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Daily News Roundup: Thursday, 5th August 2021

Posted: 5th August 2021


High Court backs Provident Financial’s partial repayment scheme

Provident Financial customers can now claim compensation for mis-sold loans after the High Court backed a partial repayment scheme. The company has set aside £50m to meet claims from borrowers who were sold unaffordable loans. The Court agreed to the scheme despite the fact that customers will not get a full refund, after the firm warned full payments would force it to go bust leaving many victims with nothing. The Times’ Alistair Osborne says the FCA did little to “fight the corner of some of the poorest borrowers around” and  allowed Provident to set a precedent. “Any company done for mis-selling will now try to cap redress via a scheme and take their chance in court.”

Number of fixed-rate deals back at pre-pandemic levels

The number of fixed-rate mortgage deals available has recovered to pre-pandemic levels, according to recent analysis. Around 2,488 fixed-rate mortgages are on the market, which is just over the 2,479 deals available in March 2020, according to financial data firm Defaqto. The number of products shrank dramatically last year as the coronavirus pandemic struck. Lenders were concerned about the potential for house price falls in the uncertain economy, as well as borrowers' incomes being hit. Back in April 2020, there were just 1,390 fixed-rate deals available, with many low-deposit mortgages being pulled.

Santander to roll out cash flow management app for SMEs

An app that helps smaller companies track their cash flow and invoices is being rolled out by Santander UK. Called CashFlow Manager, the app will let clients have a “single view” of various account balances and transactions across their different banks. “SMEs are working incredibly hard to get on the road to recovery from the pandemic,” head of commercial clients at Santander UK, John Baldwin, said, adding that the app is designed to ease some of the time-consuming workloads many small business founders face.

Defaults on UK’s emergency Covid loans set to be up to £5bn

Experts have assessed that £5bn of state-backed government COVID-19 emergency loans are at risk of not being repaid, far less than feared due to the strong economic recovery.


Computer-driven funds to muscle into new markets, says Man Group CIO

Corporate debt and private equity look set to be the latest targets of quantitative investment managers, according to Man Group’s Sandy Rattray.


SEC issues cryptocurrency warning

The chair of the US Securities and Exchange Commission, Gary Gensler, has described the cryptocurrency market as “rife with fraud, scams and abuse”. Mr Gensler told the Aspen Security Forum that there was not yet adequate investor protection and that stricter oversight was required, adding: “Frankly, at this time, it’s more like the Wild West.” Mr Gensler went on to warn US investors against backing Chinese companies, saying he was concerned they may not be receiving enough information about them.

HSBC hikes pay for Wall Street juniors

HSBC has raised starting salaries for its junior staff on Wall Street bringing pay for first-year analysts in its investment banking team up from $85,000 to $100,000. The move follows similar pay hikes at rival banks as they look to prevent an exodus of younger staff who have reappraised their need for work-life balance over the course of the pandemic.

Commerzbank swings to loss as restructuring costs bite

Shares in Commerzbank fell over 6% after the bank reported revenue down 18% and a net loss of €527m, both worse than estimated. The  lender took a €200m writedown for a botched IT project and €500m of restructuring costs.


Toyota: record profits presage a downhill path

Toyota reported a surge in first quarter profits on Wednesday, but left its full-year net profit forecast unchanged, citing “uncertainties in and after the second quarter”.


Taylor Wimpey raises profit target as UK housing market booms

FTSE 100 housebuilder Taylor Wimpey said on Wednesday that it now expects to hit an operating profit of about £820m for 2021, thanks to the stamp duty holiday, low interest rates and a surge in demand. The company built 7,303 homes in the six months to July 4, hitting revenues of £2.2bn – 26.8% more than in the same period in 2019. Meanwhile, CEO Pete Redfern has described government proposals to introduce time limits for building on land as “frustrating” adding that ministers should spend their time understanding what the barriers to development are.


