BANKING
Executive excess 'rife' at building societies
The Mail on Sunday’s Jeff Prestridge says “executive excess is rife” at British building societies. Analysis of the 43 societies which between them manage assets in excess of £500bn and look after the savings of more than 22m customers, shows that 25 of the 30 societies with year ends of December 2022 paid their bosses a bonus for their work during 2022. These ranged from the £7,157 collected by the boss of Penrith BS to the £408,000 paid to the head of Yorkshire BS - who was chief executive for just over half the year. The total remuneration received by these 30 bosses ranged from the £1,151,000 received by Skipton's Stuart Haire, down to £55,000 that the new boss of Bucks BS got for four months' work. Seven of the 30 bosses received double-digit increases in remuneration for their work in 2022, while only the boss at Principality saw her overall pay fall. Alan Debenham, founder of the Building Societies Members Association, said too many building societies “justify eye-watering executive pay by pointing to the financial rewards bank executives receive.” He added: “That's not right. It's time for a renaissance in the membership focus of building societies, with the rewards directed into the pockets of savers rather than executives.”
Skipton loan to sidestep mortgage deposits
Skipton Building Society is developing an unorthodox mortgage product aimed at renters unable to accumulate a deposit for their first home. The lender hopes to launch a home loan that enables would-be borrowers to sidestep normal minimum deposit rules by providing evidence that they have successfully met rental payments for a considerable time. Stuart Haire, Skipton’s chief executive, said: “We’re looking at how we can build a product that can help those people trapped in rents.” Market data shows that the best mortgage deals require deposits of 15% or more. A new product would have to be approved by the Prudential Regulation Authority and the Financial Conduct Authority, with the regulators anxious to prevent banks and building societies lending at high loan-to-value ratios.
Marshall Wace builds biggest short position in NatWest
Hedge fund Marshall Wace has built the biggest short-selling bet against NatWest ever recorded by the Financial Conduct Authority. The firm has taken a 0.61% net short position in shares of the lender. Marshall Wace disclosed that it was building a short against NatWest last month amid uncertainty over the banking system following the collapse of three American lenders, including Silicon Valley Bank.
Metro Bank criticised over executive pay
Metro Bank is at risk of a shareholder rebellion over executive pay, after investor advisory firm Glass Lewis said the lender had failed to justify a “significant” 20% salary hike for top bosses. Glass Lewis has urged investors to vote against the bank’s remuneration report amid concerns over rising payouts for chief executive Daniel Frumkin and chief financial officer James Hopkinson. Metro Bank offered Mr Frumkin a 20% hike in his base salary. He waived the increase by a year but when it takes effect in January 2024 it will increase his base pay from £769,600 to £925,000. Glass Lewis noted that the 20% increase was far above the average 5% rise granted to staff for 2023. The proxy firm also raised concerns about the pay offered to Mr Hopkinson, with his £500,000 base salary nearly 24% higher than that of his predecessor. Metro Bank said: “Both awards are consistent with the remuneration policy approved by shareholders.”
Glass Lewis urges Barclays investors to veto executive pay proposals
Glass Lewis has urged investors to vote against pay proposals for Barclays’ top executives following a slew of expensive scandals. A trading blunder last year cost the bank over £700m in penalties. While Barclays docked £1m from the pay of its top executives in February, the proxy advisor highlighted that ex-CFO Tushar Morzaria was still receiving around 70% of his pay package. "We believe shareholders could reasonably have expected the committee to further reduce this award to better reflect the financial and reputational impact of the risk and control issues over the period," Glass Lewis said. As a result, it recommends that shareholders at the lender's AGM vote against the pay schemes for top executives.
Illegal immigrants to have bank accounts closed
The Government has restarted a programme of sharing information with banks on people suspected to be living in the UK illegally so their current accounts can be closed as part of a package of measures designed to deter illegal migration and illegal working. Banks will not be required to check customers' documents for their migration status but the Home Office will share details of illegal migrants and banks can then check their personal current account holders against the list.
