Closing summary
Time to recap…. here’s today’s main stories so far:
Some sad news for those with children of a certain age – Islabikes, the UK maker of cycles for young people, is winding down.
The Shropshire cycle manufacturer, best known for improving the design of children’s bicycles, is to close after almost two decades of trading.
Founded in 2005 by the former triple British cyclo-cross champion Isla Rowntree, the Ludlow-based company made its name developing children’s bikes with smaller hands and bodies, as well as bicycles for older people.
However, Rowntree and the managing director, Tim Goodall, have decided to shut down the business after a “turbulent and difficult time for the cycle industry”.
Islabikes had net assets of more than £4m and employed 21 people, according to its most recent company accounts, published in December last year. In 2021, Rowntree transferred majority ownership to Goodall as part of a management buyout.
“Today, it’s easy to forget just how bad most children’s bikes were when I started Islabikes 18 years ago,” Rowntree said in a press statement first reported by BBC News.
“They were monstrously heavy, fitted with outsized components and had dreadful brakes that were out of reach.
The great orange juice trading rally – and why a big squeeze could lie ahead
Elsewhere in the financial markets this week, orange juice futures have been rising – news that will delight fans of Trading Places.
The price of OJ futures has surged of late, up 92% since the start of the year – relentlessly setting fresh highs, my colleague Alex Lawson writes.
The contracts, for future deliveries of frozen concentrated orange juice traded on the Intercontinental Exchange in New York, were changing hands at $3.97 (£3.27) a pound on the spot market this week. Its part of a global market for “soft commodities”, which includes everything from cocoa, sugar and coffee to soya beans and pork bellies.
The price spike has come as the result of a devastatingly poor orange harvest in Florida this year. The Sunshine State typically produces more than 90% of US orange crops annually, but producers have been hit by the combination of a long-term decline in the lucrative industry and the triple whammy of Hurricanes Ian and Nicole last autumn followed by freezing conditions.
Production levels are expected to be the lowest level for more than a century this year.
US consumer confidence drops as inflation expectations rise
We also have confirmation that US consumer morale weakened this month, as stock markets dropped and inflation expectations rose.
The University of Michigan’s Index of Consumer Sentiment dropped to 63.8 this month, down from September’s 67.9, following two months of little change.
The University of Michigan consumer sentiment final reading for October is 63.8, up from the preliminary 63.0 in early October, and down from the final 67.9 in September. #sentiment pic.twitter.com/fb7RJYB9Ot
— Econoday, Inc. (@Econoday) October 27, 2023
This decline was driven in large part by higher-income consumers and those with sizable stock holdings, consistent with recent weakness in equity markets.
Surveys of Consumers director Joanne Hsu explains:
Across all consumers, one-year expected business conditions plunged 16% and expectations over consumers’ own personal finances in the year ahead fell 8%, reflecting ongoing concerns about inflation and, to a lesser degree, uncertainty over the implications of negative news both domestically and abroad.
The survey also found that Americans are anticipating a faster jump in inflation over the next year.
Year-ahead inflation expectations rose from 3.2% last month to 4.2% this month, the highest reading since May 2023.
YIKES! US consumer expectations for 1-year #inflation spiked to 4.2%! pic.twitter.com/aympclTchb
— jeroen blokland (@jsblokland) October 27, 2023
Back in the financial markets, Russia’s currency is a little stronger against the US dollar today.
One dollar is worth 93.2 roubles this agrernoon, down from 93.6 roubles to the dollar last night.
Russia stock exchanges are basically flat today, with the rouble-based MOEX index down 0.01% and the dollar-denominated RTS down 0.03%.
Black Friday strikes planned at Amazon in over 30 countries
E-commerce giant Amazon is facing a wave of industrial action on one of its busiest days of the year.
Plans have been announced for industrial action and protests by workers at Amazon on the busy Black Friday sales day in more than 30 countries, including the UK.
Details were finalised at a summit in Manchester on Friday held by campaign group Progressive International.
Spokesman David Adler said Amazon’s financial results showed that the company can afford to pay its workers a decent wage and negotiate with trade unions.
He said the global day of action on November 24 is set to be the largest yet, with workers going on strike and joining other protests.
BREAKING: Amazon announces nearly tripled profits & quarterly revenues of $143 billion.
