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Daily News Roundup: Thursday, 27th February 2020

Posted: 27th February 2020

BANKING

Metro Bank losses hit expansion plans

Metro Bank swung to a pre-tax loss of £130.8m in 2019, down from profits of £40.6m the year prior. The struggling challenger bank, which suffered an accounting scandal last year, now plans to cut costs and halve new branch openings to 24 over the next three years - down from a planned 71 new sites. The bank will also be giving back some of the £120m it took from the Banking Competition Remedies (BCR), which manages the £750m fund that RBS was forced to provide to increase competition in the sector. The Guardian’s Nils Pratley questions the wisdom of the handout arguing that Metro’s share price was plunging at the time and “the smell of crisis was unmistakable”. Metro Bank's new boss, Dan Frumkin, lamented a "challenging year." Shares finished 3% down yesterday after an initial 16% drop.

City calls for end to bank taxes

City lobbyists are calling on the Government to scrap taxes that specifically target banks to help the industry become more competitive after Brexit. TheCityUK said in a letter to Boris Johnson: “The UK tax regime targets specific sectors like UK-based banking in a differentiated way, which may jeopardise future investment in this sector and thereby risks adversely impacting the broader ecosystem in which related businesses operate.”

Job cuts and branch closures at Virgin

Virgin Money is planning to cut 500 jobs and shut 52 branches as it continues its consolidation with Clydesdale and Yorkshire Banking Group (CYBG). Virgin Money said that “a significant proportion” of the jobs cuts would come from its head offices.

Lloyds to cut 780 UK jobs as lender looks to cut costs

Lloyds Banking Group is to cut 780 UK jobs across its Bank of Scotland, Lloyds and Halifax brands as part of cost-cutting plans. No branches are expected to close. The move is blamed on a rising number of customers switching to online banking.

Barclays urged to 'show leadership' over fossil fuels

ClientEarth boss James Thornton has written to Barclays chairman Nigel Higgins warning him that if the bank continues to finance the fossil fuel industry it will have “consequences” for the bank’s reputation. The warning follows a pledge by ShareAction to bring a resolution on the issue at the AGM in May.

Bank of England puts squeeze on Libor lending to encourage shift

The Bank of England has announced that, from October, a discount will apply to the value of Libor-linked collateral that commercial banks can post to secure loans. The central bank wants Libor replaced with the central bank's own overnight "risk-free" Sonia rate by the end of 2021.

PRIVATE EQUITY

Blackstone to buy UK student flats from Goldman for £4.7bn

Blackstone is to buy the UK student accommodation company IQ from Goldman Sachs. The £4.7bn deal is being hailed as the UK’s largest-ever private real estate transaction. IQ Student Accommodations owns and operates 67 sites in 27 UK towns and cities. Goldman Sachs owns 70% of the business, and the medical charity the Wellcome Trust owns 28%.

INTERNATIONAL

Investment banks ban Italy travel

Goldman Sachs, Citigroup and Credit Suisse have joined Lazard, BNP Paribas and Deutsche Bank in warning staff against all “non-essential travel” to northern Italy. Those working on particularly sensitive deals were told to ask for special permission from senior management if they needed to fly to Milan, Bologna or other northern Italian cities. It's the first time banks have restricted trips within Europe due to the coronavirus risk. Meanwhile, the Tokyo offices of the biggest Wall Street banks are planning to split staff into groups and keep them physically segregated in preparation for an outbreak of the coronavirus in Japan.

Ukraine bank chief warns president of crisis if clean-up is reversed

The CEO of Ukraine’s biggest lender, PrivatBank, has warned President Volodymyr Zelensky that if he permits the nationalised back to be returned to oligarchs the country risks capital flight.

AUTOMOTIVE

PSA Group posts record profit

PSA Group posted a record profit in 2019 reporting a 13.2% rise to €3.2bn (£2.7bn) on revenue up 1% to €74.7bn. The results come ahead of its merger with Fiat Chrysler later this year.

Car production has fallen for the fifth month in a row

Figures from the Society of Motor Manufacturers and Traders (SMMT) show car production in the UK fell by 23.9% in January compared with a year ago, although exports increased by 4.1%.

AVIATION

Airlines reveal spending cuts due to coronavirus

The coronavirus has pushed Dutch airline KLM to cut back on hiring new staff and external consultants, delay new IT projects and office refurbishment plans and reduce its travel expenses significantly. Lufthansa, Germany’s largest airline, has also announced a cost savings program, which includes a suspension of new recruitment, to counter the business impact of the outbreak. More than 25,000 staff at crisis-hit Cathay Pacific Airways are taking unpaid leave as the carrier moves to cut 90% of its capacity to China in the next two months amid growing concern about the coronavirus. Meanwhile, senior managers at Thai Airways have voluntarily reduced their salaries by 15% to 25% for six months in an attempt to cut expenses amid a reduction of passenger numbers as travel slows from the coronavirus outbreak.

