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Daily News Roundup: Wednesday, 14th October 2020

Posted: 14th October 2020

BANKING

Mortgage availability falls to 10-year low

Mortgage options for house hunters have more than halved in the last 12 months, with the number of loans available falling to a 10-year low, according to industry analysts Moneyfacts. Mortgage availability has drastically diminished since the start of the COVID-19 crisis and there are now 2,259 loans on the market. This represents a 54% drop compared to last October, when there were 4,955 deals available. Small-deposit mortgages have all but disappeared as banks limit their lending amid economic uncertainty. Most will no longer lend to borrowers with less than a 15% deposit. Just 51 mortgages are available to borrowers with a 10% deposit.

Metro suspends new business accounts

Metro Bank has suspended the opening of new accounts for businesses due to a surge in demand from firms seeking Government-backed bounce back loans. HSBC, Lloyds, NatWest and Santander have all put openings on hold amid the pandemic, while there is a delay of a few weeks for Barclays business accounts.

PRIVATE EQUITY

BlackRock assets climb to record $7.8trn in third quarter

BlackRock said third quarter AUM reached a record $7.8trn, while revenue increased 18% compared with 2019 to $4.37bn. Net income rose more than a fifth to $1.36bn.

INTERNATIONAL

JP Morgan boosted by trading surge, Citigroup’s profits hit

JP Morgan’s Q3 net income rose to $9.44bn (£7.25bn) from $9.1bn a year earlier. The bank’s earnings per share of $2.92 was higher than analysts’ estimates. The rise in profit came due to a 30% increase in trading revenue to $6.6bn. The Wall Street bank also set aside less to cover loan losses than in the previous two quarters. Elsewhere, Citigroup reported that net income fell to $3.23bn in the third quarter from $4.91bn a year earlier. The decline reflected a 13% fall in revenue from global consumer banking as well as a $400m penalty for “deficiencies” in its risk controls. Nevertheless, its earnings per share of $1.40 beat analysts’ expectations, although it was not immediately clear if the fine was included in the total.

AVIATION

Delta Air Lines boss warns recovery in business travel to take at least 2 years

Delta CEO Ed Bastian says business market revenues fell 86% in the third quarter, while leisure passenger sales plunged by 82%.

FINANCIAL SERVICES

Low interest rates push up DB deficits

The Bank of England’s decision to cut interest rates in response to the coronavirus crisis has increased defined benefit (DB) deficits, with UK pension schemes facing a funding hole of £166.1bn at the end of September. Deficits have increased by £26bn in the space of a month, and over the past year aggregate deficits have risen by almost £50bn. AJ Bell senior analyst Tom Selby says: “Low central bank interest rates place downward pressure on Government gilt yields, which is bad news for DB pension schemes as this pushes up the value of liabilities,” while former Pensions Minister Baroness Altmann commented: “Negative rates make it even more difficult to fund pensions as final salary pensions cannot fall in value unless the employer is becoming insolvent.” Separately, LCP partner Steve Webb warned: “Low interest rates mean pension promises you make today are more expensive. That matters enormously for corporate Britain because if companies make pension promises that are expensive, it appears on their balance sheets, instead of them investing now."

Carney: Link executive pay to climate risk management

Former BoE governor Mark Carney has said that banks should link executive pay to climate risk management, as part of efforts to align the finance industry with Paris climate goals. Speaking at the UN Environment Programme Finance Initiative roundtable, Mr Carney said lenders should – at the very least – be transparent over whether or not pay is being tied to climate targets.

HEALTHCARE

Oxford Nanopore secures funding to ramp-up test production

Oxford Nanopore Technologies has secured new funds to ramp-up production of a 90-minute COVID test after winning approval for rollout in the UK. The biotech company has won a £112.6m contract with the Department for Health and Social Care (DHSC), following an original order for 450,000 of its fast-response LamPORE tests. Oxford Nanopore secured the £84m cash injection from new and existing investors, including Abu Dhabi-based International Holdings Company.

