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Daily News Roundup: Tuesday, 3rd January 2023

Posted: 3rd January 2023

BANKING

Half of bank branches disappear in seven years

Half of Britain's bank branches have shut in the last seven years, according to research by consumer rights group Which?. The consumer group says 5,162 bank and building society branches have closed since January 2015, with a further 206 expected to shut by the end of next year. NatWest has closed more branches than any other operator, shutting 1,147 outlets when its RBS brand is included. Barclays has scrapped 962 and Lloyds 629. Rocio Concha, of Which?, said: “Those who rely on cash need protection from bank branch and ATM closures, with a minimum level of free access to cash guaranteed to ensure they don’t have to pay to withdraw their own money.” A Financial Conduct Authority spokesman said: “We expect firms to continue to offer accessible banking services to all their customers and to ensure they can continue meeting the needs of customers, especially those in vulnerable circumstances, before closing a branch or reducing services.” UK Finance said: “The banking and finance industry is committed to preserving access to cash for those who need it, including through banking hubs, free ATMs, enhanced Post Office services and cashback without purchase."

Wall Street giants challenge British banks

The Telegraph’s Simon Foy warns that Wall Street banking giants are set to benefit from the Chancellor’s deregulation drive in the City of London. Jeremy Hunt has proposed to relax ring-fencing capital rules that will boost the UK savings arms of US banks such as Goldman Sachs and JPMorgan. Sanjiv Somani, chief executive of JPMorgan Chase’s international consumer bank in the UK, said that “any financial services reform that helps to improve the competitiveness of the UK is highly appreciated and welcome.” Mr Foy says that the “stranglehold” that Barclays, Lloyds, NatWest, HSBC and Standard Chartered continue to have on Britain’s banking market “has left little room for upstarts,” before suggesting that “ ministers are keen to give the new challengers a helping hand.” The Government has proposed relaxing rules for smaller banks that require them to separate their retail banking services from investment and international banking activities.

Revolut misses another accounts deadline

Digital bank Revolut has missed another deadline to publish its accounts. While HMRC requires accounts to be filed at Companies House nine months after the financial year ends, Revolut missed its September 2022 deadline. It was given an extension until December 31 but has also missed that cutoff. Reports in September suggested that Revolut was under pressure from its auditors to improve internal controls.

Small businesses report difficulties securing affordable loans

The Federation of Small Businesses says SMEs are increasingly struggling to secure affordable bank loans, with fewer than half of applications successful in Q3, compared with nearly two-thirds before the pandemic.

UK banks to ease pressure on mortgage holders as late payments set to surge

Some of Britain’s biggest banks have agreed measures with the Government that will help struggling homeowners with their mortgage payments and avoid a wave of repossessions when fixed-rate deals expire.

Lloyds back as investors' favourite

Lloyds has regained its crown as the most popular company with retail investors, replacing bitcoin mining company Argo Blockchain as the most bought publicly listed company by UK investors last year, according to data from investment platform AJ Bell.

INTERNATIONAL

Bankers' bonuses slump in the US

US Bankers’ year-end bonuses could be between 30% to 50% lower compared to the previous year, according to analysis. One of the reasons for the decline is that major investment banks including Morgan Stanley, Bank of America, and Barclays, have about $13bn of debt on their balance sheets that was used to fund Elon Musk’s $44bn acquisition of Twitter. This type of debt has reportedly become scarce in the market, leading banks to keep it on their balance sheets rather than selling it to investors. Meanwhile, Investment banking revenue in the US is believed to have fallen more than 50% from 2021 to nearly $35bn through mid-December.

Goldman Sachs prepares to cut jobs

Goldman Sachs CEO David Solomon has warned employees that the bank is set to make significant layoffs in the coming weeks. The chief executive pointed to a “variety of factors impacting the business landscape,” including tightening monetary conditions that are slowing down economic activity. The leadership team’s focus, he added, is “preparing the firm to weather these headwinds.” Earlier this month it was reported that Goldman Sachs plans to lay off 4,000 staff - about 8% of its workforce - as it looks to cut costs as revenue and profits slip. Since the beginning of the pandemic, Goldman has refrained from its normal practice of automatically culling about 5% of staff per year, with its headcount rising by 11,000 in the past three years. It is noted that Morgan Stanley, Credit Suisse and Citigroup are also set to cut jobs, while polling suggests that more than half of US chief executives are considering job cuts in the next six months.