CONSTRUCTION

Taylor Wimpey warns on profit margin for 2020

Taylor Wimpey’s profit before tax increased 3.1% year on year to £835.9m in 2019, but flat house prices and building costs hit the company's operating profit margin by two percentage points to 19.6%. Revenue rose 6.4% year on year to £4.34bn, but £100m was lost from the firm's cash pile to leave it with net cash of £545.7m. Taylor Wimpey said its profit margin would remain flat for 2020.

FINANCIAL SERVICES

Barnier insists City firms remain “rule-takers”

The EU’s chief negotiator Michel Barnier has warned the UK that in order for the City of London to have access to EU markets after Brexit, British financial services companies will have to observe EU regulations and the granting of “equivalence” will remain a “unilateral decision” for the EU. “The UK may not want to be a rule-taker. OK, but we don’t want to be the risk-taker,” Mr Barnier said. Meanwhile, financial services bosses gave evidence to the House of Lords EU Financial Affairs Sub-Committee yesterday and agreed that maintaining broad equivalence with EU and global regulations - to retain market access - should be the government’s negotiating position, but there were areas where the UK should diverge such as on Priips and Mifid regulation.

LCF victims harassed after FCA data leak

The Financial Conduct Authority’s (FCA) recent data security failure, which saw the private information of complainants published online, has led to victims of collapsed savings firm London Capital & Finance (LCF) being bombarded by messages from scammers, they claim. Some 1,600 people had their records wrongly published on the FCA’s website including businessman Arron Banks. Andrea Hall, who campaigns on behalf of investors, said: “Savers have received calls, emails and social media messages from people knowing they are bondholders. It’s caused panic. We would never have imagined FCA could release our confidential information.”

Direct Line's digital push to cost hundreds of jobs

Insurer Direct Line is planning to cut around 7% of its UK workforce, roughly 800 jobs, as the firm seeks to reduce costs by around £60m and supply customers with insurance digitally. The wider insurance sector is facing significant scrutiny over the way it penalises loyal customers with higher premiums and the way it calculates personal injury claims.

Carney: Finance firms can be a part of the solution

In a piece for the Daily Mirror, Mark Carney explains how the Bank of England is working to ensure the UK’s financial sector can contribute to efforts to achieve “net zero” emissions. The Bank will focus on developing the reporting of carbon emissions, risk management by banks of the shift to a net zero economy and return, meaning funds, banks and insurers should explain how investments affect the future climate.

Klarna reports first annual loss

The "buy now, pay later" specialist Klarna has suffered its first ever annual loss. Europe's joint-largest unlisted fintech, which lets people pay for online purchases in instalments at retailers, reported a loss of 1.1bn Swedish krona (£87.5m) on revenues of 7.2bn krona last year.

HEALTHCARE

CEO at NMC Health fired over secret loans

NMC Health has fired CEO Prasanth Manghat after an investigation revealed the private hospital operator had guaranteed $335m (£260m) in loans taken out by companies owned by two major shareholders – including founder and former chairman BR Shetty - without the knowledge of the board. Finance chief Prashanth Shenoy has been granted extended sick leave and the FCA is investigating.

LEISURE & HOSPITALITY

Revolution Bars ready for a return to expansion

Revolution Bars Group yesterday indicated it plans to expand over the next financial year as it posted a 20.5% jump in adjusted profit before tax from £2.9m to £3.5m in the 26 weeks to 28 December.

MEDIA & ENTERTAINMENT

Pearson profits to slide as coronavirus hits schools

Textbooks publisher Pearson yesterday predicted that profits will slide further this year as the coronavirus forces schools and universities to close. Pearson posted a 12% fall in sales in its core US market with profit coming in at £581m and it expects profits of £410m to £490m for the year ahead.

PROFESSIONAL SERVICES

Accountants support climate reporting

The UK's top accounting bodies have backed a declaration organised by the Accounting for Sustainability Project (A4S) network urging the world's accountants to put environmental sustainability at the forefront of their work.

REAL ESTATE

Covent Garden revaluation hits Capital & Counties

Capital & Counties has reported a decline in net asset value (NAV) after being hit by a revaluation of its Covent Garden holdings. The real estate investment trust reported a pre-tax loss of £61.3m for 2019, compared to a pre-tax profit of £41.6m in 2018. The firm took a £43.3m hit on the Covent Garden revaluation and sale of some of holdings.

RETAIL

Walmart in discussions to sell Asda

Walmart has confirmed it is in talks with a small number of interested parties regarding the sale of Asda, but insists “no decisions have been made”. The company, which would likely hold on to a significant minority stake in the supermarket chain, added that its mooted listing on the stock market was still “an attractive long-term objective.”

Ted Baker to cut 160 roles after 'very challenging year’

Ted Baker is cut 160 roles following what acting chief executive Rachel Osborne described as a “very challenging” 2019. The retailer said the cuts are “the first of a range of expected initiatives to improve the efficiency and cost structure of the group”.

Intu agrees overdraft extension

Shopping centre owner Intu has agreed an extension to its overdraft facility. Banks providing Intu with its revolving credit facility have agreed to a new four-year £440m overdraft, on the condition the firm raises at least £1.3bn in a rights issue.

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