Banking crisis triggers £1trn exodus from stock market
Analysis by Barclays suggests investors will shift $1.5trn out of stocks and other high-return assets in favour of low-risk money market funds over the next year following the recent chaos in the banking sector. Barclays said the continued investor flight from banks and so-called "prime funds", which invest in more risky debt, will only fuel the trend for more safety.
INTERNATIONAL
JPMorgan’s dealmaking flurry under scrutiny from US regulator
The Office of the Comptroller of the Currency (OCC) in the US is scrutinising JPMorgan Chase’s due diligence on dozens of acquisitions it made in 2021 and 2022. The review includes a $175m deal to buy student financial aid start-up Frank, whose founder Charlie Javice has been charged with conspiracy to commit bank, wire and securities fraud. JPMorgan filed a civil lawsuit against Ms Javice four months ago, alleging she told the bank that Frank had 4.25m customers when in fact it had only 300,000. She stood to make $45m from the sale of the company, prosecutors have said.
Japanese banks to face votes on climate change
Climate campaign groups are urging Japan's leading banks to cut financing linked to fossil fuels, filing shareholder resolutions to be voted on at the companies' AGMs in June. Sources say Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group have been targeted. Trading house Mitsubishi Corp is among other business that face shareholder proposals from the same coalition.
Binance has Australian financial services licence cancelled
Australia’s financial regulator has cancelled the local financial services licence of Binance. Earlier this year, the Australian Securities and Investments Commission found Binance had incorrectly classified hundreds of retail customers as wholesale investors.
CONSTRUCTION
Housebuilding falls at the sharpest pace since May 2020
British housebuilding fell at the sharpest pace since May 2020 last month due to the cost of higher interest rates, according to the S&P Global/CIPS construction Purchasing Managers' Index (PMI). The PMI dropped to 50.7 in March from 54.6 in February, with the decline in house-building being driven by a reduction in new housing projects as a result of higher interest rates. Despite concerns about the near-term outlook for housing activity, expectations for total construction output during the year ahead were relatively upbeat in March. Hiring rose at the fastest rate since October, and expectations for future activity were the highest since February 2022.
FINANCIAL SERVICES
Investment platforms back shareholder democracy plan
Britain's biggest investment platforms have thrown their weight behind a campaign to boost shareholder democracy. Marks & Spencer chairman Archie Norman has written to Business Secretary Kemi Badenoch urging changes to company law, with the Share Your Voice campaign calling for improved links between companies and small shareholders. Richard Wilson, chief executive of Interactive Investor, has described the campaign as a “tipping point” for shareholder democracy, saying: “While the rise of investment platforms such as ours have made investing cheaper and easier, it also means that UK plc has lost a direct connection with its shareholders. That does not have to be the case.” He added that private investors “shouldn't be inhibited by red tape or time-consuming bureaucracy, especially in today's world where technology provides simple, time-saving solutions.” Danny Cox of retail stockbroker Hargreaves Lansdown has also backed the campaign, saying: “We are engaging with this initiative and supportive of its sentiment.”
FTX failure stems from 'incompetence and greed'
FTX was run without sufficient financial and accounting controls, according to a new report by the company's debtors which says the failed crypto exchange was governed by “hubris, incompetence, and greed.” The report says the digital asset company, which collapsed in November, “was tightly controlled by a small group of individuals who showed little interest in instituting an appropriate oversight or control framework.” The report says FTX “lacked independent or experienced finance, accounting, human resources, information security, or cybersecurity personnel or leadership, and lacked any internal audit function whatsoever.” Board oversight, it added, “was also effectively non-existent.” The report also reveals that FTX founder Sam Bankman-Fried described his Alameda Research trading house as "unauditable," describing it as “hilariously beyond any threshold of any auditor being able to even get partially through an audit.”
