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Daily News Roundup: Thursday, 27th July 2023

Posted: 27th July 2023


UK banks agree to overhaul rules on account closures

The Information Commissioner's Office (ICO) announced on Wednesday that it had written to banks to remind them of their "responsibility to the public" after former NatWest chief Dame Alison Rose was sacked for leaking private information about Nigel Farage’s Coutts account to the BBC. "Banks should not be holding inaccurate information, they should not be using information in a way that is unduly unexpected, and they should not be holding any more information than is necessary," the Information Commissioner John Edwards said. This came after Treasury minister Andrew Griffith met with the heads of Britain’s largest banks and building societies to reiterate the importance of protecting lawful freedom of expression for customers. The Treasury said in a statement that attendees “acknowledged that recent events had impacted upon public trust for the whole sector and expressed their clear commitment to government policy on account closure and to act quickly to restore confidence.” Meanwhile, the Financial Conduct Authority and the ICO both announced investigations into whether any rules or laws had been broken. NatWest chair Sir Howard Davies and Coutts CEO Peter Flavel are not out of the woods yet, with shareholders and MPs calling for their resignation.

Rate rises help Lloyds to £3.9bn profit

Lloyds Banking Group has reported a jump in half-year profits to almost £3.9bn as rising interest rates buoyed Britain’s biggest domestic lender. Pre-tax profits were up by 23% year-on-year, with net interest rising 11% to £9.2bn. However, provisions for bad loans almost doubled to £662m. Charlie Nunn, the Lloyds chief executive, said: “We know that rising interest rates, cost of living pressures and an uncertain economic outlook are proving challenging for many people and businesses. We remain fully focused on proactively supporting our customers and helping them navigate the current environment.” Barclays will report its half-year results today, NatWest on Friday and HSBC next week.

UK SMEs consider diversifying bank pool

Three quarters of small businesses in the UK are considering spreading their deposits among a range of different banks following the banking crisis in March. A survey conducted by payments provider Neo found that 75% of UK SMEs are considering diversifying their bank pool, with 6% already having done so. The collapse of Silicon Valley Bank (SVB) earlier this year, which resulted in the largest bank run in history, has made businesses more aware of the need to spread their deposits among multiple banks. Many depositors at SVB, including tech companies, were at risk of losing access to their funds. The Bank of England is now considering proposals to update its deposit protection scheme in response to the crisis.

MPs start probe into business de-banking

The all-party parliamentary group on fair business banking is investigating the treatment of small businesses in light of the closure of Nigel Farage’s bank account. Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said: “We’ve seen a steady rise in small businesses losing their bank accounts over the past three years, often with little notice and no explanation. The regulator should be setting standards for transparency so that when this happens, the customer knows the reasoning and can challenge it if it’s wrong.”


Wall Street regulator to require disclosure of hacking incidents

The U.S. Securities and Exchange Commission (SEC) is set to adopt new rules requiring publicly traded companies to disclose hacking incidents. The cybersecurity rule would mandate companies to disclose a cyber breach within four days if it is deemed serious enough to be material to investors. The rule also requires companies to periodically describe their efforts to identify and manage threats in cyberspace. The SEC is also proposing rules to address conflicts of interest in broker-dealers' use of artificial intelligence (AI). The AI proposal would require broker-dealers to eliminate or neutralize any conflict of interest that arises from predictive data analytics. SEC Chair Gary Gensler has highlighted the dangers of AI to financial stability. The SEC is also planning to issue a similar proposal governing the use of AI by investment advisers. Additionally, the SEC is considering changing rules that exempt some online investment advisers from registering under the Investment Advisers Act of 1940.

Santander sees huge profit boost

Spain's Santander's net profit in the second quarter increased by 14% year-on-year to €2.67bn, as higher interest rates in Europe, particularly in Spain, offset some weakness in Brazil and the US. Net profit topped the €2.54bn forecast by analysts, despite a rise of 10% in provisions for bad debts. Santander UK’s pre-tax profit jumped 18% to £1.2bn thanks to a 10% rise in net interest income.

UniCredit lifts 2023 targets

UniCredit has raised its net profit and shareholder reward targets for the year after posting stronger than expected quarterly results. The Italian bank said it now expects a 2023 net profit of at least €7.25bn ($8bn), compared with more than €6.5bn earlier. It plans to return at least €6.5bn to investors through share buybacks and dividends, versus a previous goal of at least €5.75bn.