— Progressive International (@ProgIntl) October 27, 2023
Amazon can afford to pay a decent wage, clean up its act & pay a fair share of taxes.
Today at the Summit to Make Amazon Pay, we’re coming together to make it so.https://t.co/MJBeZfVaYk
Amazon has defended its treatment of workers, though, with a spokesman saying:
“We always strive to be better, and while we know we’ve got more work to do, we’re proud of the progress we’ve made.
“We’ve created millions of good jobs, while helping create and support hundreds of thousands of small businesses around the world.
“We offer great pay and benefits, and provide a modern and safe working environment which anyone is welcome to see by taking a tour of one of our buildings.
“We continue to invest in the countries and communities where we operate, and we’re proud to be the world’s largest corporate purchaser of renewable energy. That’s part of our drive to be net-zero carbon by 2040, with billions already invested in packaging reduction, clean energy and electric vehicles.”
Earlier this month the GMB union announced that more than 1,000 Amazon workers at the online retailer’s Coventry warehouse would go on strike for four days in November, including on Black Friday.
The drop in the oil price compared to the highs after Russia’s invasion of Ukraine has hit earnings at two US energy giants.
Exxon Mobil has posted a $9.1bn profit for the third quarter of the year, a 54% drop from its record earnings a year ago.
Third-quarter profit was $2.25 a share, down from $4.68 in the same quarter a year ago.
That’s an increase on the second quarter of this year, though, when Exxon made $1.94 per share.
Rival oil firm Chevron has missed Wall Street expectations for its third-quarter profits.
It made $6.5bn, or $3.48 per share, in July-September, down from $11.2bn or $5.78 per share in the same period last year.
Adjusted profit was $3.05 a share, below forecasts of $3.75 per share.
Just in: The US central bank’s favourite inflation measure has fallen.
The core personal consumption expenditures (PCE) price index rose by 3.7% in the year to September, down from 3.8% in August. This measure is closely watched by the US Federal Reserve, as it assesses inflationary pressures.
The headline PCE price index was unchanged at 3.4%, on an annual basis.
In September alone, prices rose by 0.4%, including a 0.2% increase in goods, a 0.5% rise in services, a 0.3% increase in food costs and a 1.7% jump in energy.
🇺🇲 Core PCE cooled in September.
— Trading.com (@tradingdotcom) October 27, 2023
👛The Fed’s preferred gauge for inflation eased to 3.7%, in line with forecasts.
📊 Personal spending rose 0.7%, up from 0.4%#USD 🔼 0.10% (1d)
RW: Forex trading involves significant risk.#tradingdotcom #marketupdates
Updated
Russia’s central bank chief Elvira Nabiullina is holding a press conference now to explain today’s interest rate decision.
Nabiullina says prices are rising faster than the Bank of Russia expected, and that high pricing pressures have continued into October.
She also explains that budget expenditure is fueling economic growth.
Nabiullina also says the situation in the Middle East is an “uncertainty factor”.
Returning of cap controls, ⬆️ expenditures and growing pressure on @bank_of_russia require Nabiullina to strike back. Besides key rate hikes up to 15% (too big step) she sends a clear message on further hikes and another one:CBR is independent yet and has tools to fight for it pic.twitter.com/bw9Tnsgenb
— Alexandra Prokopenko (@amenka) October 27, 2023
Russia’s central bank also says the country’s economy is expanding faster than it expected in September.
It says that “high domestic demand” is lifting growth, but also adding to persistent inflationary pressures.
The Bank of Russia says:
The steady growth of domestic demand is caused by expanding private demand, while public sector demand remains high and fiscal stimulus is expected to increase again.
The growth in consumer activity is boosted by rising real wages and high credit growth. Significantly increased profits of companies and positive business sentiment, including due to the fiscal stimulus, support high investment demand.
In its baseline scenario, the Bank of Russia forecasts that GDP will grow at 2.2–2.7% in 2023, 0.5–1.5% in 2024, 1.0–2.0% in 2025, 1.5%—2.5% in 2026.
Today’s larger-than-expected rise in Russian interest rates shows that Moscow’s central bank is alarmed that inflationary risks are still on the rise, even after a reimposition of capital controls took pressure off the ruble, reports Bloomberg.
The decision brings borrowing costs to the highest since April 2022 and risks tipping the economy into recession.
