Today’s need-to-know stories
UK bank shares climb as Budget expected to spare lenders
UK bank shares rose in morning trading after reports that the chancellor will not increase taxes on lenders in the Budget on Wednesday.
Shares in Lloyds Banking Group, Barclays and NatWest all jumped between 2 and 3 per cent as the Financial Times reported that banks will be spared any additional levies.
City executives feared Rachel Reeves would raise the bank surcharge, or levy a tax on profits, after higher interest rates, better than expected loan growth and asset quality have boosted lenders’ profits in the UK, causing some to say they were an “easy target”.
UK bank CEOs have been warning the government for months that there would be negative consequences for the economy if the fiscal gap were to be topped up by raising taxes on banks, and highlighting that UK banks pay the highest amount of tax compared with other financial centres in Europe and the US.
In her second Budget on Wednesday, Reeves will need to fill an estimated £20bn gap in fiscal spending, made up of higher government spending due to inflation, the additional cost of the reversed cuts to welfare spending, and an increase in the cost of servicing the UK’s debt because of higher interest rates.
ABN Amro to cut 25% of staff as new CEO targets profitability
ABN Amro will shed around a quarter of its roles in the next three years as part of a strategy focusing on “profitable growth” unveiled by new CEO Marguerite Bérard.
The bank said this morning it is planning to simplify its organisational structure and will scrap 5,200 roles by 2028 as it aims to become a top-five private bank in Europe.
“Our new strategy builds on our core strengths,” Bérard said. “Over the past years, we have built a solid foundation. Still, we know that more must be done to enhance our returns and competitiveness.”
The Dutch lender said half of the cuts — which began last year — will be achieved through attrition, with 1,000 jobs already axed. The group is aiming to cut its cost base, targeting a cost-to-income ratio of 55 per cent and a return on equity of at least 12 per cent.
As part of the new strategy, ABN Amro will focus on building its position in Dutch retail banking, maintaining its top-three position globally as a clearing house, and improving its standing as a private bank in Europe.
ECB probes Deutsche Bank over ‘netting’ practices
Regulators are examining allegations over how Deutsche Bank calculated risk on its balance sheet after claims made by a former employee.
The European Central Bank is reviewing accusations that the lender underplayed the risks on its books, focusing on its so-called “netting” practices, the Financial Times reported.
The European regulator has said enquiries it made to Deutsche in recent months were part of a standard review of several lenders; however, the central bank is reviewing specific allegations made by a former employee who is suing the bank, according to the FT. It has not yet decided whether to take formal action against the bank.
Netting is a process where banks reduce the overall risk on their balance sheet by consolidating financial obligations, resulting in lower regulatory capital requirements.
The lender and the ECB have previously clashed over worries that Deutsche was playing down how many loans were at risk of default.
Former Macquarie executive joins Barclays as head of aerospace and defence banking
Barclays has appointed former Macquarie Group executive Tim Alden as head of its global aerospace and defence investment banking team.
Alden, who joins as a managing director based in New York, was formerly co-head of aerospace and defence at Macquarie, and held senior investment banking roles at Goldman Sachs and Jefferies in his earlier career, according to Bloomberg News.
Alden will also advise the bank’s industrial clients on mergers and acquisitions, and other strategic decisions.