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Daily News Roundup: Wednesday, 7th February 2024

Posted: 7th February 2024

BANKING

Treasury could start selling NatWest shares in June

The Treasury could begin selling its shares in NatWest as soon as June. Holger Vieten, a director at UK Government Investments (UKGI), told the Treasury Select Committee that “the very earliest” the retail offer could begin “could be around summertime.” He later defined this period as starting in June. He said there was no “exact date for it,” with the Treasury yet to approve a timeline, adding that the plan was still “in the development and design stage.” It is understood that the Treasury wants to start the sale after the bank installs a permanent chief executive, with Charles Donald, chief executive of UKGI, telling MPs: “I think they need to provide clarity to the market on their proposals around either confirming the interim chief executive or a process around appointing a permanent chief executive.” Interim CEO Paul Thwaite, who is due to remain in his position until at least July, is among the leading contenders for the permanent job. Mr Vieten noted that UKGI had hired law firm Freshfields Bruckhaus Deringer, Barclays and Goldman Sachs to advise on the structure, size and logistics of the retail offering.

Virgin Money Q1 performance in line with expectations

Virgin Money UK has reported that its first-quarter performance is in line with expectations, despite its mortgage business being affected by stiff competition and subdued demand. The report shows that deposits edged up 1.7% year-on-year to £67.3bn. Virgin's net interest margin, which measures the difference between the interest it charges for loans and what it pays on deposits, was flat quarter-on-quarter at 1.89%. The company has maintained its full-year net interest margin forecast of 1.90%-1.95%. Meanwhile, Virgin Money warned of further cost-cutting and layoffs after reducing its headcount in the first quarter of the year. A total of 39 stores were closed in the quarter and 150 staff were laid off. The bank said it expects a further reduction in full time employees during the year.

TSB plans to cut jobs

TSB, the UK banking arm of Spain's Banco de Sabadell, is planning to cut around 300 jobs as part of a broader restructuring effort. The proposed cuts are expected to affect the lender's risk and finance, customer banking, and customer delivery teams. TSB said the changes are aimed at simplifying its operations. The bank has set aside £29m to cover the costs of the restructuring. TSB's CEO, Cesar Gonzalez-Bueno, aims to reduce TSB's efficiency ratio to 60% from the current 73.6% by the end of 2023.

PRIVATE EQUITY

Fund managers bullish on private equity

A poll of private equity funds by Carne Group shows that most managers are bullish for the year ahead despite the challenges facing the sector. In a survey of over 200 fund managers that collectively manage $1.6trn, private equity was identified as the most popular alternative investment. While 28% expect the level of fundraising by private equity firms to increase dramatically this year, 50% anticipate a slight rise. It was also shown that 83% expect the flow of new capital into their funds to increase this year, while 73% believe that the number of new funds launching in their sector this year will be higher than in 2023. Almost a quarter (23%) of managers expect a dramatic increase in the use of third-party management companies in the coming years, while 56% foresee a slight rise.

Blackstone partners with BNP Paribas over private debt fund

Blackstone, the world's largest private equity firm, is partnering with BNP Paribas over a new fund aimed at investing in companies in private debt. The fund will tap into the large pool of savings held by French retail investors through the country's popular tax-efficient life insurance product. BNP Paribas' private bank unit and insurance division Cardif have an exclusivity period to invest in the fund. The creation of a France-dedicated fund aligns with Blackstone's strategy of targeting individual investors.

CVC in talks to buy games developer

CVC Capital Partners is in exclusive negotiations to acquire Cambridge-based video games developer Jagex in a deal worth about £900m. The private equity firm is in advanced talks to buy Jagex from fellow buyout firm Carlyle. Jagex has been owned by Carlyle since January 2021 and was considering an IPO before turning to an outright sale. The auction has been run by Morgan Stanley and Aream & Co.

KKR earnings climb by 21%

KKR raised $31bn in new capital in its fourth quarter, bringing total fundraising for the year to $69bn. The private equity firm said its fee-related earnings increased by 21% in the quarter to $675m, bringing its annual earnings to $2.4bn. KKR's total assets under management were up by 10% to $553bn.

INTERNATIONAL

UBS warns of ‘significant' extra cuts

UBS CEO Sergio Ermotti has announced plans for an additional $3bn in cost cuts as the bank navigates its merger with Credit Suisse. The lender aims to achieve about $13bn in cost savings from the merger by the end of 2026, resulting in thousands more job cuts on top of the 16,000 roles already eliminated. Mr Ermotti emphasised the need for restructuring and optimisation over the next three years to fully benefit from the combination. Combining with Credit Suisse helped drive UBS to a total pre-tax loss of $751m in the three months to December, down from a profit of $1.9bn over the same period a year ago. UBS logged profit of $29bn for the full year.

JPMorgan to expand

JPMorgan Chase has announced plans to add over 500 new locations in the US by 2027, in one of its most aggressive branch expansions in recent years. The bank also plans to renovate nearly 1,700 of its existing branches and intends to hire 3,500 more employees for its branch network. The bank currently has the largest network of branches in the US, with 4,897 locations.

Intesa Sanpaolo sees profit growth

Intesa Sanpaolo expects its profits to continue growing in the coming years after reporting a 76% increase in net income in 2023. The Italian bank plans to reward shareholders by buying back its own shares, in addition to paying out cash dividends. Intesa Sanpaolo predicts that its net income will surpass €8bn this year and next, up from €7.7bn in 2023.

