BANKING
Banks to share premises under hub plan
Major banks have signed a new voluntary agreement which could see more shared banking hubs open in UK towns and villages. The agreement will see an independent assessment carried out by Link each time a branch is shut. These reviews could recommend a shared branch is opened, an ATM installed or a Post Office upgraded. Assessment trials over the past year will lead to 11 new ATMs, improved cash services in 30 Post Offices, and five new shared banking hubs all opening in early 2022. Analysis shows that more than 4,000 branches have closed since the start of 2015, and another 220 are already scheduled to close next year. Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, NatWest, Santander, TSB and Danske Bank have agreed to the new approach, a collaboration achieved through the Access to Cash Action Group. Natalie Ceeney, chair of the group, said: “I’m delighted that the industry is committing to ensuring that the cash needs of consumers and small businesses up and down the UK will continue to be met.” She added: “I’m confident that the new plan will lay the foundations for a positive future for cash access across the UK.” David Postings, chief executive of UK Finance, said: “The banking and finance industry is committed to maintaining access to cash for people who need it, when they need it.”
Chase goes on hiring spree
Chase, the new British retail banking arm of the US investment bank JPMorgan, is to hire hundreds more staff next year. The digital-only, app-based bank will increase staff numbers to more than 1,000 and is competing to become one of the biggest lenders in the UK. Sanoke Viswanathan, the head of JPMorgan's international consumer business, said it has hired 200 staff since September, taking its headcount to 800. He added that the bank will look to add more staff to help it roll out investment, savings and consumer lending products.
HSBC: Clients must have plan to exit coal by end-2023
HSBC has set out its policy on firms financing thermal coal, saying it expects all of its clients to have a plan in place to exit the fossil fuel industry by the end of 2023. Under its plan, HSBC will cut exposure to thermal coal financing by at least 25% by 2025 and 50% by 2030. Celine Herweijer, the bank’s chief sustainability officer, said: "We need to tackle some of the hard issues head on. Coal is one of the big issues."
INTERNATIONAL
BlackRock adds boardroom diversity target
Asset manager BlackRock wants US companies to aim for a board that is 30% diverse and, for the first time, contain at least one member from an under-represented group. In new guidelines explaining its priorities for portfolio companies in 2022, the firm also gave companies more leeway on how they report on their impact on climate change. It also said companies should hold votes on reorganisation proposals. Earlier this month Goldman Sachs said it wants big companies to have at least one director from an under-represented group.
Goldman and JPMorgan plan bumper bonuses for investment bankers
Sources suggest a record year for deal activity on Wall Street could see Goldman Sachs boost its bonus pool for investment bankers by 40%-50%, while JPMorgan could see a 40% increase.
Generali CEO to fight shareholder pressure with new plan
Philippe Donnet, chief executive of Italy's largest insurer Generali, is set to outline a new company strategy to try to fend off a leadership challenge from Generali's second and third largest shareholders, Francesco Gaetano Caltagirone and Leonardo Del Vecchio. They have opposed the reappointment of Mr Donnet, whose mandate ends in April.
FINANCIAL SERVICES
FSA wrongly denied firms compensation
An official review led by John Swift QC says the Financial Services Authority (FSA) failed in its duties when it excluded about 10,000 businesses from a compensation scheme for a banking scandal that saw SMEs mis-sold toxic interest rate hedging products. The report says the regulator avoided its responsibilities when it produced a sophistication test “at the stroke of a pen” for a redress scheme set up in 2012. The 493-page report looking at the FSA and its successor, the Financial Conduct Authority (FCA), also pointed to political interference in the scheme by former Chancellor George Osborne, with concerns that the scheme was going to cost banks too much money. Records show that Mr Osborne wanted redress costs to be reduced having been “lobbied hard” by the bosses of Royal Bank of Scotland and Lloyds Banking Group. The Treasury asked for FSA “proposals” on how the costs could be reduced. In 2013 an eligibility cap was introduced, essentially freezing out businesses deemed “sophisticated”. Mr Swift found “no explanation” of why the decision was made, despite examining swathes of documents and interviewing FCA staff. The changes, the report reveals, were “negotiated in last-minute confidential discussions with the banks” and the Treasury. “The FSA’s conduct fell short of the level of transparency that would have been appropriate,” Mr Swift said, adding that FSA and FCA communications “did not provide a level playing field between the banks . . . and the potential beneficiaries of the scheme”.
Tech giants crack down on ads for financial scams
Following a surge in online scams, Facebook, Microsoft and Twitter are to ban any advertisements for financial companies that are not registered with the Financial Conduct Authority (FCA). The tech giants made the announcement jointly through the Online Fraud Steering Group, saying they would “introduce a revised advertising onboarding process that requires... financial services advertisers to be authorised by the FCA”. This brings them alongside Google, which in August said it would no longer carry ads from companies not registered with the City regulator. Analysis shows a surge in fraud carried out by fake investment firms advertising on search engines or social media during the pandemic. Losses have almost doubled from £55.2m in the first half of 2020 to £107.7m in the same period this year. UK Finance has described the level of fraud as a “national security threat”.
