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Daily News Roundup: Thursday, 5th October 2023

Posted: 5th October 2023

BANKING

Supreme Court ruling could unlock billions in potential PPI claims

Royal Bank of Scotland (RBS) has lost two lawsuits over unfair commissions charged to customers who were sold payment protection insurance (PPI), potentially increasing lenders' exposure to litigation. The UK Supreme Court ruled in favour of two former customers on Wednesday, ordering RBS to repay all the money paid by them for PPI. RBS argued that the lawsuits should be thrown out due to the usual six-year limitation period, but the Supreme Court ruled that the relationship between RBS and its former customers continued to be unfair until their credit card agreement ended. The ruling comes just days after law firm Harcus Parker launched legal action for a new wave of PPI claims based on banks and credit card companies secretly charging their customers high levels of commission. Damon Parker, senior partner at the firm, said: “This Supreme Court judgment could not be more timely. Bank and credit card customers are still owed billions of pounds after they were secretly charged up to 95% commission when they took out PPI.”

UK banks criticised for weak green credentials

Six of the UK's biggest high-street banks, including JP Morgan Chase, Santander, Barclays, HSBC, NatWest, and Lloyds Banking Group, have been criticised by consumer champion Which? for their weak green credentials and fossil fuel investments. Only three out of the 13 leading current account providers in the UK earned the Which? Eco Provider badge for their strong commitment to tackling climate change. The analysis covered the banks' environmental policies, transparency levels, and targets to reduce their exposure to fossil fuels. JP Morgan Chase received the lowest score for positive environmental impact, while Barclays was identified as Europe's biggest fossil fuel financier. Consumers seeking more sustainable choices are encouraged to consider switching banks to those with better green credentials.

Metro Bank plots capital-raise to bolster balance sheet

Metro Bank is working with advisers to secure up to £600m in new debt and equity in a bid to strengthen its balance sheet. The UK challenger bank has hired bankers at Morgan Stanley to work on the plans, while Moelis, another investment bank, is also thought to be involved. Royal Bank of Canada, Metro Bank's corporate broker, is also involved in the equity-raise. The talks come after regulators last month failed to approve a request from Metro to lower the capital requirements attached to its mortgage business.

Barclays initiates layoffs, targeting 3% of global investment banking workforce

Barclays initiated a fresh round of layoffs this week, targeting 3% of its global investment banking workforce as part of an annual review to streamline its franchise. Up to 300 employees may lose their positions across the bank, source said. In the technology investment banking team in San Francisco, three senior bankers and one junior banker were notified of their termination.

Citigroup overhaul hits 250 jobs in London

Citi is reviewing 250 jobs in the UK as part of CEO Jane Fraser's plan to overhaul the bank. The review will include roles below the executive management team, with some roles remaining the same, others changing, and new roles being created. The restructuring is expected to be completed by Q1 2024.

Customers’ credit scores hit by Barclays IT fault

A fault with Barclays’ Trinity IT system means the credit records of buy-to-let mortgage borrowers are still being damaged, despite the issue being flagged six years ago.

PRIVATE EQUITY

UK financial regulator warns higher interest rates will hit private assets

The Financial Conduct Authority has confirmed that it will conduct a review of private markets, particularly real estate, amid growing fears over the impact of higher rates on the sector. While higher borrowing costs are piling pressure on the private equity industry, this has yet to be reflected in asset valuations, the FCA’s chief executive Nikhil Rathi said. He said the regulator was seeking to understand where the "build-up of risk might have taken place, how the valuations are governed and how that might feed back into other parts of the financial system".

INTERNATIONAL

ING urges policy change to help it hit climate targets

The CEO of ING has called on governments to implement stricter rules to aid the decarbonisation of real estate and other sectors. Steven van Rijswijk warns that without government support, the bank will struggle to meet its climate targets. ING believes that moving power grids to renewable energy in markets where it offers residential mortgages could help lower emissions. The bank also emphasises the need for better data and clearer labelling across countries.  

Italian lenders unlikely to pay bank tax

Italy risks collecting minimal proceeds from a windfall tax on banks after it gave lenders the option to set aside money instead of paying the levy. With no provisions in the law over capital levels and distribution policies, it would be hard for banks to justify that shareholders pay the tax when they could, instead, boost capital and keep the cash on their balance sheet, three sources close to the matter said.

FINANCIAL SERVICES

FCA defends actions amid criticism over fraud and Woodford scandal

Bosses at the City regulator, the Financial Conduct Authority (FCA), defended their actions during the regulator’s annual public meeting. FCA chairman Ashley Alder denied that the watchdog had "failed" and stated that "doing better means attacking the issue across a very broad front." The FCA has been active in taking down fraudulent websites, running the "scam smart" awareness campaign, and working with banks to address push payment fraud. Therese Chambers, joint executive director of enforcement, called on Big Tech companies to play a role in fighting fraud. The FCA was also questioned about its response to the collapse of Neil Woodford's investment fund, with Chambers stating that the interests of Woodford investors are the FCA's top priority. Alder reassured that the FCA's main role in policing the financial sector will not be diminished by new legislation aimed at boosting the UK's international competitiveness.

Brexit has brought opportunities to Britain – Bailey

Bank of England Governor Andrew Bailey has acknowledged that Brexit has presented opportunities for Britain, but in the short-term, has had a negative short-term impact on productivity and growth. Bailey added that leaving the EU had also helped to preserve parts of the City of London. “I think we have protected, and in a sense ensured, that much of the market and much of the industry remains here. And that’s been important,” he said. In a wide-ranging interview, Bailey went on to insist the Bank was politically neutral and that the Government also had a role in managing inflation.

REAL ESTATE

UK rents driven to highest level ever

Supply shortages and mortgage rate rises have combined to push the cost of private home rents up by 10% over the past 12 months. The average rent for new properties being put on the market now stands at a record £1,278 per calendar month outside London in the July to September period, according to Rightmove. The average advertised rent in the capital also hit a new high in the past quarter - £2,627 a month - a 12.1% increase on the same time last year. Rightmove's director, Tim Bannister, said: “Record rents and far more tenants looking to move than there are homes available means it will still feel very difficult for many tenants navigating the market. However, there are signs that some of the pressure between supply and demand is beginning to ease, with the number of new rental properties coming to the market now at its highest level since the end of last year.”

RETAIL

Burberry shares fall as UBS downgrades stock

Shares in Burberry fell after UBS downgraded the luxury retailer's stock and cut its price target due to fears of a slowdown in China impacting sales. UBS analysts expressed caution about Burberry's turnaround in the current environment. Other European luxury brands, such as LVMH and Kering, have also been affected by declining Chinese sales. The World Bank recently lowered its growth forecast for the Chinese economy. Despite a surge in sales in mainland China earlier this year, Burberry's largest market has since slowed. Burberry shares dipped 3.6%, reaching their lowest level in 11 months.

ECONOMY

UK services activity weakest for 8 months

The UK’s services sector saw its weakest performance since the start of the year in September, according to the S&P Global/CIPS UK services PMI survey. Sluggish business conditions, heightened risk aversion and downward pressure on demand continued to drag on output. Jobs in the industry were shed at the fastest rate since 2021.The index showed a reading of 49.3 in September, down from 49.5 in August. Any score below 50 indicates that activity in the industry has been contracting. Although this was the lowest level since January, the reading came in above the earlier flash estimate figure of 47.2. Tim Moore, economics director at S&P Global Market Intelligence, said the downturn “stood in contrast to solid growth during the spring months.”

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