BANKING
Digital bank Starling makes first acquisition in quest for faster growth
Starling has struck a £50m deal for buy-to-let mortgage group Fleet Mortgages, the first acquisition by the Goldman Sachs-backed start-up that is targeting an initial public offering within two years. Established seven years ago, Fleet manages £1.75bn of mortgages and anticipates originating another £800m this year. The acquisition comes just days after Starling reported 600% in revenue growth to nearly £97.6m in the 16 months to March 2021, and unbroken monthly profit since October last year.
BCR episode deserves probing
The Times’ Patrick Hosking reviews the progress, or lack thereof, of the Banking Competition Remedies (BCR) quango, which has been doling out millions to help persuade business customers to switch from NatWest as part of an agreement with the EU competition commissioner. BCR claims that 11% of the total SME banking market has moved from the large incumbent banks as a result of its efforts, and Anne Boden, chief executive of Starling, seems pleased with the results. But the Federation of Small Businesses says it hasn’t yet seen any discernible improvement in the overall bank treatment of small firms. Regardless, Hosking says “the entire episode deserves a proper inquiry by the National Audit Office.”
Tesco Bank to close all current accounts
Tesco Bank has said it will close all of its current accounts because most customers are no longer using them. The bank has estimated only 12% of its 213,000 personal current accounts are being used by customers as their primary account. Gerry Mallon, chief executive of Tesco Bank, said the bank would support customers to find "a suitable alternative dependent on their circumstances".
Two-year mortgage rates could fall to 0.75%
Experts are predicting that two-year mortgage rates could fall to as low as 0.75% as competition heats up following the end of the stamp duty holiday. Aaron Strutt, product director at Trinity Financial, said: "More lenders will reduce their prices over the coming weeks.” He added that five-year rates could fall further too in what is becoming a “mortgage rate war.”
Disabled struggle with bank access
Research by Which? has found that four in 10 disabled people are struggling to access their cash following the closure of 4,500 branches since 2015. One in 10 struggled with online banking, a fifth with security and over a quarter with phone banking. HSBC, TSB and Barclays were worst for customer satisfaction and First Direct was the best.
PRIVATE EQUITY
Labour to get tough on private equity takeovers
Labour has pledged to bring in tougher rules to prevent private equity firms from acquiring British firms. It follows the proposed bid for Morrisons, and the takeover of the McVitie's factory in Glasgow, where 500 jobs are set to go because its Turkish owners want to shift production overseas. The Shadow Chancellor Rachel Reeves said: "Everybody knows there is a problem with private equity companies from the tax advantages to the lax rules on takeovers, which are much stronger in other countries. We don't do enough to support businesses that provide good quality jobs. It's wrong private equity companies can saddle companies with huge debt, asset strip them and then walk away." At the heart of Labour's plans is a commitment to make, buy and sell more goods in this country. It would change procurement rules so more Government contracts go to UK firms. There would also be more help for businesses looking to re-shore manufacturing.
UK corporates positioning for M&A moves
Analysts predict that UK corporates are gearing up to compete with private equity for deals through a mix of balance sheet cash and debt funding. Aggregate net cash holdings for UK corporates has risen from £20bn to £109bn since March 2020 and there is ample appetite among lenders to diversify by funding non-PE owned corporates, explained Will Senbanjo, partner at ACP Altenburg Advisory.
INTERNATIONAL
PagoNxt to expand in 30 countries in Europe
Santander’s payment unit, PagoNxt will start to serve customers in 30 countries in Europe under the Getnet brand, the Spanish bank said on Monday.
Millennium bcp's profit plunges 84%
Portuguese lender Millennium bcp reported a 84% drop in first-half net profit on Monday after taking big provisions on foreign currency loans at its Polish subsidiary.
AUTOMOTIVE
Tesla posts record $1.1bn profit
Despite global supply issues and safety glitches in China, Tesla's quarterly profits have soared above $1bn (£726m) for the first time. The electric vehicle maker made profits of $1.1bn in the three months to the end of June on revenue of $12bn, compared to $104m in profit and $6bn revenue during the same period last year.
Nissan to create 400 jobs in Sunderland
Nissan has announced plans to create 400 jobs at its car plant in Sunderland as the Japanese company plans to develop a £1bn electric vehicle manufacturing hub at the site.
FINANCIAL SERVICES
Aon’s $30bn acquisition of Willis Towers Watson collapses
A $30bn tie-up between Aon and Willis Towers Watson has been abandoned after the US government sued to block the deal. The US Department of Justice said the merger would reduce competition and likely lead to higher prices and less innovation. Aon will now have to pay a $1bn “reverse” termination fee to Willis.
Lord Sedwill joins Lloyd's council as deputy chair
Lloyd's on Monday announced that Mark Sedwill, a former Head of the UK Civil Service, will join Lloyd's council as an independent director and deputy chair of the insurance marketplace. The appointment has been approved by the Prime Minister but remains subject to the approval of the Prudential Regulation Authority and the Financial Conduct Authority.
