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Daily News Roundup: Thursday, 26th October 2023

Posted: 26th October 2023

BANKING

Lloyds posts £1.9bn Q3 profit

Lloyds has reported a Q3 pre-tax profit of almost £2bn, with this more than triple the same period last year and slightly ahead of analyst expectations. Britain's biggest mortgage lender reported pre-tax profit of £1.9bn for the three months to September, up from £576m the previous year. Net income remained relatively flat at £4.5bn due to higher payouts to savers, lower customer deposits and slightly weaker mortgage rates. Despite a drop in customer deposits, overall deposits grew thanks to an increase in retail savings. Charlie Nunn, the bank's chief executive, said: "Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality." 

ICO: Rose breached data rules in debanking scandal

The UK’s data privacy watchdog says former NatWest chief executive Dame Alison Rose breached data protection rules during the debanking scandal. The Information Commissioner’s Office (ICO) found that Dame Alison inappropriately shared Nigel Farage’s personal information when she discussed the closure of the prominent Brexiteer’s bank account with a BBC journalist. The ICO said Dame Alison had committed two data protection breaches that saw Mr Farage’s rights “infringed.” Dame Alison was forced to step down over the incident, which prompted a broader review into politically exposed persons being denied banking services. Separately, with NatWest expected to cancel £5.2m of long-term share options accrued by Dame Alison, a source “close to the situation” says she is considering mounting a formal legal challenge if the bank decides to cancel her payoff.

NatWest adds nearly 100k customers in Q2

NatWest gained 99,695 more customers than it lost between April and June 2023, thanks to its generous cash switching offers. HSBC UK, RBS, and Ulster Bank also saw gains in customer sign-ups during the same period. Santander, on the other hand, lost more customers to other banks than any other provider. Current Account Switch Service (CASS) data shows that switching activity continues to be driven by cash switch offers from high street banks. Andrew Hagger, founder of MoneyComms, said that once these switching deals end, some customers will switch away again in search of the next free cash handout. The latest CASS figures indicate a 63% increase in current account switches compared to the same period in 2022.

Aldermore scraps Co-op Bank bid

Challenger bank Aldermore has abandoned plans to bid for the Co-operative Bank, leaving Shawbrook as the only known bidder for the mid-sized lender. Aldermore had hired advisers to work on a takeover of the Co-operative Bank but the plans are said to have been hit by a leadership shake-up at FirstRand, its South African parent company. Sources say that several parties remain interested in Co-op Bank, including Paragon Banking Group and OneSavings Bank, but none have tabled offers. Shawbrook, however, has reportedly put forward a proposal for a £3.5bn merger.

INTERNATIONAL

SEC penalties hit $5bn

The US Securities and Exchange Commission (SEC) levied $5bn in penalties and barred over 100 individuals from serving as company directors and officers in fiscal 2023. This marks a decrease from the record $6.4bn in penalties imposed in 2022. The SEC's enforcement actions rose to 780 from about 700 the previous year. The regulator also imposed the highest number of director and officer bans in a decade, focusing on individual accountability and misconduct. The agency has been more aggressive in policing markets under the leadership of chair Gary Gensler, with high-profile cases against crypto firms and executives. 

Santander reports 20% rise in profit

Spain's Santander has reported a 20% rise in net profit for the third quarter, reaching €2.9bn. This exceeded analysts' expectations, who predicted a net profit of €2.77bn. Third-quarter profits were driven by Europe, where attributable profit rocketed 49% to €4.18bn, with Spain leading growth across all markets. Spanish attributable profits were up 68% to €1.85bn, while its UK business was up 12% to €1.24bn. Overall, the group saw a 21% rise in loan loss provisions due to higher interest rates and inflation. Total loans fell by 2%, while consumer lending rose by 7%. Santander UK CEO Mike Regnier commented: “We have delivered a good set of results in spite of a challenging macroeconomic environment.”

Deutsche Bank sees profit dip

Deutsche Bank reported an 8% drop in Q3 profit, with revenue at the investment bank slumping but growing in the retail and corporate divisions. Deutsche Bank's retail division was the biggest revenue generator during the quarter, and analysts expect it to overtake the investment bank as the main revenue driver for the full year. Investment banking revenue dropped 4% during the quarter, while revenue for fixed-income and currency trading fell 12%. Deutsche Bank's origination and advisory business tripled its revenue, however. CEO Christian Sewing has expressed confidence in the bank's strong and sustained business growth momentum and the bank has upgraded its revenue outlook for the full year, forecasting it would reach €29bn, the top end of its previous guidance range. 

Morgan Stanley names new CEO

Morgan Stanley has named insider Ted Pick as its new CEO. He will replace long-time leader James Gorman as of January 1. Mr Pick, who joined Morgan Stanley in 1990, currently leads the institutional securities division. The bank also announced that Andy Saperstein will become co-president and head of wealth and investment management, while Dan Simkowitz will take on the role of co-president and head of institutional securities.

