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Daily News Roundup: Tuesday, 18th June 2019

Posted: 18th June 2019

BANKING

Saudi merger boosts RBS

Royal Bank of Scotland shares jumped after the bank said a merger between two Saudi banks would boost its capital and reduce its risk weighted assets by £4.7bn. Saudi Arabia’s Alawwal Bank and rival Saudi British Bank (SABB) completed a merger yesterday. RBS, through its Dutch subsidiary Natwest Markets NV, said it was part of consortium owning a 40% stake in Alawwal bank – with RBS itself holding an equivalent 15.3% stake in the bank. CEO Ross McEwan said the completion of the Saudi banking merger would help RBS to focus on its target markets. He said: “We are pleased that this merger has now concluded; it will help facilitate the future exit of our shareholding as we continue to focus on our key target markets.”

Innocent bank customers suspected of money-laundering

An investigation by the Law Commission has found that bank officials are wrongly suspecting customers of money-laundering and freezing the accounts of innocent people. The commission said that banks, lawyers and financial services staff were wasting time and producing too many “low-quality and unnecessary” reports on suspected money-laundering. It added that one in seven reports was deemed unnecessary. The commission has recommended a new advisory board, statutory guidance and an online form for reporting.

Nationwide boss’s pay revealed

Joe Garner, the CEO of Nationwide, has received benefits worth more than £500 a day to cover the cost of travel, security and medical expenses. The building society’s latest report shows he was handed £185,000 in perks during the year to April 4. In total, Mr Garner’s remuneration for the year was £2.37m, up from £2.32m the previous year. His total remuneration package is lower than all of the chief executives of Britain’s biggest banks because Nationwide does not reward its executives with long-term incentive plans that are common at the listed lenders.

Interest in City jobs from abroad dips

Analysis from the jobs site Indeed shows that interest in UK banking jobs from abroad has dropped by 12% since 2015. Despite this, Indeed said Britain’s banking sector remains a flagship compared to other sectors of the economy. For the average UK vacancy advertised on Indeed, 3% of interest comes from foreign-based candidates. Meanwhile, for financial sector jobs, that proportion is more than four times higher - with 13% of interest coming from talent overseas.

Tide signs up 85,000 SMEs

Digital challenger bank Tide has revealed it now has 85,000 small and medium sized businesses now using the banking platform. The figure brings Tide within touching distance of The Co-operative Bank’s 86,000 SME customers.

PRIVATE EQUITY

Goldman Sachs to combine private investing units

Goldman Sachs is merging four separate units to create a $140bn private investing business, according to reports. The bank will combine units that invest in private companies, property and other hard-to-access deals. The unit will also include the bank’s private equity and property divisions, which sit under the bank’s asset management division.

INTERNATIONAL

UBS snubbed from bond deal as ‘Chinese pig’ row escalates

China Railway Construction Corporation (CRCC) has opted not to hire UBS on a dollar-bond sale following comments made last week by Paul Donovan, chief economist at UBS Global Wealth Management, about Chinese pigs which sparked allegations of racism. According to people familiar with the situation, UBS had won a mandate on the bond sales by CRCC, but was removed from the process on Monday morning. Last week, Haitong International decided to suspend its collaboration with UBS. UBS has issued an apology for Mr Donovan’s comments and he has been placed on leave. Patrick Jenkins in the FT argues that companies often kowtow to criticism in China, but UBS should stand by Mr Donovan.

Deutsche Bank prepares to overhaul trading operations

Several papers pick up on reports that Deutsche Bank is planning to create a so-called “bad bank” to hold up to €50bn (£44.7bn) of toxic assets as part of a major restructuring. The German bank is also set to make severe cuts to its equities and rates trading businesses outside continental Europe. A spokesman for the bank said: “Deutsche Bank is working on measures to accelerate its transformation so as to improve its sustainable profitability. We will update all stakeholders if and when required.” The company is expected to update investors on its plans around the time of its half-year results on July 24. Commenting on the developments, Lucy Burton in the Telegraph suggests the restructuring could be too little, too late.

Banks accused of overcharging small customers for forex services

Small businesses are being overcharged for foreign exchange services to the tune of hundreds of millions of euros a year by banks across Europe, according to research by the European Central Bank.

Swedbank suspends CEO of Estonia unit

Swedbank has suspended the CEO and CFO of its Estonian business with immediate effect following an investigation into compliance with money-laundering rules at the bank.

ANZ executive quits after probe into wine and chauffeur expenses

David Hisco, the CEO of ANZ Bank’s New Zealand division, has stepped down amid a probe into his business expenses.

