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Daily News Roundup: Thursday, 29th November 2019

Posted: 29th November 2018

BANKING

UK lenders can survive hard Brexit

The Bank of England has told the UK’s seven largest banks - Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Standard Chartered - that they can survive a “severe economic shock” in the event of a chaotic, no-deal Brexit as they each passed its annual stress tests. The BoE, which this year set higher hurdles for lenders to clear, tested a scenario where the UK crashes out of the EU with no deal and no transition period and found that banks would still be able to keep lending to customers. “The 2018 stress test shows the UK banking system is resilient to deep simultaneous recessions in the UK and global economies that are more severe overall than the global financial crisis [in 2008],” the Bank said. Lenders also had to show that they could withstand a 4.7% drop in UK GDP, a 4% rise in interest rates, a 27% fall in the value of the pound and a 33% plunge in UK house prices. Meanwhile, the Bank’s financial policy committee has retained the buffer that banks must hold as an extra defence against economic downturn.

Kerr takes on SME role

The Co-operative Bank has announced the appointment of Donald Kerr to the new role of managing director, SME Banking. The move is part of the Co-op Bank’s bid to grow its presence in the business banking market. He joins from CYBG.

INTERNATIONAL

South Korea fines Goldman over short-selling

Goldman Sachs has been fined 7.5bn won (£5.2m) by South Korea’s financial regulator for breaking rules on short-selling. The Financial Services Commission (FSC) said that the fine is for short-selling without securing underlying assets. It said Goldman Sachs Group’s subsidiary Goldman Sachs International had conducted short sales worth 40.1bn won in May. Naked short selling, which occurs when an investor sells stock that has not yet been borrowed, is illegal in South Korea.

EU banks cutting risks on bad loans

The European Commission has said that EU banks have cut bad loans and raised provisions before finance ministers decide next week when to introduce the European Deposit Insurance Scheme (EDIS), which guarantees that the holder of a deposit of up to €100,000 (£88,191) in any bank in a eurozone country would always get it back in case of a bank collapse. Germany and some other northern European countries have said EDIS can only be introduced once banks in various countries become safer by reducing existing risks.

Danske Bank hit with charges

Danske Bank has been charged on four counts of breaking Danish money laundering laws following the scandal at its Estonian affiliate. Prosecutors said the charges relate to the bank's handling of so-called non-resident clients at the branch between 2007 and 2016.

UniCredit chief defends steep price for new $3bn bond

UniCredit’s boss Jean-Pierre Mustier has defended the Italian bank’s decision to issue a new $3bn bond, which has reportedly been sold to Pimco.

Spain’s BBVA promotes its US head as new chief

Onur Genç, the country manager of BBVA US, has been named head of its global parent in Spain.

AUTOMOTIVE

Brexit impacts car manufacturing

Uncertainty over Brexit has played a part in UK car manufacturing falling 9.8% in October, according to the Society of Motor Manufacturers and Traders. There were 15,255 fewer units produced compared with the same month a year ago. Meanwhile, production for the home market fell 12.1% last month while overseas demand fell 9.3%.

AVIATION

Airbus cautiously backs Brexit plans

Katherine Bennett, the UK boss of Airbus, has said that the European plane manufacturers’ investments in the UK could be unlocked if Theresa May’s deal with Brussels passes through Parliament. Ms Bennett told MPs on the Business Select Committee: “We have great capability, but obviously because of the uncertainty, which we want to see reversed, that is why investments have been put on hold.” She described the agreement as a “welcome first step” amid Airbus's concerns about uncertainty and a lack of clarity.

CONSTRUCTION

Telford Homes grows revenue

Telford Homes said total revenue in the first half of 2018 increased 31% to £129.6m, while profit before tax rose 16.1% to £10.1m. The housebuilder said it remains “confident in long-term strategy of delivering an increased number of much needed homes in non-prime locations of the chronically undersupplied London market.” It added that it is at the forefront of build to rent in London delivering over 1,750 homes in the sector.

FINANCIAL SERVICES

Axa adjusts ROE projections

Axa said it expected adjusted return on equity to increase between 14% and 16% annually over the coming two years, up from a previous target of between 12% and 14%. The insurer also confirmed its target for underlying earnings per share to increase by between 3% and 7% a year over the same period. Axa said it expects profitability will be boosted by the diversification achieved from its $15bn (£11.76bn) acquisition of Bermuda-based XL earlier this year. The company also raised its expected synergies on XL to €500m (£442m) from €400m.