UBS to cut Credit Suisse staff in Spain

UBS is cutting nearly half of the staff it inherited from Credit Suisse in Spain. Some 147 jobs will be cut, with the majority from its investment bank. The remainder of the Credit Suisse investment bank staff in Spain will move over to UBS. A small number of jobs will also go in the wealth management business.

AUTOMOTIVE

Carmakers urge EU to delay ‘cliff-edge’ post-Brexit tariffs

The chief executives of 13 leading carmakers have written to the president of the European Commission, calling for an “urgent” delay to post-Brexit tariffs on electric vehicles that are set to be introduced in January. Bosses at manufacturers including Ford, Jaguar Land Rover, Toyota, Mercedes-Benz, Renault, Volvo, Ferrari, Volkswagen and BMW have called on Ursula Von Der Leyen to offer a “temporary amendment” to the UK-EU Brexit deal to pause ‘rules of origin’ tariffs. The rules add a 10% tariff to any electric car traded across the Channel which fails to source nearly half of its value from inside the UK or EU. The letter was arranged by the European Automobile Manufacturers’ Association trade body.

AVIATION

Boeing cuts production forecasts for 737 Max

Boeing has cut the production forecasts for its 737 Max short-haul aircraft. The manufacturer said it had cut expected 2023 deliveries of the 737, mainly Max variants but also including some 737NGs from the previous generation of the jet, to between 375 and 400, with this down about 10% from its previous forecast of 400 to 450.

FINANCIAL SERVICES

FCA warns crypto firms to comply with new regulations

The Financial Conduct Authority (FCA) has warned crypto firms to take its new regulations on the marketing of digital assets seriously or face action. Since the new rules came into force on October 8, the FCA has found common issues with crypto companies failing to properly highlight the risks involved with crypto assets. One of the main problems identified is that risk warnings were too difficult to read or understand, often being set as small print or in a style that made them hard to digest. The FCA said it expects authorised firms approving the financial promotions of crypto asset firms "to take their regulatory obligations seriously," adding: "Where this is not happening, we will take action and have already placed restrictions on an authorised firm to restrict it from approving crypto asset financial promotions.”

Financial services leaders expect AI to impact productivity

A poll shows that 77% of European financial services leaders expect Generative AI to significantly affect productivity and change roles. The survey found that up to a quarter of all roles will require AI training or upskilling over the next six to 12 months. However, many firms lack plans to train their workforce in new GenAI technologies. Only 2% of respondents believe their workforce is fully equipped to contribute to building AI capabilities and bosses flagged concerns about limited understanding and experience of GenAI applications and their impact across the workforce. While some firms have already implemented AI ethics frameworks, 45% have yet to develop one.

REAL ESTATE

Lloyds: House prices will fall until 2025

House prices are set to fall this year and next before rising in 2025, according to a prediction from Lloyds Banking Group. Halifax-owner Lloyds expects prices to drop 4.7% this year and by a further 2.4% in 2024. In the longer term, the lender expects prices to rise 0.6% by 2027. The forecast is based on the Halifax House Price Index, which excludes figures for cash buyers, which currently make up over 30% of housing sales. According to the UK House Price Index, the average property price - based on completed transactions - was £291,044 in August.

RETAIL

Vinted weighs €200m share sale as sustainable fashion booms

Second-hand marketplace Vinted is exploring a secondary share sale and will work with Morgan Stanley to explore its options for its capital structure ahead of a possible IPO.

ECONOMY

BoE likely to hold rates steady

The Bank of England looks set to keep interest rates on hold at 5.25% next week, according to investors and economists polled by Reuters. The Bank’s Monetary Policy Committee opted to hold rates at the 15-year high in September, bringing to an end a succession of increases. James Smith, an economist with ING, said rate setters “won't want to take any chances and they really don't want to see markets price in rate cuts." He added: “Data has started to go tentatively in their favour but central banks have learned inflation data has tended to come in on the upside."

Lloyds: UK economy improving and on course to avoid recession

Lloyds Bank believes that the economy is modestly improving and that the UK remains on track to avoid a recession. Britain’s biggest high street bank has forecast that the economy will grow by 0.4% this year and by 0.5% next, offering an improved outlook on previous predictions of 0.2% and 0.3%. William Chalmers, Lloyds’ chief financial officer, said that the more optimistic outlook marks a “pretty modest set of adjustments.”

UK household spending power rises for sixth consecutive month

Spending power in UK households has increased for the sixth consecutive month, according to a survey by the Centre for Business and Economic Research. The average UK household now has £220 a week to spend after essential bills and taxes, representing a 4.3% increase compared to the previous year. However, growth in discretionary income has slowed down due to high inflation and moderated wage growth. "

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