Wells Fargo AM rebrands to Allspring in push to revive fortunes
Wells Fargo Asset Management has hired Joe Sullivan, the former head of Legg Mason to be its new CEO. The group, backed by private equity firms GTCR LLC and Reverence Capital Partners, will also rebrand to Allspring Global Investments.
Crypto has ‘no inherent worth’ but is good to trade, says Man Group chief
Luke Ellis, the CEO of Man Group, has told the FT in an interview that cryptocurrencies have “no inherent worth” but are creating trading opportunities for his company because of their wild price swings.
LGIM denies ‘greenwashing’ over ESG China bond ETF
Legal & General Investment Management has denied “greenwashing” a fund that invests in issuers that are 100% owned by the Chinese state, which some say is “worlds apart” from ESG values.
HEALTHCARE
Elvie taps BlackRock and UK banks in £58m fundraising
The Business Growth Fund and Blackrock are backing femtech company Elvie, contributing the lion’s share of a £58m capital injection.
LEISURE & HOSPITALITY
Hospitality leaders criticise exemption list
Hospitality leaders have criticised the Government for leaving the sector off the list of those exempt from self-isolation rules. Kate Nicholls, of UKHospitality, said restaurants, pubs and leisure venues, are having to close their doors or reduce services and sales just as they should be re-opening. She said: “It is disappointing that the Government's list of roles was so tightly defined, omitting hospitality and leaving the rest of the economy to face the consequences. The sector will do all it can to provide great service, but it will be with one hand tied behind our back. Team members who are fully vaccinated should be able to test after a ping and, subject to a negative result, carry on with their lives.”
Admiral Taverns to acquire Hawthorn pubs
NewRiver has agreed to sell Hawthorn, a community pub company, and its estate of 674 tenanted and leased pubs, to Admiral Taverns in a deal worth £222.3m. It means that NewRiver has now abandoned plans for an initial public offering of the business. Admiral is jointly owned by C&C Group, the maker of Magners cider and Tennent's lager, and Proprium Capital Partners and the deal is being funded by existing lenders and Proprium. Mark Davies, chief executive of Hawthorn, said he was "blown away" by the level of interest during the sale and IPO process.
MANUFACTURING
UK signals it may intervene in Cobham pursuit of Ultra
Britain’s business secretary Kwasi Kwarteng has ordered officials to launch a national security probe into Cobham’s £2.6bn takeover of Ultra Electronics. A source close to Mr Kwarteng said: "Given the sensitivities of this proposed deal, the business secretary is taking an active interest. While no decisions have been taken, we'll continue to monitor the transaction closely." Cobham is owned by private equity firm Advent International which sold off half of the company within 18 months of taking control. Kevan Jones, Labour MP and a member of the House of Commons defence select committee, commented: “The Government cannot stand by once more whilst defence technology is offshored.” The news comes after UK government sources also signalled they could block China’s state-owned nuclear energy company from building a nuclear reactor in Britain, again on national security grounds.
REAL ESTATE
Central London house prices tumble
Prime inner-London rents and house prices have plummeted since the start of the COVID crisis, driven by the dwindling appeal of city life during lockdown and restrictions on international travel. Average prices per square foot have been hit the hardest in Knightsbridge, dropping to £1,546 in the first half of 2021, down 11% on the area’s five-year average. However, the number of flats sold peaked at a five-year high during the six-month period, as buyers rushed to lock-in tax savings before the end of the stamp duty holiday. Experts warn the bargain will be short-lived and property prices in the area, which has historically been popular among foreign buyers, will rebound when border restrictions are lifted.
House prices hit new highs
The ongoing demand for extra space driven by pandemic lockdowns has pushed up the average price of a house by 7.3% over the past year, reaching a new high of £230,700, property website Zoopla says. The growth in flat prices, on the other hand, was lagging at 1.4% over the past year. Zoopla’s head of research Grainne Gilmore said properties of all kinds are in short supply and she expects the trend to continue into 2022.
RETAIL
Footfall rises in London's West End
New figures reveal that footfall in London’s West End increased 4% last week, as 'Freedom Day’ meant theatres and clubs could open their doors for the first time in over a year. The New West End Company, a business partnership of over 600 retailers, found that the weekend was busiest period with a 14% increase in foot traffic compared with the weekend before.
Luxury goods frenzy pushes LVMH to new heights
LVMH has reported a 14% hike in Q2 revenue to €14.7bn, compared with the same period in 2019, on the back of strong global demand “in almost all of our categories.”
ECONOMY
Working longer and negative rates could give BoE more capacity - Vlieghe
Bank of England MPC member Gertjan Vlieghe has suggested that extending the retirement age could give the central bank more firepower to fight the next recession. The Bank should also explore negative interest rates and shifting to digital cash as ways of fuelling the economy, he said in his final speech as a member of the committee. However, in the meantime Mr Vlieghe expects the current setup of 0.1% interest rates and the final £150bn of the quantitative easing programme to stay “in place for several quarters at least, and probably longer”.