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Daily News Roundup: Wednesday 12th February 2020

Posted: 12th February 2020

BANKING

N26 is pulling out of Britain

German-based digital lender N26 is closing hundreds of thousands of bank accounts and leaving Britain arguing that it would need a UK banking licence after the Brexit transition period ends and it is too expensive to get one. However, rivals say there is no regulatory reason to leave the UK and N26 simply hasn’t prepared and wanted to focus on less competitive markets. UK customers have been asked to switch to another provider by April 15th. N26 will focus on expansion elsewhere, including in the United States, said N26’s chief banking officer Thomas Grosse.

Competition grows for 95% LTV mortgages

Moneyfacts research reveals the market for 95% LTV mortgage deals has picked up with rates on two and five-year fixed rate deals down by 0.19% and 0.26% respectively to an average of 3.22% and 3.52%. There are currently 405 mortgage products available. Eleanor Williams, finance expert at Moneyfacts, said the low rates were good news for prospective first-time borrowers while the number of deals available to remortgage customers had also risen. The Telegraph suggests mortgage companies are dismissing concerns raised by the PRA about risky lending and future rate rises.

Banks must do more to promote no-frills accounts, says FCA

The Financial Conduct Authority (FCA) has said high street lenders are not doing enough to promote basic bank accounts to customers with poor credit history or debt problems. The regulator wants banks to review their sales processes. Rachel Springall, of finance data firm Moneyfacts, said: "I think it is important that the basic bank account is presented as number one for anyone who contacts a bank.”

Metro's chief risk officer out

Metro's chief risk officer since 2013, Aileen Gillan, will depart at the end of the month. Ms Gillan leaves amid an investigation by the Prudential Regulation Authority and the Financial Conduct Authority into a £900m accounting error at Metro.

PPI complaints break 2m barrier

The Financial Ombudsman Service received over 151,000 PPI inquiries in the last six months of 2019, taking the total complaints lodged to over 2m. Some £36bn has been paid out so far and the total bill may be up to £50bn.

Pester moves to consumer role

Paul Pester has been named as the new chair of Fairer Finance's consumer advisory board. Pester resigned as TSB CEO after the bank’s catastrophic IT failure.

INTERNATIONAL

HK banks offer relief to customers amid coronavirus outbreak

Standard Chartered and HSBC are among Hong Kong banks offering billions of dollars in liquidity support to borrowers as the economy buckles under pressure from a recession and the coronavirus. Elsewhere, the FT reports on how the outbreak has curbed dealmaking in China as bankers are barred from travel and face-to-face negotiations remain impossible. A slump in investor confidence due to the virus has also led to a 90% fall in UK active fund sales.

Deutsche Bank taps US tech to boost turnaround efforts

Google, Microsoft and Amazon have set up shop on a Deutsche Bank site in Frankfurt to advise with proposals to fix the bank’s technology and partner with it on projects. Deutsche approached the US tech giants as part of a €13bn (£11bn) technology investment it has planned up to 2022 after struggling to harmonise its tech networks following years of rapid global expansion. Meanwhile, Deutsche Bank is to issue its first contingent convertible bond since 2014.

Mastercard wins approval to enter Chinese payments market

Mastercard’s application to launch a joint venture with a local company in China has been approved by the People’s Bank of China. Access for card companies was demanded by President Trump as part of recent trade negotiations.

Commerzbank told to speed up restructuring by ECB

The ECB has urged Commerzbank to speed up its restructuring efforts amid concerns over sluggish profitability and high costs. The comments were made by a bank official during a meeting in December.

Russian ministry to buy control of Sberbank

Russia’s finance ministry is buying the controlling stake in Sberbank held by the country’s central bank with 75% of the proceeds helping to pay for public spending pledges made by Vladimir Putin.

Have Australia’s scandal-hit banks changed their culture?

Jamie Smyth questions whether Australia’s banks have improved their culture following years of scandal, noting resistance of late to a slew of reforms.

AVIATION

Holiday demand boosts Tui amid Boeing pain

The drag on profit by the continued grounding of the Boeing 737 Max will be offset by stronger holiday demand, says tour operator Tui. The company now expects underlying core profits of between €820m and €1.05bn for the 12 months to the end of September, compared to €893m in the previous year. Shares were up 12%.

Third runway at Heathrow needed for global Britain

Heathrow’s CEO John Holland-Kaye has called on the government to approve a third runway at the airport as its growth slows. Mr Holland-Kaye said: “If we are to be a truly global Britain, we need to be better connected to global markets than our rivals in Europe.”

CONSTRUCTION

Construction firms rise on HS2 approval

Shares in construction and engineering companies rose yesterday after Boris Johnson signalled the go ahead for HS2. Balfour Beatty, Kier Group and Costain all rose following the PM’s decision on the £100bn infrastructure project.

