering or finalising plans to move to another EU state, rising to 56% for banks and brokerages.
AJ Bell inflows up
AJ Bell has revealed that underlying platform inflows grew to £1.2bn in the three months to the end of December, up 20% on the total for the same period in 2017. It also saw a 4% decline in assets under management, leaving them at £44.2bn. The firm added 7,285 customers over the period, reaching 190,498. Chief executive Andy Bell warned that platforms such as AJ Bell will be affected as defined benefit pension transfers continue to fall, adding that, despite this and short-term market volatility, “the outlook for the platform market remains strong.”
Brewin Dolphin blames uncertain markets for declining assets and income
Brewin Dolphin saw a 7.7% drop in total funds, to £39.5bn, in the quarter to the end of December. It also saw a 7.2% reduction in discretionary funds. Total income was down 1.2% year-on-year.
Virgin Money cuts tracker fund fees
The Telegraph reports that Virgin Money is to cut the price of its £2.7bn tracker fund from 1% to 0.6%. Mark Polson of consultancy Lang Cat said new rules requiring firms to regularly justify their value is likely to have contributed to the cut. He also suggested that a joint venture with Aberdeen Standard Investments and CYBG, which took over Virgin Money in October, may have played a part, saying: “Aberdeen Standard has a reputation to maintain and the potential for running what is a very simple product at a full 1% probably sits uncomfortably with that business.”
TransUnion announces new boss
Credit reference firm TransUnion, formerly known as CallCredit, has appointed Satrajit Saha as its new chief executive.
LEISURE AND HOSPITALITY
Wetherspoons sees profits slow
Pub chain Wetherspoons has reported a 7.2% rise in like-for-like sales in the 12 weeks to January 20, with total sales climbing 8.3%. The firm said half-year profits are expected to be lower than a year earlier as rising wages push up costs. The company said its full-year expectations remain unchanged.
Blackstone prepares Center Parcs Europe portfolio for sale
Blackstone has agreed long-term leases with the operators of seven Center Parcs Europe resorts. The move adds to the saleability of the sites, with a sale of its real estate portfolio predicted.
MANUFACTURING
Output sees slight growth
The Confederation of British Industry's latest monthly Industrial Trends Survey indicates that manufacturing output grew slightly faster than the long-run average in the three months to January, with a balance of 16% saying it picked up. The survey, of 326 manufacturers, showed optimism falling sharply however, with 34% of firms saying they were less optimistic about the general business situation than three months ago.
RETAIL
WH Smith boosted by surge in travel sales
WH Smith has posted a 6% rise in total sales in the 20 weeks to January 19th, boosted by a 16% rise in the travel division that serves the UK’s airports, train stations, motorway service stations, and hospitals, while like-for-like sales there were up 3%. The retailer’s high street sales were down 1%, and by 2% on a comparable basis, although it said an increase in gross margins kept it on track to deliver £9m of cost savings.
ECONOMY
Debt fears ‘puzzling’ - Broadbent
Rapid growth in risky corporate loans and unsecured consumer debt in the UK is less alarming than it appears, Bank of England deputy governor Ben Broadbent has said. In a speech at the London Business School, he described concerns about the rapid growth of household debt as "puzzling" as it was being driven by car finance and student loans. These categories, he added, are not “really unsecured debt in the conventional sense". Adding that excluding them from official statistics shows unsecured household debt relative to income is no higher than it was 25 years ago. “This makes it slightly puzzling to read, as one often does, that household debt is 'unsustainably' high," he added.
Haldane: Brexit deal will see investment
Bank of England chief economist Andy Haldane believes that failure to secure a Brexit deal has caused “a significant set of companies to press the pause button on some projects.” He suggests that a deal would reduce uncertainty and “cause people to take their finger off the pause button and do a bit more investment spending.” Pointing to low interest rates and a high return on capital, he adds that there “has never been a better time for companies to be investing.”