But stabilizing the ruble to get a better grip on inflation has emerged as a key priority for Russia at a time when Vladimir Putin prepares for presidential elections while the war against Ukraine rages into a 21st month.
Russia's wartime economy stumbles on. Return to a mix of capital controls and high interest rates are working to stabilize the ruble after months of depreciation. https://t.co/3hjXIC7qsW pic.twitter.com/W4xB8l0OkZ
— Daniel McDowell (@daniel_mcdowell) October 27, 2023
Russia hikes interest rates to 15% to battle inflation
Newsflash: The Bank of Russia has raised its key interest rate from 13% to 15%, a larger rise than expected.
Announcing the 200 basis point hike, the Bank of Russia says current inflationary pressures have significantly increased to a level above its expectations.
This is the third tightening of monetary policy since the summer. In August, Russia’s central bank lifted rates from 8.5% to 12%, after the rouble weakened through the 100-to-the-dollar mark, and followed this up with a rise to 13% in mid-September.
The Bank of Russia says it now expects annual inflation will range from 7.0 to 7.5% this year, well over its 4% target.
It expects inflation will decline to betwen 4% and 4.5% next year, “and stay close to 4% further on”.
Inflation has been lifted, in part, by the weak rouble, which has fallen from 75 to the dollar at the start of 2023 to around 100/$ earlier this month.
The central bank says:
Higher inflationary pressures are seen across an increasingly broader range of goods and services. This means that a steady rise in domestic demand is progressively exceeding the capabilities to expand the production of goods and the provision of services.
These conditions boost businesses’ appetite to pass higher costs on to consumers, which is driven among others by the weakening of the ruble and labour shortages.
US announces new sanctions targeting Hamas financing
Just in: The US has issued a second round of sanctions on the Palestinian group Hamas following its attack on Israel this month.
The new sanctions target a Hamas official in Iran and members of Iran’s Islamic Revolutionary Guard Corps.
They also target additional assets in Hamas’s investment portfolio and individuals who are facilitating sanctions evasion by Hamas-affiliated companies, the Treasury says.
Deputy Secretary of the Treasury Wally Adeyemo explains:
“Today’s action underscores the United States’ commitment to dismantling Hamas’s funding networks by deploying our counterterrorism sanctions authorities and working with our global partners to deny Hamas the ability to exploit the international financial system.
We will not hesitate to take action to further degrade Hamas’s ability to commit horrific terrorist attacks by relentlessly targeting its financial activities and streams of funding.”
Speaking in London now, Adeyemo says the US is taking a three-way strategy against Hamas.
First, stepping up the use of financial sanctions including today’s measures; second, increasing information-sharing and collaboration globallly to tackle terrorist financing; thirdly, ensuring financial institutions take steps to prevent illicit financial flows to these organizations.
Last week, the US sanctioned a Gaza-based virtual currency exchange which was being used to transfer funds to Hamas.
Updated
Wilko stores are set to return to the High Street
Wilko stores are set to return to the High Street in time for the festive season, just weeks after the chain’s collapse with the loss of thousands of jobs.
The parent company of The Range, which also snapped up Wilko’s website and intellectual property following the discount chain’s administration, has announced it will open five shops before Christmas.
CDS Superstores said the first two standalone Wilko “concept stores” will be opened in Plymouth and Exeter.
Wilko, which sold a range of household and garden products, called in administrators in August after rescue efforts failed. That led to the closure of all its 400 stores by early October, leading to the redundancy of almost all its 12,500 workers.
Alex Simpkin, chief executive officer of CDS Superstores, said:
“The public reaction to the loss of Wilko stores was undeniable.
“It’s clear that there’s a huge love for Wilko and we’ve seen an encouraging demand for the return of its own-brand products.
“That’s why we’ve taken the decision to reintroduce Wilko back to many of the high streets and communities that it used to so proudly serve.”
Full story: NatWest decision to close Nigel Farage’s bank accounts was lawful, says report
NatWest’s decision to close Nigel Farage’s bank accounts was lawful but there were “serious failings” in how it treated the former Ukip leader, an independent review commissioned by the bank has found.
Lawyers hired by NatWest Group said the lender had acted “in accordance with the relevant bank policies and processes” when it decided to shut the accounts Farage held at its private bank Coutts.
However, the initial report also identified “a number of shortcomings”, related to how it reached that decision, how the bank communicated with Farage, and how it treated his confidential information.
