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Daily News Roundup: Tuesday, 4th May 2021

Posted: 4th May 2021


Barclays Q1 profit hits £2.4bn

Barclays has unveiled pre-tax profits of £2.4bn for the first quarter of 2021. This was up from £913m over the same period of 2020 and marked the highest level in 13 years. This was driven by strong growth in its corporate and investment banking division, while mortgage lending surged as the stamp duty holiday nudged up house prices. Money put aside in case of defaulting loans came in significantly reduced, with impairment charges of £55m compared with £2.1bn a year ago. Barclays said that, unlike NatWest and Lloyds, it will not yet release the provisions, saying it wanted to “gauge the impact as government support measures lift over the coming months”. Barclays said it will release its real estate review in the next few months, with the bank set to outline plans to reduce office space after the pandemic changed working patterns.

TSB returns to profit

TSB has recorded pre-tax profit of £13.1m for the first three months of the year, a welcome rebound with the bank having seen a £200,000 loss a year ago. TSB's net profit was €10m, while owner Sabadell's profits in Q1 reached €73m.

UK banks’ support for coal industry has risen

British banks’ financial support for companies involved in the coal industry has risen since the 2015 Paris agreement. Lenders provided loans and underwriting services worth $30.3bn to companies that sold or burned coal, or provided coal industry services, during 2019 according to research by the campaign groups Reclaim Finance and Urgewald. This marks a significant increase on the $21.5bn in financing provided in 2016. Barclays was the biggest UK provider of finance to companies in the coal industry, followed by HSBC and Standard Chartered.

JPMorgan plans UK current account

JPMorgan is set to launch a UK current account later this year, with sources saying the US bank is preparing to unveil its digital retail bank Chase within the next six months. JPMorgan is hoping customers will move their salaries to its digital current account. The move marks its entry into retail banking in Britain. It is noted that rival Goldman Sachs launched its Marcus savings account in 2018.

UK banks expect deluge of ‘pay as you grow’ requests from SMEs

Banks are expecting many SMEs to request extensions or repayment holidays for coronavirus rescue loans, with the initial wave of Bounce Back Loan Scheme borrowers due to begin making repayments this month.

Barclays rewrites terms

Barclays has rewritten its terms and conditions to allow it to impose new fees on savers and current account customers. The change means the bank can introduce a new cap on the amount of money customers can hold fee free in any account, charging customers who hold deposits above that level.

Ofcom: Scammers can spoof banks’ phone numbers

Ofcom’s head of telecoms technology, Huw Saunders, has warned that criminals have learned how to impersonate banks by using their phone numbers to call victims.

HSBC to raise juniors’ pay

HSBC is to increase the salaries of its junior investment bankers and hire more staff to share the workload as it looks to tackle burnout among young staff. It is also planning to shorten a four-year associate programme for groups in certain locations, meaning associates with three years' experience will be considered for promotion to vice president, or associate director positions.


Blackstone asks companies to report on sustainability

Blackstone Group has asked executives in companies controlled by its private equity arm to regularly report on environmental, social and governance matters to their boards. Blackstone's private equity business heads wrote in a letter to portfolio company CEOs: “ESG factors are attracting greater focus globally and demand careful attention on your part … We believe providing transparency for your directors on ESG-related matters is a best practice."


Horta-Osório pledges Credit Suisse review

New Credit Suisse chairman António Horta-Osório has vowed to deliver an urgent review of risk management, strategy and culture at the bank. Mr Horta-Osório, who left Lloyds Banking Group last week after a decade as chief executive, said Credit Suisse's present and potential risks "need to be a matter of immediate and close scrutiny". Meanwhile, the bank has announced that Andreas Gottschling, head of its risk committee, will step down ahead of a threatened shareholder rebellion.

Goldman eyes Ovo stake

The private investment division of Goldman Sachs is in talks to invest £250m in gas and electricity supplier Ovo Energy.


FCA close to payout over Park First

The Financial Conduct Authority (FCA) is close to negotiating a settlement over the £230m Park First investment scandal that has left 4,600 investors facing significant losses. The City watchdog is in talks with Toby Whittaker, owner of Park First and associated companies that sold individual car parking spaces at airports for up to £25,000 each, promising investors annual returns of at least 8% that failed to materialise. The FCA intervened in July 2016, ruling that Park First was operating an unlawful “collective investment scheme”. The firm restructured the scheme to offer refunds or a new lease option with returns of 2%. So many investors demanded their money back that Mr Whittaker put Park First and associated companies into administration in July 2019. The FCA launched High Court action against Park First in 2019, saying it promoted the scheme “using false or misleading statements”.

Watchdog looks to loosen Spac rules

The Financial Conduct Authority (FCA) has set out a “more flexible” regime for special purpose acquisition companies (Spacs), with the regulator looking to encourage more use of blank-cheque companies while boosting their flexibility and protection. The current regime sees a listing suspended once a Spac has found a target, locking in investors until the deal completes. The FCA is looking into loosening up the rules, with Clare Cole, director of market oversight at the watchdog, saying: “We are consulting on a set of clear conditions based on which we will not look to suspend the listing of a Spac.” The changes "should encourage issuers that are willing to provide transparency and strong protections to investors”, she added. The mooted reform has been prompted by a government-commissioned review by Lord Hill which looked into how to reform the UK listings market.

