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Daily News Roundup: Wednesday, 2nd February 2022

Posted: 2nd February 2022


Virgin Money reports steady growth

Virgin Money has reported steady growth in the first three months of its financial year. Deposits from existing customers rose 1.2% to £31bn, despite overall deposits falling 2% to £65bn in the quarter. Unsecured lending grew 3%, hitting £5.6bn. Business lending was down 2.2% to £8.3bn, while mortgage lending fell 0.5% to £57.8bn, with the firm pointing to the end of the stamp duty relief and tough competition in the sector. The firm’s first quarter saw it book lower charges for bad debts, at £16m. Virgin Money saw 132,000 new credit card accounts opened during the three months, the highest level since the beginning of the pandemic. CEO David Duffy commented: “Virgin Money’s performance in the first quarter has been strong. Our balance sheet is performing well, asset quality remains robust and we have increased guidance on net interest margin for 2022.” He added: “We are optimistic about the pace of recovery of the UK economy based on growing consumer and business confidence, underpinned by lower unemployment.”

Monzo unclear on fees, says CMA

The Competition and Markets Authority (CMA) says Monzo breached competition rules by failing to properly disclose the maximum fee on its personal current account. The watchdog says that between October 2018 and November 2021, the digital bank did not specify the monthly charge in the correct document when customers exceeded agreed overdrafts. This meant customers were not aware of potential monthly fees of up to £15.50. The CMA did not carry out formal enforcement action after Monzo updated its charges document in November.


PE firms eye Novartis' generics unit

Private equity firms Blackstone and Carlyle Group are reportedly in talks about potentially teaming up on a bid for drugmaker Novartis' generics unit, with the Sandoz business potentially valued at £19bn.


UBS posts best profits since 2006

UBS saw net profit jump 14% to £5.5bn in 2021, its strongest performance since 2006. UBS’s global wealth management unit led the way, generating £419m in profits before tax for the final three months of last year. Ralph Hamers, chief executive of UBS, said: “We continued to implement our strategy and build our global ecosystem. And we’ll carry that momentum forward as we deliver on our strategic plans and ambitious new targets.”

SocGen and ING in talks over Boursorama

French bank Société Générale and Dutch lender ING are discussing the possibility of serving ING's online banking customers in France via SocGen's Boursorama. This follows ING's decision to quit the French market.


FCA staff back industrial action

Staff at the Financial Conduct Authority (FCA) have voted in favour of industrial action over proposed reforms to pay and working conditions. Unite said 87% of its members at the City watchdog approved action over the proposed changes. Staff are said to be unhappy about certain reforms that have been put forward as part of FCA chief executive Nikhil Rathi’s transformation plan. Among areas of contention are cuts to pension rights and the abolition of bonuses that Unite says could lead to pay reductions of 10% to 12%. The union also said FCA staff had complained of an “unfair appraisal system” and pointed to “unusually high” levels of pay inequality at the regulator compared to other public watchdogs. Unite general secretary Sharon Graham said employees are telling FCA bosses “that the proposed changes are damaging and destroying any remaining goodwill the staff had.”

Activist investors increase their presence

Charlie Conchie in City A.M. looks at the prevalence of activist investors taking stakes in UK firms, saying Vodafone is the latest British company “to fall into the sights of an external agitator” in the shape of Cevian Capital. He notes that Unilever and GlaxoSmithKline have come under pressure from US investors Trian and Elliott respectively, while Third Point holds a $750m stake in Shell and hedge fund Bluebell Capital Partners has been pushing for change at Glencore. Iuri Struta, an analyst at Insightia, says “pockets of undervaluation” present “a huge opportunity for the activists.” He also says that a shared language means US activist investors see UK boardrooms as “a much easier place to push through the changes they want compared to Europe”.

LV= urged to cancel bonus for CEO

The Mail claims that LV= is coming under pressure to cancel bonus pay-outs to its CEO Mark Hartigan following a collapsed takeover by Bain Capital. Mr Hartigan could receive a maximum bonus of £740,000 for 2021, taking his total package to £1.26m. However, critics said it would the bonus would be an “outrage”. Peter Hunt, of mutual consultancy Mutuo, said: “You should be paying bonuses on performance. By any year it’s been a pretty woeful year for LV’s board.” Conservative MP Kevin Hollinrake, who sits on the Treasury Committee, added: “He’s frittered millions of members’ money on a failed deal, and any bonus would be a reward for failure.”

