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Daily News Roundup: Wednesday, 16th December 2020

Posted: 16th December 2020

BANKING

FCA fines Barclays £26m for mistreating borrowers

The Financial Conduct Authority (FCA) has fined Barclays £26m for failures in its treatment of more than 1.5m retail and small business customers in financial difficulties who fell behind on credit card and loan payments between April 2014 and December 2018. The City watchdog said Barclays had “failed to treat customers fairly or to act with due skill, care and diligence”. The fine took into account that Barclays had proactively redressed these customers, with the bank paying out over £273m since 2017. In agreeing to settle the case, Barclays qualified for a 30% discount on the penalty, reducing the fine from £37m. Mark Steward, FCA executive director of enforcement and market oversight, said: “We will take action against unfair treatment, or where firm systems expose customers to the risk of unfairness.” He added: “While this case predates the pandemic, this message is especially important as the impact of coronavirus continues to affect household incomes and budgets.” A Barclays spokesperson apologised and commented: “Since the issue was first identified, we have implemented a number of changes to our customer journeys, systems, processes and colleague training to correct it”.

BBLS losses could total £26bn

The Public Accounts Committee says Government plans for recouping taxpayer losses on fraudulent COVID-19 loans are "woefully underdeveloped". MPs on the committee say ministers failed to "strike the right balance" between rescuing companies and protecting the public purse. They added that the Government did not have the data to "assess the levels of fraud within the scheme, or its actual economic benefits" nor a counter-fraud strategy. The Times notes that the British Business Bank and senior business department officials objected to the scheme, voicing concern over possible losses and crime. Bosses at Lloyds and Santander have told the committee that around 1% of Bounce Back Loans have been taken out fraudulently. Analysis suggests losses from the BBLS could reach £26bn.

Mortgage blow for self-employed applicants

Experts say some self-employed workers are having mortgage applications unfairly rejected as banks impose tougher rules amid the coronavirus crisis, with some refusing to take bonus or overtime income into account. Andrew Montlake of Coreco said: “We are seeing more relatively strange decisions on applications that would have flown through before the pandemic hit.” A UK Finance spokesman said lenders will adopt different approaches based on their risk appetite, adding that they will consider factors including employment status, sector and payments.

Revolut launches Plus account

Revolut’s new subscription option, Revolut Plus, will include theft and accident coverage alongside purchase protection up to £1,000 for a year. The Plus service will cost £2.99 a-month. Revolut also announced plans that will see Premium customers protected up to £2,500 while Metal customers are to be protected up to £10,000.

Deal or no deal for bankers

Katherine Griffiths in the Times looks at what a deal or no-deal Brexit would mean for banks and financial services, saying the financial sector has already made arrangements for the future when access to the EU will be much more limited. She notes that most big banks have set up entities within the EU to serve big business customers with cross-border activities.

PRIVATE EQUITY

Treasury plans UK tax shake-up for asset holding companies

The Treasury has detailed proposed reforms to taxation of specialist vehicles used by private equity and infrastructure funds, a move that could “remove barriers” to establishing such companies in the UK.

INTERNATIONAL

ECB gives green light for banks to restart dividends

The European Central Bank will allow profitable eurozone banks with “robust capital trajectories” to pay modest dividends to shareholders from the start of next year but has outlined strict limits.

Credit Suisse to focus on boosting wealth management profits

CEO Thomas Gottstein says Credit Suisse plans to increase profits from its wealth management business by a quarter by 2023, with initiatives costing up to SFr150m set to boost the division.

SocGen wrong to fire banker after break

Judges in France have ruled that Societe Generale was wrong to fire an employee for failing to show up to work after a three-year sabbatical and ordered the bank to pay him more than £75,000 in compensation. The employee, who was told his previous job no longer existed, refused to return and take up a new position. Under French law, staff who go on sabbatical are entitled to return to the same job or one with similar status.

ANZ Bank in pledge to investors

ANZ Bank CEO Shayne Elliot has addressed concerns over reduced dividends, saying that while some may feel that allowing customers to defer loan repayments amid the pandemic may have been at shareholders' expense, it “was completely aligned with shareholder interests”. He told the AGM: “Treating customers with respect and providing help in the tough times earns respect and loyalty in the good times."

FINANCIAL SERVICES

LV= to be acquired by Bain Capital

LV= has sold its entire savings, retirement and protection businesses to private equity firm Bain Capital for £530m. LV= said the deal “maintains competition and choice for customers and IFAs in the UK market by supporting LV=’s ambitions to grow its leading brand, distribution and products”. LV= will ring-fence its with-profits business in a separate fund, but will close it to new business. LV said that following the sale, it would look to strengthen its relationship with advisers.

Chance for Paris to boost financial standing

City AM reports that Paris has an opportunity to burnish its credentials as a financial centre as Brexit approaches with no full EU equivalence deal for the City of London forthcoming. It quotes chief executive of European trading platform Aquis Exchange, Alasdair Haynes, as saying that the company decided to open a Paris unit because “the French have an enormous influence on how things are run in Europe.” This comes after the European Banking Authority moved its headquarters from London to Paris after the vote for the UK to leave the EU.

