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Daily News Roundup: Wednesday 1st April 2020

Posted: 1st April 2020


Banks scrap shareholder payments

A number of the UK’s biggest banks, including NatWest, Santander and Barclays, have agreed to suspend dividend payments, holding onto the cash as uncertainty over the impact of the coronavirus pandemic continues. The Bank of England (BoE) welcomed the decision and has also urged the banks not to pay bonuses to senior staff. The Prudential Regulation Authority said: “Although the decisions taken today will result in shareholders not receiving dividends, they are a sensible precautionary step given the unique role that banks need to play in supporting the wider economy through a period of economic disruption.” Analysis by AJ Bell shows that Lloyds, Royal Bank of Scotland, Barclays, HSBC and Standard Chartered were set to pay a combined £15.6bn to shareholders, with the BoE saying this money will now “help the banks support the economy through 2020".

SMEs pushed toward more expensive loans

The Federation of Small Businesses has warned that some lenders are pushing SMEs seeking to get interest-free loans offered as part of the Chancellor’s COVID-19 support package toward more expensive alternatives that carry large interest rates and other charges. Federation chairman Mike Cherry said: “While the big banks have ruled out the use of personal guarantees where smaller interruption loans are concerned - a very welcome development - there is, at this point, nothing to stop them pushing those inquiring about these loans towards conventional products where personal guarantees are needed, and high interest rates are applied." In a letter to the Chancellor, chairwoman of the Business Select Committee Rachel Reeves has warned that some lenders are pushing their own financial products before the emergency loans, while others are seeking to apply high interest rates once the interest rate-free initial period ends.

Pandemic delays Virgin Money closures

Virgin Money has announced that a planned closure of 52 branches, alongside 500 job losses, would be suspended in light of the continuing coronavirus crisis. The banking group's Lucy Dimes said: "Our primary focus is on supporting our customers and protecting our colleagues during this challenging time.”

Monzo boss won’t take salary for year

Challenger bank Monzo is offering some staff voluntary furlough for two months via a scheme introduced by the Government which is designed to limit layoffs during the coronavirus pandemic by covering 80% of furloughed employees’ wages. Monzo will reportedly accept up to 175 furlough applications from its customer support division and up to 120 from other areas of the bank. This comes as the bank announced that CEO Tom Blomfield will not take a salary for a year, with the lender’s senior management team and board also volunteering to take a 25% pay cut.

Banks pushed to waive personal guarantees for SME coronavirus loans

Ministers are pushing for an agreement with the banking sector that would mean small companies need not provide personal guarantees to access interest-free loans designed to ease coronavirus-related pressures.

Contactless limit raised to £45

Measures to help tackle coronavirus have seen an increase in the maximum spend for contactless payments fast-tracked. As of today, the limit increases from £30 to £45, although UK Finance says the process of updating software in sale terminals may mean the new limit will not be active across all stores immediately.

Lloyds unveils helpline for over-70s

Lloyds has set up a phone line for customers who are over 70, providing support and helping protect against fraud. The banking group will also provide NHS workers and vulnerable customers with Lloyds, Halifax and Bank of Scotland with a priority service.


Asian PE fundraising at decade low

Figures from Preqin show private equity fundraising in Asia has dropped to its lowest level since the aftermath of the financial crisis, with the $9bn raised by 35 Asia-focused funds in Q1 marking the worst opening quarter since 2010. The slowdown has been attributed to the coronavirus.


ECB financial supervisor urges banks to cut bonuses

Andrea Enria, chair of the European Central Bank’s (ECB) supervisory board, believes banks should exercise “extreme moderation” on bonus payments this year as the central bank looks to prepare the banking sector for an expected recession driven by the COVID-19 outbreak. Mr Enria said: “In the capital conservation mentality that we are trying to instil in banks, I think we will expect them to exercise extreme moderation on variable remuneration.” The ECB last week urged eurozone banks to freeze dividends and share buybacks until at least October, with ING, Rabobank, Commerzbank and Unicredit among those having done so.


TPR warns of scams during COVID-19 crisis

The Pensions Regulator has warned that pensions savers could be exploited by scams amid the coronavirus crisis, In updated guidance, it said: “Pension trustees should give greater attention to the heightened risk of members being targeted by scammers and unscrupulous financial advisers.” The regulator last week issued guidance to trustees saying that all transfer activity could be halted for three months, with former pensions minister Baroness Ros Altmann among experts who had called for a pause over concern that valuations of pension pots would be inaccurate due to market turbulence caused by the COVID-19 outbreak.

Insurers pull out of travel market

New research from Which? has found that nearly half of the UK's major insurers have pulled out of the travel insurance market since the coronavirus pandemic sparked chaos around the world. Which? researchers found that 31 insurers, including household names such as Aviva, LV= and Direct Line, had temporarily suspended the sale of travel insurance to new customers as a result of the pandemic.

Barnett offloads unquoted investments

Invesco’s best-known fund manager Mark Barnett is offloading all the unquoted investments from his Income and High Income funds. Investors in the Income and High Income funds are expected to take a painful hit on the sale, as Invesco is understood to have written down the value of the companies by a total of 60% from when they were last assessed.

Fidelity shuts three Treasury funds to new investors

Fidelity Investments has closed three money market funds to new investors to protect the return of existing shareholders after the Federal Reserve this month cut short-term interest rates to near zero.


Big drugmakers under pressure to share patents against coronavirus

The heads of the World Health Organization and Unitaid are urging drugmakers to give up patent rights for potential treatments and vaccines as coronavirus continues to spread.


CMA clears £10bn gambling merger

The Competition and Markets Authority (CMA) has given Paddy Power owner Flutter’s acquisition of Sky Bet owner Stars the green light, ruling that consumers would not receive less favourable odds or less generous promotions as a result of the £10bn deal. Pointing to strong competition in the gambling sector, the CMA said that while the companies compete closely, “they are among a number of close competitors, and the merger will not worsen the offering to people who choose to bet online”. The CMA launched an investigation into the merger at the start of February.


Media industry feels the pressure from pandemic

The top 10 news websites have seen viewership figures rise 54% on the previous four weeks as the coronavirus crisis continues, while advertising revenue falls as a decline in consumer spending results in deep cuts across the media industry. Meanwhile advertising firm WPP’s dividend and share buyback have been cancelled, while guidance for the year has been suspended, as coronavirus sees clients increasingly cancel work.


Treasury trebles spending plans

The Treasury has trebled its Budget plans to raise cash from markets in April as it looks to support the economy through the coronavirus pandemic. The Debt Management Office says it will seek to raise £45bn in April – a record cash issuance of UK government bonds. The figure compares with an anticipated £16bn set out at the time of the Budget in March. Former Bank of England deputy governor and member of the Office for Budget Responsibility Sir Charles Bean has suggested Government borrowing could hit the same level as during the financial crisis, saying: “Together with the costs of the measures, the budget deficit could easily top £200bn this year according to the Institute for Fiscal Studies. That is nearly 10% of GDP, the same level reached in the Great Recession.”


Stock markets see worst quarter since 1987

A sell-off driven by the COVID-19 outbreak has seen stock markets suffer notable losses in Q1. The Dow Jones Industrial Average and the FTSE 100 recorded their biggest quarterly drops since 1987, falling 23% and 25% respectively, while the S&P 500 saw its steepest decline since 2008, dipping 20%. March ended with some positive movement, with the FTSE gaining almost 2% on Tuesday while Germany's Dax and France's CAC 40 saw gains. However, US indexes saw declines, with the Dow down 1.8%, the S&P 500 falling 1.6%, and the Nasdaq seeing a dip of almost 1%.

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