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Daily News Roundup: Tuesday, 23rd June 2020

Posted: 23rd June 2020

BANKING

BDB calls for post-Brexit equivalence priority as banks told to prepare for worst

The Association of German Banks (BDB) has urged the EU to prioritise equivalence rules in post-Brexit negotiations with the UK, arguing that these rules are essential for achieving market and financial stability on both sides. In a position paper, the BDB said: “Clarity regarding future market access arrangements should be provided at the earliest possible date,” adding that a comprehensive free trade agreement should be established, alongside strengthening “the EU internal market and market infrastructure”. A spokesperson for UK Finance said: “The Association of German Banks is right to call for full and reciprocal financial services access to be established as early as possible in the EU-UK trade deal…These arrangements do not need to be contained solely within a free trade agreement and can build on the longstanding regulatory relationships and supervisory cooperation that already exist.” The comments come as Germany’s deputy finance minister Jeorg Kukies told the Frankfurt Finance Summit on Monday that banks must prepare for a hard Brexit, warning that there is a “very significant risk” of a “difficult situation” ahead. He said: “The strategy of hope for the best, plan for the worst, I think is very prudent here”.

Bank of England to reverse QE before rates are raised - Bailey

The Bank of England must begin reversing quantitative easing before interest rates can be raised from record lows, according to governor Andrew Bailey. He wrote in an article for Bloomberg: “When the time comes to withdraw monetary stimulus, in my opinion it may be better to consider adjusting the level of reserves first without waiting to raise interest rates on a sustained basis.” The policy of predecessor Mark Carney was that the Bank should raise rates before trying to sell bonds back to the market, while Mr Bailey said he does not want high Bank of England purchases of government bonds to become a long-term arrangement. In separate comments to Sky News, Mr Bailey said the Bank’s early intervention in the coronavirus crisis save the government from potential financial collapse.

Adrian Sainsbury to steer Close

Close Brothers has appointed Adrian Sainsbury to replace outgoing Preben Prebensen as CEO later this year. Mr Sainsbury has been managing director of the FTSE 250-listed company's banking division and a member of the group executive committee since November 2016.

Metro opens the first outlet in Yorkshire

Metro Bank has opened a store on Fargate in Sheffield city centre – the bank’s first opening in Yorkshire. Metro Bank plans to open 15 stores in the North in the coming years and has opened stores in Manchester and Liverpool in the past year.

PRIVATE EQUITY

British Business Bank commits £50m into new UK life science fund

Epidarex Capital, a transatlantic life science venture firm, has raised £102m to invest in biotechnology start-ups at universities beyond Oxford, Cambridge and London. The British Business Bank committed £50m from its Enterprise Capital Funds (ECF) programme for early stage venture capital.

INTERNATIONAL

Berlin and ECB signal end to legal impasse over bond-buying

German finance minister Olaf Scholz has indicated that a resolution to the spat between the ECB and Germany’s constitutional court could be resolved soon, easing fears the central bank’s bond-buying could be disrupted.

AUTOMOTIVE

New finance chief named at Aston Martin

Kenneth Gregor has been appointed new finance chief at Aston Martin, tasked with reviving the finances of the manufacturer after it recorded a £119m first-quarter loss. He stated: “I am delighted to be joining Aston Martin Lagonda. There is an exciting opportunity to build on the Company’s inherent strengths, its brand, its engineering prowess, and the skills of its people to enable Aston Martin to become a sustainably profitable business.”

AVIATION

Lufthansa shareholder objects to bailout plan

Lufthansa shares were down 6.7% as the airline’s largest shareholder, billionaire Heinz Hermann Thiele, announced his objections to a bailout plan under which the German state would take a 20% stake in the firm. Mr Thiele is reportedly planning to meet the German finance minister to discuss the issue this week.