CMA casts doubt on merger of credit score firms

The Competition and Markets Authority has raised concerns over the £275m merger of credit score firms Experian and Clearscore. The CMA said the deal between the two could lessen competition in the sector. It added that it might also make it more difficult for new, smaller rivals to grow their businesses if the deal goes through. Experian said it was disappointed by the CMA’s fresh findings. It added that the agreement would “help more consumers with their finances”.

Brewin Dolphin increases profit

Brewin Dolphin said adjusted profit before tax for the year to 30 September was £77.5m, a 10.7% increase on the previous year. The investment management firm’s total funds stood at £42.8bn, an increase of 6.7%. Brewin Dolphin increased its full year dividend 9.3 per cent to 16.4p with its final dividend increasing 11.6% to 12p per share.

Revolut gains licence in Japan

Revolut is set to reveal that it has received authorisation from regulators in Japan and Singapore, operating under a licence similar to its UK business through partnerships with local banks. Revolut’s co-founder and CEO Nikolay Storonsky commented: “We've been working closely with the Singapore regulator to shape the future regulatory environment of the country.”

FCA issues warning over Larksway

The Financial Conduct Authority has stopped insurance broker Larksway providing services after concerns over its behaviour. Customers are being warned their policies are at risk.

LEISURE AND HOSPITALITY

The Restaurant Group succeeds in Wagamama takeover

The Restaurant Group has succeeded in its £559m takeover of Wagamama. Some 60% of shareholders voted in favour of the acquisition at yesterday's general meeting. There had been investor concern about the taking on of £202m of net debt in the noodle bar chain.

On the Beach continues to grow

On the Beach, the online holiday start-up, has posted a 24% rise in annual pre-tax profit despite suffering from this summer’s record temperatures. The company generated £104.1m of annual sales, 24.5% higher than the previous year and up 10.8% once the impact of acquisitions was removed.

PROFESSIONAL SERVICES

Brexit continues to take its toll on services

A CBI survey has found that optimism in the service sector fell in the three months to November as uncertainty over Brexit drove volumes and profitability down. Optimism in the business and professional sector, which includes accountancy, legal and marketing, fell at the fastest pace since November 2016, while sentiment in the consumer services sector, including hotels, bars, restaurants, fell again after improving in the quarter to August.

REAL ESTATE

Housing market unaffected by Brexit

New research suggests that Brexit has yet to make a serious dent in Britain's housing market and seems unlikely to do so in the near future. With year-on-year prices up over 6% in cities like Leicester, Manchester and Birmingham, analysts at Hometrack say “housing indicators suggest no imminent deterioration in the outlook for prices or levels of market activity.”

RETAIL

Ikea profits dip

Ingka Group, the new corporate name for Ikea’s main retail division, said net profit in the financial year to the end of August dropped to €1.47bn from €2.47bn last time. Turnover increased slightly to €37.1bn, a gain of 2.1%. The company reiterated that investment in transforming its business model toward a greater focus on ecommerce would mean 7,500 employees being made redundant globally, with 11,500 different jobs being added to its global workforce.

ECONOMY

Brexit plan would result in 4% hit to GDP

Theresa May’s Brexit plan will make people worse off than if the UK remained in the EU, the government’s own assessment of the agreement concluded yesterday. A no-deal Brexit would cause the greatest economic hit, with GDP up to 10.7% smaller than if the UK had stayed in the EU, while a free-trade agreement would see the nation take an 8.1% hit. The draft future relationship with the EU agreed on Sunday was not analysed for the impact on the UK economy, but an examination of a looser Chequers agreement-style deal warned that GDP would take a 3.9% hit - equivalent to about an annual £1,100 per person reduction in living standards compared with an assumption that the UK stayed in the bloc. In response, the PM claimed that her Brexit deal will leave the UK “better off” despite the official economic forecasts predicting a hit to growth.

Household debt poses risk to economy

The Bank of England has warned that households are sitting on historically large piles of debt. The Bank said that although people’s debt is lower than it was during the financial crisis, falling from 144% of incomes to 125% today, consumers could stop spending abruptly if they came under more financial strain. This would, the central bank added, amplify an economic downturn.

OTHER

Wealthy move cash abroad in fear of Corbyn

A survey by Gareth Parsons, from wealth manager Saunderson House, has found City leaders are more afraid of Jeremy Corbyn than Brexit. Over £15bn has been withdrawn by investors from Britain over the past two years over fears of a far-left Labour government. Mr Parsons says that although the pros and cons of Brexit are well known, a socialist Corbyn government is "a much greater unknown". Clients had been moving pension scheme money overseas to protect them against a potential run on Sterling and a wealth tax, with concerns increasing over the last two weeks.

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