Bankers set for bonus bonanza
The Guardian’s Rupert Neate reports that British bankers will this week start collecting the biggest bonuses since before the global financial crisis in 2007. He cites research by financial data provider Refinitiv showing that London bankers in mergers and acquisitions earned total fees of £2.6bn in 2021. This is the highest annual total since Refinitiv's records began in 2000. Mr Neate says this money is “now set to be returned to bankers in their bonuses”, with HSBC, Barclays, Lloyds Banking Group and NatWest expected to pay out a total of more than £4bn in bonuses when they report their annual results in the next fortnight, with their combined annual profits expected to exceed £34bn. Mr Neate says the bonuses will see several hundred more UK bankers added to the EU's "high earners" report which details every banker earning more than €1m a year. European Banking Authority data shows that 3,519 bankers in the UK earned more than €1m last year - more than seven times the figure in Germany, which has the second highest number.
Metro Bank announces Arden exit
Metro Bank has announced that finance chief David Arden is to step down with immediate effect. His departure comes less than two months after Metro was fined £5.4m by the Bank of England’s Prudential Regulation Authority over an accounting mistake three years ago. The errors uncovered in January 2019 meant Metro had to increase its risk-weighted assets by £900m but it was not holding enough capital so was forced to raise £375m from its shareholders. The Financial Conduct Authority is still conducting its inquiry into the matter. Marc Jenkins, the deputy finance chief, will take on Mr Arden’s responsibilities while Metro looks for an interim replacement. CEO Daniel Frumkin said in a statement: “On behalf of the Board I would like to thank David for the important work that he has done to strengthen Metro Bank's financial controls over the past two years. He has played an instrumental role in helping to deliver the bank's strategic priorities and turnaround plan.”
Atom Bank eyes IPO
Atom Bank has been valued at £435m in a fundraising round, raising £75m from its two biggest shareholders, Spanish banking group BBVA and investment manager Toscafund. This is expected to be the last fundraising round before Atom attempts a listing on the stock exchange. CEO Mark Mullen said: “The next time we do anything in terms of raising money, it’ll likely be through an IPO process,” adding: “You can never absolutely guarantee it, but that’s the plan.” He noted that the latest fundraising is about raising growth capital, with the money used to bolster Atom’s regulatory capital buffers and to invest in products and services.
Pay at buyout firms ‘dwarfs’ sums on offer to investment bankers
Private equity giants Blackstone, KKR and Carlyle Group earmarked $2m in total pay and benefits per employee in 2021, far exceeding the amounts set aside at Goldman Sachs, Morgan Stanley and JPMorgan Chase.
Madison Dearborn to buy MoneyGram
Private equity firm Madison Dearborn Partners will acquire money transfer platform MoneyGram International in a deal valued at $1.8bn. The agreement includes a 30-day "go-shop" period expiring on March 16, during which MoneyGram would be allowed to seek alternate bids.
Banca March buys BNP Paribas's Spanish private bank
Spanish investment bank Banca March has agreed to buy BNP Paribas' private bank in Spain for €100m. BNP Paribas will transfer 80% of its portfolio of clients and its bankers to the Spanish bank, with the French bank to retain 20% of the business.
Firms call for more time to implement FCA's consumer duty
The Personal Investment Management and Financial Advice Association (Pimfa) has called for more time to implement the Financial Conduct Authority’s consumer duty, saying the proposed nine month timeframe is insufficient and greater clarity is required. In response to the second FCA consultation on the consumer duty, Pimfa and providers in the industry have called for more time to fully understand and implement the proposals. Pimfa said that while the City watchdog’s updated proposals carry more clarity, there is still significant scope for subjectivity. Liz Field, chief executive of Pimfa, said: “In our ongoing discussions with the FCA we have consistently asked for further clarity on the proposals that they have put forward.” She added that while an updated package of measures and draft guidance means the FCA’s expectations are clearer, “there is still scope for further clarity”. The FCA has set out plans for a new consumer duty designed to create a higher level of consumer protection in retail financial services. In December the FCA said it planned to roll out the new consumer duty, with an implementation date of April 30, 2023, nine months after final rules are due to be published in July 2022.
Complaints Commissioner: FCA approach to LCF is flawed
The Financial Conduct Authority (FCA) is coming under pressure to pay more compensation to the victims of the London Capital & Finance (LCF) scandal after the Financial Regulators Complaints Commissioner suggested the watchdog’s approach is flawed and recommended it changes the way it has calculated compensation. Commissioner Amerdeep Somal has been looking into the way the FCA handled complaints from those who lost money in the £237m scandal. It is noted that while the Financial Services Compensation Scheme paid out £57.6m to 2,871 investors and a special Government initiative has distributed £105m to about 8,500 people, the FCA has paid £34,020 to four people. Ms Somal said in her report: “The FCA’s approach to compensation in the LCF cases is unjustified and does not stand up to scrutiny.” She also warned that she has “significant concerns” about the FCA’s financial services register, which the public can use to research investment companies.
