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Daily News Roundup: Tuesday, 29th January 2019

Posted: 29th January 2019

BANKING

Bank of America Merrill Lynch to move jobs to Paris

Bank of America Merrill Lynch is preparing to move hundreds of London staff to Paris next week as it looks to implement its Brexit plans. According to the Standard, about 200 London sales and support staff will move to the bank’s newly refurbished offices in Paris. BAML joins Goldman Sachs, JPMorgan, Citigroup and other major banks in moving of staff out of London. Meanwhile, lobbying group TheCityUK has said that banks will not bring back jobs moved out of Britain in anticipation of Brexit even if the UK ends up staying in the EU. Miles Celic, chief executive of TheCityUK, said: “Once firms have taken the costly decisions to move operations or relocate people, these moves are unlikely to be reversed. This is why securing agreement as soon as possible and ending the current uncertainty is vital.” Catherine McGuinness, policy chairwoman at the City of London Corporation, added: “We haven't seen substantial job losses in financial services materialise yet. However, these are early days. Firms are watching closely to see if a way can be found through the current Brexit impasse. This will play an important role in determining whether we see more jobs move to the Continent.”

Paragon sees professional landlord demand surge

After an increase in demand from professional landlords, Paragon has reported strong new lending growth, with total new lending for the three months to December 31 reaching £660m, a 40% increase on the previous year. Some £424.7m, representing the majority of new business flows, came from buy-to-let lending, prompting chief executive Nigel Terrington to say he remains confident in his outlook but will maintain a capital liquidity buffer as a safeguard against any deterioration in the “external operating environment”. Meanwhile, Paragon has defended its process of assessing loan book risks, insisting that the application of risk weightings did not need to be subjected to a regular external audit.

Accounting error could see Metro Bank ask for more funds

The Mail claims that Metro Bank could be forced to ask investors for £300m after an accounting error uncovered a hole in its balance sheet. The lender revealed last week that it had underestimated the amount of reserves needed to guard against the risk of commercial and buy-to-let property loans going sour. If the fundraising goes ahead, Metro will have tapped investors for £850m since the start of 2018. Patrick Hosking in the Times notes that the Prudential Regulation Authority did not identify Metro’s accounting problem itself and its reaction seems to suggest it is “keener to brush it under the carpet rather than to learn from it.” Elsewhere, Patrick Jenkins in the FT lists six reasons why Metro Bank’s prospects look much bleaker than they did a week ago.

TSB to increase safeguards for borrowers

TSB has announced a range of measures that it claims will safeguard small business borrowers following a string of scandals that have blighted the sector. The lender pledged to support SME customers when they are in financial distress and protect them against unfair treatment and charges. They include fairness and transparency, giving customers time to return their business to health and not raising loan margins on existing borrowings. Richard Davies, TSB's SME banking director, said: "The issues of the last decade have shown there is a need for greater protections for business borrowers, and we hope that the rest of the business banking industry will follow suit.”

Banks line up for RBS cash

Lucy Burton in the Telegraph profiles the battle between banks for two cash pots totalling £775m which aims to boost competition in the UK banking sector. Applicants for the funds must have no more than £350bn in UK assets to qualify for a portion of the money, which is being stumped up by RBS as a condition of its taxpayer bailout. Burton says the goal of the funding is to give a helping hand to those banks trying to challenge the big four, from newer start-ups such as Starling and Monzo, to more established players like TSB, Co-op Bank and CYBG. Ian Gordon, an analyst at Investec, comments: “Will it change the market? That's debatable - switching levels will likely remain low, so the big four will still dominate, but perhaps it's fair to say that customers will have greater choice. Everything moves slowly in banking - except when banking stocks go south.”

Barclays bosses were concerned about bonuses

Southwark Crown Court has heard that one of Barclays’ top executives was awake and panicking at 2.00am during the financial crisis over fears that a government bailout would compromise his bonus. Roger Jenkins told senior bank staff “I was panicking that we were about to get nationalised", adding that the government "wouldn't look kindly on compensation over a million dollars”. The court also heard that former CEO John Varley was “scared to death” about a possible nationalisation of the bank, which also made his colleague Bob Diamond “paranoid”. The bankers, along with Tom Kalaris and Richard Boath, are accused of committing fraud by disguising extra payments made to secure a crucial bailout from Qatar during the crash a decade ago. All four have pleaded not guilty.

HSBC promotes internal candidate to lead global markets division

HSBC has promoted Georges Elhedery to head of global markets, following the departure of Thibaut de Roux. The division generated $5.2bn of revenues in the first nine months of 2018.

Gadhia plans new finance firm

The former head of Virgin Money, Jayne-Anne Gadhia is reportedly planning to launch her own fintech start-up called Snoop. The start-up is designed to utilise Open Banking rules to save consumers money on their household bills.

New regional head for Kleinwort Hambros

Kleinwort Hambros has appointed Richard Brown as head of its Yorkshire office.

