NatWest criticised after hiking bonuses
NatWest is facing criticism after hiking its bonus pool to £367m, from 298m a year earlier.
Fran Boait, executive director at campaign group Positive Money, points out that the taxpayer bailed out Royal Bank of Scotland, as NatWest was then known, after the financial crisis.
“NatWest is using bumper profits to deepen its bonus pool, not to support the public, who bailed it out just 15 years ago, and who are now footing the bill of the higher interest rates boosting those very same profits.
“It is completely unjust that bankers who create only more wealth for the already-rich get pay boosts whilst those who educate, transport and care for the public are forced onto picket lines for fair wages.
“Clearly the government was reckless in its decision to remove the cap on bankers’ bonuses, which needs to be reinstated, and should tax these unmerited profits in order to provide struggling communities with financial support.”
Banks such as NatWest have benefitted from higher net interest margins due to rising interest rates – lifted to tackle the inflation surge from the energy crisis.
Unite general secretary Sharon Graham is calling for a windfall tax on the banks:
“It’s offensive that government ministers are insisting NHS workers take another savage pay cut while their big City banker friends are given carte blanche to make billions.
“Rishi Sunak needs to put a real powerful windfall tax on the excess profits of the big banks. Like the energy companies, the greed of the big banks is fuelling the cost-of-living crisis.
An epidemic of profiteering has brought this country to its knees – workers are not responsible for it and should not have to pay for it. It is time the government held the big business interests that profit, while everyone else pays the price, to account.”
Key events
Closing post
After hitting record highs this week, the FTSE 100 index is ending on a slightly weak note.
The blue-chip share index is down 10 points in late trading at 8002 points, down 0.1%.
NatWest continues to be the biggest faller, down 6%, with Lloyds Banking Group down 3.8%.
Michael Hewson of CMC Markets says:
NatWest Group has seen an underwhelming reaction to a strong set of full year results, an increase in the dividend and a share buyback.
Given the share price reaction today, it seems there’s just no pleasing some people even accounting for the disappointment over its guidance, which appears to be being blamed for today’s weakness.
Here are today’s main stories:
The US ecconomy continued to weaken last month, according to the Leading Economic Index produced by the Conference Board.
The LEI for the US fell by 0.3% in January, and has now dropped by 3.6% over the last six months.
“The US LEI remained on a downward trajectory, but its rate of decline moderated slightly in January,” said Ataman Ozyildirim, senior director for economics at The Conference Board.
“Among the leading indicators, deteriorating manufacturing new orders, consumers’ expectations of business conditions, and credit conditions more than offset strengths in labor markets and stock prices to drive the index lower in the month. The contribution of the yield spread component of the LEI also turned negative in the last two months, which is often a signal of recession to come.
While the LEI continues to signal recession in the near term, indicators related to the labor market—including employment and personal income—remain robust so far. Nonetheless, The Conference Board still expects high inflation, rising interest rates, and contracting consumer spending to tip the US economy into recession in 2023.”
On the Carillion settlement, a spokesperson for the Official Receiver said (via Financial News):
“Carillion and KPMG have agreed a settlement of Carillion’s claims against KPMG in respect of the audits of Carillion for the period 2014 to 2016.
The parties have agreed that the terms of that settlement will remain confidential.”
KPMG says it has reached a settlement with liquidator of Carillion
It’s official: KPMG has reached a settlement with the liquidator of Carillion, as flagged a few minutes ago.
But the settlement is confidential, so we don’t know how much KPMG is paying over its auditing of the construction firm before it collapsed in 2018.
KPMG’s UK chief executive Jon Holt said in a statement.
“I am pleased that we have been able to resolve this claim.
Carillion was an extreme and serious corporate failure, and it is important that we all learn the lessons from its collapse.”
Sky: KPMG reaches settlement with Carillion’s liquidator
Audit firm KPMG has reached a settlement with the liquidator of Carillion, the UK construction company which collapsed five years ago, Sky News’s Mark Kleinman reports.