Deutsche Bank Q2 profit falls 27%

Deutsche Bank posted a 27% fall in second-quarter profit on Wednesday as investment banking revenues slumped. However, the fall was lower than expected and higher interest rates fuelled gains at the retail division. Net profit came in at €763m ($843.04m), down from €1.046bn a year earlier.


Nissan and Renault reboot alliance after China ‘wake-up call’

Nissan and Renault finalised a long-delayed deal to rebalance their capital relationship, citing the growing challenge from China as “a wake-up call” for rebooting the troubled alliance.

Volkswagen invests $700m in China’s Xpeng to boost faltering car sales

Volkswagen is investing $700m in Guangzhou-based electric vehicle group Xpeng as the German carmaker looks to boost lagging sales in China.


Rolls-Royce shares jump on profit upgrade

Shares in Rolls-Royce jumped 20% to their highest level since the start of the pandemic after the company said first half operating profits would be more than double what analysts had predicted - between £660m and £680m, compared with consensus estimates of £328m.

Debt pile weighs on Heathrow

Heathrow Airport has reported losses of £139m for the first half of the year as it struggles with debt servicing costs. The airport remains a long way off its pre-pandemic profit of £153m.


Marshall Wace makes £5m shorting NatWest

Marshall Wace has made a multi-million pound gain on its bet against NatWest shares following the exit of Dame Alison Rose for leaking information about Nigel Farage to the BBC. The fund netted paper gains of around £5m on Wednesday after NatWest’s share price slumped more than 3.7% after Dame Alison’s exit was announced. The fund’s owner, Sir Paul Marshall, also owns GB News, which employs Nigel Farage. Marshall Wace first disclosed that it was building a short position against NatWest in March.

BlackRock strikes joint venture with Mukesh Ambani’s financial unit

BlackRock and Jio Financial Services, the financial services arm of Indian tycoon Mukesh Ambani’s Reliance Industries, have jointly launched a digital-first asset manager aimed at serving India’s growing investor population.


GSK raises forecasts after strong sales in vaccines and HIV business

GSK raised its full-year profit and sales guidance on Wednesday after its second-quarter earnings beat expectations, helped by strong sales of its shingles vaccine Shingrix and HIV medicines. The strong results may further help revive investor confidence in CEO Emma Walmsley, coming a year after the company spun off its consumer health business, Haleon, in its most radical shake-up in 20 years.


Meta posts strong revenue growth amid restructuring

Meta returned to double-digit revenue growth for the first time since the end of 2021, with revenues rising 11% to $32bn in the second quarter. Advertising revenue was up 12%, faster than growth at Google, where ad revenue rose 3%. Expenses were forecast to rise this year and next due to legal fees, fines and infrastructure investment.


RICS: High interest rates depress UK commercial property

A survey by the Royal Institution of Chartered Surveyors (RICS) found 68% of members felt Britain's commercial real estate market is in a downturn, even though some sectors such as industrial property, student housing and prime office space were robust. Higher interest rates have brought the toughest credit conditions since at least 2014. "This has, almost inevitably, impacted sentiment within the commercial property market, as higher borrowing costs weigh on investor demand and place renewed pressure on capital values," RICS economist Tarrant Parsons said.


Amazon proposes marketplace changes to address CMA concerns

Amazon has proposed several changes to the way it treats third-party sellers on its Marketplace platform in an effort to appease concerns raised by the UK’s Competition and Markets Authority (CMA). Under the measures, Amazon will commit to not using Marketplace seller data to give itself a competitive advantage and treat all sellers equally when selecting which products to feature in the ‘Buy Box’. An independent trustee, with input from the CMA, will monitor compliance. If the CMA agrees, a lengthy probe could be avoided.


Fed raises US interest rates to highest level in 22 years

The US Federal Reserve raised its benchmark interest rate by 0.25 percentage points on Wednesday to the highest level in 22 years, and kept the door open to further increases this year. The Federal Open Market Committee said inflation remained “elevated” and agreed unanimously to lift the federal funds rate to a new target range of 5.25% to 5.5%. The increase comes despite the rate of price rises dropping further than expected - to 3% in the year up to May.

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