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Daily News Roundup: Tuesday, 19th September 2023

Posted: 19th September 2023

BANKING

Major report on City reform delayed

A new report on City reform has been delayed until next year, City AM reports. L&G boss Sir Nigel Wilson began an investigation in May for the Capital Markets Industry Taskforce, headed by London Stock Exchange chief Julia Hoggett, and the findings were due to be published in the autumn. However, sources say more time is needed to distil feedback into the plans. The Capital Markets of Tomorrow report was looking to roll up a number of reviews of the capital markets ecosystem into a cohesive plan for the City. But delays to the latest report could fuel concerns about the pace of reform in the capital. Charles Hall, head of research at investment bank Peel Hunt said the industry was now “keen to see a faster pace of change” to regulation to solve the malaise facing London. “Regulators need to be clear that regulating a declining market is in no-one’s interest, including their own,” he added.

NatWest to examine Irish unit over small business loans

NatWest has told the Financial Conduct Authority that it will begin a programme of remediation for business customers who are found to have been treated unfairly by its Irish unit, Ulster Bank.

UK regulator finds no evidence of politicians being ‘debanked’ over views

A probe into debanking by the Financial Conduct Authority has found no evidence that politicians are being denied bank accounts because of their views.

INTERNATIONAL

Santander consolidates retail and commercial activities

Spain's Santander is consolidating its retail, commercial, and consumer activities under two new global businesses to improve performance and add customers. The new Retail and Commercial unit and Digital Consumer Bank will join Santander's other global operations in Corporate and Investment Banking, Wealth Management and Insurance, and Payments. The restructuring aims to help Santander achieve its strategic goals, including adding 40m customers by 2025 and increasing its return on tangible equity.

SocGen shares slump after Slawomir Krupa cuts profit targets

Shares in Société Générale fell over 12% on Monday after CEO, Slawomir Krupa, cut profitability targets for the lender and forecast slower growth as he unveiled a three-year strategy for the bank. Meanwhile, SocGen has announced plans to spend €100m over the next two years to close its gender pay gap. The money will be used to boost the remuneration of female employees in the same or similar roles as men, where there is no reasonable explanation for a discrepancy. 

UBS sounds out investors over first AT1 sale since CS rescue

UBS is considering issuing its first Additional Tier 1 (AT1) bond since its takeover of Credit Suisse in March, revising the terms to make them more palatable to bondholders. UBS is reportedly under pressure to replace up to $17bn of Credit Suisse AT1 bonds in coming years in a bid to increase the efficiency of the enlarged bank's capital structure and free up cash for shareholder payouts and possible acquisitions.

German banker with links to Scholz charged in €280m tax fraud

Christian Olearius, the co-owner and former chair of MM Warburg, has been charged in relation to €280m in illicit tax refunds derived from cum-ex trades. Olearius could be sentenced to up to 10 years in jail.

AUTOMOTIVE

UK carmakers call for tax incentives to help switch to EVs

The lack of tax incentives for private buyers is causing a decline in demand for electric vehicles, according to carmakers. The Society of Motoring Manufacturers (SMMT) has called for a reduction in VAT on battery-powered vehicles and public charging to make them more affordable. A survey by Savanta found that over two-thirds of drivers want to switch to electric cars but are deterred by the lack of incentives and concerns about charging. While business buying has surged due to tax incentives, individual car buying has slowed. The £1,500 grant towards an electric car was scrapped last year, and carmakers are also calling for electric vehicles to be exempt from the "expensive car supplement". Sales to private buyers have risen just 0.9% this year compared to a 43% rise for fleets.

Pendragon to sell its UK motor division

London-listed car group Pendragon is offloading its motor and leasing business in the UK following a strategic review. Lithia Motors will acquire the division for £250m and take a stake in Pendragon’s software business, Pinewood, which will be launched as a standalone company. The US car dealer will buy a 16.67% stake in Pinewood Technologies will allow the brand entry into the US market and enable a broader roll out in the UK.