US Virgin Islands AG fired days after suing JPMorgan Chase

US Virgin Islands Attorney General Denise George has been fired just days after she sued JPMorgan Chase, accusing the bank of complicity in Jeffery Epstein's sex crimes. The AG said JPMorgan Chase was “indispensable to the operation and concealment of the Epstein trafficking enterprise.” Governor Albert Bryan Jr said he had relieved her of duties, without explanation. In December, George announced a $105m settlement with the estate of Jeffrey Epstein after bringing a case based on anti-criminal enterprise, sex trafficking, child exploitation and fraud. Her firing coincides with a visit to the USVI territory of St. Croix by US president Joe Biden and his family.

JPMorgan bankers try to lure away Morgan Stanley’s tax fund clients

Sources claim that private bankers at JPMorgan Chase are trying to convince wealthy clients to move billions of dollars from Morgan Stanley’s tax strategy funds to their bank’s own platform.

AUTOMOTIVE

UK car production edges up again

Car production in the UK continued its recovery in November with outputs up 5.7% on the same month last year. The Society of Motor Manufacturers and Traders said 80,091 cars were made in Britain last month, with production growing in six of the past seven months. However, outputs were down 25.7% on November 2019 figures and they remain 44.1% behind the pre-pandemic five-year average for the month.

FINANCIAL SERVICES

Bankman-Fried associate admits to misuse of FTX customer funds

The former head of FTX’s trading affiliate Alameda Research has admitted that she and FTX founder Sam Bankman-Fried hid the fact that they were using customer deposits to make risky bets and provide billions of dollars in secret loans to FTX executives. Caroline Ellison pleaded guilty to defrauding customers of sister business FTX, which collapsed in November owing about $8bn to creditors and retail investors.

High Court tosses out case by LME traders for disclosures on nickel debacle

A case brought by hedge fund AQR Capital Management and other market participants against the London Metal Exchange demanding further disclosure from the LME on its March decision to cancel billions dollars worth of nickel trades has been dismissed by a London court. Fears over Russia's invasion of Ukraine drove nickel prices up in March but the LME is accused of cancelling $4bn in trades to protect Chinese nickel producer Tsingshan Holding Group, which had a massive short position on the metal. The move erased an estimated $1.3bn of gains for long position holders.

GAM hires bankers to explore sale

Swiss asset manager GAM has hired UBS bankers to explore a possible sale, according to industry sources. "We are constantly reviewing the progress of the firm, and we are committed to ensuring that our strategy is appropriate and in the interests of all our stakeholders," a GAM spokesperson said.

LEISURE & HOSPITALITY

Rail strikes hit hospitality hard

Industry bodies have warned that rail strikes have cost the UK hospitality industry at least £1.5bn in December alone. Kate Nicholls, the chief executive of UKHospitality, said the financial impact of train strikes on the sector was worse than expected, resulting in a “perfect storm” for businesses battling soaring energy bills and inflation that meant “undoubtedly we will see more business failures” in the next three months. 

MEDIA & ENTERTAINMENT

Bloomberg eyes takeover of WSJ publisher

Michael Bloomberg is mulling a bid for Dow Jones, the Rupert Murdoch-owned parent company of The Wall Street Journal, Barron’s and MarketWatch. The billionaire is said to have expressed an interest but has not yet contacted Mr Murdoch to discuss a deal. Mr Bloomberg would also consider buying The Washington Post from the Amazon founder Jeff Bezos if it were up for sale, Axios reported, but a spokesman for the outlet said it was not for sale.

REAL ESTATE

House prices could fall by 9% by 2024

While Rightmove data shows that house prices in some regions have risen by up to 20% since 2019, the latest predictions from the Office of Budget Responsibility (OBR) forecast a 9% drop by the third quarter of 2024. The OBR says the prices will fall £26,550 by summer 2024, with the decline driven by “significantly higher mortgage rates as well as the wider economic downturn.” Elsewhere, Zoopla expects price growth to dip into negative territory as the market adjusts to weaker buying power and concerns over the economic outlook. Capital Economics and Oxford Economics expect prices to fall by 12% in 2023, while Lloyds, Pantheon Macroeconomics and the Centre for Economics and Business Research have each forecast an 8% fall. Nationwide expects a 5% drop but, in a worst-case scenario, it said values could plunge by 30%. Halifax expects average values to drop 8% next year, while Rightmove is predicting a 2% drop in average asking prices. Andrew Montlake, managing director of mortgage broker Coreco, says that while a fall of around 10% is “a real possibility,” this would represent “the froth coming off the market and a reversal of the unsustainable growth we have had since the stamp duty holiday.”

