FCA tells banks to explain rise in overdraft fees
The Financial Conduct Authority (FCA) has written to the UK’s biggest banks demanding they explain why they have all revised their overdrafts rates to around 40% following the introduction of new rules banning lenders from charging more for unarranged overdrafts. Analysts said the clustering of fees by HSBC, Nationwide, TSB and NatWest at around 40% could force the watchdog to cap charges at a lower rate. The FCA also requested "a summary of your approach to dealing with customers who will be worse off following your pricing changes and the measures you are taking to support them". Former pensions minister Ros Altmann said: “The new overdraft interest rates are just wrong. The FCA wanted to address charges bank customers paid on unauthorised overdrafts, and its solution means banks are massively raising the costs of authorised overdrafts. If it wasn't so egregious I'd think the banks were having a laugh.”
Virgin Money builds consumer loan book
Despite a “difficult market” in the three months to December, Virgin Money built up its personal and business loan book. Personal lending increased 3.7% quarter on quarter, the bank said in a trading update, while business lending expanded 2.5%. Although it suffered an expected 0.8% slip in mortgages and flagged “uncertainty over the final Brexit settlement” as an ongoing headwind, the UK’s sixth-largest lender also confirmed the worst is over in terms of mis-sold insurance payouts to customers. The Times Katherine Griffiths questions whether CEO David Duffy deserves his £5.1m pay package suggesting this level of award shouldn’t be handed out until he has proved his strategy.
Opinion: Cut Metro Bank some slack
Anthony Hilton says in the Standard that Metro Bank has weathered recent storms reasonably well and has stabilised in a difficult market. If Britain wants challenger banks, continues Hilton, perhaps Metro should be cut some slack: “It has done some things wrong, but what business hasn’t?”
Single account holders access risk
Consumer group Which? has warned that 77% of people use a single bank provider meaning they could be left without access to cash in the event of an IT meltdown. Which? said in 2019 the main banks suffered 265 IT shutdowns - up from 228 in 2018. Jenny Ross, Which? money editor, says: “If the industry wants to encourage people online then banks must demonstrate their systems are up to scratch by drastically reducing the number of outages.”
Consumers increasingly relying on contactless
A third of credit card transactions and almost half of debit card payments are now contactless, according to UK Finance. Tap-and-go payments were up more than 10% to 761m transactions in October.
Barclays takes stake in receipt start-up
Barclays is set to take a minority stake in the London-based digital receipts start-up Flux. Flux connects banks with merchants to provide users with a digital version of their receipt, and recently signed deals with Papa Johns, Just Eat and KFC.
Six eurozone banks fall short of ECB capital requirements
Six unnamed eurozone banks have fallen below the European Central Bank’s capital requirements, up from one last year, emphasising the continuing fragility of Europe’s banking sector.
Airbus responds to bribery allegations
Airbus has agreed to settle allegations of bribery and corruption after probes by the French Parquet National Financier, the UK Serious Fraud Office and the US authorities. France and the UK have both investigated the French-based manufacturer for suspected corruption dating back more than a decade, while in the US the aircraft manufacturer is accused of violating export controls.
Brexit headwinds bite into Crest Nicholson
Profit before tax at Crest Nicholson sank 39% for the year ending in October, down from £168.7m in 2018 to £102.7m. The housebuilder's profit margins were also squeezed to 12.2%, a 4% year-on-year decline, while home sales slipped 2%, from £1.122bn in 2018 to £1.095bn. While it managed to maintain its 33p total dividend per share and net cash more than doubled to £37.2m, Crest Nicholson said it was particularly exposed to last year’s Brexit uncertainty.
McCarthy & Stone profits tank
McCarthy & Stone has reported that its profit before tax fell by 25% to £43.4m in the 14 months to October 31 last year, down from £58.1m in the 12 months to August 31 2018, largely due - it said - to around £17m of exceptional costs in relation to land that will no longer be developed. Revenue increased 8% to £725m, up from £671.6m in 2018, while legal completions grew from 2,134 in 2018 to 2,301 last year. McCarthy ended the year with £24.7m in net cash, up significantly on the £4m it had at the end of 2018.