AVIATION

Volotea considers listing shares on Madrid stock market

Spanish airline Volotea has hired Morgan Stanley and Barclays to prepare for a possible listing of its shares on the Madrid stock market. While the decision to list the shares has not been made yet, Volotea's management wants to be ready for when a market opportunity arises, according to reports.

FINANCIAL SERVICES

Phoenix hails boost to retirement sector from high inflation

Rising wages have led to an increase in contributions to workplace retirement schemes, which have in turn provided a boost to FTSE 100 life insurance group Phoenix. Higher interest rates have also reduced the future liabilities of pension funds, bolstering the market for bulk purchase annuities. Phoenix on Monday reported that new business inflows had risen 72% in the first half of the year, to £3.1bn, and that it was on track to deliver positive net fund flows from 2024 for the first time in its history. CEO Andy Briggs said he expects the bulk annuity market - which insures company-defined benefits, or final salary and pension schemes - to grow to a record of over £40bn this year as higher interest rates make it more affordable. It has been around £30bn in the last couple of years.

National Trust loses millions to green investments

The value of the National Trust’s investment portfolio has slumped by millions after a portion of its assets were handed over to a climate-focussed fund. Robeco Climate Global Credits Fund was selected in 2021 to take on a 6.1% slice of National Trust assets, the Telegraph reports. However, the allocation has lost 11.7% between March 2022 and February this year costing the charity £11m. The Rotterdam-based firm boasts having the first ever investment strategy that is fully compliant with the 2015 Paris Agreement on climate change. The National Trust’s fortune is £1.5bn, down £49m in the year to February 28, 2023, after a number of its investments gave negative returns, its annual statement of accounts shows.

LEISURE & HOSPITALITY

Big Mamma group sells majority stake to private equity

French-owned Italian restaurant group Big Mamma has been valued at €270m after selling a majority stake to London-based McWin, the private equity firm behind the Gail’s bakery chain.

MANUFACTURING

Riverlane lauds new quantum computer chip

Cambridge-based start-up Riverlane claims it has made a breakthrough in chip production for quantum computers. Riverlane’s chip addresses the problem of the high error rates inherent to the technology. The company’s quantum decoder chip gives the company massive leadership in the race to become the next Arm, founder and CEO Steve Brierley said.

MEDIA & ENTERTAINMENT

S4 Capital issues second profit warning

S4 Capital, the advertising group founded by Sir Martin Sorrell, has cut profit forecasts for a second time in three months. Slower than expected trading over the summer months led the company to warn of a fall in net revenue over the year. Sir Martin said: “We had a very mixed first half of the year reflecting challenging global macroeconomic conditions and consequent fears of recession, which resulted in client caution to commit and extended sales cycles, particularly for larger projects. We expect the year as usual to be weighted to the second half, especially the fourth quarter”.

ECONOMY

Bank of England expected to raise interest rates to 5.5%

The Bank of England is widely predicted to raise interest rates by another quarter point at its meeting on Thursday, taking the cost of borrowing to 5.5%. Some economists expect this to be the last increase in the current cycle of monetary tightening, but others predict the BoE could raise rates further but will raise the bar for doing so. Inflation remains at 6.8% – far above the Bank’s 2% target, but down on its peak of over 11% last year.

Hedge fund bets could spark turmoil in US Treasuries, BIS warns

The Bank for International Settlements warned on Monday that a build-up of leveraged bets has the potential to “dislocate” trading in the $25tn US Treasuries market. The BIS also said exuberant stock markets were at risk of ignoring the negative aftershocks from persistent inflation, which could trigger a wave of insolvencies and a steep fall in property prices.

OTHER

IMF pledges to leave climate finance to others

The International Monetary Fund has said it will not stray out of its remit to promote international economic stability by attempting to act on climate change. Kristalina Georgieva, the head of the IMF, said other institutions, such as the World Bank, can lead on "sectoral issues" including climate finance. Her comments follow criticism from some in the US that the IMF had become distracted from its core mission by issues such as climate change.

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