Bank of England gives dividends, bonuses and buybacks the green light
Banks will be able to start paying normal dividends after the Prudential Regulation Authority (PRA) deemed them financially resilient. A nine-month ban on dividends rolled out amid the pandemic was eased in December, with the regulator saying pay-outs could resume but with limitations. These restrictions have been removed with “immediate effect”, the PRA said yesterday, announcing: “Extraordinary guardrails on shareholder distributions are no longer necessary”. The announcement came as the Bank of England’s Financial Stability Report found that banks were “resilient to outcomes for the economy that are much more severe than the Monetary Policy Committee’s central forecast”. This came after a stress test by the Bank’s Financial Policy Committee (FPC) found that Britain’s biggest lenders could withstand £70bn of losses on top of the £20bn they took last year in impairments. The FPC also said that while businesses and individuals have emerged largely stable from the pandemic, there are areas of concern. It said that SME debt has risen by about a quarter, although much of it is in low-interest government guaranteed loans. It also noted that while property prices are surging, the number of high risk mortgages is still lower than before the pandemic - with around one in 20 home loans above 90% loan to value compared with one in five in 2019. The FPC said it is in banks’ “collective interest” to continue to lend to support customers rather than trying to conserve their own capital. The central bank also said it was worried about "increased risk-taking" in global financial markets and noted the volatility of certain cryptoassets, saying that while their influence on wider markets has been "limited", that could change as more institutional investors, banks and payment providers actively invest and accept payments and deposits in cryptoassets.
FCA threatens action over banks’ poor financial crime controls
The Financial Conduct Authority (FCA) has issued a warning to retail banks about their failings in regard to financial crime controls. In a letter from David Geale, the FCA’s director of retail banking and payments supervision, banking industry chiefs were given an outline of the key issues and weaknesses, with governance and oversight, risk assessments and due diligence among the control weaknesses identified. The City watchdog has requested that banks complete a gap analysis of each of the identified weaknesses and take prompt and reasonable steps to resolve them by September 17. The regulator warned retail banks that it was likely to request proof of actions taken and, if they fell short, it may consider regulatory action. Mr Geale wrote: “The consequences of poor financial crime controls in a high-risk sector such as retail banking are significant.” He warned that this “can lead to criminals abusing the financial system to launder the proceeds of crime, supporting further criminal activity and damaging the integrity of the UK financial market.”
Firms not planning to rush back to offices
A number of large businesses plan to maintain a cautious approach to bringing staff back to the office despite England’s final coronavirus restrictions being lifted on July 19, with many opting for a staggered approach to getting staff back to their desks. NatWest will bring a small number of "priority workers" back to the office from next Monday, with these in roles "that can't really be done from home". These include market traders, those in NatWest's treasury department and employees who need to meet clients. The bank added that those who would rather work in the office for wellbeing reasons" can return to its sites from Monday. Insurance group Aviva said that while it expects "to see more of our people returning", the “vast majority” of staff “want to work flexibly in future" and will combine office attendance with remote work.
Bank looks into cloud firms
The Bank of England (BoE) has called for new powers to investigate cloud-focused tech firms’ growing hold over the UK's financial system, with governor Andrew Bailey warning that a dependence on firms including Amazon Web Services and Microsoft's Azure could heighten financial stability risks without "greater direct oversight". The BoE’s financial stability report said additional policy measures were needed for regulators to assess the strength of banking IT platforms as more critical services and sensitive data were moved into the cloud. A 2019 report by the Bank estimated that four firms held 65% of the market. Sam Woods, chief executive of the Prudential Regulation Authority, said it was concerned at more critical data being placed in the cloud. With it noted that banks spread data around several cloud providers to reduce risks, Steve Newson, chief technology officer at Starling Bank said the cloud-based bank uses multiple providers to deliver services.
Web probe reveals fraud tools
A Daily Mail investigation into the dark web reveals that fraudsters are selling fake website templates for banks for as little as £22, noting that these are often used for phishing scams. The probe uncovers a listing for an almost identical template of Santander's online banking page, plus some of its customers' details, including bank and security information, with web pages for Nationwide, HSBC, Halifax and Lloyds also available for £36. Mobile numbers for NatWest customers were also on sale, with these sold in batches of 100 for £33.
Halifax offers switch reward
The Mirror looks at switching deals being offered by banks as Halifax rolls out a £100 cash reward for those moving from another bank. It is noted that HSBC is offering £125 for switchers to either its Advance Bank Account or Premier Bank Account, while Virgin Money is offering £150 to new customers who switch to its M Plus Account.
Goldman Sachs and JPMorgan see bumper Q2 profits
Goldman Sachs and JPMorgan have reported bumper profits for the second quarter, with their investment banking divisions benefiting from surging activity in mergers and takeover deals. Goldman Sachs reported profits of $5.5bn in the second quarter - its second highest profit on record after the high recorded in Q1. Strong performance in its investment banking division meant revenues were also the second highest on record, at $15.4bn. Goldman’s chairman and chief executive, David Solomon, said the Q2 numbers and record revenues for the first half of the year “demonstrate the strength of our client franchise and our continued progress on our strategic priorities”. Elsewhere, JPMorgan reported a 150% increase in profits, which rose to $12bn from $4.7bn in Q2 2020. While revenues fell 7% to $31.4bn, investment banking revenues jumped 37% year-on-year. Chief executive and chairman Jamie Dimon commented: “Consumer and wholesale balance sheets remain exceptionally strong as the economic outlook continues to improve.”
