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Daily News Roundup: Wednesday, 26th July 2023

Posted: 26th July 2023

BANKING

NatWest boss resigns

Dame Alison Rose is to step down as CEO of NatWest after admitting to leaking private information about Nigel Farage’s finances to the BBC. Downing Street and Jeremy Hunt, the Chancellor, reportedly expressed significant concerns about Rose remaining in post while three other cabinet ministers said that her position was untenable. Mr Farage was de-banked by Coutts, NatWest’s private banking unit, because of his political views. NatWest chairman Sir Howard Davies said on Tuesday that the board retained full confidence in Dame Alison, describing the leak as “a regrettable error of judgment” and promising an independent review. But overnight he announced that Rose was stepping down by mutual consent. Mr Farage had called for both Rose and Davies to quit along with the boss of Coutts, Peter Flavel while the Financial Conduct Authority had indicated that it was prepared to take action. NatWest later confirmed Paul Thwaite, the current chief executive of the company’s Commercial and Institutional business, would take over Dame Alison’s responsibilities for the next year, pending regulatory approval. The Treasury minister Andrew Griffith will question bank bosses today over the “blacklisting” of customers for their political views.

HSBC cuts mortgage rates after inflation fall

HSBC is to cut rates on a range of mortgage deals today making it the first high-street bank to react to the better-than-inflation figures released last week. The bank will cut its standard two-year fixed mortgage rate from 6.24% to 6.14% for those remortgaging while its five-year fixed mortgage rate for those remortgaging is expected to fall by 0.2 percentage points, from 5.84% to 5.64%. David Hollingworth, of broker L&C Mortgages, said: “This is significant because it’s HSBC. They are generally competitive in the market and that will force others to think about whether they need to follow suit.” Smaller lenders have already trimmed rates slightly, such as Platform, owned by the Co-operative Bank, and Accord Mortgages, which is owned by Yorkshire Building Society. The average two-year fixed rate mortgage across the market stood at 6.83% on Tuesday according to Moneyfacts.

Paragon Bank attracts billions in new deposits

Paragon Bank has seen its retail savings balance increase by 21.6% to over £12.3bn by the end of June. The massive rise on last year comes as savers sought to lock up their money longer term with better rates. In a trading update covering the nine months to June, Paragon said the net loan book had grown by 4.8% to £14.7bn; mortgage lending climbed 7.8% but commercial lending fell 8.7%. Nigel Terrington, chief executive, said: “The group has delivered another strong trading performance with robust new business flows, strong customer retention and good margins. We expect to deliver results for the year in line with expectations.”

PRIVATE EQUITY

Bridgepoint banking on M&A bounce

Bridgepoint is betting on a rebound in dealmaking in the second half of the year after first half results revealed investment income had slumped to €12.7m, down from €38.7m last year. However, the private equity firm’s managed assets had risen by 3.9% on the same period last year to €39.5bn, a 6% increase on the same period last year and a 48% rise since the firm floated in 2020. Pre-tax profits climbed 10% to £53.1m. Chairman William Jackson said: “As we move into H2, we are already seeing activity increase in the M&A market. In this context, Bridgepoint remains on track to deliver full year results in line with financial guidance.”

GIC warns of the end of an era for private equity

The boss of Singapore’s $700bn private equity firm GIC has said the days of high valuations, lower leverage costs and low interest rates are coming to an end.

INTERNATIONAL

PacWest and Banc of California agree merger

Banc of California and PacWest are to merge as regional US lenders further consolidate following the collapse of Silicon Valley Bank. Warburg Pincus and Centerbridge Partners will invest $400m in the new group.

Lazard launches new capital raising arm

Lazard has launched a new unit aimed at advising its clients on capital raising. Lazard Capital Solutions will be led by Tim Donahue who joined Lazard from JP Morgan Chase last year.

Deutsche Bank announces €450m buyback

Deutsche Bank will undertake a €450m ($497m) share buyback this year, reflecting the improved financial state of Germany's largest lender. The bank is set to release quarterly earnings today.

Wells Fargo approves $30bn buyback program

Wells Fargo has authorised a new share buyback program of up to $30bn. Shares rose 1% in extended trading after earlier jumping almost 4% after the announcement.

FINANCIAL SERVICES

LME names new CEO for clearing house

The London Metal Exchange (LME) has announced the appointment of Michael Carty as the new chief executive of LME Clear. Carty, who joins from Euroclear Group, will begin his role on 2 October. LME Clear, the clearing house of the LME, has seen several changes to its senior team this year. David Warren, chairman of the LME Clear board, expressed his excitement about Carty's appointment, stating that his expertise and international experience will be of great benefit to LME Clear. James Cressy, the interim chief executive, will remain with LME Group when Carty takes over. The appointment comes after LME faced controversy last year when it suspended trading and later cancelled trades worth $3.9bn. The Bank of England has confirmed that LME Clear will face supervisory action following an audit of last year's events.

HEALTHCARE

Sir Nigel Rudd returns to Destiny Pharma

The boardroom veteran Sir Nigel Rudd, known for his previous chairmanships of companies like Heathrow and Alliance Boots, is set to return to the stock market as chairman of biotech firm Destiny Pharma. Rudd, who has also held senior roles at the CBI and the Financial Reporting Council, previously chaired Destiny Pharma from 2010 to 2018. The company, which recently appointed a new CEO, focuses on treatments to prevent postsurgical infections and foot ulcers. Rudd expressed confidence in the company's potential, stating that there is a $2bn-plus opportunity with the XF-73 programme in the US alone. Destiny Pharma's shares rose 9.9% following the announcement of Rudd's appointment.