LSE promotes new rules to lure more high-growth firms to FTSE 100

FTSE Russell, a subsidiary of the London Stock Exchange Group, is consulting on changing listing rules to allow companies to issue fewer shares to the public, meaning insiders could retain a greater control of a company. It is cutting the "free float" - the percentage of shares that must be available to be publicly traded - from 25% to 10%. For companies based abroad, the requirement would drop from 50% to 10% as well. The move comes after Rishi Sunak pushed for stock market rules to be relaxed in an attempt to make London a hub for high-tech listings. FTSE Russell’s plans would also make it easier for companies with dual-class share structures to claim places in the leading share indices. The Financial Conduct Authority is also consulting on relaxing its “one share, one vote” requirements. But this weakening of investors’ rights runs the risk of reducing the UK’s strong reputation for high corporate governance standards, says Joe Dabrowski of the Pensions and Lifetime Savings Association.

UK pension funds urged to back investment “Big Bang”

Prime Minister Boris Johnson and Chancellor Rishi Sunak have urged UK institutional investors to “seize the moment” and pile cash into domestic assets that will provide long-term income, such as tech start-ups and infrastructure projects. In a letter to asset managers, the pair encouraged them to move funds away from short-term, highly liquid investments, and instead to seek out “British success stories”. They said: “We need an Investment Big Bang, to unlock the hundreds of billions of pounds sitting in UK institutional investors and use it to drive the UK’s recovery. It’s time we recognised the quality that other countries see in the UK, and back ourselves by investing more money into the companies and infrastructure that will drive growth.”

Legal & General increases dividend after topping £1bn in profits

Legal & General’s profits have topped the £1bn mark in the first six months of this year, with the group confirming it will raise dividend payouts to shareholders. L&G said it would return £309m to shareholders in September after operating profits during the six months to the end of June rose by 14% to almost £1.08bn, beating expectations in the City for £999m. Assets across L&G's investment management arm, which is the biggest fund management house in the country, increased by 7% to £1.33tn. Net inflows at the division rose to £27.4bn, up from £6.2bn a year ago.

French fund manager to launch first EU-regulated bitcoin tracker

Melanion Capital, the Paris-based computer-driven fund manager, is set to launch an EU-regulated fund that will track a basket of up to 30 stocks in sectors such as cryptocurrency mining and blockchain technology.


SoftBank acquires $5bn stake in Swiss drugmaker Roche

SoftBank has acquired a $5bn non-voting stake in Swiss drugmaker Roche via its asset management division, Northstar.


Rolls-Royce to sell Spanish ITP Aero

Boston-based private equity firm Bain Capital is set to team up with construction engineering firm Sener Grupo de Ingenieria to acquire Rolls Royce’s ITP Aero Division for about €1.6bn (£1.4bn). The move comes after Rolls-Royce last year announced it is on the hunt to raise at least £2bn from asset sales, in a bid to repair a balance sheet wrecked by the pandemic.


Musicians can tour parts of Europe again without visas

Ministers have secured an agreement on visa-free travel for touring artists within 19 EU countries following widespread criticism of the Government on post-Brexit travel for musicians. However, the Let The Music Move campaign stated that the deal still represented a “failure” as there was “no certainty around touring in almost a third of EU countries, eight months after the music industry was dealt a no-deal scenario”.


La Liga agrees to sell 10% stake to CVC

Spain's top soccer league, La Liga, has agreed in principle to sell 10% of its business to private equity firm CVC Capital Partners for €2.7bn (£2.3bn). Clubs will receive about 90% of the funds from CVC's investment.


Traders betting against sterling for the first time since last December

Data from the Commodity Futures Trading Commission show that, in aggregate, bets against the pound now exceed bets on the currency for the first time since the build-up to the pre-Brexit crunch last December. Kit Juckes, chief foreign exchange strategist at Société Générale, commented: “Vaccine-related optimism has waned over the spring, with lockdown restrictions not being lifted enough to radically change the economic outlook.” He continued: “It seems to me that if we could get the sun back out, and the holidays back on track, there’s room for positions to reflect economic optimism and expectations that the MPC will start to unwind current policies sooner than the [European Central Bank] does.” If that happens, he added, “Sterling has a chance of another sortie into the $1.40s”.

UK’s service sector recovery slows

The latest IHS Markit/CIPS health check on UK services firms reveals growth in the sector has slowed to its weakest since March. Tim Moore, an economics director at IHS Markit, said: “July data illustrates that recovery speed across the UK economy has slowed in comparison to the second quarter of 2021. More businesses are experiencing growth constraints from supply shortages of labour and materials, while on the demand side we’ve already seen the peak phase of pent-up consumer spending.”

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