Financial services recruitment stymied by Brexit worries and IR35
A report by recruitment firm Morgan McKinley has found that uncertainty over Brexit and the roll out of IR35 made financial services firms reluctant to take on new staff last year. The report found that banks and asset managers were particularly hesitant as they awaited clarity over the UK’s exit from the EU, and although sentiment has improved, the report warned that Brexit uncertainty will continue in 2020. Morgan McKinley added that IR35, which aims to prevent workers from disguising themselves as freelance contractors as a way to pay less tax, would likely lead to a reduction in short-term contracts, which could hurt recruitment in many financial services sectors.
Recognition for fintech in Scotland
Scotland’s financial technology community has been formally recognised for its excellence by the European Secretariat for Cluster Analysis (ESCA), which benchmarks economic clusters across Europe. Stephen Ingledew, chief executive of FinTech Scotland, said: "We are very proud of this centre of excellence cluster recognition which will further contribute to being recognised as a global fintech centre. Achieving cluster accreditation recognises the progressive innovation, collaboration and inclusion initiatives across Scotland over the past two years and will shape the economic and social priorities for 2020 and beyond.” Meanwhile, Lord Mayor of London William Russell, the elected head of the City of London Corporation, is actively seeking Scottish fintech companies to take part in upcoming trade visits to China, Japan and the Gulf.
Woodford investors scalped
Hundreds of thousands of investors in Neil Woodford's flagship fund are facing steep losses after administrator Link Fund Solutions said initial payments of between 46.3p and 58.9p per share, depending on class, would be made to investors. This represents 74% of the current fund value of the Woodford Equity Income Fund, now known as the LF Equity Income Fund, and follows the offloading of the most liquid holdings. The fund's more illiquid assets will be handled by boutique bank PJT Partners.
Saga takes Thomas Cook hit
Saga has asserted that its underlying profits before tax will meet expectations, despite a £4m hit from the administration of Thomas Cook. While margins will still hit the higher end of Saga’s £71 to £74 guidance range, the over-50s insurer warned that home and motor insurance revenue will likely come in 3% down on the year prior. Following a “challenging” backdrop in its last half-year, Saga has set full-year underlying profit before tax guidance at between £105m and £120m.
LEISURE & HOSPITALITY
McDonald's to be delivered via Just Eat
Just Eat has confirmed a deal to deliver McDonald's in the UK, describing it as "exclusive" even though the fast-food chain already has a similar agreement with Uber Eats. Sherri Malek, an analyst at RBC, said the partnership was "another significant win" for Just Eat after it announced a delivery tie-up with bakery chain Greggs earlier this month.
Kone joins CVC in bid for Thyssenkrupp elevator unit
Finnish lift maker Kone and private equity group CVC have tabled a joint bid for Thyssenkrupp's elevator unit. The "nonbinding offer" values the business at about €17bn including debt.
MEDIA & ENTERTAINMENT
Huawei furore: Johnson vows to remove China’s tech stranglehold
The UK has agreed limited access for Huawei to provide equipment for Britain’s 5G network, going against warnings from the US and senior ministers that the Chinese company poses a security risk. Boris Johnson appears to have placated Donald Trump to a degree by declaring Huawei a “high-risk vendor” and promising to work with the US to reduce Huawei’s presence in UK telecoms infrastructure, with the ultimate aim of excluding the Chinese giant altogether. Huawei’s share of the new market will be capped at 35% for each of Britain’s four mobile phone operators, and it will be banned from core parts of the telecoms network and from sensitive sites.
BT repatriates call centres
BT’s remaining overseas call centres have been brought back to the UK meaning all issues raised by British and Irish customers will be dealt with by local support services for the first time in nearly two decades. Over 2,000 jobs have been created in the UK in the past three years as the group attempts to repair its reputation for poor customer service.
John Lewis to end weekly sales figures
Department store retailer John Lewis is to stop publishing weekly sales updates and will no longer break down sales and operating profits between the John Lewis and Waitrose brands.
Subdued spending figures fuel rate cut talk
CBI retail data show sales were flat in late December and early January as households remained cautious about their finances. However, sales across the last three months were the strongest for a year suggesting an improvement in sentiment. Economists said the survey will likely fan expectations that the MPC could well vote to cut interest rates. But writing in the Yorkshire Post, Baroness Altmann says: “It is difficult to fathom the economic rationale for such a move.” “Monetary policy should not be backward-looking: Cutting rates would mean policy-makers responding to lagging indicators that represent circumstances which have fundamentally changed,” she adds.