FINANCIAL SERVICES

Brussels warned over access to City

The European Union will not entertain the UK's pitch for "comprehensive permanent equivalence decisions" for financial services in any free trade arrangement, Michel Barnier has said in response to Sajid Javid's assertions that the government would seek to keep regulatory autonomy while a “durable relationship” can be built. Bank of England deputy governor Sir Jon Cunliffe has warned the European Union that it will need to maintain close financial ties with London if it wants to remain part of "global pools of capital and liquidity” after Brexit. The FT’s Lex suggests “selective equivalence” could be arranged for certain areas of the City but others may well have a no-deal type outcome. Mark Carney joined Sir Jon in hinting that access for EU institutions to London could be cancelled if the EU threatened to pull UK eligibility.

UK should back the trawlermen over the financiers

The Telegraph’s Matthew Lynn outlines why the UK should back its fishermen over financiers in negotiations with the EU. He says the City’s access to EU markets isn’t as vital as is sometimes made out and with London a global financial centre, tying it to European regulations would do it more harm than good. Fishing, on the other hand, although worth a fraction of financial services, could grow considerably if the UK had full control over its waters and a revived industry would benefit a raft of deprived areas.

Pension plans come under more pressure on climate risks

The impact of climate change on savers’ pension pots will need to be better explained by trustees, the government has said, with schemes now required to disclose their strategies to manage risk. Therese Coffey, the Secretary of State for Work and Pensions, and Mark Carney, the Prime Minister's finance adviser for COP26, outline the rationale for greater climate-related disclosure in a piece for the Telegraph. They say pension funds “have the power to channel funding towards companies with a plan to make the transition to net zero.”

Woodford fund opens

Neil Woodford's Income Focus fund, renamed the LF ASI Income Focus and now managed by Aberdeen Standard Investments, will officially reopen tomorrow at midday. Savers will be allowed to start placing buy and sell orders today at noon.

UK university spinouts fail to capitalise on record equity funding

Despite a record £12bn equity funding for UK-based start-ups in 2019 the amount secured by university spinouts declined with experts fearing large investors are letting high-potential firms slip away to foreign buyers.

Lloyd’s of London taps mental health experts to overhaul culture

The FT reports on some of the people being brought in by Lloyd’s of London to help the insurance market reform its culture following claims last year that sexual harassment was widespread.

HEALTHCARE

KKR backs away from NMC Health

Private-equity behemoth KKR will not be bidding for struggling Middle Eastern hospitals operator NMC Health, dashing hopes for a rescue bid. Only GK remains in the running, despite concerns about overlaps in NMC founder BR Shetty’s business interests, as GK, led by a businessman called Kamel Ghribi, has interests in his healthcare assets.

RETAIL

Logistics investment takes Ocado to bumper losses

Ocado has reported a £214.5m pre-tax loss for the 12 months to December 1st, citing exceptional charges of £94.1m and heavy international investment. Group revenue was driven by 10.3% growth in the firm’s retail division, which grew to £1.6bn. Group earnings before tax fell 27.2%, from £59.5m to £43.3m over the whole year. Growth in both the retail and logistics divisions was offset by a £62.1m loss in international solutions. Despite this, Ocado bosses, including the company’s chief executive, Tim Steiner, are sharing an £88m windfall after a bonus scheme pegged to the online grocer’s share price paid out.

Intu shares tumble after Link backs out of equity raising

Intu shares lost more than a third of their value yesterday after Link Real Estate Investment Trust backed out of plans to participate in the shopping centre-owner’s planned £1bn fundraising.

ECONOMY

Economy flatlines in Q4 2019 but exports jumped

The UK economy ground to a halt in the last quarter of 2019, according to the latest data from the Office for National Statistics (ONS), as political uncertainty driven by Brexit and the December General Election weighed heavily on the nation. Britain’s services sector rose just 0.1%, while manufacturing production fell 1.1% quarter on quarter, as the UK economy grew 1.4% in 2019 as a whole. “The underlying picture for production was one of weakening throughout 2019, with nine months of the year showing negative rolling three-month growths,” the ONS said. However, UK companies sold £689bn of goods and services overseas last year, up 5% on 2018, according to the ONS. Goods exports to outside the EU rose 13.6% while sales into the bloc fell by 0.9%. China is now Britain's third largest export market behind the US and Germany having leapfrogged France, the Netherlands and Ireland.

OTHER

Mark Carney applauds plans for levelling up

Outgoing Bank of England Governor Mark Carney has hailed Boris Johnson’s infrastructure and skills spending plans as a means of levelling up the economy, arguing that the “prize in social and also in economic terms is great.” He added that if the productivity of greater London could be replicated in the rest of the UK “the economy would be one-third bigger”. His comments follow the PM’s announcement that HS2 will go ahead, which business groups also applauded. But the Federation of Small Businesses urged HS2 contracts to be broken down to “increase competition, drive down costs, and protect taxpayers from the risk”.

Radical new approach to monetary policy needed

Standard Life Aberdeen CEO Keith Skeoch says in a piece for the Telegraph that a “new government, a new Bank governor and a new life outside the EU is an opportunity to take a radical new approach to monetary policy”.

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