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Daily News Roundup: Wednesday 22nd May 2019

Posted: 22nd May 2019

BANKING

Tesco Bank to sell mortgage portfolio

Tesco Bank has announced that it plans to sell off its mortgage portfolio after halting new lending, in a move which could affect more than 23,000 customers. The bank said that it had ceased new mortgage lending and was actively exploring options to sell its existing portfolio, which has total lending balances of £3.7bn. CEO Gerry Mallon blamed recent challenging market conditions and said the move was part of a strategic decision to “focus on serving a broader range of customers in more specific areas”. Tesco Bank said that its customers did not have to take any action and there would be no changes to their accounts as a result of the announcement of the possible sale. It will notify customers of any account changes if it agrees a deal with a buyer. Writing in the Mail, Alex Brummer says the ring-fencing of domestic banking from international and investment banking at the big four banks is leading to greater competition in the mortgage market. He says that HSBC has never been a big player in UK mortgages but now claims close to 6% of the home loans market by offering a competitive margin of just 1.16% above market rates. The FT’s Lex adds that as mortgage costs have plunged, so have lenders’ margins.

Profits squeezed at Nationwide

Nationwide Building Society has reported that its annual profits have fallen by almost a fifth after taking a £227m hit on its technology assets and ramping up spending on IT. The mutual reported a 19% drop in underlying pre-tax profits to £788m for the year to April 4 - its third straight year of falling annual earnings. On a statutory basis, pre-tax profits fell to £833m from £977m the previous year. CEO Joe Garner said Nationwide suffered lower profits to put the interests of members first. He explained: “During the year, we also announced a significant boost in our technology investment over five years to ensure we continue to excel on service. These were conscious decisions we were able to make as a building society.” The lender said it expects the housing market to remain “fairly subdued”, but strengthen once the wider economy picks up as Brexit concludes. It said growth is set to remain “modest” amid Brexit uncertainty and predicts little change in interest rates over the next few years.

Norges Bank buys into Metro

A filing has revealed that Norway's sovereign wealth fund Norges Bank acquired a 3.1% stake in Metro Bank on Friday, a day after the British lender raised £375m to shore up its balance sheet. Meanwhile, Metro Bank escaped a potential investor challenge at its annual meeting, but there were sizeable votes against several of its most senior directors. Metro’s pay report was opposed by 21% of investors who voted, while 28% voted against the re-appointment of board directors Stuart Bernau and Eugene Lockhart. Including abstentions, 16% of voters opposed the re-election of chairman and founder Vernon Hill, while 11% failed to back CEO Craig Donaldson.

Reforms will help small banks … if they can survive a little longer

Writing in the Times, Katherine Griffiths contends that new rules labelled “Basel 4” will make it cheaper for small banks and more expensive for larger ones to issue low-risk mortgages and loans. Under the existing rules, smaller banks and building societies apply a 35% risk-weight to their mainstream mortgages. Big banks, meanwhile, are able to use their own internal models and can apply a risk-weight of as little as 5% or 10% for the same loan. Ms Griffiths notes that Basel 4 will level the playing field and could present a significant opportunity for smaller lenders. She does add, however, that it remains to be seen if the challenger banks can stay around long enough to take advantage of the changes, or follow the lead of Tesco Bank and give up on the market.

Urgent action needed to protect cash

The Independent’s David Clarke argues that it is time for a new settlement with Britain’s banks. He says if they continue to receive substantial taxpayer backing, they must justify it by – at the very least – providing basic services to the public. He adds that urgent action is needed to protect access to cash. He also says that a new settlement with Britain's banks must also recognise the need for systemic change regarding banks' wider role in the UK economy. The vast majority is lent to property and financial markets, resulting in an economy skewed towards housing bubbles, finance and asset price inflation. Clarke proposes that the Bank of England should be more proactive in steering lending towards SMEs, the green economy and communities which have been starved of funds.

Closures trigger call for banking hub

MP Jamie Stone has written to the bosses of the Bank of Scotland, Clydesdale, Royal Bank of Scotland and TSB demanded that they pool their resources and open a “banking hub” in the Highlands after a series of branch closures.

PRIVATE EQUITY

Bridgepoint seeks upside from Brexit and Corbyn hit to pound

Bridgepoint has said it is working on contingency plans to take advantage of cheaper labour if the pound is hit by a combination of a no-deal Brexit and a Jeremy Corbyn-led government.

INTERNATIONAL

Former Credit Suisse banker pleads guilty on Mozambique bribes

Detelina Subeva, a former Credit Suisse banker, has pleaded guilty to a charge that she helped launder money from a kickback scheme involving $2bn in loans to state-owned companies in Mozambique.