LEISURE & HOSPITALITY

William Hill owner 888 names Per Widerström CEO

888 Holdings has named Per Widerström as its new chief executive, replacing Itai Pazner who resigned earlier this year amid an investigation into suspected money laundering. Widerström, a gambling industry veteran, previously held top positions at Fortuna Entertainment Group, Gala Interactive, and PartyGaming. He will take over on 16 October. The appointment comes after 888 Holdings abandoned plans to hire former Entain boss Kenny Alexander as CEO. The company's UK operating licence is currently under review by the Gambling Commission. 888 Holdings shares rose 3.8% following the announcement.

MANUFACTURING

Rise in manufacturing output spurs hopes of recovery

Output in the UK's manufacturing sector has increased for the first time this year, raising hopes of a gradual recovery. The latest survey from the CBI shows a slowdown in declining orders and an overall rise in activity between April and June. This comes after a PMI survey revealed output in the sector fell to a three-year low last month. While energy prices have fallen and supply chain disruption has been repaired, weak global conditions and trade barriers have impacted UK companies. A separate survey from the Federation of Small Businesses shows an increase in exports in the second quarter while the ICAEW found that, despite falling production costs, manufacturers have raised their selling prices at the fastest pace on record.

MEDIA & ENTERTAINMENT

Guardian Media Group sees revenues rise

The Guardian Media Group increased turnover by 3% to £264.4m in 2023, boosted by a 17% increase in revenue in the publisher’s international markets, which rose to £93.2m in the financial year to 31 March 2023. In the UK alone, however, revenues were down by 3% to £171.2m due to a decline in print newspaper sales and a weak UK advertising market; income from digital products accounts for 70% of revenue. The company recorded a cash outflow of £21m following increased investment in editorial teams, newsletters and podcasts.

Profits up for Telegraph Media Group

The Telegraph Media Group, the parent company of The Daily Telegraph, has said it will soon hit its target of 1m subscribers by the end of 2023 after buying the Chelsea Magazine Company and Classic Boat magazine. Operating profit prior to exceptional items hit £40.1m, up on the previous year, while overall revenue also grew slightly to £254m. The business is in the early stages of seeking a new owner after Lloyds Banking Group wrestled control of the newspaper from the Barclay family early this year.

Demand for AI drives revenues up at Microsoft

Microsoft has posted better than expected revenues after the integration of artificial intelligence into its cloud computing and office software business boosted demand. Revenue rose to $56.2bn (£43.56bn) in the three months up to the end of June - up 8% on the same period a year ago and more than the 7% expected by analysts.

Alphabet revenue beats forecasts on robust digital ad performance

Revenue at the search and advertising giant Alphabet climbed 7% in Q2 to $74.6bn, ahead of estimates for $72.8bn. Revenue from Google ads, YouTube ads and Google Cloud all beat forecasts with overall net profit coming in at $18.4bn - well ahead of the $16.9bn expected by analysts.

REAL ESTATE

Bank of Mum and Dad gives children 10-year head start

Research from the Bank of England found first-time buyers who rely on the Bank of Mum and Dad get a 10-year head start in the property market. “Deposits are two and a half times larger, loans are 30% smaller, and houses cost £15,000 more for those getting help, compared with those who are not,” according to the research, conducted by May Rostom, a senior analyst at the Bank.

ECONOMY

IMF confirms forecast for UK growth

The UK economy will grow by 0.4% this year, the International Monetary Fund has predicted, confirming a forecast made in May and marking a significant upgrade on the 0.3% contraction it predicted in April. The IMF said the UK’s improvement reflected “stronger-than-expected consumption and investment from the confidence effects of falling energy prices”. The Fund added that said Windsor Framework improved trade between Northern Ireland and Great Britain while the financial sector proved resilient in the wake of the collapse of Silicon Valley Bank in the US and Credit Suisse in Switzerland. The UK will outperform Germany, which is expected to suffer a 0.3% contraction this year, a downgrade on the 0.1% drop previously forecast. This means Germany is now expected to be the worst performing major economy in the world this year.

BoE’s money printing balloons by £50bn

The Bank of England is facing losses of £270bn on its bond buying sprees - £50bn more than just three months ago. Rising interest rates have pushed the bill for quantitative easing up, which will be paid by the taxpayer. The loss dwarfs the £123.8bn in QE profits sent to the Treasury between 2009 and 2022, suggesting a net cost to the taxpayer of £150bn by 2033. Meanwhile, ratings agency Fitch estimates that the Government will spend £110bn on debt interest payments this year, equivalent to 10.4% of its revenue. This is the largest share of its revenue on interest of any high income country.

OTHER

Chancellor reminds big firms of their social contract

Jeremy Hunt is urging Britain’s biggest businesses to do more to help with the cost of living ahead of bumper earnings reports. In an article for the Times, the Chancellor says that banks must improve “measly” interest paid to savers and oil companies ensure that falls in price are passed on swiftly at the petrol pump. Food producers need to show what they are doing to pass on falling wholesale costs to shoppers. “For many, profits will go up significantly, which I will welcome - that is the business of capitalism. It will mean companies are growing, extra revenue for our public services, bigger pension pots and more jobs. But I also hope we hear about what they have done - and are doing - for their customers directly.”

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