LEISURE AND HOSPITALITY

Cash concern for Cineworld

Analysts have warned that Cineworld could run out of cash within weeks and will need to raise $500m (£380m) from lenders to get through to next spring. The cinema group has opened talks with banks and other creditors after last week's decision to close all of its UK and US sites, putting 45,000 jobs at risk. Bank of America, an adviser to Cineworld on its aborted £1.6bn acquisition of Canadian rival Cineplex earlier this year, said the roughly $400m the company had in the bank in June would not be enough to get it to Christmas.

PROFESSIONAL SERVICES

FRC in diversity call for accounting profession

The Financial Reporting Council (FRC) has called on the accounting profession to improve diversity in its senior ranks as women still hold less than a fifth of top jobs at the UK’s biggest firms. The accounting watchdog found that half of all students registered with professional accounting bodies are now women but a lack of representation persists in leadership positions. Women make up 37% of accountants but less than a fifth of partners at the biggest firms are female. The FRC’s Key Facts and Trends report also found that just 6.7% of partners at the sector’s largest firms are from ethnic minorities, while no firms with fewer than 200 employees were found to have any Black, Asian, and minority ethnic managers.

Professional services at risk post-Brexit

A House of Lords’ EU services subcommittee report has warned that UK-based accountants are among professionals at risk of losing contracts and jobs when Britain formally leaves the EU in January. The report accused the Government of ignoring the “hugely important” professional services industry in trade negotiations with the EU. The professional services sector, which makes up around 13% of the UK workforce, is the UK’s leading services export. The EU is the largest market for UK professional services, accounting for 37% of exports from the sector.

REAL ESTATE

OnTheMarket sees surge in potential buyers post-lockdown

Property platform OnTheMarket has revealed that consumer engagement has been very strong after the government eased restrictions on the UK housing market in May, and it had delivered record leads to advertisers. In the six months ended 31 July the group posted revenue of £10.2m, up 28% from the previous year. OnTheMarket returned to profit during the period, with a profit after tax of £700,000, up from a loss of £7m last year. The platform said average listed advertisers increased 9% to 13,592 in the half-year period.

RETAIL

French Connection losses triple on virus hit

French Connection says sales halved in the first half of the year. In the six months to July 31, revenue came in at £23.9m, compared to £51m a year earlier, reflecting the adverse impact of temporary store closures amid the lockdown and the permanent closure of nine retail locations. The company consequently saw an underlying loss of £12.2m, compared with a loss of £3.6m last year. The retailer estimated that the virus-induced lockdown hit revenue by £22.2m and net profit by £9m with poor trading partly offset by reduced costs and Government support.

ECONOMY

IMF: COVID-19 will cost global economy $28trn

The International Monetary Fund (IMF) has warned that the COVID-19 pandemic will cost the global economy $28trn (£21.5trn) in lost output by 2025. The IMF said a stronger than expected performance in Q2 and Q3 means global output is likely to fall by 4.4% in 2020 compared with the 5.2% drop forecast in June. However, the organisation said that rising infection rates in some emerging market economies had forced it to pare back its estimate of the rebound in 2021 from 5.4% to 5.2%. For Britain, the IMF predicts the economy will decline by 9.8% this year, less than the 10.2% forecast in the summer. For 2021, the IMF expects Britain to see a recovery of 5.9%. Looking at the global picture, IMF chief economist Gita Gopinath warned that there is “tremendous uncertainty” about the future. On the impact of a second wave of COVID-19, she added that “the toll on economic activity would be severe, and likely amplified by severe financial market turmoil”.

OTHER

Unemployment hits three year high

The UK unemployment rate has risen to its highest level in over three years, climbing to 4.5% in the three months to August, compared with 4.1% in the previous quarter. Figures from the Office for National Statistics (ONS) also show that redundancies have hit their highest level since 2009. The data show that an estimated 1.5m people were unemployed between June and August, with the number of people made redundant hitting 227,000 – an increase of 114,000. Overall employment has fallen by 480,000 since the start of the year, with 16- to 24-year-olds accounting for 60% of the decline. Meanwhile, HMRC data show that the number of staff on company payrolls rose by 20,000 in September.

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