The Financial Conduct Authority said it had reviewed the findings of the initial independent report, and said it highlighted “potential regulatory breaches” and a number of areas for improvement.
That included how the bank considers the potential closure of accounts, handles complaints from customers, and the effectiveness of its “governance mechanisms”.
The NatWest chair, Howard Davies, said:
“This report sets out a number of serious failings in the treatment of Mr Farage. Although Travers Smith confirm the lawful basis for the exit decision, the findings set out clear shortcomings in how it was reached as well as failures in how we communicated with him and in relation to client confidentiality.
“We apologise once again to Mr Farage for how he has been treated. His experience fell short of the standards that any customer should expect. Our job now is to make sure that does not happen again.
“The bank is committed to implementing all the recommendations made by Travers Smith and we are making substantive changes to our policies and procedures, in particular to ensure that the lawfully protected beliefs or opinions of customers do not play any role in our decision-making.”
Alison Rose, NatWest’s former CEO, has commented on the independent legal inquiry into the Nigel Farage debanking row, whose key findings were released this morning.
Rose says:
“I note the Travers Smith report this morning.
This confirms everything I told the Board in July was correct. Both Travers Smith and the Information Commissioner’s Office have concluded that I inadvertently confirmed what had already been widely reported, that Mr Farage held an account at Coutts. The ICO also concluded the ‘impact around this specific disclosure was minimal’.
“Travers Smith is clear that ‘there was no leak of specific detailed financial information’.
Travers Smith also confirmed I knew nothing about the comments made by Coutts staff about Mr Farage, which were deeply unpleasant and unfair.”
Travers Smith concluded that Rose’s comments to the BBC “probably amounted to a Personal Data Breach for the purposes of GDPR”, adding;
They might also amount to a regulatory breach by members of the NatWest Group, but this is a matter for the regulator to decide.
Updated
Over in the eurozone, growth in Spain’s economy has slowed, but remained faster than expected.
Spanish GDP grew by 0.3% in the July-September quarter, compared to Q2, data from the National Statistics Institute showed this morning.
That’s a slowdown on the 0.4% growth in the April-June, but ahead of the 0.2% expansion which economists expected.
Trading in NatWest shares was just briefly halted, due to volatility as traders react to today’s financial results.
They’re trading again now, though, and are down 8% – a partial recovery from the 16% plunge at the start of trading.
Shares in IAG have dropped by over 1% this morning, despite the airline group posting a 40% increase in operating profits this morning.
Victoria Scholar, head of investment at interactive investor, says there are concerns about weaker customer demand:
The company says it expects 2023 to be a year of strong recovery in margins, operating profit, and its balance sheet, heading back towards pre-covid levels. However it warned of ‘wider macroeconomic and geopolitical uncertainties that might affect the remainder of the year.’
British Airways’ parent company enjoyed record quarterly earnings thanks to strong demand for leisure travel during the busy summer holiday season. There was particular strength across European holiday destinations. Over the summer, it reported a rebound in passenger revenue thanks to a recovery in long-haul travel after China’s covid restrictions ended. IAG has been focusing on bringing down its debts after concerns about its debt levels sparked a sell-off in February.
However there is nervousness about weaker consumer demand ahead, particularly over the quieter winter months and the risk of rising energy prices that could push up its costs. IAG said it has 73% of its fuel cost hedging in place for the fourth quarter. The airline group also said it is well-hedged on jet fuel into the first and second quarter next year.
Shares initially opened higher but have since turned lower with the stock now down around 6% in the past month weighed down by the threat of rising oil prices on the back of the Israel-Hamas war.”
IAG’s CEO Luis Gallego has also said the Israel-Hamas conflict has had an impact on revenue for flights to Egypt’s capital, Cairo, and also to Amman, the capital of Jordan.
British Airways has suspended flights to and from Israel since October 11.
After reporting IAG’s results this morning, Gallego told reporters:
“We are very mindful of the geopolitical and macroeconomic uncertainties and in particular now the events that are happening in the Middle East.
“Regarding this terrible situation we see some limited revenue impact on flights to Cairo and Amman, and for sure Israel, but it’s too early to conclude if we’re going to have a wider strain and implications.”
British Airways parent company IAG posts jump in profits
Elsewhere this morning, British Airways owner IAG has reported a jump in profits in the last quarter due to strong performances on its North and South Atlantic routes.
