BANKING
FCA fines Metro Bank £10m for misleading investors
The Financial Conduct Authority (FCA) has fined Metro Bank £10m for publishing false information to investors in its Q3 2018 results. Former chief executive Craig Donaldson and ex-chief financial officer David Arden have also been told to pay £223,100 and £134,600, respectively, for being aware of the transgression. The FCA said the financial information published by the lender in the quarterly results “was wrong and would require substantial correction,” noting that the bank released figures that it “was aware at the time" were wrong. Metro had applied the wrong risk weighting to professional buy-to-let loans and commercial mortgages, which ultimately meant the group was not holding enough capital. Metro Bank said it “has cooperated fully with the FCA investigation and accepts the outcome.” The Prudential Regulation Authority last year fined the bank £5.4m for “failing to act with due skill, care and diligence” in regard to the reporting of its capital position, governance and controls.
Smaller banks offering best returns
While big name high street banks rarely feature on best buy lists in the current market, a number of smaller or newer banks are offering the best returns on savers’ cash. Melton Building Society is currently offering one of the best fixed rates on the market, according to Moneyfacts. Savers are being offered a rate of 4.9% on a four-year bond with a minimum deposit of £10,000. Zopa’s two-year or four-year bonds offer rates of 4.65% and 4.75% respectively, while Shawbrook Bank offers the best deal for a one-year fixed bond, at 4.55%. Earl Shilton Building Society offers one of the most competitive cash Isa rates, at 2.65% with a 90 day notice period and 2.55% for instant access, while Virgin Money is currently offering the best cash Isa rate, at 3%.
INTERNATIONAL
ECB to raise scrutiny of banks' credit risk
The European Central Bank (ECB) plans to increase scrutiny over how banks manage credit risk and diversify funding, with the bloc set to see sky-high inflation and a sharp economic downturn. The ECB, which supervises more than 100 big banks in Europe, intends to look at lenders exposed to the most vulnerable sectors, adding that it will also keep a close eye on residential mortgages and commercial real estate. In a statement, the ECB said: “Higher interest rates and a sluggish or possibly recessionary growth outlook may challenge the debt-servicing capacity of borrowers going forward.”
US mulls charges against Binance
US prosecutors could bring criminal charges against cryptocurrency firm Binance, with the Justice Department considering charges against company executives over issues including unlicensed money transmissions. This follows a criminal investigation into the cryptocurrency exchange which began in 2018 and is focused on Binance's compliance with anti-money laundering laws and sanctions. Tigran Gambaryan, head of global investigations at Binance, said the company had responded to "over 47,000 law enforcement requests" and increased its security headcount by more than 500%.
Credit Suisse's Greater China CEO to leave
Credit Suisse's chief executive for its Greater China business, Carsten Stoehr, is leaving the bank, according to an internal memo seen by Reuters.
Goldman Sachs eyes crypto firms
Goldman Sachs is looking to buy or invest in distressed cryptocurrency companies, with Mathew McDermott, its head of digital assets, saying the bank is doing due diligence on various firms.
Citi to cut jobs in EMEA
Citigroup is cutting as many as 50 jobs in the Europe, Middle East and Africa region, according to sources.
AVIATION
EasyJet chief lands £3m despite losses
EasyJet chief executive Johan Lundgren was handed a pay package worth almost £3m, despite the airline posting an annual loss of £208m and its share price slipping by almost 40%. The airline has been forced to cancel thousands of flights because of staffing and other problems. Mr Lundgren has been given an annual bonus of £1.2m on top of his fixed pay of £833,000, as well as shares worth £925,000. Kenton Jarvis, the chief financial officer, received a total of £2.1m. His salary and other benefits are worth £860,000 and he saw £1.26m in variable compensation. Moni Mannings, chairwoman of easyJet’s remuneration committee, said: “Operations have significantly improved as a result of management actions to mitigate the disruption that the whole airline ecosystem experienced through the third quarter.”
FINANCIAL SERVICES
FCA warns against focusing on senior staff diversity
The FCA has warned firms they risk "cannibalising each other" by focusing solely on the diversity of their most senior staff rather than creating sustainable pipelines of diverse talent. In a review into diversity and inclusion strategies within financial services companies, the regulator said it found several instances where firms focused almost exclusively on gender representation at senior levels because there were external targets and expectations for it. This, the FCA said, suggested some financial services companies were taking a "compliance approach" to diversity and inclusion rather than being genuinely committed to it.