LEISURE & HOSPITALITY
Trade bodies call for fresh support
Trade bodies have urged ministers to offer new support measures amid the latest coronavirus restrictions. UK Hospitality chief executive Kate Nicholls has called for full business rates relief, grants, rent protection and extended VAT reductions, saying: "We desperately need support if we are to survive this latest set of restrictions, and urge the Government to stand behind our industry.” VAT was cut to 5% for hospitality during the pandemic but was increased to 12.5% from October and will return to 20% in March. The British Chambers of Commerce has called for it to be returned to 5% - and has also requested that business rates relief be reinstated. Meanwhile, The Night Time Industries Association has called for the return of the furlough scheme in the first quarter of 2022, describing new measures as a "pseudo-lockdown". CEO Mike Kill said the trade body wants VAT frozen at 12.5% and additional sector specific grants targeted at hospitality.
MEDIA & ENTERTAINMENT
CMA: Apple and Google have a ‘vice-like grip’ on phones
The Competition and Markets Authority (CMA) has warned Apple and Google have a “vice-like grip” on how consumers use mobile phones. A preliminary investigation by the competition watchdog says the firms have dominated the market, exercising control over the content that people are able to access on devices. The CMA said the tech giants have been able to “tilt the playing field towards their own services.” The regulator has set out a range of possible solutions, including making it easier for consumers to switch between iOS and Android phones and giving users a choice of how they pay for things in-app, rather than being tied solely to Apple and Google’s payment systems.
REAL ESTATE
BoE plans to ease mortgage lending rules
The Bank of England has announced plans to ease mortgage lending rules in a move that could help first-time buyers get on to the property ladder. The Bank's Financial Policy Committee said that it was "minded" to withdraw the rule that forces banks to check that potential borrowers could afford a 3 percentage-point rise in their mortgage interest rate above the lender's standard variable rate. Scrapping the requirement could help 1% of renters in Britain currently not able to meet the affordability test. A further 6% of mortgage borrowers would also have been able to secure a bigger loan if the rule had not been in place. The Bank said a rule limiting some new mortgages to 4.5 times a borrowers' income, as well as separate affordability criteria set by the Financial Conduct Authority, were sufficient to guard against excessive risks in the mortgage market. It will consult on the change in the first half of 2022.
RETAIL
Tesco avoids pre-Christmas strike with fresh pay offer
Tesco has agreed to a new pay deal with trade union Usdaw, averting a potential pre-Christmas strike by workers at nine distribution centres. The trade union said it had "secured a new and much improved pay offer" and would ballot more than 5,000 members employed as drivers and warehouse workers on the deal.
ECONOMY
Bank of England urged to up rates
The International Monetary Fund (IMF) has urged the Bank of England (BoE) to increase interest rates to tame inflation, telling the Bank it needs to “withdraw the exceptional support provided during” the pandemic or risk facing spiralling inflation. The economic watchdog says the Bank should avoid “inaction bias” and lift rates from the record low of 0.1%. The IMF said the rate of price rises will not revert back to the BoE’s 2% target until 2024, estimating that inflation will hit a three-decade high of 5.5% in 2022. City economists expect the rate to climb to around 5%, with the Office for National Statistics estimating that inflation is already at 4.2%. Meanwhile, the IMF has forecast that the UK will see GDP growth of 6.8% for this year, with this dropping to 5% in 2022.
Inflation expectations highest since 2013
A poll from Citi and YouGov shows that expectations for inflation over the next five to 10 years have climbed to the highest level in eight years. Long-term inflation expectations rose to 3.8% in December from 3.7% in November. The 3.8% rate matches that recorded in September, making it the joint highest level since Q3 2013. Inflation expectations for 12 months' time were static at 4.0%. With the Bank of England set to decide whether to raise interest rates on Thursday, Citi analysts said they not believe rates will increase this week due to the Bank’s concern about the Omicron coronavirus variant, saying: “Instead, we expect some upward pressures here to keep the Bank on course for a rate hike - most likely in February.” Citi also said it expected inflation to reach as high as 6.4% in April 2022.
OTHER
Businesses resist price hikes as costs climb
Businesses are absorbing increasing costs in a bid to avoid hitting demand by hiking prices, according to research by Lloyds Bank. The analysis shows that the gap between the amount it costs firms to produce goods and the price they charge for their products has widened to the largest on record amid the soaring cost of raw materials. Lloyds said the rise in prices for components is “increasing pressure on margins that could potentially leave firms vulnerable to weakening demand and further input price shocks.” Jeavon Lolay, head of economics and market insight at Lloyds, said that many businesses are facing rising input costs but “are potentially choosing not to fully pass them on to their customers.” He added: “Persistent or worsening price pressures could leave some with no choice but to eventually raise prices.”
Slowdown ahead for big firms’ dividends
Analysis by AJ Bell suggests Britain’s largest listed companies will increase dividends at a slower pace next year after a steep increase driven by a strong rebound from the pandemic. Total dividends from FTSE 100 companies, excluding special dividends, are expected to reach £81.8bn this year, an annual increase of 32%, with pay-outs of £83.7bn next year, a rise of just 2%.