IAG reported that operating profits rose to €1.745bn in the July-September quarter, up from €1.216bn in the third quarter of 2022.
Flight capacity (measured in ASK or ‘available seat kilometres’) rose by 17.9% year-on-year, to 95.6% of levels reported in Q3 2019 (before the Covid-19 pandemic).
IAG says this capacity increase was due to a focus over the summer on European holiday destinations and further investment across the South and North Atlantic, supported by 20 aircraft deliveries year to date.
The cost of fuel dropped 6.2% compared with a year ago while revenue per passenger rose 2.2% and is up by almost a quarter since 2019.
Chief executive Luis Gallego said:
“This quarter represents a record third-quarter performance for IAG. This is allowing us to invest in the business and reduce a significant amount of our debt.
“During the third quarter we saw sustained strong demand across all our routes, in particular the North and South Atlantic and in all leisure destinations around Europe.
“We continue to develop our hubs of Barcelona, Dublin, London and Madrid, supported by our fleet deliveries and future orders.”
NatWest results: What the experts say
Here’s Michael Hewson of CMC Markets on NatWest’s third-quarter results, and the tumble in its shares:
It’s not been a great year for the NatWest Group share price, and it got even worse this morning, the shares plunging to 30-month lows, after the bank lowered its full year guidance on NIM, as well announcing that the FCA is reviewing the findings of an independent review into its conduct over the Nigel Farage debanking case.
The rot started to set in after the bank downgraded its full year guidance in Q2 even as attributable profits to shareholders came in at just over £1bn pushing H1 profits up to £2.3bn. Net interest margin slipped back in Q2 to 3.13%, from 3.27% in Q1, with the bank cutting the full year forecast to 3.15% from 3.2%.
Given what has happened this week with Barclays and Lloyds and their NIM guidance, it wasn’t a surprise to see a further downgrade here, however that isn’t NatWest’s only problem given the fallout from CEO Alison Rose’s departure when it was revealed she was the source of a leak over the details of the bank’s relationship with Nigel Farage.
From a reputational standpoint this is hugely damaging, and even accounting for the increased competition for customer deposits the revelations of unprofessionalism this week about some of its staff could prompt some customers to take their business elsewhere.
Today’s Q3 numbers have confirmed the fears that NIM was likely to be hit with another downgrade with Q3 NIM falling to 2.94% with the bank downgrading its full year forecasts from 3.15% to just above 3%, which is a sizeable downgrade.
This shouldn’t have come as a surprise given the previous assessments were based on a Bank of England base rate of 5.5%, with the new forecasts now based on the new rate of 5.25%.
Richard Hunter, head of markets at interactive investor, says NatWest’s Q3 reults echo the disappointing themes which have plagued bank results this week, adding:
Net Interest Margin (NIM) declines across the sector have taken a toll on share price performance, while also suggesting that the benefits of higher interest rates have peaked as customers seek higher returns on their cash after years of virtually nil return. The changing deposit mix has been a feature of the reporting season this far, as has the pressure on mortgage margins which has impacted overall NIM.
For NatWest, NIM was 2.94% for the quarter, down from 3.13% in the previous, although holding up at 3.11% for the year to date. This should cause more than a ripple of disappointment given estimates of 3.07%, even though NatWest’s share price decline this week following the read across from other banks needs to be factored in.
In terms of impairment, the news is slightly more positive. The new provision of £229 million this quarter takes the number to £452 million so far this year, significantly lower than that of its peers. For some, it will be a reflection of the generally lower risk loan book which the bank runs, while NatWest has itself stated that levels of default are stable. The group had previously described its own “intelligent approach to risk” as including a proactive attitude for those customers who may be approaching some level of financial strain, such that the new provision is a prudent move in the circumstances.
Matt Britzman, equity analyst at Hargreaves Lansdown, says today’s results are “largely disappointing”:
“NatWest has been in a pickle of late following a series of governance issues. Along with third-quarter results, NatWest also released findings from stage 1 of its review into the account scandal following the closure of Nigel Farage’s Coutts account. The independent review found no legal breach, but did pick up on several governance concerns with how the decision was reached – something I think we already knew.
