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Daily News Roundup: Tuesday, 26th February 2019

Posted: 26th February 2019

BANKING

RBS switching scheme goes live

Banks have begun tempting businesses to switch away from Royal Bank of Scotland as part of the £350m scheme to boost competition in the sector. Metro, Starling, Santander, Co-operative, CYBG, TSB, Arbuthnot Latham, Hampden and Handelsbanken all went live with new offers on Monday morning, and Monzo and Nationwide will join the scheme after they have developed their business banking offerings. Santander said it had hired 300 new people to its business banking team. Managing director of Santander Business Sue Douthwaite said: “It is a really exciting opportunity to bring more competition to a market which for too long has been dominated by a few big players.”

Banks losing battle to be ready for Brexit

Sources at three investment banks have said their preparations for Brexit Day on March 29 will not be complete in time, potentially throwing the legal status of thousands of contracts into doubt. A source familiar with one investment bank's position said between 10-15% of contracts they had intended to transfer were still “work in progress”, with some clients actively resisting the transfer, while others have held off paying for legal advice on the expectation a deal will still be struck. Other banks are still waiting for licences for new EU units so they can still fully serve customers. RBS is still seeking licences in Frankfurt for two entities so it can maintain access to Bundesbank payment systems, while Lloyds Banking Group is waiting on the final approval to set up the third of its planned EU hubs in Luxembourg, which is for its insurance clients.

Big banks divided on provisions for Brexit defaults

A growing divide has emerged between big banks on how much they should reserve for defaults after Brexit, with some setting extra cash aside, and others less pessimistic.

KPMG facing £4m fine over Co-op Bank audit

The Financial Reporting Council is preparing to fine KPMG millions of pounds for its work supervising the accounts of the Co-operative Bank, bringing a five-year probe to a close. It is understood that the FRC has informed the Big Four accountancy firm that it intends to impose a penalty of roughly £4m.

PRIVATE EQUITY

Half of women in private equity considering leaving

A report from Investec has suggested that half of women working in private equity would consider leaving the industry compared to 22% of men. The survey also found that almost 50% of women believe there has been little or no change in their firm’s attitude towards diversity over the last two years. Deborah Sayagh, banker to private equity professionals at Investec Private Bank, commented: “The lack of female representation in private equity cannot be disputed, but the industry is moving in the right direction. Take, for example, initiatives such as Blackstone Group’s Future Women Leaders Programme which has had a positive impact in doubling the number of female applicants for its analytics division.”

INTERNATIONAL

Bank of Ireland shares down after warning on interest margin

Bank of Ireland’s shares fell by more than 5% yesterday after it reported that pre-tax profit fell by €17m to €835m for 2018. The bank grew its loan book in 2018 for the first time in a decade, but said competition in the UK mortgage market, which accounts for almost a third of its total book, contributed to a fall in its net interest margin.

Bank of America to drop Merrill Lynch name

Bank of America is planning to drop the Merrill Lynch name from its investment banking, global markets and capital markets group. The bank's wealth management business - Merrill Lynch Wealth Management - will also be rebranded to just Merrill. CEO Brian Moynihan commented: “We are continuing to unify the company, continuing down the road we started on a decade ago.”

AUTOMOTIVE

Honda investors back carmaker’s decision to close UK plant

Analysts at Morgan Stanley MUFG have backed Honda’s decision to close its Swindon plant stating that the management had shown “clear decision making”.

FINANCIAL SERVICES

UK and US agree post-Brexit derivatives trading deal

Financial regulators in the US and the UK have agreed a pact to cut disruption to the world’s largest derivatives markets following Brexit. The Bank of England, Financial Conduct Authority and US Commodity Futures Trading Commission have reassured banks, investors and other firms in both jurisdictions that they will still be able to access the other's derivatives markets and services. The governor of the Bank of England Mark Carney, said: “Market participants can be confident that the clearing and trading of derivatives between the UK and the US will maintain the high standards of today when the UK leaves the EU.”

Hiscox profits treble

Profits at Hiscox trebled last year, as its London market returned to growth for the first time in three years. The Lloyd’s of London underwriter's pre-tax profit was $137.4m (£105m) in the year to the end of December 2018, up from $39.7m the previous year, while gross premiums grew 15% - from $3.28bn to $3.78bn in the period. The insurer's Brexit preparations have cost an estimated $15m in one off costs and will continue to cost $2.4m a year.

Provident rebuffs hostile bid

Provident Financial has dismissed an “unsolicited” £1.3bn proposal to merge with subprime lender Non-Standard Finance. Provident, defending its decision to delay annual results to “take a few moments” following the bid, said the offer was an “irresponsible approach in the context of a financially regulated business which is recovering from a period of substantial instability.”

Cyber-attacks on financial services sector rise fivefold in 2018

Figures obtained by law firm RPC show that financial services companies reported 145 data breaches in 2018, up from 25 in 2017. Investment banks were targeted most, with 34 incidents.

Legal & General picks Michelle Scrimgeour chief of investment unit

  1. & General has brought in Michelle Scrimgeour to run its £1trn investment management unit. She joins from rival funds firm Columbia Threadneedle.

HEALTHCARE

General Electric to sell off life sciences unit in $21bn deal

General Electric is to sell its life sciences division BioPharma to Danaher as it moves to tackle its debts. BioPharma generated around $3bn last year.

MANUFACTURING

Rolls-Royce awarded nuclear submarine contract

  1. defence secretary Gavin Williamson has announced that Rolls-Royce has been awarded a £235m contract to maintain nuclear submarine engine systems. The deal will provide support, advice and material to the propulsion systems on board Trafalgar, Vanguard and Astute class submarines until 2022.

MEDIA AND ENTERTAINMENT

Daily Mail owner ‘reviews options’ for Euromoney service

  1. Mail and General Trust has confirmed reports that it is “reviewing options” for Euromoney, but said it was not in discussion with any potential suitors.

RETAIL

Laura Ashley bid in “very preliminary stages”

Florida-based Flacks Group has confirmed that it was in the “very preliminary stages” of considering a bid for Laura Ashley, and that if it did it would offer no more than £20m in cash. The brand is currently valued at £24.4m after shares were lifted 7% yesterday, and chairman Andrew Khoo has made clear his opposition to selling his family’s controlling stake. He said at the weekend that any bid would be assessed on its relative merits. The company announced a £1.5m pre-tax loss in the second half last year, and issued its fourth profit warning in two years.

ECONOMY

Debt time bomb could lead to new crisis

The OECD has warned that a global economic slowdown could trigger a £13trn corporate debt time bomb. The think-tank said private companies have borrowed twice as much from the bond markets as they had before the 2008 financial crisis, leaving the world economy vulnerable. The OECD explained that with US interest rates rising and other countries expected to follow, the cost of debt servicing is expected to grow.

OTHER

SFO appoints Sarah Lawson QC as new general counsel

Sarah Lawson QC has been appointed as the Serious Fraud Office's new general counsel. She replaces Alun Milford who left to become a partner at Kingsley Napley. Lawson has prosecuted criminal and regulatory cases for Government departments including the SFO and HMRC.

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