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Daily News Roundup: Tuesday, 2nd January 2018

Posted: 2nd January 2018

BANKING

BoE could approve digital currency pegged to sterling

The Bank of England could approve its own digital currency at some point this year, according to reports. A research unit has been set up by the BoE to investigate the possible introduction of a crypto-currency linked to sterling. The bank has been trialling technology for digital transactions, using the same methods that underpin Bitcoins and other crypto-currencies. The currency would be pegged to sterling and underpinned by the bank, making it far less volatile than Bitcoin.

Card fees ban could mean higher prices

The Government’s ban on credit card fees could result in consumers facing higher prices and new “service charges” from retailers and businesses. From January 13, fees of up to 3% charged when people pay by credit card, ostensibly to offset charges paid to card companies, will be prohibited. But a Sunday Telegraph survey suggests retailers and other companies are planning to respond to the new rules by refusing credit card payments, increasing shelf prices or introducing new “service charges” across the board.

Bank closures hit remote SMEs

Figures show that 802 bank branches closed this year – believed to be a record – with campaigners warning of the impact this could have on small businesses in remote areas. The cull, much of it in rural towns and villages, was led by Barclays, Lloyds, HSBC, Santander and NatWest owner RBS. The data shows that the five biggest banks now account for fewer than 6,000 branches, compared with 11,240 20 years ago.

Banks prepare to move

London-based finance firms are expected to start moving staff and part of their UK business to rival financial hubs if details of a Brexit transition period are not agreed during the first quarter of 2018. HSBC is on course to move up to 1,000 jobs to France, while Barclays' Dublin office is to serve as its EU hub. Lloyds Banking Group plans to convert its Bank of Scotland-branded branch in Berlin into an EU subsidiary.

PRIVATE EQUITY

Private equity turns to early loans to boost returns

The FT’s Henny Sender explores how private equity firms are using cheap bank loans to make investments and are then asking their clients for money.

INTERNATIONAL

Deutsche investors warn Cryan

The Sunday Telegraph reports that Deutsche Bank CEO John Cryan has been warned by investors that another set of disappointing results could trigger a management shake-up. “Cryan's contract runs until 2020 which I think is too long for lacklustre results,” said Michael Huenseler, an investor at Assenagon Asset Management, a shareholder in the lender. “A major disappointment 'in the investment bank' will inevitably lead to shareholders demanding a change at the helm.” Ingo Speich, an investor at top 20 shareholder Union Investment, added that shareholders were gasping for “some proof” that Deutsche could turn around its investment bank. “If we see very weak numbers compared to the US peers then I guess we have to bring the discussion forward,” he said. Meanwhile, Mr Cryan has promised staff “normal” bonuses and pay increases for the first time in his two and a half years in charge.

Europe begins countdown to day of the Mifid

The FT looks ahead to tomorrow’s introduction of Mifid II legislation. The EU reforms will cost the finance industry more than €2.5bn to implement, with the largest banks expected to spend more than €40m each on compliance.

Goldman Sachs to lose billions from tax changes

Goldman Sachs has warned that President Trump's tax legislation changes will knock billions from its earnings. In a filing to US regulators, the investment bank says its fourth quarter results, due in January, will be $5bn (£3.7bn) lower than expected. It says two-thirds of this is down to revisions to US corporate income tax.

Trump tax cut bumps up Wall Street bonuses

President Trump’s tax overhaul is expected to increase the bonus gap between US and European bankers this year. Shares in US banks have soared since Trump was elected in 2016, and US stocks are predicted to keep rising thanks to a major cut to the corporate tax rate. Last year bankers in the City of London collected an average bonus of £247,000, compared to £317,000 for their Wall Street counterparts.

Beijing keeps pledge to Trump on cutting banking red tape

The China Banking Regulatory Commission has issued new rules to make it easier for foreign commercial banks to incorporate on the mainland, open new branches and obtain permits to enter new business lines.

AUTOMOTIVE

New car sales set to fall below 2007 levels

Forecasts from the Society of Motor Manufacturers and Traders have suggested that car sales in Britain are set to tumble below pre-global financial crisis levels. Figures due on Friday are likely to show a 5.5% fall in new car sales last year to 2.55m, with registrations toward the end of the year sliding at a rate of more than 10% a month. Sales are thought likely to drop further still in 2019, with the SMMT believing that annual sales will go down to 2.39m.