AVIATION

Jet Airways lenders plan insolvency proceedings

Lenders to Jet Airways said they plan to bring insolvency proceedings against the struggling carrier. The move follows a failed attempt to find a suitable buyer.

CONSTRUCTION

Kier to cut 1,200 jobs

Kier has said it will cut 1,200 jobs as it seeks to make cost savings of £55m a year by 2021. The cuts came as Andrew Davies, the firm’s new boss, announced a plan to simplify Kier's business and reduce its debt. The company will sell its homebuilding business, Kier Living, and will shut or sell other interests.

FINANCIAL SERVICES

CMA handed new powers to deal with loyalty penalty

As part of new plans being announced by the Government, companies that overcharge or mislead customers could be hit with direct fines without the need to go through a court. The Government said it would consult on plans to give the Competition and Markets Authority new powers to decide itself whether consumer law had been broken. Misleading claims, unfair terms and conditions and hard-to-exit contracts would be covered by the powers. Ofcom and the Financial Conduct Authority would also be given powers to stop companies taking advantage of loyal customers. Theresa May said: “We are confirming our intention ... to give customers the protection they deserve against firms who want to rip them off.”

Hargreaves Lansdown chief waives bonus in wake of Woodford crisis

The boss of Hargreaves Lansdown has surrendered his bonus following after the company came under fire for its “close” relationship with Neil Woodford’s suspended fund, Woodford Equity Income. Chris Hill said: “Until investors are able to access their money held with Woodford Equity Income, I will not be taking a bonus.”

Retail and financial services firm slow to update IT

According to notes compiled by Microsoft, retail and financial services firms are lagging in updating their IT systems, potentially opening them up to the risk of cyber-attacks. Almost four-fifths of retailers surveyed in the annual Retail Crime Survey reported a rise in cyber-attacks, while attacks on the financial services sector were up fivefold in 2018, according to the FCA.

London-Shanghai share trading initiative launched

Britain and China began selling shares in each other’s companies on Monday under a landmark deal between the Financial Conduct Authority and China Securities Regulatory Commission. Under the cross-border investment program called Shanghai-London Stock Connect, investors and issuers in the UK and China will have a mutual access to both capital markets through depository receipts.

Facebook prepares to launch cryptocurrency

Facebook is set to launch a cryptocurrency today as it targets Bitcoin with a push into digital currency. The social media network has reportedly invested $1bn in the project. Facebook’s push into cryptocurrency is being overseen by a consortium known as Libra, said to include firms such as Visa, Mastercard, PayPal and Uber.

Hedge fund Cheyne raises €1bn for stressed loan fund

Cheyne Capital has raised €1bn for a new fund that aims to profit from European banks selling down their loan portfolios to meet new accounting and regulatory standards.

REAL ESTATE

Newly listed house prices reach near high

The national average price of a newly marketed property has increased by 0.3%, thanks to buoyant property markets in the north according to Rightmove’s latest measure of online asking prices. Despite Brexit uncertainty weighing down house price growth over the past year, the average price of a property coming on to the market was £309,348, close to June 2018's record high of £309,439.

ECONOMY

Global slowdown will continue into 2020

Fitch Ratings has warned that the global slowdown will continue into next year as mounting trade war uncertainty forces businesses to rein in spending and Chinese consumers turn cautious. Fitch trimmed its 2020 global growth forecast to 2.7% from 2.8%. It added that growth would slow a further 0.4 percentage points to 2.4% if President Trump carried out his threat to slap tariffs on the remaining $300bn of Chinese imports and Beijing retaliates.

Stockpiling hampering growth

New research from Lloyds Banking Group has revealed that British businesses have close to £600bn tied up in excess working capital, potentially stifling growth and leaving them exposed to economic uncertainty. Lloyds blamed increased inventories on political and economic uncertainty, with stockpiling at larger UK firms rising by a third in three years. Ed Thurman, Lloyds' managing director of global transaction banking, said stockpiling “can be risky as cash invested in inventory is rarely easy to release, meaning firms are less able to invest in growth or respond to unexpected changes in demand”.

OTHER

Rise in middle-aged “money mules”

New figures from Cifas, the fraud prevention service, have revealed that criminals are increasingly recruiting middle-aged people to act as “money mules”. The research showed that the number of people aged 40 to 60 being used by criminals to transfer funds between accounts rose by 35% last year compared with the previous year. Cifas said that the 40 to 60 age group were easier targets because more of them were going online. Cifas also found that most victims of identity scams last year were young adults and over-60s. Cases involving victims aged 21 and under rose by 26%, and cases involving over-60s rose by 34%.

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