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Daily News Roundup: Tuesday, 29th May 2018

Posted: 29th May 2018

BANKING

Government lining up RBS sale

Ministers are preparing to sell 10% of the government’s stake in RBS this week, proceeds of which could be worth over £2bn, as it continues down the path to privatisation. British taxpayers own more than 70% of the banking chain after the Government pumped £45.5bn into propping it up during the 2008 financial crash, but stand to lose up to £20bn if the shares are offloaded in the near future, due to a drop in share prices. Labour has insisted there is no justification for a new sell-off of RBS shares after reports the Government is set to offload part of its stake in the bank. Meanwhile, RBS has said it will make an additional £1bn available to SMEs over the next year. The £1bn fund aims to boost investment in manufacturing and technology. Separately, the Scottish Affairs Committee has found that RBS has failed to appreciate the impact of its decision to close dozens of branches in Scotland, saying the move was a “devastating blow” for the communities which will be affected. The committee report said the closures would remove “vital services relied upon by businesses and disproportionately affect vulnerable customers”. RBS’s CEO Ross McEwan outlines in the Sunday Times why the bank needs to become sustainable, one that works for its customers and is fit for today and for the future.

Decline in high-street bank visitors

Bank branch closures will continue despite the negative impact they have on local communities, as up to 15% see periods of several days without visitors, a senior bank chief warns. The executive, who declined to be named, heads retail banking for a major high-street lender and said that some branches get around 16 individual customers visiting them per month. He said the lack of users, the cost of running bricks and mortar sites and the rise of online and mobile banking, meant that the trend of closures is likely to continue.

BoE could block Barclays spin off

Barclays bosses believe the Bank of England will “resist shareholder calls to spin off [the bank’s] investment arm” as they want to ensure the UK has its own home-grown investment bank. The speculation comes as Barclays tries to bolster its defences against activist investor Edward Bramson, who has built up a 5% stake.

CYBG poised to increase takeover offer for Virgin Money

CYBG is expected to lift its offer for Virgin Money within days, in a move that could create the UK’s biggest challenger bank. CYBG approached Virgin earlier this month about a takeover that would create a bank with assets of about £70bn and more than 6m customers.

Tandem bank gains 100,000 customers in five months

Startup digital bank Tandem has landed 100,000 customers since it launched just five months ago, putting it ahead of target as it accelerates its growth plans after acquiring Harrods Bank.

PRIVATE EQUITY

Schools operator Cognita plans £2bn sale

International private schools operator Cognita is being lined up for a £2bn sale or stock market float, with KKR appointing investment banks Goldman Sachs and Barclays to sound out bidders.

MoneyFarm raises £40m

Digital wealth advisor MoneyFarm has raised £40m in its latest fundraising round, despite tightening regulations on online investing platforms. Backers include insurer Allianz, venture capital firm Endeavor Catalyst and Italian finance firm Fondazione di Sardegna.

INTERNATIONAL

Deutsche fears tough second quarter amid plan to cut jobs

Deutsche Bank has announced plans for more than 7,000 redundancies, including some of its top London investment bankers and has warned investors of a difficult second quarter as it kicks off a major downsizing of operations. The figure is to include 25% of the global equities business, which has a heavy presence in London and New York.

European non-performing loan sales rise sharply

The European market for non-performing loans is seeing a growth in activity led by Italy and Spain, according to research by the European Central Bank.

Central bank independence under threat

Central banks must become as transparent and accountable as possible if they want to keep their independence, Federal Reserve chairman Jerome Powell has warned. “Opinion polls show that [public] trust in government and public institutions is at historic lows,” said Mr Powell. “In this environment, central banks cannot take our measure of independence for granted,” he added.

Europe’s bank bosses stress need for consolidation

Europe’s bank bosses emphasised the need for consolidation at a meeting in Brussels last week, amid concerns that the election of a populist government in Italy will make deals harder.

StanChart seeks exit from Saudi investment

Standard Chartered's private equity arm is seeking to sell its stake in a unit of Saudi Binladin Group, the construction group whose owners were caught up in Saudi Arabia's anti-corruption purge, according to sources familiar with the matter.

AVIATION

Hyperloop could spell end of short-haul flights

Short-haul flights will be driven to extinction by the advance of hyperloop technologies, Sir Richard Branson has predicted. A system of vacuum tubes could allow travel of up to 1,000 miles an hour. “If you had Hyperloop between London and Edinburgh - I think people would almost definitely prefer to jump on a Hyperloop than jump on a plane,” said Mr Branson.

