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Daily News Roundup: Tuesday, 4th January 2022

Posted: 4th January 2022

BANKING

Nearly half of bank branches have been lost since 2015

Since the start of 2015, some 4,735 bank branches will have disappeared by the end of next year - making up 48% of the network, according to consumer group Which? This year alone, 736 bank and building society's branches disappeared from the high street, while another 221 are set to go in 2022. Barclays has reduced its network the most, according to Which?, with 841 branches having closed - or scheduled to - by the end of 2022. NatWest Group will have closed 1,110 branches by the end of 2022, while Lloyds Banking Group has shut down 723 sites, rising to 770 in 2022. Jenny Ross, Which? money editor, said: “Wave after wave of bank branch closures in recent years have left many people who depend on them for essential banking services - particularly the elderly and vulnerable - at risk of being cut adrift.”

Banking apps can help tackle scams

UK Finance has been told that apps could help determine whether a customer’s phone might have been stolen or is being used fraudulently, with technology able to track typing speed, the times of payments and a user’s heart rate. The Information Commissioner’s Office said in May that biometric measurements should be used in a “targeted and proportionate way”. It has noted the importance of considering whether “behavioural biometrics provide better protection against fraud” than “knowledge-based” security, where users input passwords and more traditional biometric measures, such as fingerprints. In 2019 the European Banking Authority set out guidelines on which biometric measurements would comply with rules around “strong customer authentication”, including eye scanning, voice recognition, keystroke dynamics and heart rate. NatWest said in 2020 that it would be introducing new security measures utilising behavioural biometrics.

Mortgage lending hits 14-year high

Data from UK Finance shows that 2021 was the strongest year for mortgage lending in 14 years, with £316bn of home loans issued. This was the highest annual total since the £357bn recorded in 2007. James Tatch, head of data and research at UK Finance, said: “We’re seeing a return to a stable path for new lending” for 2022 onwards, adding that more remortgaging activity is expected to take place in 2022 and that this could accelerate further in 2023. Noting that a number of five-year fixed-rate mortgage deals will end in two years’ time, he said this “will provide a boost to remortgage numbers.”

NatWest deficiencies ‘left bank exposed to money laundering risk’

Court documents show that faulty computer systems at NatWest meant there was a risk of clients evading its money laundering checks, with the bank concerned that some might have evaded the safeguarding measures that failed to stop a gold dealership from laundering vast sums of money at the bank. Fowler Oldfield managed to deposit £365m and in documents released by the Financial Conduct Authority, NatWest said other businesses could also have evaded detection. NatWest was last month found guilty of money laundering offences and fined £265m for its handling of the Fowler Oldfield case.

Shawbrook explores £1bn London listing

The owners of challenger bank Shawbrook are exploring plans to list it on the London Stock Exchange less than five years after taking it private. Private equity firms BC Partners and Pollen Street Capital, which each hold 50% of Shawbrook, are holding talks with investment banks about a potential IPO, with sources saying talks are at an early stage. Shawbrook floated in London in 2015 with a valuation of £725m and was taken private two years later in a deal worth £850m. Sources say the challenger bank could be worth more than £1bn in a 2022 flotation or sale.

Tencent takes a stake in Monzo

Chinese tech firm Tencent has become an investor in Monzo in a fundraising that values the digital bank at $4.5bn. Tencent has taken an undisclosed, minority holding in Monzo in a round led by the Abu Dhabi Growth Fund which has raised $600m from investors. Monzo CEO TS Anil commented: “With the backing of some of the best names in the investment community, we’re going into next year with big ambitions — and we’re just getting started.”

Green Investment Bank’s profits surge

The Green Investment Bank reported a £144m profit for the year ended March 2021, with this up from £34m the year before. Launched by the Government in 2012 to help spur investment in green projects, the bank was sold to Australia’s Macquarie for £2.3bn five years later.

Santander error gives unexpected Christmas bonuses

Santander accidentally paid out £130m on Christmas Day. About 75,000 people and companies in receipt of normal one-off or regular payments from 2,000 businesses were inadvertently paid a second time. The second payment was made from Santander’s own reserves, meaning customers were unaffected. Recovering the money will see other banks asked to retrieve the money paid into accounts, with account holders at Barclays, HSBC, NatWest, Co-operative Bank and Virgin Money among those affected.

Habito lends borrowers seven times their salary

Mortgage market disruptor Habito is offering home buyers the chance to borrow seven times their salary, far higher than the standard loan-to-income ratio of 4.5. Borrowers must, however, work in a profession specified by the lender. Habito will also accept applications where at least one borrower earns a salary of £75,000 or more in any profession.

Blue Motor Finance boss joins Tesco Bank board

Tiku Patel, chief executive of motor finance provider Blue Motor Finance, is to become a non-executive director on the board of Tesco Bank. Mr Patel has spent the past 20 years at financial services businesses including Barclays, Experian and the PRA Group

Starling on the prowl for a new lending business

Starling Bank CEO Anne Boden has said the digital lender is on the lookout for a new lending business to buy following the acquisition of Fleet Mortgages earlier this year. Boden said: “We're out there looking for one or more lending platforms. We have deposit balances which we need to make work for us.” Separately, more than 50 fintech company founders have accused Starling of stifling innovation after Ms Boden said that Britain’s open banking regime had failed.