AUTOMOTIVE

Nissan co-operating with probe

Nissan has said it is co-operating with an inquiry by U.S. regulators, following reports that the carmaker is being investigated over executive pay disclosures. The development comes as the firm’s former chairman Carlos Ghosn faces charges of financial misconduct in Japan.

Saudi Arabia cuts exposure to Tesla

The Saudi Public Investment Fund has reduced its exposure to Tesla just months after CEO Elon Musk settled fraud charges over his claim that the kingdom was prepared to back a management buyout.

AVIATION

Flybe supports chairman in row with Hosking

After Flybe’s largest shareholder Hosking Partners demanded that chairman Simon Laffin step down, the airline said it has “full confidence” in his leadership. Hosking Partners requested an extraordinary general meeting to discuss appointing aviation executive Eric Kohn as a director, to investigate the sales process to Connect Airways.

CONSTRUCTION

Kier to sell housing maintenance arm

Kier Group is to sell off its housing maintenance business, as the firm seeks to cut hundreds of millions of pounds worth of debt. This follows the departure last week of chief executive Haydn Mursell.

FINANCIAL SERVICES

Libor has uncertain end

The Financial Conduct Authority has warned the endgame for Libor interest rates could be “uncertain” and urged banks and businesses to “rapidly” move to alternatives. Edwin Schooling-Latter, the FCA’s director of markets policy, commented: “One thing I cannot provide to you today is certainty about what the end-game for Libor will look like. That means uncertainty for those who continue to hold or write contracts that reference Libor.”

Sturgeon seeks to strengthen finance ties

Scotland’s First Minister Nicola Sturgeon has committed to strengthening the ties between Edinburgh and London, promising more collaboration between financial services in Scotland and the City. She highlighted both cities' push for innovation and digital skills as proof of their "determination to be firmly outward looking, and firmly open for business".

Pension providers required to disclose charges under FCA proposal

Under Financial Conduct Authority proposals to increase transparency and competition, the providers of popular pension products will be required to show consumers the fees they have actually paid in “drawdown”.

Asset managers look at a cull of weak funds

Severe pressure on fund fees is forcing many investment managers to consider which products will stay viable, with companies such as JPMorgan Asset Management looking to reduce their ranges.

Revolut to launch app for children

Revolut is planning to launch an app this summer aimed at improving the financial literacy of children. Through the Revolut Youth app, children can choose their own card and start using the company's current account and money management platform.

LEISURE AND HOSPITALITY

Stonegate launches bond

Stonegate Pub Company has launched a £150m bond issue to repay borrowings taken on to finance recent acquisitions including two bar operators and several pubs from Novus Leisure.

MANUFACTURING

Siemens and Alstom unveil new concessions

Siemens and Alstom have made new concessions in an effort to convince the European Commission to approve their merger that would create a rail manufacturing giant. Alstom said the new offer “preserves the industrial and economic value of the deal.”

MEDIA AND ENTERTAINMENT

Facebook pledges to do more on self-harm

New Facebook VP Sir Nick Clegg has said that the firm will do “whatever it takes” to make its social media platforms safer for young people. Sir Nick said: “We're already taking steps soon to blur images, block a number of hashtags that have come to light, and thirdly to continue to work... with the Samaritans and other organisations.”

Condé Nast to launch Vogue Business for fashion professionals

Condé Nast International is set to launch Vogue Business in an attempt to tap into new sources of revenue. The title will be a digital-only publication aimed at fashion industry professionals.

PROFESSIONAL SERVICES

SThree profits up 20% last year

Staffing organisation SThree has posted better-than-expected figures, with pre-tax profits up 20% for the year. Profit before tax was £53.4m for the year ending November 30, an increase of 20% year-on-year from £44.5m, while annual revenue was up 13%, to £1.26bn. Net debt was £4.1m, compared to £5.6m net cash last year.

RETAIL

Oddbins prepares to appoint administrators

European Food Brokers, the owner of the Oddbins off-licence chain, is set to appoint administrators in a move which potentially puts 539 jobs at risk. The firm has blamed tough conditions on the high street and economic uncertainty created by Brexit for the situation. The businesses affected include Wine Cellar Trading Limited and Whittalls Wines Merchants.

ECONOMY

Carney: Digital ID cards could keep online finance safe

Accessing money online could be made safer by the introduction of digital ID cards, Mark Carney has said. Speaking at the Bank’s Future Forum, the Bank of England Governor admitted that the idea would raise privacy concerns, but “having a consistent and comprehensive digital ID” would unlock a lot of opportunities and provide some of the protections needed for a digital financial system. Mr Carney added that ID cards were a decision for the Government, not the bank.

OTHER

Labour report calls for investment in regions

A specially commissioned report by Sheffield Hallam University says a future Labour government should help spread economic prosperity to the struggling regions with a long-term strategy involving a national investment bank, targeted transport spending and a buying-British policy, among a series of 29 recommendations.

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