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Daily News Roundup: Tuesday, 23rd March 2021

Posted: 23rd March 2021

BTG ADVISORY

Fall in trading volumes not a sign of things to come

David Abbott of BTG Advisory reflects on Office for National Statistics figures showing UK goods exports and imports to the EU declined by £5.6bn (41%) and £6.6bn (29%) respectively in January. He says that while border disruption following the end of the EU exit transition period was a primary cause for the downturn, the headline numbers “mask a more nuanced picture”, arguing that the data is “unlikely to be a harbinger of a long-term trajectory for future trends”. Mr Abbott says preparatory stockpiling in November and December in anticipation of border disruption, the impact of the UK’s third national lockdown, pandemic-induced global supply chain disruptions, and reduced demand for imports will all have played a part in the monthly fall in EU trading. He also points to a new reporting system implemented by the ONS as another possible driver of the fluctuation in trade recorded in January. Mr Abbott says there are indications of a re-acceleration in EU imports and exports from late January, while the proportion of UK businesses that reported export and import challenges plateaued in mid-February. The Office for Budget Responsibility, Mr Abbott notes, predicts that UK trading with the EU will recover quickly over 2021 and 2022, with imports to rise modestly and exports set to fall slightly in the medium term.

BANKING

Barclays appoints new private bank heads

Barclays has appointed Bernard Corneau and Carlo Baronio as heads of private bank coverage in France and Italy as it seeks to expand its European wealth operations. Jean-Christophe Gerard, chief executive of Barclays private bank, said: “Europe remains the second-biggest market for high net worth after the US, roughly 20% of the total global market, and we see opportunities to grow our market share in countries such as France and Italy where there is still strong creation of wealth.”

Zopa set to expand

Online lender Zopa has secured £20m from private investors to expand and offer more savings accounts and credit cards. The firm, the UK's first peer-to-peer lender, launched in 2005 and last year it gained a banking licence, allowing it to start offering more traditional products. It has since taken £250m in deposits and has become a top-ten UK credit card issuer in terms of new customers.

Revolut seeks US banking licence

Revolut has submitted its draft application for a US banking licence as it expands its business account across all 50 states. The company said a license would allow it to offer more services to US customers, such as overdraft protection, loans and deposit accounts. The fintech secured a Lithuanian banking licence bank in 2018 and announced it had applied for a UK licence earlier this year. Rival Monzo applied for a US licence last April.

INTERNATIONAL

Goldman CEO’s Saturday aim

Goldman Sachs CEO David Solomon says the bank’s management is going to work harder to give junior bankers Saturdays off. This came after a group of first-year analysts spoke out over working 100-hour weeks to tackle hefty workloads and “unrealistic deadlines.” Addressing the matter in a voice note, Mr Solomon told employees that the bank will strengthen enforcement of its Saturday rule, which holds that employees cannot work from 9pm Friday night to 9am on Sunday except in certain circumstances. He reportedly said: “In this world of remote work, it feels like we have to be connected 24/7 … This is not easy, and we're working hard to make it better.”

Germany poaches head of Swiss regulator to lead BaFin

Mark Branson, head of Swiss financial watchdog Finma, is to become president of German regulator BaFin. He will replace Felix Hufeld, who was ousted amid the fallout of the Wirecard scandal.

Credit Suisse mulls asset management split

Credit Suisse may split off its asset management business to address concerns over its links to collapsed finance business Greensill. CEO Thomas Gottstein said making the division an independent entity was "potentially part of the plan".

FINANCIAL SERVICES

L&G ties bonuses to climate targets

Legal & General will tie its executive pay to climate targets, saying the executive pay “scorecard” which measures success against targets when setting the maximum bonus bosses can receive will now include specific climate-related goals. The pensions and insurance group also said asset management arm LGIM will push harder to encourage the companies it invests in to behave responsibly. Meanwhile, LGIM is set to call for more protections for minority investors in a submission to the Financial Conduct Authority. It will call for a range of measures to deliver reform of the listings regime, including for dual-class shares to be excluded from premium indices for three years after listing; banks to publish sponsorship letters providing reassurance as to the health of firms about to list; and for chairs to be appointed at least six months before a firm goes public.

Insurers pay out £470m on Covid business claims

The Financial Conduct Authority says insurers have already paid out £470m in coronavirus-related business interruption insurance claims after the Supreme Court ruled they must hand over money following a test case.