Ana Botín’s comments on Dia prompt regulator’s scrutiny

Spain’s market regulator is analysing comments on Twitter from Santander’s chairman Ana Botin about an agreement with Russian tycoon Mikhail Fridman to rescue Spanish retailer DIA.

Four big challenges for Deutsche Bank as investors prepare to vote

The FT’s Olof Storbeck examines the challenges facing Deutsche Bank as investors prepare to deliver a rebuke to the bank at its annual meeting tomorrow.

CONSTRUCTION

Galliford Try to cut 350 jobs

Galliford Try is to cut 350 members of staff as part of a wider streamlining of its operations, with the firm confirming that its construction division would shrink to a revenue base of around £1.3bn this year - down from a previous £1.5bn. Its current order book is £3bn, slightly down on £3.3bn this time last year, though 78% of next year’s revenue has already been secured in the projects pipeline. Galliford said the staff changes would help to deliver annual savings of around £15m by 2021.

FINANCIAL SERVICES

Barroso asserts financial services priorities amid Brexit uncertainty

Jose Manuel Barroso, chairman of Goldman Sachs and former president of the European Commission, has urged Britain’s Brexit negotiators to prioritise the UK’s financial services sector. Speaking at the City Week conference in London, he said: “I think the most important issue for Britain is services, and in services certainly the jewel of the crown is financial services,” adding: “London will remain a very important, one of the leading financial places in the world because of the culture, because of the global market infrastructure, because of the expertise.”

EU and UK regulators clash over post-Brexit market supervision

Steve Maijoor, chair of the European Securities and Markets Authority, has spoken out over concerns surrounding financial services firms potentially abusing regulatory arbitrage post-Brexit.

HEALTHCARE

Merck agrees $1bn deal to buy biopharmaceutical company Peloton

American pharma giant Merck has agreed to buy Peloton Therapeutics, in a $1.05bn deal, to gain exposure to the biopharmaceutical firm’s renal cancer treatment - which is in development at present.

LEISURE AND HOSPITALITY

Oliver’s restaurant empire collapses with 1,000 jobs lost

Jamie Oliver’s restaurant chain has collapsed with the loss of 1,000 jobs. Administrators have been appointed to the group, which includes the Jamie's Italian chain, Barbecoa and Fifteen. Mr Oliver said he was devastated while unions sought assurances that workers would be paid what they were owed. The Telegraph reports that Oliver made personal guarantees to HSBC and distributor Brakes who could now pursue him for debts.

MANUFACTURING

British Steel on the brink with thousands of jobs at risk

Thousands of jobs are in the balance as British Steel teeters on the verge of collapse. The company could fall into administration today should talks about the government providing an eleventh-hour loan break down. The business minister Andrew Stephenson told MPs that “subject to strict legal bounds, the government will leave no stone unturned in its support for the steel industry”. However, sources close to the talks expressed pessimism. One said: “There is no good news and definitely not the good news the government needs at this time, given the European elections are on Thursday.”

UK manufacturing growth holds steady

UK manufacturing output growth held steady in the three months to May, according to the CBI’s monthly industrial trends survey, which revealed that though manufacturers saw order books fall in May, recent Brexit stockpiling took stocks of finished goods to a decade high.

MEDIA AND ENTERTAINMENT

Profits slip at Entertainment One

Entertainment One has reported that its profit before tax has fallen 43% to £37m after one-off charges. The production company said adjusted profit before tax was up 20% at £156m from £130m. Entertainment One said that decline in its film, television and music division was the result of fewer film releases and home entertainment market decline which was partly offset by a 30% increase in music revenue.

REAL ESTATE

Shaftesbury increases West End property revenue

West End landlord Shaftesbury has posted a 5.2% revenue increase in its first-half results. Shaftesbury said net property income hit £48.6m for the six months ended March 31 - up from £46.2m in the same period last year. Profit after tax fell 68.7% however, after growth in the valuation of its properties slowed.

SPORT

French group targets Six Nations

The French sports agency Lagardère has launched a multimillion pound bid for the Six Nations rugby competition, according to the Times. The leaders of the Six Nations unions already have an offer from CVC Capital Partners worth about £500m, to buy a 30% share of the commercial revenue of the Six Nations and all other Tests in Europe.

ECONOMY

OECD cautions BoE against raising rates amid Brexit uncertainty

The Bank of England has been warned against raising interest rates amid the Brexit uncertainty. The OECD predicted UK economic growth of just 1.2% this year and 1% next year.

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