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Daily News Roundup: Tuesday, 31st January 2023

Posted: 31st January 2023


Banks struggle with digital transition

A report from data analytics firm Quantexa shows that major banks are struggling to manage their digital records, with it found that around 10% of customer records are duplicated. Quantexa asked IT and data experts working in the UK, USA and Canada how many customer records were duplicated and the banking industry, the average response was 10%. The actual proportion could be higher as 29% of the 356 experts quizzed estimated that between 11% and 15% were duplicates, while 15% placed the duplication rate between 16% and 20%. When asked about the impact of duplicates, 41% said it increased exposure to risk, while 23% said it made making “timely and accurate decisions” more difficult.

Barclays unveils banking pods

Barclays plans to launch a string of 'banking pods,' saying it will expand its 'flexible banking formats' in response to changing customer needs. The banking pods will be purpose-built, semi-permanent structures in locations such as shopping centres and retail parks. These facilities will provide a dedicated, private space and can be moved depending on demand. At least 10 will be rolled out across the UK by summer 2023. Jo Mayer, head of everyday banking at Barclays UK, said the Barclays Local initiative “provides a flexible way to reach customers in new locations and retain a presence where customer footfall has reduced, bringing face-to-face support to convenient locations.”


Goldman Sachs restructures asset holdings in Russia

Goldman Sachs has restructured its assets in Russia and could move to exit the country completely. In March 2022 the bank said it had been winding down its business in Russia amid its invasion of Ukraine, and in November said it had reduced its credit exposure to the country.

Morgan Stanley's Kayello to step down as MENA head

Morgan Stanley's regional head for the Middle East and North Africa (MENA) Sammy Kayello is stepping down, the bank said, although he will remain with the business as a senior adviser. Morgan Stanley's chief executive for Saudi Arabia, Abdulaziz Alajaji, and the bank's head of investment banking for MENA, Patrick Delivanis, will succeed Mr Kayello as regional co-heads of MENA.

Bank boss turns down pay rise

Wells Fargo CEO Charlie Scharf, who was paid $24.5m last year, has rejected a pay rise. While Mr Scharf was eligible for total compensation of $27m, he asked the board not give him a salary increase as he believed the company's transformation plan to improve management was not yet finished, adding that extra compensation would not be appropriate.


FCA will take ‘timely action’ over poor advice

The Financial Conduct Authority (FCA) says it will “take timely action” where firms provide simplified advice inappropriately. The watchdog is looking to simplify investment advice to make it cheaper and easier for firms to advise consumers on certain mainstream investments. The FCA has told the Treasury Committee that the core investment advice regime would retain most of its current rules. Sarah Pritchard, the FCA’s executive director for markets, said firms would be expected to “have appropriate processes in place to triage potential clients effectively,” adding that they “must ensure that those with more complex financial needs are identified as requiring services beyond core investment advice.” Under the proposals, consumers receiving simplified advice will have access to Financial Services Compensation Scheme protection, as well as be able to complain to the Financial Ombudsman Service.

Committee chair questions FCA’s ‘suspiciously round numbers’ for justifying new rules

The chair of the Treasury Committee has suggested the Financial Conduct Authority (FCA) landed on “suspiciously round numbers” to justify its planned rules on greenwashing. Harriett Baldwin has written to FCA chief executive Nikhil Rathi over the regulator’s proposed rules for ESG investments that would introduce ‘sustainable investment product labels’ that would look to boost trust in investment products. With the FCA calculating that a third of investment funds would not qualify, a third would not apply for regulation under the new sustainability labelling proposals, and another third will qualify and apply, Ms Baldwin said: “It isn’t clear what methodology the regulator has used to come to these suspiciously round figures, and if they have fully considered the consequences of their proposals for sustainable investing.”

L&G chief to retire

Legal & General chief executive Sir Nigel Wilson has announced plans to retire, having led the financial services and asset management firm since 2012. He will remain in post while the board searches for his successor, a process which is estimated to take approximately a year. The firm will reportedly consider candidates from both inside and outside the business.


