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Daily News Roundup: Wednesday, 18th November 2020

Posted: 18th November 2020

BANKING

Co-op Bank joins list of takeover targets in UK

The Co-operative Bank has received a takeover approach from a US private equity firm. While the bank only referred to the bidder as a “financial sponsor with knowledge and experience of investing in European financial services businesses”, it is believed that Cerberus Capital Management is behind the bid. Co-op Bank is currently owned by US hedge funds including Silver Point Capital, GoldenTree, Anchorage Capital, Blue Mountain and Cyrus Capital, as well as fund manager Invesco. Meanwhile, Sainsbury’s yesterday confirmed that it has been involved in discussions over a possible bid for Sainsbury’s Bank, saying it has “received some very preliminary expressions of interest in the bank”. This follows reports that NatWest has made an approach. John Cronin, an analyst at stockbroker Goodbody, says a “wave” of mergers and acquisitions in the banking industry could be on the horizon, identifying Virgin Money and TSB as possible targets. Elsewhere, it has been suggested that TSB’s future is uncertain with owner Sabadell in talks over a takeover by BBVA.

Dividends ‘should remain on hold for now’

Carolyn Rogers, secretary-general of the Basel committee of regulators, has said shareholder payouts should remain suspended until the likely economic effects of the coronavirus crisis are clearer. Comparing the current situation to the 2008 financial crisis, she said banks are “not pulling back credit like they did to save themselves at the expense of the broad economy. That’s a good thing - we can give them a gold star and a pat on the back, but we should also remember this is part of their job.” “Banks are supposed to absorb and not amplify shocks and downturns to the economy,” she added. Ms Rogers also stressed the importance of banks being well capitalised and not over-leveraged.

Lenders approve mortgage holiday plan

Banks and building societies have agreed to allow six month mortgage holidays up until July 31, 2021, with the industry agreeing the move with the Financial Conduct Authority. Applications can be made until March 31. Borrowers who have used up their six-month allowance can apply for "tailored support" such as reduced payments.

Start-up loans climb

Analysis shows that a record number of small companies have taken start-up loans during lockdown, with 2,670 loans provided under the British Business Bank's start-up loan scheme. This marks an increase of almost a quarter, year-on-year.

ABN Amro CFO joins Virgin Money

Clifford Abrahams, CFO and vice-chairman of ABN Amro, will leave the Dutch lender in early 2021 and become finance chief at Virgin Money.

PRIVATE EQUITY

Intermediate Capital sees profit climb

Intermediate Capital Group says performance since June has been "exceptional", with figures released yesterday pushing up shares in the asset manager by 7.9%. Investment company first-half profit increased by 56% to £103m for the six months to the end of September, while fund management profits increased by 6% to £89.8m.

INTERNATIONAL

Goldman Sachs plans further job cuts

Sources familiar with the matter say Goldman Sachs is preparing for a second round of job cuts, with this coming three months after it started trimming 400 positions from its workforce. Goldman is looking to cut costs to achieve a target of reducing operating expenses by $1.3bn over the next three years, an aim outlined in January as part of a broader strategic revamp.

DBS introduces job-sharing scheme

DBS, South East Asia's largest bank, is introducing a job-sharing scheme that will see two employees share the responsibilities of one full-time role.

AUTOMOTIVE

Ban on new petrol and diesel cars from 2030

Prime Minister Boris Johnson says new petrol and diesel cars and vans will not be sold in the UK from 2030, although some hybrids will still be allowed. The move comes as part of a "green industrial revolution" designed to tackle climate change.

AVIATION

Pandemic grounds easyJet earnings

Airline easyJet has reported a £1.27bn loss for the last financial year, compared to a £430m profit for the year-earlier period, with revenues down by over 50% to £3bn. The figures mark the first annual loss in the airline's 25-year history. Chief executive Johan Lundgren told BBC Radio 4's Today programme that positive trials of coronavirus vaccines are good news as “that is going to be a very critical part of the recovery", adding that testing and “refined development” of the quarantine system will also be needed.

Virgin Australia to position itself as mid-market airline

New CEO Jayne Hrdlicka says Virgin Australia will position itself as a mid-market airline, adding that it will target around a third of the domestic aviation market under the ownership of US private equity firm Bain Capital. Pointing to Qantas and its low-cost offshoot Jetstar, she said: “Australia already has a low-cost-carrier and a traditional full-service airline, and we won't be either”.