City firms to lose EU derivatives clearing access in 2025
UK-based derivatives clearing houses will no longer have access to the EU after June 2025, European Commissioner for Financial Services Mairead McGuinness has confirmed, saying the EU will no longer allow non-EU, UK-based firms to operate within the bloc from that point. The announcement comes just weeks after EU officials withdrew a deadline to pull European finance firms’ access to London clearing houses. London processes the vast majority of Euro-denominated financial contracts and European finance hubs lack the clearing capacity to replace London’s work load. The existing permit scheme was set to expire this June. Pointing to the “interconnected nature of financial markets and the important role that UK clearing houses play”, Conor Lawlor, managing director for capital markets at UK Finance, said the three year extension “provides needed certainty for EU and global customers and clients accessing the UK’s clearing infrastructure.”
Labour pledges manufacturing investment
Labour has released analysis showing that jobs in manufacturing fell by 93,000 between the end of 2009 and the end of 2021. This includes 16,000 jobs lost in the North and 18,500 in the Midlands. Labour leader Keir Starmer has accused the Government of presiding over a “shocking decline” in the number of manufacturing jobs. He has pledged to reverse the trend with a combination of investment in new technologies and training – especially in green technologies – and the awarding of more public contracts to British businesses.
Self-employed see loan woes over Covid grants
While government support grants and loans designed to support workers amid the pandemic are not officially marked against self-employed workers, some have found they are still causing problems when it comes to applying for a mortgage. A poll by the Association of Independent Professionals and the Self-Employed shows that two in five people who used the Self-Employment Income Support Scheme during the pandemic fear that they could be penalised in a mortgage application, while half fear they will not be treated fairly. Meanwhile, The Mortgage Lender, a firm which specialises in mortgages for self-employed people, says the group are the most likely to have experienced job volatility, with more than a quarter having their employment status change during the pandemic. A case study by the Daily Mail shows that some lenders are deducting the grant from borrowers' income for the 2020/21 tax year. This not only reduces the size of the mortgage they can qualify for, but in some cases means they cannot pass the affordability checks.
Blackstone announces recapitalisation of logistics business
Blackstone is doubling down on its support for its European logistics company Mileway with a £17.6bn reinvestment. Mileway has over 1,700 assets across 10 European countries with a team of over 350 employees across 26 offices. James Seppala, Blackstone's head of real estate Europe, said: “Logistics is one of our highest conviction themes globally and the sector continues to prove its resiliency and strong growth potential.”
Wage growth lags behind rising cost of living
UK wage growth failed to keep pace with the rising cost of living between October and December, Office for National Statistics (ONS) figures show. While wages increased, when taking inflation into account pay was down 0.8% compared to a year earlier. Employees' regular pay, excluding bonuses, grew by 3.7% between October and December from a year earlier but inflation was up by 5.4% in the 12 months to December, nudging down real wages. ONS analysis suggests employers are starting to push up wages at an increasing pace, finding that for workers on payrolls in January, median monthly wages increased by 6.3% compared with January 2021. Meanwhile, the ONS also revealed that that the number of job vacancies hit a record 1.3m between November and January. Matthew Percival, director for people and skills at the CBI, commented: “The good news is that the UK economy is continuing to create jobs. The bad news is that businesses are struggling to hire and pay is failing to keep up with inflation."
Interest rates forecast to hit 13-year high
Economists have warned that interest rates will hit their highest level for more than 13 years this summer, with HSBC analysts expecting rates to hit 1.25% in August. If this comes to fruition, it would be the highest level since early 2009. On top of this, experts at Capital Economics say rates could then hit 2% in 2023. The Bank of England has raised interest rates twice in recent months as it looks to tackle soaring inflation – from 0.1% to 0.25% and then to 0.5%. Inflation is set to continue to climb, having hit 5.4% in December, with Bank analysts expecting it to pass 7% in April as energy prices jump.
Britain more productive than before Covid
Britain is now more productive than it was before the pandemic, according to figures from the Office for National Statistics. Analysis shows that the UK produced 2.3% more goods and services per hour worked compared to before the Covid-19 outbreak, with each worker capable of producing 0.8% more than they were in February 2019. Despite gains in productivity, the actual amount of value workers add to the production process dipped 0.2%. It is noted that statistics have been skewed due to the furlough scheme masking real levels of productivity, with less productive workers more likely to be furloughed, meaning they dropped out of the calculations.
SMEs flag inflation concerns
Analysis by Barclaycard suggests SMEs are looking to increase hiring due to greater confidence in their prospects. The poll found that 40% plan to gain six new workers on average by the end of March, after a "promising start" to 2022. The survey also found that inflation has jumped to the top of the list of concerns for SME leaders. While last year 22% of small businesses said the pandemic was the biggest threat to the economy, this has since fallen to 6.6%. Fears over inflation have increased, however, with 10.2% of respondents flagging it as their primary worry.