Cenkos Securities reports profit

Cenkos Securities has saw an underlying profit of £4m last year, with revenue of £31.9m. The stockbroking firm saw revenue was up by 2% and underlying profit climbed by 188%.

LSE boss David Schwimmer receives bumper pay rise

David Schwimmer, chief executive of London Stock Exchange Group, has seen his pay jump, hitting £6.9m in 2020 compared to £2.5m in 2019. This came as LSE’s share price hit record highs.

LEISURE AND HOSPITALITY

Entain revised offer accepted by Enlabs

Swedish online bookmaker Enlabs is to be taken over by Ladbrokes owner Entain, which increased its cash offer price from 40 to 53 Swedish kronor per share. This comes after Entain, previously known as GVC Holdings, reported 2020 online revenues up 28% on 2019 to £2.7bn, marking 20 consecutive quarters of double-digit online growth.

Travel warning effects seen on stock market

Travel and aviation firms such as IAG, easyJet and Rolls-Royce have seen shares fall in response to government warnings not to book holidays abroad this summer. Citigroup analyst Mark Manduca said there was a “heightened level of fatigue amongst fundamental investors” after airline stocks rebounded recently. He commented: “The upside momentum-driven express train of all things recovery is now beginning to peter out and falter.”

Blackstone makes $6.2bn bid for Australian casino operator Crown

Blackstone Group has made an $6.2bn bid for Crown Resorts, a gaming business that has come under pressure after Australian regulators flagged concerns about money laundering and poor corporate governance.

MEDIA AND ENTERTAINMENT

Nominet bosses voted out

The CEO and chairman of Nominet, an internet registry service, have been ousted at an extraordinary general meeting. Anger over executive pay and falling charitable donations saw members opt to vote out five out of Nominet’s eleven directors, including chair Mark Wood and chief executive Russell Haworth. The resolution passed 53% to 47%.

Simon & Schuster takeover investigated by CMA

The Competition and Markets Authority is probing Penguin Random House’s $2.18bn £1.45bn acquisition of Simon & Schuster's book publishing business.

REAL ESTATE

First-time buyers in London need £132k deposit

The average deposit being put down by first-time buyers in London has increased by more than £20,000 since last year, according to new research from Halifax. The analysis shows that in the 12 months to February 2020, the average deposit put down by first-time buyers in the capital was £111,321 but in the 12 months to February 2021 it was £132,685. The average London house price in the 12 months to February hit £462,617, with the average deposit 24%. Across the UK, Halifax says first-timers need to find £11,677 more for a deposit than they would have done a year ago, with the average now £58,986 – 23% of the typical purchase price.

Budget sparks property rush

The announcement that the stamp duty holiday was to be extended prompted a surge in demand for property, according to Zoopla. Firms registered a 24% uptick in queries in the week after Rishi Sunak said he would extend the stamp duty cut while offering 95% mortgage guarantees to first-time buyers. Overall, demand is now running 80% higher than in the same period over the past four years.

ECONOMY

Inflation expectation

David Milliken of Reuters says inflation is on course to rise “rapidly” this year and is set to go “well above” the Bank of England’s (BoE) 2% target. While consumer price inflation was just 0.7% in January and the Bank has forecast it reaching just below 2% this year, economists at Bank of America and Pantheon Macroeconomics say it could hit 2.5% by late 2021. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, says a rebound in oil prices is likely to push all central banks’ headline inflation rates above targets this year. Mr Milliken notes that BoE governor Andrew Bailey has stated that the Bank will not tighten policy at the first sign of inflation, while chief economist Andy Haldane has likened the economy to a “coiled spring” and said inflation is a “tiger” that is beginning to stir.

Jobs needed to drive recovery

Research from Centre for Cities and HSBC UK suggests that the UK economy will need to create 9.3m jobs over the next few years in order to get 1.3m people back into work. The report also says the UK will need to create high-value, export-led jobs across all regions if it is to address the productivity puzzle. HSBC UK chief executive Ian Stuart says this presents a shared challenge to government and business. On the need to level up UK regions, he says that while focus has been on government action, the challenge must be shared with the private sector, calling for support for job creators so as to maximise the post-pandemic recovery and rebalance the economy.

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