Peltz wins Janus Henderson board seat

Activist investor Nelson Peltz and Ed Garden, who co-founded investment group Trian Partners with him, are joining the board of asset manager Janus Henderson as independent directors. The Telegraph says the appointments “are likely to be closely watched at Unilever”, with Mr Peltz having built a holding in the business amid demands for a shake-up and possible sale of assets.


Manufacturing output growth climbs

The IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) shows UK factory output grew at its fastest pace in six months in January. Production output climbed for the third straight month to its highest since July 2021. The PMI reading, where a figure above 50 represents expansion, stood at 57.3 in January, down from 57.9 in December. Despite the dip, the sector remained in growth territory for the 12th consecutive month. IHS Markit director Rob Dobson said: “UK manufacturing made a solid start to 2022, showing encouraging resilience in the face of the Omicron wave, with growth of output accelerating as companies reported fewer supply delays.” However, he added that “causes for concern remain”, noting that new orders growth slowed, exports barely rose, staff absenteeism remained high, and “manufacturers’ ongoing caution regarding supply chain disruptions led to the beefing-up of safety stocks.” 


Housing market sees strongest start to a year since 2005

Figures from Nationwide show house price growth hit 11.2% in January, with this marking the strongest opening month to a year since 2005. The year-on-year pace of growth was faster than the 10.4% seen in December and the strongest since June. Prices rose by 0.8% month-on-month, marking the sixth consecutive increase as the typical value hit £255,556. The total number of property transactions was the highest since 2007 and around 25% higher than pre-pandemic levels recorded in 2019. Nationwide's chief economist Robert Gardner said housing demand had "remained robust" but noted: “While the outlook remains uncertain, it is likely that the housing market will slow this year."

Mortgage approvals hit 71k in December

Homebuyers saw 71,000 mortgage approvals in December, according to Bank of England data, with this above the 12-month average up to February 2020 of 66,700. The number of approvals for remortgaging with a different lender rose slightly, to 44,900 in December. This remains low compared with the 12-month average to February 2020 of 49,500, but is the highest since the 52,500 logged that month.


Premier League window shopping hits £295m

Premier League clubs spent more than four times as much money during the January transfer window than in the same period a year ago. The league’s 20 clubs spent a combined £295m, far exceeding the £70m spent in 2021. The five teams propping up the table accounted for more than 50% of the expenditure as they battle to avoid relegation. Premier League spending accounted for nearly 50% of gross expenditure across Europe's five biggest leagues - the top divisions in England, France, Germany, Spain, and Italy.


Households borrowing more and saving less, says BoE

Bank of England data shows that households are borrowing more and saving less, with the figures suggesting that people are dipping into extra savings amassed during the pandemic as inflation drives up costs. The Bank's Money and Credit report shows that consumer credit - which includes borrowing on credit cards, personal loans and overdrafts - increased by 1.4% year-on-year in December, marking an increase on the 0.8% climb recorded in November. It was also found that households deposited £3.2bn into banks, building societies and NS&I accounts in December – far lower than the pre-pandemic average, with typical deposits of £5.5bn a month recoded in the year to February 2020. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the data points to people starting to “draw down their 'excess savings,” suggesting this “reflects households attempting to support their current level of expenditure while their real disposable incomes are being battered by high inflation, rather than a positive shift in consumers' sentiment.” 

Two in three report cost-of-living squeeze

Two thirds of Britons saw their cost of living rise last month, according to an Office for National Statistics (ONS) poll of nearly 4,500 people. Of the 66% experiencing a higher cost of living, 32% said they were cutting back their domestic fuel use. Of those who said their cost of living had gone up, 79% said their gas or electricity bills were higher. The ONS said higher energy costs are disproportionately hitting lower income households, with the poorest 10% spending 7% of their disposable income on gas and electricity, compared with 2% for the richest 10% of households. Domestic fuel prices are expected to rise by 50% when a review of regulated tariffs takes effect in April. Martin Young, an energy industry analyst at Investec, said the new limit was likely to be set at £1,924 based on wholesale energy prices – a total that is 51% above the current level. He added that the price cap could rise even further in October, estimating that it could reach £2,450.

Supermarket bills could climb £180

Annual shopping bills are set to rise by around £180 on average as inflation pushes up the cost of groceries. Grocery price inflation over the last four weeks stands at 3.8%, with this a 0.3 percentage point rise from December. Over a 12-month period, the 3.8% rise in prices could add an extra £180 to the average annual grocery bill.

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