House prices fell again in December

Figures from Nationwide show that house prices fell for the fourth consecutive month in December. The price of an average UK home fell by 0.1% to £262,068 between November and December. Year-on-year, the pace of price growth slowed from 4.4% to 2.8%. This was the lowest rate of growth since the 1.5% recorded in July 2020. Nationwide's chief economist, Robert Gardner, said the recent weakness in mortgage applications “may, in part, represent an early seasonal slowdown,” adding: “With the chaotic backdrop and elevated mortgage rates in recent months, it wouldn't be surprising if potential buyers have opted to wait until the New Year to see how mortgage rates evolve before deciding to step into the market.”

RETAIL

Card spending up by 10.6% in 2022

Consumer card spending grew by 10.6% in 2022, according to data from Barclaycard, with the amount spent on debit and credit cards climbing year-on-year as people returned to shopping in-store, eating and drinking out, and booking holidays. Spending on essential items grew by 6.3% – thanks to a 28.3% rise in fuel outlay that was driven by surging petrol and diesel prices and increased car use, post-pandemic. Spending on utilities grew by 32.9% over the year as the cost of energy soared. Meanwhile, the Barclaycard report also shows that retail spending dropped 0.8% over the last year. While high street retailers received a welcome boost, with sales increasing by 8.3%, there was a 12.2% fall in online shopping spending. With food price increases continuing to climb through 2022, there was a 0.1% reduction in grocery spending. DIY retailers saw a 5.5% drop in the value of consumer spending, while sales volumes dropped 7.5%. Electronics sales were down 7.2% in 2022 and furniture stores saw revenue slip by 3.2% compared to 2021.

ECONOMY

Taxpayers to pay £167bn for QE

Taxpayers face a £167bn bill from the Bank of England tied to losses from the quantitative easing (QE) bond-buying programme launched during the financial crisis. The Bank still owns £830bn of government bonds, or gilts, that it bought through QE from 2009. The Bank started selling off the gilts in October as part of efforts to tighten monetary policy in order to tame soaring inflation, but the gilts are worth less than the Bank paid for them. Mark Capleton, head of inflation-linked research at Bank of America, says that if the Bank sold all those gilts at once, it would face a loss of £167bn. Under the terms agreed with the Treasury, the Bank cannot incur any losses on QE. The Treasury made its first payment to the Bank in October — for £800m — but the sums are expected to increase. Mr Capleton expects £5.5bn to be paid to the Bank for the financial year to April 2023.

UK faces worst and longest recession in G7, say economists

The UK is set to face one of the worst recessions and have one of the weakest recoveries in the entire G7 this year, according to the FT’s annual poll of leading UK-based economists. The news comes as the International Monetary Fund warns that a third of the world economy will be in recession this year, with the US, EU and China all expected to experience slowdowns.

UK stocks saw record outflows in 2022

Investors pulled over $26.3bn out of UK stocks last year, according to data from EPFR Global. The outflows set a new record and mark the seventh year in a row that investors have fled the country’s markets. The spike in redemptions coincides with a 20% slump for the domestic-facing benchmark FTSE 250 Index, the most since 2008.

OTHER

FTSE 100 outperforms its rivals

Britain's stock market outperformed all of its major rivals last year, with the FTSE 100 ending the year 1% up while its rivals in the US and Europe all fell. The US's Dow Jones and S&P 500 are down 9% and 19% respectively, while the Nasdaq has slid by 34%. France's Cac 40 lost 10% over the year and Germany’s Dax is down 12.4%. While Bloomberg recently suggested the London Stock Exchange (LSE) had “lost its crown” as Europe's largest stock exchange to Paris's Euronext, think-tank New Financial said the data was “comparing apples with oranges” by pitting the entire French stock market against only domestic British stocks, ruling out the international listings on the LSE.

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