Revealed: The big four accountancy firm KPMG will issue a statement today disclosing that it has reached a settlement with the liquidator of Carillion, the construction firm it audited and which collapsed in 2018 with the loss of thousands of jobs and with shareholders wiped out.
— Mark Kleinman (@MarkKleinmanSky) February 17, 2023
Carillion collapsed in January 2018 with £7bn in debts, resulting in 3,000 job losses and chaos across government and private-sector construction projects ranging from hospitals, schools, roads and even work on Liverpool football club’s stadium, Anfield.
Last May, KPMG was fined £14m – one of the largest penalties in UK audit history – after former staff forged documents and misled the regulator over audits for companies including Carillion.
In February last year, we reported that KPMG was being sued for £1.3bn by government officials liquidating Carillion, in an unprecedented legal action against one of the big four auditors.
Joanna Partridge
Segro, the London-listed property group which specialises in warehouses, has pleased investors with an 8% increase in annual pretax profit, which came in at £386m for 2022, my colleague Joanna Partridge writes.
The company, which is developing a 700-acre logistics park called East Midlands Gateway near Derby and next to East Midlands airport, said it had seen a near 20% increase in net rental income to £522m.
It also reported a record number of new rent signings over the year thanks to strong demand from companies seeking warehousing and logistics space, which came in at £98m.
The news has gone down well with investors, pushing Segro shares about 4.4% higher and making them the top riser on the FTSE 100 today.
However, rising interest rates and the turmoil in the property markets sparked by Liz Truss and Kwasi Kwarteng’s disastrous mini budget last autumn saw the value of the company’s portfolio written down by 11%.
Chief executive David Sleath told the Guardian there were reasons for optimism for the coming year:
“There is a growing degree of confidence that we are at or near the peak of the rates cycles, so if that’s it, people can start to plan and make their own assumptions around growth and returns, and that’s attracting more capital into that marketplace.”
Segro said it continued to see strong demand from companies in a range of sector, particularly those looking for space to house data centres, as well as from logistics companies, retailers and manufacturers.
Alex Lawson
More energy news: The bailed-out Germany energy giant Uniper has taken a €4.4bn hit
after losing control of its Russian subsidiary last year, our energy correspondent Alex Lawson reports.
The company, which was rescued by the German government last year, posted a record €19.1bn net loss for 2022 as it became one of the biggest corporate casualties in the fallout from the war in Ukraine.
Uniper agreed a bailout package with the government after it was left stranded by the drop in gas deliveries from Russia. It was once the largest importer of Russian gas in Germany.
Uniper said that it has been given no access to information from its Russian subsidiary, the power generation company Unipro, since last year.
On Friday, the company said it will overcome the problems generated by Russian gas cuts by 2024 at the latest.
Uniper owns the Ratcliffe-on-Soar coal-fired power station, which has formed part of this winter’s emergency contingency plans, as well as a string of gas plants in the UK.
UK supermarket chain Asda to raise staff pay by 10%
Sarah Butler
Asda is investing £141m in raising shop workers’ hourly pay by 10% by July, my colleague Sarah Butler reports.
Workers will receive an hourly minimum of £11 from 2 April and then £11.11 from 2 July – up from £10.10 at present.
The rise lifts pay for hourly paid staff at Asda from the back of the pack, and onto a par with Aldi and Sainsbury’s, currently the highest payers among UK supermarkets.
Mohsin Issa, Asda’s co-owner, said:
“We appreciate the great job that our store colleagues do representing Asda while serving customers day in and day out.
We know that rising living costs are affecting customers and colleagues alike and recognise we have a responsibility to support them during these challenging times.”
The pay rise comes after Asda said it wanted to cut more than 300 jobs while 4,300 staff would receive a pay cut after the supermarket announced a swathe of changes to night shifts, Post Office outlets and pharmacies to cut costs.