Lloyds to take minority stake in Bink

Lloyds Banking Group is reportedly finalising plans to buy a stake in Bink, a fintech business which links consumers' payment cards with retailers' loyalty schemes.

PRIVATE EQUITY

Deal-making hits 14-year high

The value of takeovers involving UK companies increased 10% to $630.8bn in 2021, the highest total since 2007, according to data from Refinitiv, with access to cheap finance amid a record low interest rate environment and depressed equity values encouraging private equity firms to snap up British businesses. The analysis also shows that the volume of deals climbed 39% to 6,926. Private equity firms launched 781 takeovers targeting British businesses this year, the highest since records began in 1980, with these worth just over $85bn. John Farrugia, managing partner at broker finnCap, commented: “Despite the pandemic wearing on, the ingredients of capital availability, improving market conditions and financial market enthusiasm, coupled with dealmaking appetite (whether stable or distressed) look set to contribute to a continuation of the deal frenzy.”

INTERNATIONAL

Deutsche fined over rate-rigging controls

German financial regulator BaFin has fined Deutsche Bank €8.66m for failing to implement measures designed to prevent rate-rigging. "The bank at times did not have in place effective preventive systems, controls and policies," the regulator said. Deutsche Bank said it accepted the fine and has implemented measures to improve its controls regarding Euribor, the euro rate-setting mechanism.

HSBC gets approval to buy out China life insurance joint venture

HSBC has received regulatory approval from the China Banking and Insurance Regulatory Commission to take full ownership of HSBC Life China, its life insurance joint venture in the country. HSBC agreed a deal in May 2020 in light of China's rules on foreign ownership of insurance companies and will now buy the remaining 50% of the venture which launched in 2009. HSBC Life China is headquartered in Shanghai and has a presence in ten cities across China.

Morgan Stanley to pay $60m to resolve data security lawsuit

Morgan Stanley has agreed to pay $60m to settle a proposed class action on behalf of about 15m customers who say the bank exposed their personal data when it twice failed to properly retire some of its older information technology. Morgan Stanley denied wrongdoing in agreeing to settle and says it has made "substantial" upgrades to its data security practices.

Credit Suisse investigates chairman’s Covid breach

An internal investigation by Credit Suisse has found that chairman António Horta-Osório breached coronavirus quarantine rules when he flew to London and watched the Wimbledon tennis finals at a time when travellers were required to isolate for 10 days when entering the country. This marks the second time Mr Horta-Osório has reportedly broken coronavirus restrictions.

AUTOMOTIVE

Nearly 10m fewer cars built in 2021

Research by market intelligence group LMC Automotive suggests almost 10m fewer cars were built in 2021 due to supply chain issues and the global semiconductor shortage. The situation is unlikely to substantially improve until the second half of 2022, LMC said, with the gap between chip demand and supply taking until 2023 to close.

CONSTRUCTION

Apollo in £1.2bn deal to buy UK housebuilder from Bridgepoint

Apollo Global Management is to buy housebuilder Miller Homes from British buyout group Bridgepoint for in excess of £1.2bn.

FINANCIAL SERVICES

Banker bonuses set to surge

Bankers are set to see large bonus pay-outs after securing record fees in the last year. Data from Refinitiv shows a surge in deal-making saw mergers and acquisitions advisers pull in a record £2.7bn in 2021. This could see investment banks' total bonus pools swell by as much as 20%, while the rewards offered to M&A departments may climb by 50%. JPMorgan is considering increasing investment bankers' bonuses by 40%; Goldman Sachs is weighing a 50% increase; investment bank bonuses at Barclays could climb by more than 25%; and some staff at Royal Bank of Canada have reportedly seen rises of up to 50%.

FCA keeping an eye on insurers over new rules

The Financial Conduct Authority (FCA) has warned insurers that it will be watching them to ensure they adhere to new rules designed to end a “loyalty penalty” paid by customers. As of January 1, sellers of motor and home cover have been banned from “price walking” – increasing prices for existing customers renewing their policies while new customers get cheaper deals. The City regulator said the move will save consumers £4.2bn in the next decade. Sheldon Mills, the FCA’s executive director for consumers and competition, said: “Insurers can no longer penalise consumers who stay with them,” adding: “We are keeping a close eye on how insurers respond to our new rules, to ensure that the benefits of a better insurance market are delivered to consumers.”

Half of EU finance firms fail to apply for City licenses

Data suggests that many European financial services firms are not interested in continuing to be authorised in London, with only half of EU firms given a temporary license to operate in the UK post-Brexit having applied for full authorisation. The Financial Conduct Authority (FCA) set up a temporary license regime in order to enable EU-based firms to continue trading in the City while final rules and regulations were worked out. Firms could continue to operate if they applied for full authorisation from the FCA or the Prudential Regulation Authority. However, only 54% of the firms that were awarded temporary licenses applied for full authorisation in Britain, with just 39 out of 72 firms that were expected to apply doing so by the September 30 cut-off. While the data shows that 46% of firms did not apply, the FCA had initially expected the rate to be about 20%.