HEALTHCARE
Pfizer sees $10bn-plus in potential revenue from mRNA vaccines
Pfizer says annual revenue from its mRNA vaccine portfolio could reach $10bn to $15bn by 2030, alleviating fears of a sharp hit to its top line from an expected decline in Covid vaccine demand and patent expirations. The company's revenue is expected to top $100bn this year- more than double the pre-pandemic level - helped by strong demand for its Covid-19 vaccine and oral treatment Paxlovid.
MEDIA & ENTERTAINMENT
Netflix paid £5m in UK tax after earning £1.3bn
Netflix paid just £5m in UK corporation tax last year, despite earning a record £1.38bn from British subscribers. The streaming service used a legal accounting loophole to avoid an estimated £49m in UK taxes by diverting cash to the Netherlands. The firm’s 2021 accounts reveal that it transferred £1.24bn – of which an estimated £260m was pure profit – to Dutch-registered Netflix International BV “per a distribution agreement.” This effectively reduced the company’s UK corporation tax rate on its profits from the standard 19% to under 2% – reducing its bill from around £54m to just £5.2m. While MP Nigel Mills, a member of the Fair Tax All-Party Parliamentary Group, said it looked as if Netflix was “not paying a fair amount of tax in the UK,” the company insisted it has invested more in production in the UK than anywhere outside of North America.
REAL ESTATE
House prices could fall 10% as mortgage debt rises
Economists at Credit Suisse say house prices are set to slump due to rising interest rates and a looming recession. Warning that the rising cost of mortgages will see the burden of payments hit the highest since 2009, Credit Suisse’s Peter Foley said: “We expect house prices to fall at least 10% next year in the US and UK.” Credit Suisse expects borrowers in the UK to be hit harder by rising interest rates than the US because the “overwhelming majority of US mortgages” are fixed for 30 years while most UK borrowers fix their interest rates for between two and five years. Elsewhere, the Office for Budget Responsibility believes prices will fall 9% over the next two years. Meanwhile, Karen Ward, chief market strategist at JPMorgan Asset Management, has ruled out a “doom loop of construction activity contracting massively, people getting into negative equity and consumer behaviour really changing because of the housing market.”
RETAIL
Future looks brighter for Monsoon
Monsoon, which nearly collapsed two years ago, has said that it will open new stores in 2023 after doubling its profits this year. Adena Brands, which owns the Monsoon womenswear and Accessorize chains, reported a 43% rise in sales to £258m in the 12 months to the end of August. Like for like in-store sales doubled, largely because of the reopening of international travel. Despite the rising cost of making and importing goods, Adena managed to increase its margins, which contributed to a 132% increase in underlying profits to £24.4m.
ECONOMY
Economy shrinks despite October rebound
The UK economy shrank by 0.3% in the three months to October, according to figures from the Office for National Statistics (ONS). The decline came despite a 0.5% increase in October, which was driven by an increase in retail sales and followed a 0.6% contraction in September. Much of September’s decline in GDP was attributed to the extra Bank Holiday to mark the funeral of Queen Elizabeth II. Analysis shows that the economy shrank by 0.2% in the three months to September, with economists warning that the UK is already in recession. Samuel Tombs, chief economist at Pantheon Macroeconomics, expects a “peak-to-trough fall in the quarterly measure of GDP of about 2%,” adding that the economy is unlikely to grow again until early 2024. Reflecting on the ONS data, Chancellor Jeremy Hunt said the figures “confirm that this is a very challenging economic situation,” adding that “it will get worse before it gets better."
OTHER
Poll raises standard of living concerns
A study by the New Economics Foundation think-tank suggests that 30m people in the UK will be unable to afford a decent standard of living by the time the current parliament ends in 2024. The report warns that rising prices, below-inflation increases in earnings and projected increases in unemployment would result in 43% of households lacking the resources to afford groceries, buy new clothes or treat themselves and their families. This marks a 12 percentage point increase since 2019. The NEF said that by 2024 almost 90% of single parents and 50% of workers with children would fall below a minimum income standard. The think-tank has called for universal credit to be scrapped and replaced by a national living income, a minimum below which no one could fall whether they were in or out of work.