AVIATION

Windfall for Gatwick owners

Global Infrastructure Partners, the owner of Gatwick, has reaped a £175m dividend as speculation mounts over a sale of the airport, according to the Sunday Times. The dividend, paid in October, grew from £125m a year earlier and followed six months of growing passenger numbers and profits.

CONSTRUCTION

Balfour sells further Connect Plus stake

Balfour Beatty is to sell an additional 7.5% stake in Connect Plus, the company which operates and maintains the M25, to Dalmore Capital in a £62m deal. Dalmore has already paid £103m for a 12.5% holding.

FINANCIAL SERVICES

Lawyer tipped for FCA chairmanship

Lawyer Charles Randell has emerged as a leading candidate to become the next chairman of the FCA. Mr Randell, 59, is a specialist in corporate finance law and is a member of the Bank of England’s prudential regulation committee. The FCA’s current chair, John Griffith-Jones, is due to leave in March.

LCH boss warns against forcing euro clearing from London

A plan by Brussels to force the clearing of trillions of euros in derivatives out of London and into the eurozone would harm EU companies, according to the boss of one of the world’s biggest clearing houses. Dan Maguire, chief executive of LCH Group, said the impact of denying EU-based clients access to the global liquidity pool for euros “would simply be to grant them access to a much smaller and restricted liquidity pool.”

Tenfold rise in City fines

The FCA collected almost £230m in fines last year, compared with just £22.2m a year earlier. The rise in penalties was largely the result of the £163m fine imposed on Deutsche Bank in January following a money-laundering scandal.

Cyber security top priority

Bosses in the financial services industry and the public sector have identified cyber-crime as the biggest technological threat in a poll carried out by digital workplace provider Invotra. The research saw 79% of senior IT managers working across public sector and 85% in the financial services sector say data and systems security are their biggest priority.

Financial services and construction fail pay test

The financial services sector has reported the second largest gender pay gap, with an average median gap of 24.6% between what firms pay their male and female staff.

HEALTHCARE

Big pharma poised for “Kodak” moment

ARM Holdings founder Hermann Hauser has said he believes that big pharma is poised for its own "Kodak moment" as healthcare moves away from drugs and towards artificial intelligence. Mr Hauser said watches that can track heart rate, apps that advise on dieting, and eventually an implant that could provide a constant health check in real time, will all keep people healthier for longer.

REAL ESTATE

Rise in older people seeking home loans

An increasing number of people of retirement age are seeking mortgages, reports Jessie Hewitson in the Times, adding that many are still finding securing loans difficult. Figures from the Building Societies Association and UK Finance show that the number of building society remortgages for the over-50s has gone up 19% since 2012 and the value of lending has risen 41%.

Brookfield moves into private rented sector for fresh profit

Fund manager Brookfield Property Partners, the largest owner of rental accommodation across the US, is to retain 1m sq ft of space across three residential towers in London as it enters the UK rental market.

Advisory firm launches property division

Investment advisory firm Full Circle Partners has launched a property fund, FCP Property Development Fund, which will offer short-term liquidity and investment support to established property developers.

RETAIL

Co-op unveils expansion drive

The Co-op Group’s food division is planning to open 100 new food stores in 2018, creating about 1,600 jobs. The retailer will invest more than £160m in the venture, as well as giving "major makeovers" to a further 150 outlets. More than 20 stores will open in London, up to 18 in Scotland, ten in Wales and others in English cities including York, Plymouth and Bristol.

ECONOMY

Stock markets close at record high

UK stock markets climbed to new highs on the final day of trading for 2017, with both the FTSE 100 index and the FTSE 250 setting new records. The blue-chip index was up 7.63% over the year, adding £141bn of value, while the FTSE 250 finished almost 14.7% higher, an uplift of £52bn. Meanwhile, the amount of money raised by companies floating on the London Stock Exchange hit a three-year high in 2017. Around £15bn was raised by 106 IPOs this year, 164% higher by value than the previous year and surpassing all other European exchanges.

Productivity not a priority, say small firms

The UK’s prolonged productivity crisis looks set to continue after a survey of small business owners found it was not a priority for bosses. Just 7% plan to make improving productivity a priority next year, according to the poll by HSBC, with SMEs citing the state of the economy as a much greater concern. The findings come after productivity growth was revised down by the OBR for the seventh year in a row.

OTHER

No clear favourite for governor role

The Mail’s Alex Brummer says there is no standout candidate to take over from Mark Carney as governor of the Bank of England in 2019, with Andrew Bailey, Andrew Haldane, Ben Broadbent and RBS chairman Sir Howard Davies all suggested as potential successors.

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