Bumper year for London listings

London has raised more equity capital for newly listing businesses this year than at any time since 2007, with 122 companies listing on the main market in 2021. Data from the London Stock Exchange Group (LSEG) shows these raised £16.8bn – up from £9.4bn across 43 floats in 2020. LSEG said this made London the biggest single source of capital outside the US and China, noting that London has been “by a significant margin the number one exchange in Europe, raising more equity capital than the Amsterdam and Paris exchanges combined.” Including capital raised via rights issues and placings, the total raised in London this year is £49.2bn.

Insurer says EU rules hold back £2bn of investment a year

Pension Insurance Corporation (PIC), which manages assets worth £50bn, has told MPs that it could invest an extra £2bn a year for ten years if changes to Solvency II regulations were implemented. UK-based insurers argue the rules, introduced in 2016 by the EU, force them to be risk-averse and traps capital that could be unleashed for “productive finance” - such as projects supporting levelling-up and net zero. The Treasury is currently working with the Bank of England on a review of Solvency II regulations. “There is potential for this reform to be the first major Brexit bonus,” PIC said.

Brexit working 'very well' for the City, says broker

Sam Smith, chief executive of London-listed broker finnCap, says Brexit has boosted the City as it has allowed regulators to scrap EU red tape, with the Financial Conduct Authority overhauling a number of rules. Saying the City is working "very well", she added: "To me, Brexit has not been anything other than quite positive ... we are seeing signs that actually the regulatory regime could be changed in a positive way post-Brexit to really make this ecosystem fly."

The City bosses set to take centre stage

The Times looks at some of the business leaders “who will take centre stage” in 2022. The paper’s Patrick Hosking says Aviva CEO Amanda Blanc faces a “pivotal year”, saying that despite her achievements at the insurance group, she has yet to significantly improve the rating of the business in the eyes of investors. He notes that it is one of the lowest-rated composite insurers in Europe and says activist investment group Cevian, which has amassed a stake of more than 5%, could call for changes despite being supportive so far. Meanwhile, Katherine Griffiths reflects on what 2022 may hold for Lloyds Banking Group’s Charlie Nunn, who will deliver his strategic vision for the lender alongside its full-year results in February.

Covid health disaster helps pension firms

Analysis by Royal Bank of Canada has found that lower life expectancy triggered by Covid and its knock-on effects, including reduced cancer diagnosis and erosion of mental health, is expected to boost the profits of pension providers by £7.4bn over the next five years. The impact will boost profits for major pension managers, including Aviva, Just Group and Legal & General, on smaller pay-outs to retirees. 

HEALTHCARE

Reckitt Benckiser to sell skincare brand to Swedish firm

Reckitt Benckiser is to sell its E45 skincare brand to Stockholm-based Karo Pharma for £200m. The consumer goods giant has been trimming its portfolio to concentrate on high growth categories.

Moderna faces shareholder pressure over cost of vaccine

Legal & General Investment Management is questioning the pricing of Moderna’s Covid vaccine and its failure to share the technology with poorer nations given the state assistance the company has received.

LEISURE & HOSPITALITY

Cruise companies demand workers are jabbed

Travel companies including Carnival, Tui and Virgin are enforcing 'no jab, no job' policies for staff amid fresh COVID-19 outbreaks on cruise ships.

REAL ESTATE

Average house price hits record high of £255k

Average house prices in the UK hit a record £254,822 in December, according to Nationwide. Prices rose by 10.4% in 2021, with this up on the 10% annual growth recorded in November and the fastest growth rate in 15 years. Wales was the UK region with the fastest house price growth, with values up 15.8% in the calendar year, while London was the slowest-growing region, with prices rising by 4.2%. Values in Northern Ireland rose 12.1% and annual house price growth in Scotland was 10.1%.

First-time buyers borrowing more

Analysis of Office for National Statistics data shows that the average existing homebuyer takes an advance of £232,854 when purchasing a property, with this equivalent to 63.3% of a property’s value. In the last 10 years, the amount required as an advance has climbed by 4%. For first-time buyers, the average advance on a first home currently comes to £172,106 – 76.9% of the total property value, with the proportion of the value borrowed via a mortgage up 6.2%.

ECONOMY

Inflation could pass 7%, economists say

A Times poll of economists suggests inflation, which hit 5.1% in the year to the end of November, could exceed 7% this year. Over a third of the 32 economists expect inflation to peak between 6% and 6.5%, while 15% predict it will surpass 6.5%. Two of the economists, including a former Bank of England rate-setter, said inflation would climb beyond 7%. On interest rates, more than 90% of the economists polled expect it to rise to at least 0.50% by the end of the year, with the Bank having increased the base rate from 0.10% to 0.25% in December. The majority of those polled expect the value of FTSE 100 companies to increase by the end of 2023, and around one in ten predict it will remain at its current level. Three quarters of those polled expect business investment to grow next year.

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