China suspends top credit rating agency as defaults hit market

The China Securities Regulatory Commission has announced that credit rating agency Golden Credit Rating is being suspended, with a former executive in the firm accused of accepting “massive” bribes.

LEISURE AND HOSPITALITY

Tier fears for hotels

Hoteliers have warned that businesses will be devastated by London being placed under Tier 3 coronavirus restrictions. Robin Hutson, CEO for The Pig Group, said in a social media post that “it won’t just be the capital that suffers”, warning that every country hotel in UK faces a “catastrophic” Christmas. Jane Pendlebury, CEO of the Hospitality Professionals Association, said hotels “were set for a period that would not only allow them to open, but would actually provide the opportunity to recoup some of their losses and help repair some of the damage of the last few months.” “Now though, they’re in despair,” she added.

MANUFACTURING

Chemring profits up over 30%

Defence firm Chemring’s profits rose 31% to £51.7m for the year to October 31 – with revenue up 20% to £402.5m. CEO Michael Ord said that 78% of expected order book revenues for the current financial year were already secured, with resilient Government defence budgets boosting the firm.

MEDIA AND ENTERTAINMENT

WPP gets its numbers wrong by £300m

Advertising agency WPP has admitted understating its losses by £301m, with the accounting error meaning a record half-year loss of £2.6bn reported in August has been corrected to a loss of £2.9bn. WPP said its finance team spotted the error after the results were issued, adding that it plans to restate accounts for 2017 to 2020 to correct them.

EU warns that it may break up Big Tech companies

The EU’s proposed Digital Markets Act could see big tech firms broken up if they are found to have repeatedly engaged in anti-competitive behaviour.

PROFESSIONAL SERVICES

Solutions 30 shares tumble after Muddy Waters joins attack

Shares in Solutions 30 fell by 38% after Muddy Waters CIO Carson Block questioned the outsourcing group’s corporate governance. The firm was last week criticised in an anonymously published report.

REAL ESTATE

Ministers urged to extend or adapt stamp duty holiday

The Treasury has been urged to extend the stamp duty holiday rolled out to support the property sector amid the coronavirus pandemic beyond the March 31 cut-off, with experts arguing that pushing the deadline back could prevent close to a quarter of a million sales from collapsing. Yorkshire Building Society estimates that 240,000 sales worth £58bn could miss the deadline. While some banks and those within the property sector are calling for the stamp duty holiday to be extended, others have mooted a technical change that would mean contracts had to be exchanged by the end of March. Nitesh Patel from Yorkshire Building Society has called on ministers to give buyers three months to complete purchases if their mortgage offer has been accepted by the current cut-off.

Shaftesbury reports loss of £700m

London landlord Shaftesbury has reported a loss of nearly £700m for 2020, citing the effects of the coronavirus pandemic on the value of its retail and hospitality properties. Losses after tax came in at £699.5m, compared to profit of £26m in the previous year, while net property income was down 24.2% to £74.3m, with a 3.5% fall in like-for-like rental income and charges for credit losses and impairments of £21.9m.

Purplebricks rides out pandemic challenges

Purplebricks has announced that it will beat full year profit expectations, citing an increase in demand during the coronavirus crisis. Earnings before interest, tax, depreciation and amortisation at the online estate agent were up 110% to £8.4m in the six months to October 31, while total fee income was up 6% to £49.1m.

RETAIL

Retail sales fall north of the Border

The latest monitor from the Scottish Retail Consortium shows that retail sales in Scotland fell by 10.2% last month compared with November 2019. On a like-for-like basis, sales decreased by 9.6%.

ECONOMY

Capital Economics issues optimistic prediction

Economists at Capital Economics have predicted that the coronavirus vaccine will see the UK economy recover more quickly than most analysts expect. While the Government’s official forecaster has predicted growth of 5.5% in 2021 and 6.6% in 2022 following a decline of 11.3% this year, Capital Economics believes that following a record decline of 11.5% this year, the economy will grow by 7.5% next year and by the same rate the year after. Paul Dales, chief UK economist at Capital Economics commented: “We think the COVID-19 crisis will lead to minimal long-term scarring. Later this decade GDP will return to the path it would have been on if COVID-19 never existed.” The firm also suggested that chancellor Rishi Sunak will not raise taxes or reduce spending in 2021 or 2022.

OTHER

Record spike in redundancies

Office for National Statistics (ONS) figures show that redundancies rose by an all-time high as 370,000 jobs were lost in the three months to October. The losses mean the jobless rate has hit 4.9%, up from 4.8% in September to the highest level since 2016. The number of UK workers on payrolls has fallen by 819,000 between February and November, while the ONS estimates that around 4.5m workers are currently on furlough. Experts have suggested that the Chancellor may be forced to extend the furlough scheme beyond March, with Investec’s chief economist Philip Shaw warning that a no-deal Brexit may have an impact, saying: “That is a non-COVID-19 event but one that could disrupt the economy in such a way to persuade the Chancellor to extend.” Paul Dales, chief UK economist at Capital Economics, said that if the pandemic means the Government is forced to continue tiers or lockdowns beyond March, “I think they are obliged to continue the furlough.”

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