FINANCIAL SERVICES

New FCA chief appointed

Nikhil Rathi, chief executive of the London Stock Exchange, has been appointed head of the Financial Conduct Authority by Chancellor Rishi Sunak. Mr Rathi will replace Chris Woolard, who has run the regulator on a temporary basis since Andrew Bailey left to become Bank of England governor in March. FCA chair Charles Randell commented: “Nikhil has been closely involved in guiding the FCA’s development… and brings both private sector management skills and experience of domestic and international regulatory policymaking.” Mr Sunak added: “Nikhil is the outstanding candidate for the position of chief executive of the Financial Conduct Authority, and I am delighted that he has agreed to take up the role.”

Amigo Loans hit by surge in customer complaints

Amigo Loans is dealing with an increasing number of customer complaints, with the subprime lender forced to delay its full-year results and shares falling 25% as a result.

Missing Wirecard money ‘does not exist’

German payments firm Wirecard has said that €1.9bn (£1.7bn) believed to be missing from its accounts may not exist, after auditors refused to sign off the firm’s accounts until the money was located. The FT reports that SoftBank executives along with Abu Dhabi’s sovereign wealth fund Mubadala have lost hundreds of millions of dollars of paper profits following a $1bn “structured equity” trade on the German payments company’s stock.

LEISURE & HOSPITALITY

Saga issues refunds to customers affected by pandemic

Some £44m of advance payments has been refunded to Saga customers whose travel plans were disrupted by the coronavirus outbreak. The cruise operator and insurance firm for over-50s said it was expecting some travel to begin by the end of the year, stating: “Market conditions continue to be challenging, in part due to COVID-19, with an easing of competitive conditions in February and March but with signs of a return to more competitive conditions in motor and home in the last month.” It also predicted that revenue could be down some 65% for tour operations and cruises, if the cruise industry were suspended for six months.

Diageo full-year results delayed as result of coronavirus

Publication of Diageo’s full-year results has been delayed by five days to allow the company time for auditors to assess the effects of the coronavirus crisis. It comes as research by trade body UK Hospitality reveals that pubs and restaurants across the country will only be trading at just over half of 2019 levels by the end of the year.

MANUFACTURING

UK factory output falls at fastest pace since 1975

The latest manufacturing output gauge from the Confederation of British Industry dropped from minus 54% in May to minus 57% this month - the largest fall since records began in 1975. Anna Leach, the CBI’s deputy chief economist, said: “The UK manufacturing sector remained in a deep downturn in June due to the ongoing COVID-19 crisis. Output volumes declined at a new record pace and export order books fell to an all-time low, reflecting the significant fall in demand in the UK and abroad. Firms are again hoping this will ease somewhat in the next three months.”

Thai rubber gloves maker set to raise $484m to speed expansion

Thai rubber glove manufacturer Sri Trang Gloves is capitalising on increased demand for its product thanks to coronavirus and has priced an initial public offering to raise almost $500m.

RETAIL

Retail footfall rises after lockdown

Retail footfall rose by 45% in the week from 15 June, compared to the previous week, after non-essential stores were allowed to reopen in England for the first time since the beginning of lockdown. High streets and shopping centres saw a 51% increase in visiting customers, although the number of customers at retail locations in England remains 47.7% lower than a year ago. The figure stands at 68.8% and 66.5% for Wales and Scotland respectively. Footfall in London’s West End saw a year-on-year decline of 81% last week, as a result of a lack of international visitors to the UK and difficulties in accessing public transport. The British Retail Consortium estimates a 57.2% year-on-year decline in retail footfall across the UK.

ECONOMY

Creativity and boldness required to lift UK up again – Javid

In a piece for the Telegraph, former Chancellor Sajid Javid outlines some of the measures the government could take to rejuvenate the economy. Mr Javid has written a report with the Centre for Policy Studies called After the Virus which sets out more than 60 recommendations, covering everything from taxation to monetary policy. Jobs, growth and business support should be the top priority, he says, recommending a significant cut to Employer’s National Insurance, and a temporary VAT cut, which would help encourage spending and hiking investment in infrastructure. The report also urges the Chancellor to ensure the deficit falls year on year, and aims to balance the current budget within three years of GDP returning to pre-crisis levels.

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