The UK’s third largest supermarket chain, said 211 night shift manager roles were going and a further 4,137 staff would lose out on premiums of at least £2.52 an hour for working nights as it switched the restocking of packaged groceries and frozen food to daytimes and evenings.
In addition, Asda planned to close seven of its 254 in-store pharmacies, putting 62 jobs at risk, including 14 pharmacists.
Back on NatWest, the BBC points out how the bank has been quicker to pass on higher interest rates to borrowers than to savers, saying:
[CEO Alison] Rose said the bank has passed on interest rate increases to savers and claimed that the bank was “helping people build regular saving habits”.
But analysis for the BBC by financial information service Moneyfacts showed that the increase on standard mortgage charges far outstripped that on standard savings accounts – by a factor of six times.
Interest on the bank’s variable rate easy access savings account was increased by just 0.55 percentage points from 0.1% to 0.65% over 2022.
Meanwhile, over the same time its standard variable mortgage rate climbed more than three percentage points from 3.59% to 6.74%.
Technically, mortgage rates are priced relative to swap rates, which are influenced by movements in gilt yields (the interest rates on UK government bonds). Those yields, though, are set by market expectations of inflation and central bank interest rates.
Schiphol: We’ve never let so many passengers and airlines down before
Photograph: Evert Elzinga/EPA
Dutch airport management firm Schiphol Group has admitted that it let down passengers and airlines last year.
In its latest financial results, Schiphol Group resists the temptation to sugarcoat its performance. Insead, it announces that today it “publishes poor financial results for 2022”.
The group, which owns and operates Amsterdam Airport Schiphol, Rotterdam The Hague Airport and Lelystad Airport, made an underyling loss of €28m for 2022 after being hit by staffing problems.
It says “upscaling issues” overshadowed the operational performance of Schiphol, causing it to incur €120m of extra costs.
Ruud Sondag, CEO of Royal Schiphol Group, is engagingly blunt about the poor performance.
“Never before in Schiphol’s history have we disappointed so many travellers and airlines as in 2022.
Our efforts and hard work did not lead to the necessary improvements in the system and, as a result, we were not able to provide the service we wanted. 2022 will therefore go down as a bad chapter in our own history books. But it is also a chapter we will not forget, so that all new chapters we write will be better.
We are working hard on this, and in 2022 we started to implement structural improvements. Because we have to do better. And I am convinced that we can.”
There were severe delays at Schipol last year, as demand jumped as Covid-19 restrictions were relaxed. Staff shortages at security led to long queues, and flight cancellations. A wildcat strike by KLM ground crew also caused disruption last April.
NatWest’s financial results suggest its customers are more resilient than economists had feared,
Steve Clayton, head of equity funds at Hargreaves Lansdown, explains:
NatWest acknowledge that there is a gloomy case that can be made about the outlook as rising interest rates and high utility bills bite, but their customers are so far resilient.
Bad debt losses were just 0.09% of the loan book and much of that was assumptions about what’s coming next, rather than loans that have already soured.
In the currency markets, the pound is trading at its lowest level against the US dollar in six weeks.
Sterling dropped to $1.1913 this morning, the lowest since 6th January, despite hopes of a breakthrough in the Northern Ireland protocol.
The issue is that the dollar is strengthening after data this week showed that producer price inflation is higher than thought.
This has led to a ‘significant’ shift in market expectation for US interest rates this year, says Neil Wilson of Markets.com:
A fortnight ago markets priced in one more hike and 2 cuts this year – now pricing the chance of 4 hikes this year. The 2yr US Treasury yield has risen from 4.1% to 4.7% in barely two weeks.
The 10yr is now above 3.9%, its highest since November, from below 3.4% at the start of February. December 2023 Fed Funds implied rate has risen to 5.10% from 4.35%.
What’s this telling us as investors? Fundamentally, the market and perhaps the Fed were declaring victory on inflation too soon. It’s the old pivot narrative from last year but remember the Fed was never going to pivot and now can’t because it’s become data dependent; and the data won’t allow it.