FINANCIAL SERVICES

FCA: Insurers’ policy claims ‘extraordinary’

Colin Edelman, a lawyer for the Financial Conduct Authority, has told the Supreme Court that insurers had come to an “extraordinary conclusion” by saying business losses during the coronavirus pandemic are largely uncovered by policies. He said insurers had seemingly taken the position that “We insure perils but not ones that are going to cost us a huge amount of money.” The hearing is seeking to determine whether policy wordings cover disruption caused by responses to the pandemic, with Arch, Argenta, MS Amlin, Hiscox, RSA and QBE challenging a High Court judgment that found largely in favour of the FCA and a policyholder action group.

PayPal arm invests in UK fintech

Fintech group Modulr is set to announce a £9m strategic investment from PayPal Ventures. The fundraising marks the first significant capital injection into Modulr since a funding round earlier this year raised almost £19m. The firm, which offers payment services, has raised more than £60m from investors since it was established in 2015. Myles Stephenson, chief executive of Modulr, said the investment from PayPal Ventures represented an "important milestone" for the company.

Scammers use name of closed firm

The Financial Conduct Authority has issued a warning to investors, telling them not to engage with a firm called Vision Introducer after it was found that fraudsters are using the closed firm's identity. The FCA had accidentally given the scam legitimacy, having failed to remove Vision Introducer from its industry database despite it having closed in 2012.

LEISURE AND HOSPITALITY

Lockdown hit for hospitality

Kate Nicholls of UK Hospitality has warned that pubs, restaurants and hotels are expected to burn through £500m this month as they faced ongoing expenses despite being unable to operate due to coronavirus restrictions. Ms Nicholls said that the hospitality industry had lost around 667,000 jobs even before England was plunged back into a national lockdown to fight the spread of COVID-19.

MEDIA AND ENTERTAINMENT

News Corp eyes Simon & Schuster

Rupert Murdoch’s News Corp is set to bid for Simon & Schuster, with Viacom CBS putting the publishing giant up for sale following a strategic review in March. News Corp is said to be a frontrunner in the auction, alongside Penguin Random House, the largest book publisher in the US, which is owned by German media group Bertelsmann.

REAL ESTATE

Homes sales boost economy by £1bn

Every 100,000 homes sold boosts the UK economy by £1bn, a study has found. Spending on building works, decorating and furniture means that each housing deal is worth £9,559 to the economy, according to the Home Builders Federation.

RETAIL

Online sales set to break records

A new report from IMRG has claimed that the combination of Black Friday discounts and coronavirus restrictions will make November a record-breaking month for online spending in the UK, with web sales expected to rise 60%. Of 320 retailers monitored by IMRG, by the middle of last week more than one in 10 had launched their Black Friday campaigns, compared with about 4% in 2019. A separate report for VoucherCodes found that shoppers are expected to spend £7.5bn during Black Friday. That would be a fall of about 12% on last year, with the dip blamed solely on lockdown store closures. Online sales are expected to be £2bn higher at £5.8bn.

High street losing £2bn a week during lockdown

The British Retail Consortium has claimed that retailers deemed to be “non-essential” are losing £2bn every seven days when they should be raking in pre-Christmas sales. Helen Dickinson, of the British Retail Consortium, said: “Many businesses survival is threatened. An arbitrary line has been drawn down the industry with a definition of what ‘essential’ means.”

ECONOMY

Bailey: Pandemic is changing the economy

Andrew Bailey, governor of the Bank of England (BoE), says positive results from trials of coronavirus vaccines could trigger a surge in investment by removing some of the uncertainty that has held back spending. Development of successful vaccines, he added, would be a “a big step forward” for the economy. Mr Bailey told a TheCityUK conference that while nobody was sure how permanent any economic changes would be, his “best guess” was that there will be “lasting changes”. He went on to say that the pandemic may spur “a reversal of the period of low productivity growth”. He also suggested that loosening financial regulations could drive large scale “productive investment” that would support the country’s post-coronavirus recovery. Elsewhere, BoE deputy governor Dave Ramsden has warned of the economic impact of the crisis, saying as much as £490bn would be lost to the economy over the next three years.

Investors fear long-term recession

A survey of over 1,000 investors by FJP Investment shows that 62% fear that the Government’s handling of the coronavirus pandemic will result in a long-term recession. In regard to Brexit, 41% said they are concerned over the impact of the UK’s exit from the EU on their finances, especially as a trade deal with the bloc has yet to be agreed. The proportion concerned by Brexit jumps to 53% for those with portfolios worth over £250,000.

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