City urges action over online scams

Large City institutions are urging ministers to tackle online financial scams, with increasing concern that criminals are using Facebook and Google to target victims via fraudulent advertisements. In a letter to Digital Secretary Oliver Dowden, groups representing Britain's biggest banks, insurers and asset managers warned that consumers are losing large amounts of money because big internet firms are failing to check the authenticity of ads. This, they argue, has contributed to a surge in brand cloning scams where criminals impersonate legitimate businesses. The letter’s signatories are calling for the forthcoming Online Harms Bill to carry a legal obligation for internet firms to stop misuse of advertising platforms. The Financial Conduct Authority has made a “clear recommendation” for ministers to include digital fraud in the Bill, with MPs on Parliament's Work and Pensions Committee making a similar call.

Pension withdrawals: calls grow for automatic guidance sessions

Richard Parkin, a non-executive board member of the Financial Services Compensation Scheme, has suggested savers should be automatically enrolled into a Pension Wise appointment before gaining access to their pension cash.

UK ministers ‘pandering’ to asset managers over pension reforms

Andrew Warwick-Thompson, the Pensions Regulator’s former Executive Director for Regulatory Policy, has claimed that ministers are pandering to asset managers over pension reforms.


Prices climb at fastest rate since 2004

Figures from Nationwide show that house prices rose at the fastest rate since February 2004 last month. The average UK house price rose 2.1% in April compared with March, while year-on-year growth hit 7.1%, exceeding the 5.7% increase recorded in March. The jump in prices took the average UK house price to £238,831. The increase in prices was attributed to a boom in sales as buyers sought to take advantage of an extended tax break. Robert Gardner, the chief economist at Nationwide, commented: “Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the budget prompted a re-acceleration in April.” He added that the stamp duty holiday and a new mortgage guarantee scheme to help people with a 5% deposit get on the property ladder is likely to see housing market activity remain “fairly buoyant” over the next six months.


Amazon sees European sales of £38bn but pays no corporation tax

Amazon's latest corporate filings in Luxembourg revealed show that it saw record sales income of €44bn in Europe last year but did not have to pay any corporation tax for the unit which handles sales for the UK, France, Germany, Italy, the Netherlands, Poland, Spain and Sweden. Accounts for Amazon EU Sarl show that despite collecting record income, the Luxembourg unit made a €1.2bn loss and paid no tax. It was granted €56m in tax credits it can use to offset any future tax bills should it turn a profit. It has €2.7bn worth of carried forward losses stored up, which can be used against any tax payable on profits.


BoE set to curb pandemic support

The Bank of England is set to pull back on stimulus rolled out during the pandemic amid increasing optimism over the state of the economy. Economists believe that the Bank’s Monetary Policy Committee (MPC), which is currently buying £4.4bn of government debt a week under its asset purchase programme, could cut weekly purchases by almost half as it lifts growth forecasts this week. Philip Shaw, Investec’s chief UK economist, said: “The pace of bond-buying has to slow down and it would make sense to announce that this week.” He added that with the growth outlook “getting stronger and stronger”, the MPC is “likely to acknowledge that.” The MPC is expected to declare that the economy is recovering from the coronavirus recession faster than expected and is likely to raise its growth forecasts when it publishes its latest monetary policy report. In its February update the Bank forecast a 5% rise in output this year, with this following a 9.8% pandemic-driven slump in 2020. Deutsche Bank economist Sanjay Raja expects the Bank to increase its GDP forecast to closer to 7% and bring forward its forecast for a return to its pre-pandemic level to the end of the year, rather than Q1 2022.

Barclays boss predicts biggest economic boom since 1948

Barclays boss Jes Staley believes the UK is set to see its biggest economic boom since the late 1940s, saying a post-pandemic rebound is set to be driven by the coronavirus vaccine programme and built-up savings, with an extra £200bn estimated to be sitting in customer and company bank accounts. Mr Staley said: “We estimate the UK economy will grow at its fastest rate since 1948. That's pretty spectacular”. He added that “tremendous pent-up demand” will deliver economic growth of around 6.5% in 2020. Mr Staley also noted that Barclays thinks a robust economic recovery in 2021 “will carry through into 2022.”

Eurozone driven into double-dip recession

Figures from Eurostat, the EU’s statistical office, show that the eurozone fell back into recession in Q1, with restrictions rolled out in a bid to tackle a third coronavirus wave hitting the region’s economies. GDP in the 19 economies sharing the euro shrank by 0.6% between January and March when compared to Q4 2020. The previous three months also saw a decline, with GDP down 0.7%. Q1 2021 saw GDP in Germany slip 1.7%, while Spain and Italy saw respective declines of 0.5% and 0.4%. France, on the other hand, saw growth of 0.4% in the quarter.

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