Cryptocurrencies require EU-wide regulation, says France
France’s markets regulator wants EU governments to give the European Securities and Markets Authority responsibility for overseeing cryptocurrencies, transferring power from national supervisors to the EU’s financial markets watchdog.
Boeing cuts 787 production over structural fault
Boeing has scaled back production of its 787 airliners after finding a structural defect. It now expects to deliver less than half its inventory of 787s and said it is “reprioritising production resources for a few weeks to support the inspection and rework”.
Financial services deal making climbs
Analysis shows that deals in the UK financial services sector more than doubled in the first half of 2021 compared to the first six months of last year. The financial services industry saw 121 deals in H1 2021 compared with 57 during the same period in 2020. Despite an increase in deals in which there was either a UK target or a UK acquirer, the total value more than halved from £32bn in H1 last year to £13bn. However, it is noted that the £27.1bn acquisition of Willis Towers Watson by Aon accounted for a large proportion of last year’s total. The number of wealth and asset management deals jumped from 17 in the first half of 2020 to 62 in 2021, while the number of insurance deals rose from 18 to 33 and banking deals increased from 22 to 26.
Bailey: EU unlikely to open doors for UK financial services
Bank of England governor Andrew Bailey does not expect the EU to open the doors to UK financial services exports following Brexit, telling a news conference: “On equivalence, I think it’s fair to say that nothing really has moved forwards”. Chancellor Rishi Sunak recently made similar comments, noting that a financial services deal between the UK and EU “has not happened” despite the Brexit transition period ending over six months ago. City firms are unable to access the European market unless the EU declares that rules governing Britain’s financial services sector are equivalent to the bloc’s regulations. While Britain has recognised equivalence for the EU in several financial service activities, these have not been reciprocated by Brussels.
FSB: Cyber criminals exploit remote work shift
The international body which coordinates financial guidelines for the G20 says the pandemic has opened up new opportunities for cyber-attacks, with criminals looking to take advantage of a shift toward remote working. The Financial Stability Board (FSB) said: “Most cyber frameworks did not envisage a scenario of near-universal remote working and the exploitation of such a situation by cyber threat actors”. The FSB said that while financial institutions “have generally been resilient”, they may need to consider adjustments to cyber risk management processes, cyber incident reporting and response and recovery activities. The FSB report notes that cyber-crime including phishing, malware and ransomware, grew from less than 5,000 incidents a week in February 2020 to more than 200,000 a week in April 2021.
Phoenix to offload Ark Life Assurance
Phoenix is set to sell Ark Life Assurance Company to Irish Life for around £197m. Ark Life Assurance Company, known as Ark Life, added around £1.8bn of assets under administration to Phoenix's heritage division as of December 31.
LEISURE & HOSPITALITY
Land Sec to sell £500m of hotels
Commercial property developer Land Securities is preparing to offload £500m of hotel assets from its portfolio, saying the disposals are part of a wider change in strategy to focus on office and retail while pivoting away from non-core assets. The firm owns 21 hotels spread across UK cities including Manchester, Glasgow and London.
Insurer: Affordable housing needed to power recovery
Legal & General has warned that London will struggle to rebuild from the pandemic unless more affordable housing is built. The L&G Rebuilding Britain Index shows housing is the poorest performing measure behind jobs and economic prosperity. Land Registry data shows that while house prices are up 8.9% on 2020, house building remains depressed, with this leading to an imbalance between supply and demand.
Post Office cash movements highlight economic recovery
New figures reveal a record £2.7bn in cash was deposited and withdrawn at Post Office branches across the UK last month in a further sign that the economic recovery from Covid continues to gain momentum. According to the Post Office's latest "cash tracker", personal cash deposits topped £1bn for the fourth consecutive month, while withdrawals totalled £636m - the highest figure excluding Christmas since the start of the UK lockdowns in March 2020. Business cash deposits totalled £1.02bn in June as consumers loosened their purse strings after more than a year of restrictions. Business cash deposits were up by nearly 24% month-on-month.
Planned redundancies at six year low
Employers are planning the lowest number of job cuts for over six years, with redundancy figures from the Insolvency Service showing 15,661 positions were at risk in June. This marks the lowest monthly total since February 2015 and comes after June 2020 saw nearly ten times last month’s figure and delivered the worst rate on record. The data is based on the HR1 form employers planning 20 or more redundancies have to file to notify the Government at the start of the process. Xiaowei Xu, senior research economist at the Institute for Fiscal Studies, said: “The data suggest that there is no spike in redundancies coming in July or August”. She added: “The labour market is in a much better position than anyone expected at the start of the pandemic, and it shows how well the furlough scheme has worked."