Car finance faces mis-selling claims
Claims companies and no-win, no-fee law firms believe the car finance industry could be at the centre of the next big mis-selling scandal. The Financial Ombudsman Service (FOS) received 11,452 complaints about car finance loans in the 2022/23 financial year, marking an 87% year-on-year increase. Car finance is now the third most complained about financial product after bank accounts and credit cards. Of the complaints lodged in regard to car finance, 90% come from third parties – such as claims firms - rather than consumers themselves. Coby Benson of no-win, no-fee law firm Bott and Co said: “Slowly but surely firms have grown in confidence that car finance is going to be a viable area of claims and that is why you are seeing more.” Finance and Leasing Association data shows that around 93% of new cars are bought on finance, with around £40bn borrowed a year.
WealthTek shut down
The Financial Conduct Authority has ordered wealth manager WealthTek to cease any regulated activities after uncovering “serious regulatory and operational issues” at the partnership.
LEISURE & HOSPITALITY
Flutter lines up new chairman
Flutter Entertainment, which owns Paddy Power, SkyBet and Betfair, is in advanced talks to appoint John Bryant as its new chairman. Mr Bryant, who is the senior independent director at contract catering company Compass Group, also sits on the boards of two US-based companies - Ball Corporation and Macy's. Meanwhile, proxy adviser Glass Lewis has urged its investor clients to reject a proposed pay plan at Flutter in which chief executive Peter Jackson could earn shares worth as much as £19.6m - or 1,600% of his base salary. ISS has offered its “qualified support” of the proposal, saying that while it acknowledged that “the size of these awards represents a cause for concern.” it recommends clients back the plan.
Blackstone increases bet on UK staycation boom
US private equity group Blackstone is pumping another £170m into its UK holiday parks business, Haven, which it bought as part of its near-£3bn purchase of Bourne Leisure two years ago. The extra £170m will take its total investment to more than £400m since it bought the business. Of the £56bn Britons spent on holidays in 2019, £14bn was spent in the UK and Blackstone is betting staycations will command more of that spending in future.
REAL ESTATE
UK house prices rose unexpectedly in March, says Halifax
House prices increased by 0.8% between February and March, according to Halifax, with easing mortgage rates and a tight labour market firming market resilience. It’s the third consecutive month of price rises, following increases of 0.2% and 1.2% in January and February. The rise surprised economists who had predicted a 0.3% fall. The average UK property costs £287,880, up from £285,660 in February but around 2% below the peak reached last August. The annual rate of house price growth slowed in February to 1.6%, the weakest rate of annual growth in three and a half years.
ECONOMY
IMF: Ultra-low interest rates will return
The International Monetary Fund (IMF) expects a return to ultra-low interest rates, with an ageing population and low productivity set to tame inflation and see interest rates returning to levels seen before the coronavirus outbreak. The IMF says high inflation has interrupted a trend for low interest rates, rather than delivered a permanent shift in the economy. The report says: “Recent increases in real interest rates are likely to be temporary. When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels.”
OTHER
Bank seeks engineers for digital 'Britcoin'
The Bank of England is hiring a workforce of up to 30 people to develop its ‘Britcoin’ digital currency project. In February, the Bank announced that a scheme for a new digital pound would enter the design phase. It is now seeking engineers to lead the project. The Bank is currently involved in an open consultation with businesses and the public on what they might want from a new digital coin. Ian Taylor, board adviser for CryptoUK, the trade association for the crypto asset industry, said: "As a 'starter for ten' at the beginning of this project, a team of 30 seems like quite a significant resource to focus on the digital pound." He added: "It shows the impact it would have, and that the Bank are serious about it."
London IPOs slide
Initial public offerings (IPOs) on the London Stock Exchange fell to their lowest in a decade in the past financial year, with the amount of money raised in new listings falling substantially. Analysis shows that 41 companies completed IPOs on the main market of the London Stock Exchange in the year to March 31, the lowest total since the 37 recorded in the same period to March 2013. The £1.2bn raised in new issues was the smallest amount generated in at least 14 years and is 80% below the £6bn raised a year earlier.
Boom time for boardroom raiders as activism hits record highs
Activist investors launched a record 83 new campaigns in Q1, according to Barclays, with boardroom raiders encouraged by depressed share prices. Europe and Asia accounted for more than 50% of activity.