CONSTRUCTION

Shareholders revolt over pay at Balfour Beatty

Nearly 14% of shareholders have refused to back Balfour Beatty’s latest remuneration report while more than 10% of shareholders voted against chairman Philip Aiken’s re-election. Chief executive Leo Quinn was paid almost £5.4m in 2017, including £2m of LTIP bonuses while FD Philip Harrison was paid £1.9m, which included £752,000 bonuses.

FINANCIAL SERVICES

Treasury and BoE clash over City of London regulation after Brexit

The Bank of England and the Treasury are at odds over future City of London regulation following Brexit, with one official saying that relations “between the BoE and the Treasury on this are at new lows.” Chancellor Philip Hammond favours an approach that would keep Britain close to the EU after Britain leaves the bloc, but the central bank does not want to be left as a “rule-taker”, according officials.

FCA cracks down on crypto firms

Twenty four City firms that deal with high-risk digital currencies such as Bitcoin are being probed by the Financial Conduct Authority, as to whether they traded with the proper authorisation. The FCA, the Bank of England and the Treasury are also reviewing the crypto market with a view to introducing new rules.

Debenhams to offer financial services

Debenhams may soon offer its customers savings products and loans, as the department chain seeks to expand its financial services business and diversify away from retail. Andy Newman, head of personal finance, said that offering more financial services would be a logical next step. The planned services would be delivered via a third party provider.

FCA urged to take further action on high-cost credit

The FCA is facing calls to extend its cap on payday lending fees and interest to a broader range of high-cost financial products.

Wealth management mergers predicted

The wealth management industry is one of the most fragmented in global finance, with 32 of the largest firms having a collective market share of just 50%, making it ripe for consolidation, according to JPMorgan.

Rakuten invests in UK payments group Azimo

Japanese ecommerce firm Rakuten is betting on the rising digitisation of cross-border payments by heading an investment in Azimo - valuing the British financial technology company at several hundred million dollars.

MANUFACTURING

Glue maker short-changes Crowdcube investors

Thousands of investors have been left out of pocket after Sugreu, which makes a new type of mouldable glue, was taken over by German sticky tape maker Tesa in a £7.6m deal. The company had raised £5.3m on Crowdcube, achieving a valuation of £40m, but 4,800 shareholders received just 9p in the pound in the deal. It is one of the biggest crowdfunding failures to date.

MEDIA AND ENTERTAINMENT

BT attracts investor interest in Openreach

Investors have approached BT seeking to invest in its Openreach division, which controls much of Britain’s telecoms and broadband infrastructure. Openreach could be expected to fetch as much as £25bn, according to the estimates of one broker, but BT has shown no interest in accepting offers.

REAL ESTATE

Mortgage lending up despite drop in house buying

Gross mortgage lending in the UK in April reached £20.4bn, 13.3% higher than a year earlier. The number of total mortgage approvals also increased 11%, driven primarily by remortgage approvals which were almost 30% higher than a year earlier and 11% up on the previous month, according to figures from UK Finance. However the data confirmed home buying was down 9.4% on the previous year, representing the fifth lowest level in three years.

Guy Hands considering £2.5bn bid for Quintain

Guy Hands is considering a £2.5bn bid for Quintain, the developer planning to build 7,000 homes in the area around Wembley stadium. Quintain was offered for sale in March by its owner, Lone Star, which is said to be looking to cut its exposure to the capital's property market before Britain leaves the EU.

ECONOMY

Carney warns of ‘disruptive Brexit’ impact

Bank of England governor Mark Carney has issued a strong warning on the dangers of a disruptive Brexit, claiming that his much-maligned guidance on fiscal policy will be needed more than ever as negotiations for the UK leaving the bloc continue. Mr Carney told economists in London that the Bank of England may be forced to cut interest rates or pump money into the economy to stabilise it, as it did following the EU referendum, if the Brexit “transition isn’t smooth”.

Worst GDP figures for five years

The ONS has confirmed that UK GDP growth slowed to 0.1% in the first three months of the year, the worst quarterly performance for five years. The slowdown was caused by factors including the weakest household spending for three years and falling levels of business investment, and the ONS maintained that the “beast from the east” winter storm had little impact.

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