HSBC sells Armenian unit

HSBC has agreed to sell its Armenian unit to Ardshinbank CJSC, as part of its strategy to redeploy capital from "less strategic businesses to higher-growth opportunities globally." The deal is subject to regulatory approvals and the terms of the transaction have not been disclosed.

US banks close 37 branches in a week

US banks, including Bank of America, TD Bank, and KeyBank, filed to close 37 branches in a single week last month. A total of 139 scheduled bank branch closures were made public in January, more than the monthly average across 2023.

AVIATION

FAA increases presence at Boeing facilities

The US aviation regulator is increasing its oversight of Boeing and reviewing its practice of delegating some safety tasks to the airline. This comes after a mid-flight blowout incident involving a Boeing 737 MAX 9. Mike Whitaker, head of the Federal Aviation Authority (FAA), told the Committee on Transportation and Infrastructure that some inspectors are to be kept on at Boeing and airplane part maker Spirit AeroSystems after a six-week production audit.

CONSTRUCTION

Optimism builds in construction

Optimism among UK construction companies has reached its highest level in two years, according to a survey. The S&P Global purchasing managers' index (PMI) for the sector rose to 48.8 in January, up from 46.8 in December. However, housebuilding output continued to fall due to subdued demand for homes. The construction industry is hopeful that a loosening of monetary policy and interest rate cuts will boost revenue and demand for new buildings. Tim Moore, economics director at S&P Global Market Intelligence, said that construction companies are increasingly optimistic as recession risks fade and interest rate cuts appear close on the horizon. Despite the rising confidence, the industry is still struggling to generate growth as monetary policy remains restrictive.

FINANCIAL SERVICES

FCA races ahead with reforms to UK listing regime

The Financial Conduct Authority (FCA) has been compared to a Formula One team for its speedy and precise reforms to the UK's listing regime. Clare Cole, the FCA's director of market oversight, defended the regulator's work in overhauling the rules around listing in the UK, stating that they have acted with pace, agility, and ambition. The FCA has been forced to revamp the UK's listing rules due to a drop in IPOs and fresh listings. The regulator has been forced to revamp the UK's listing rules over the past two years after a drop off in IPOs and fresh listings in the UK. The number of firms listed in London has now cratered by around 40% from its peak in 2008.

Financial services firms urged to expand talent pool outside of London

Financial services firms should “get out more” to attract talent, according to Education Secretary Gillian Keegan. Keegan emphasised the need for City hiring managers to look beyond London to address recruitment challenges and create a broader talent pool. She highlighted the lack of awareness about financial services businesses outside of the capital as a barrier to attracting talent. Her comments come after a survey revealed that hiring managers in the industry were concerned about the challenging recruiting landscape. The research by Efinanciers found that more than 80% of the 465 respondents said the recruiting landscape was challenging.

COO leaves LSEG for insurance broker

David Shalders, the London Stock Exchange Group’s chief operating officer and head of integration, is to stand down to become group COO at insurance broker Howden. He will sit on Howden’s board and be a key part of the firm’s decision making.

REAL ESTATE

New home registrations fall by 44%

Figures from the National House Building Council (NHBC) shows that new home registrations fell by 44% year-on-year in 2023, There were 105,449 registrations in 2023, compared to 189,009 in 2022. Registrations for private sector homes saw a fall of 53%, while in the rental and affordable sector saw registrations dip by 22%. The NHBC report also shows that 133,213 new homes were completed in 2023, a 12% decline on 2022's total of 151,308. In the rental and affordable sector, 45,649 new homes were completed, marking an increase of 10% from 2022, while the number of private sector homes completed was down 20%. NHBC chief executive Steve Wood commented: "Whilst there were considerable supply and demand pressures on the new homes market in 2023, it is very encouraging to see record numbers of new home completions in the affordable sector."

RETAIL

Retail sales growth slows in January

British Retail Consortium (BRC) data shows that sales were up by 1.2% year-on-year in January, marking a slowdown on the 1.7% rise recorded in December. The Retail Sales Monitor also shows that January’s sales were down on the 4.2% growth seen in the same month in 2023. Victoria Scholar, head of investment at Interactive Investor, said January was a “harsh reality check for the retail sector,” with consumers “tightening their purse strings to mark the beginning of a new year and the end of the festive splurge.”

ECONOMY

Bank’s QT bond sales a 'leap in the dark' - MPs

MPs on the Treasury Select Committee say the Bank of England took a “leap in the dark” by starting to reverse its £875bn money-printing programme. They also voiced concern over potential losses of up to £130bn on the quantitative tightening programme, saying this could have “significant implications” for public spending. Quantitative tightening began in 2022 when the Bank started selling government bonds it had accumulated under its quantitative easing programme. Harriett Baldwin, chair of the committee, said: “It has become clear that the decision to undertake a period of quantitative tightening is a leap in the dark for the UK economy.”

OTHER

UK M&A deals decline by 17%

City bankers suffered a steep decline in deals last year as the UK underperformed in international mergers and acquisitions markets. The UK market saw the number of M&A deals decline by 17% to 4,362, with the value of transactions falling by 41% to £88bn. Dealmakers have said larger transactions have become more difficult to finance amid rising interest rates but the market had primarily slowed because of disagreements over the price of assets.

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