BANKING
Santander takes £1.3bn hit on UK business as Brexit looms
Brexit and tougher regulations have taken Santander to a £1.3bn UK business writedown. The UK now has the lowest medium term return on equity target of its main markets. The bank said ringfencing legislation meant it now had to hold more assets in its London branch while its costs have risen because some functions within the bank are now duplicated. However, Ana Botín, Santander executive chairman, insisted the UK "remains a critically important market, in which the group is investing significantly to service our customers and to continue to compete". The FT’s Lex points out that ringfencing rules have hobbled UK lenders and sparked a price war in the mortgage market.
Sainsbury’s Bank to stop selling mortgages
Sainsbury’s Bank is to stop selling mortgages with immediate effect. As part of its five-year plan for financial services, it will also end all group capital injections after £35m in 2019/20. J Sainsbury’s group chief executive Mike Coupe said the bank “is too expensive to run” and that its cost-income ratio would fall to 50% over five years, from its current level of 71%.
Mortgage approvals rise
Despite the continuing Brexit uncertainty, a total of 85,931 mortgages were approved by the main high street banks in August and mortgage approvals for home purchases were 3.2% higher than in 2018, according to data from UK Finance. Remortgage approvals were 0.1% higher and approvals for other secured borrowing were 0.4% lower than August last year.
Metro’s backers sitting on massive losses
Analysis by Hargreaves Lansdown shows that the top nine shareholders who backed Metro Bank’s capital raise in May, when shares were at 500p, have now seen the total value of their stock fall by a combined £407m. The stock is now worth just 187p.
HSBC aims fund at Scots SMEs
HSBC has launched a £650m lending fund for small businesses in Scotland as part of a wider £14bn package for SMEs across the UK. Meanwhile, Barclays is to hold dozens of so-called 100 Brexit clinics to give support to its customers north of the border.
PRIVATE EQUITY
KKR weighs pivot towards tech with $300m Asia fund
KKR is considering plans to raise a $300m Technology, Media and Telecommunications fund for Asia, supplementing its $9.3bn Asia buyout fund.
Advent and Bain team up to make rival bid for Osram
US private equity groups Bain and Advent have teamed up to outbid Austrian sensor maker AMS for German lighting group Osram.
INTERNATIONAL
Deutsche Bank co-operating with criminal money-laundering probe
Deutsche Bank has said it is co-operating with prosecutors after they launched an investigation into the bank’s role in the money-laundering scandal at Danske Bank. Meanwhile, former Danske Bank executive Aivar Rehe, who was at the heart of a €200bn money-laundering scandal, has been found dead in an apparent suicide.
IMF names Kristalina Georgieva as new head
The International Monetary Fund has named Bulgarian economist Kristalina Georgieva as its new managing director. Ms Georgieva, who was previously chief executive of the World Bank, will succeed Christine Lagarde, who is leaving to become head of the European Central Bank (ECB).
ECB’s German board member quits over loose monetary policy
Sabine Lautenschläger, Germany’s representative on the European Central Bank’s executive board, has quit apparently in protest at the ECB’s decision to restart its bond-buying programme.
AUTOMOTIVE
Aston Martin raise investor concerns
Aston Martin shares sank on Wednesday after the carmaker revealed that it had successfully raised $150m (£120m) of short-term debt on which it will pay interest of 12%. While 6% per annum is payable in cash, the other 6% has been assigned as payment-in-kind notes which allow the company to put off interest payments. One analyst suggested this type of debt was a “red flag”.
Car-making up for first time in a year
Car production increased by 3.3% last month, the first rise in more than a year. Some 92,158 vehicles were built in August, said the Society of Motor Manufacturers and Traders. However, Mike Hawes, chief executive of the SMMT, said: "Today's figures mask the underlying downward trend."
FINANCIAL SERVICES
FCA finds pension pots accessed without advice
The Financial Conduct Authority has found that 48% of pension pots that have had funds withdrawn were accessed by people who had not taken any advice. According to the FCA, more than 645,000 pensions were accessed during the 2018-19 period. More than 350,000 pots were fully withdrawn at the first time of access, of which 90% had a value of less than £30,000. Keith Richards, chief executive of the Personal Finance Society, called the findings “deeply concerning” adding that the Government and the FCA should “do more to make sure providers are signposting guidance services and advice and explaining the potential ramifications if you don’t seek assistance”.
Prudential confirms date for M&G split
Prudential has announced that asset manager and insurer M&G would be spun off into a separate FTSE 100 company by October 21st. Instead of M&G raising new capital via the transaction, existing Prudential shareholders will effectively receive one M&G share for every group share they own. Both Prudential and the new M&G entity are expected to pay out more than £1.3bn in dividends between them over the course of 2019 and 2020.
Pension schemes urged to boost exposure to venture capital
The British Business Bank has recommended that workplace pension schemes should be able to invest in venture capital funds and that management fees should be adjusted to better facilitate this.
Chasing wealth managers is a risky business
The FT notes the profitability of the private banking business compared with traditional retail banking but warns the assets of the emerging ultra-wealthy have yet to be tested in a global recession.
LEISURE & HOSPITALITY
Banks facing the biggest losses from Thomas Cook collapse
Royal Bank of Scotland, Barclays and Lloyds are facing losses of £75m each following the collapse of Thomas Cook. Answering questions on the firm’s collapse in the Commons, Transport Secretary Grant Shapps said directors could have their bonuses clawed back to help the taxpayer recoup the costs of repatriating holidaymakers.
PROFESSIONAL SERVICES
Rosenblatt wades into litigation funding debate
Law firm Rosenblatt has said it will change the way it accounts for legal cases it funds following criticism of Burford Capital for writing up the value of cases on its books before they had ended.
RETAIL
Sainsbury’s outlines cost-saving strategy
J Sainsbury is to close about 125 supermarkets and Argos stores as the company maps out its future following the failed merger attempt with Asda. The store closures will reduce costs by £500m over five years. Sainsbury’s announced the strategy update as it reported that trading had improved further in the second quarter, with like-for-like sales down by 0.2%, compared with a 1.6% fall in the first quarter. Grocery sales in the three months rose by 0.6%. Analysts broadly welcomed the development.
ECONOMY
Deutsche boss warns of ‘darkened skies’
Christian Sewing, chief executive of Deutsche Bank, struck a gloomy tone over the future of the world economy with banking delegates in London on Wednesday, warning that central banks have already “turned on the money tap to the limit.” He also cautioned that, despite the low interest rates, Europe’s financial sector faces troubling structural issues: “What is really worrying is that the central banks have used their tools to a large extent already, so there are no conventional measures left to effectively cushion a real economic crisis,” he said, adding: “Very few economists believe that cheaper money at this level will have any effect, something our clients absolutely reinforce”.