Hospitality faces £100m hit from strikes

The retail and hospitality sector expects to see a huge financial hit from strike action set to take place tomorrow, with Kate Nicholls, chief executive of UKHospitality, estimating that industrial action will result in £100m in lost sales. She says hospitality “continues to suffer as collateral damage as a result of this dispute,” warning the “entirely avoidable” situation adds more pressure to a sector already dealing with soaring energy costs, workforce challenges and dampening consumer confidence. Kris Hamer, director of insight at the British Retail Consortium, commented: “UK footfall remains down on pre-pandemic levels, and this will only slow the progress retailers have made to bring people back to stores.”


2m streaming subscriptions cancelled

British households cut more than 2m subscriptions to services such as Netflix, Prime Video and Disney+ last year. It was the first annual decline since the UK streaming revolution began a decade ago. Many households that still stream have multiple subscriptions, with an average of 2.5 services. The total number of video subscriptions fell by just over 2m last year to 28.5m.


Home sellers are overpricing their homes

Seven in 10 estate agents say home sellers are being unrealistic about what their properties are worth, according to estate agent membership body Propertymark. Agents say sellers are overvaluing their homes, either because they think they have the best house on the street, or because they want to sell at a price which will enable their next move. Propertymark's latest figures show the number of prospective homebuyers registering with agents fell from 2.5 per available property in December 2021, to 1.4 per property in December 2022 - a 45% decline year-on-year. The average number of viewings per property fell by 71% between April and December 2022.


JD Sports customer data at risk in cyber attack

JD Sports has disclosed it was the victim of a cyber attack that exposed the data of 10m customers, in the latest of a spate of hacks on UK companies. The attack  involved “unauthorised access” to a system that contained names, billing addresses, delivery addresses, email addresses, phone numbers, order details and the final four digits of payment cards.

Owner pumps £60m into online retailer

The private equity backer of Matchesfashion is pumping tens of millions of pounds of new funding into the business as it seeks a revival under its new management team. Buyout firm Apax Partners has agreed to inject £60m into the online upmarket fashion retailer. The new capital will be split between £40m in equity and £20m in debt, with the latter element expected to be finalised in the short term.


Britain the only G7 economy forecast to shrink in 2023

Britain is expected to be the only major industrialised country to see its economy shrink this year, according to the International Monetary Fund. The IMF said it expected the UK economy to contract by 0.6% this year – 0.9 percentage points worse than it had pencilled in just three months ago and slower even than sanctions-hit Russia. The IMF said that while the prospects for every other member of the G7 group of leading developed nations had improved or remained unchanged since October, rising interest rates and higher taxes had made the outlook for the UK gloomier. IMF Chief Economist Pierre-Olivier Gourinchas told the BBC that for 2022, the UK had had “fairly robust" growth at 4.1%, which he said was "one of the strongest growth numbers in Europe.” “But it is true that we are forecasting a sharp slowdown in 2023, with growth that would turn even negative for the year,” he added.

Brexit and the economy

Dharshini David, BBC News’ global trade correspondent, considers the impact of Brexit on the UK economy. On trade, she notes that it has not bounced back post-pandemic as fast as it has in other major nations, saying that overall, the UK's trade with the rest of the world, as well as trade with the EU, has fallen relative to the size of the UK economy. Ms David says investment has stalled since the referendum, as businesses remain wary of the outlook for the economy. On jobs, she cites a study by the Centre for European Reform and UK in a Changing Europe think-tanks which suggests there are 330,000 fewer workers in the UK as a result of Brexit. While this is just 1% of the total workforce, sectors such as transport, hospitality and retail have been particularly hard hit. Ms David goes on to note Office for Budget Responsibility analysis suggesting that the UK will ultimately be 4% worse off than it would have been had it remained in the EU.


Investors face dividend drop-off

Investors in UK firms are facing a drop-off in dividends this year, with rising costs prompting firms to rein in payouts. Data from Link Group's latest dividend monitor shows payouts increased 8% on a headline basis to £94.3bn in 2022, despite a slowdown in the one-off special dividends that surged during the pandemic. Banking dividends accounted for nearly a quarter of the increase seen in 2022, with lenders seeing bumper profits on the back of rising interest rates. Ian Stokes, managing director of corporate markets UK & Europe at Link, said that while company margins across most sectors are under pressure from higher inflation and tighter household budgets, “soaring interest rates are now crimping profits by raising debt-service costs too.” He added: “This will leave less money for dividends and share buybacks in many sectors.”

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