Back to results, they were largely disappointing as net interest margin dipped below 3%, and the outlook was lowered. Deposit levels did grow, which is a positive sign that NatWest is pricing itself at the right levels to attract customers searching for higher rates. That trend’s plain to see, with longer-term cash balances jumping to 15% of the book – compared to 11% last quarter. But it’s less profitable business than non/low-interest current accounts. Add in mortgage headwinds as highly profitable business written over the pandemic rolls off, and that’s caused the hit to net interest margin.
NatWest shares drop 16%
Ouch! Shares in NatWest have tumbled by 16% at the start of trading in London.
Traders are concerned that the bank has downgraded its profit outlook in its results this morning (see here) despite also growing profits in the last quarter.
*NATWEST DROPS 16% AFTER BANK CUTS MARGIN GUIDANCE
— Michael Brown (@MrMBrown) October 27, 2023
This puts NatWest at the bottom of the FTSE 100 leaderboard, and on track for their biggest one-day drop since June 24, 2016, when the UK voted to leave the European Union in the Brexit referendum.
Other bank shares are also weakening, with Lloyds down 3.5% and Barclays losing 2%.
NatWest downgrades profit outlook
In today’s financial results, NatWest cautions that the economic outlook and its impact on customer behaviour “remain uncertain”.
The bank has cut its profit outlook, as the earnings boost from higher interest rates fades.
NatWest has cut its forecast for net interest margin (NIM) - a key measure of lending profitability – to “greater than 3%” from a previous view of around 3.15%.
In the third quarter, NIM was 2.94% – which is 19 basis points lower than Q2 2023.
Natwest sees FY net interest margin above 3%, saw about 3.15%.#AInvest #Ainvest_Wire #Powell #ratehiking #inflation
— AInvest Wire (@Ainvest_Wire) October 27, 2023
View more: https://t.co/M8aehD23q1 pic.twitter.com/OmPf9ti2Gz
That is based on the assumption that Bank of England base rates remain flat at 5.25% for the remainder of the year.
Rising NIMs lifted bank profits in the last year, as lenders were quicker to lift the rate on mortgages rather than on savings.
But that boost has faded, as competition for savings and mortgage products increases. More customers have been locking in current higher interest rates, by moving their money into fixed term accounts, which pay a set interest rate for a certain period of time.
Updated
Farage: This is a whitewash
Nigel Farage has hit out at the results of the independent inquiry into the decision to close his Coutts account.
The former UKIP leader says the report is a ‘whitewash’, and insists that his support for Brexit was a factor in the decision to close his account.
Farage says:
The long-anticipated Travers Smith report has whitewashed the decision to close my accounts at Coutts Bank. This comes as little surprise to me given Travers Smith’s Emeritus Chair, Chris Hale, is a pro-Remain lawyer who once described Brexiteers as racist and xenophobic.
The report’s authors claim it was “predominantly a commercial decision” to close my accounts but, crucially, they also noted that evidence given to them by witnesses in relation to this episode was not entirely consistent. Travers Smith has taken a very mealy-mouthed approach to this complex issue. The law firm argues that my political views “not aligning with those of the bank” was not in itself a political decision. This is laughable. Worse still, Travers Smith did not find “any evidence” that my “pro-Brexit stance were factors in the Exit Decision”. The word Brexit appeared no less than 86 times in my Subject Access Request. What planet are they are living on? Interestingly, though, Travers Smith has revealed that in an effort to justify the decision to exit me, my status as a Politically Exposed Person, which had been revoked in 2022, was reinstated by the NatWest Group to bolster their exit plans. This despite being told by Camilla Stowell, head of private clients at Coutts, that I did not have PEP status at all. Clearly, the bank’s response to this was haywire. To compound matters, the letters that were sent to me confirming the closures of my accounts without explanation were sent on a paper headed template usually reserved for those suspected of fraud. All this says so much about the culture created by Alison Rose, who has now been found by the ICO to have breached my privacy during this scandal – something this report fails to mention at all. The Travers Smith report is inconclusive and ignores the elephant in the room. What really matters now is the next steps that the ICO takes and, perhaps more importantly, what the FCA, the regulator of this industry, does about this scandal.
The NatWest / Travers Smith report out this morning is a whitewash.
— Nigel Farage (@Nigel_Farage) October 27, 2023
They say my political views “not aligning with the bank” was not in itself a political decision.
They also find no evidence my “pro-Brexit” views were a factor, despite Brexit appearing 86 times in the SAR. pic.twitter.com/dhKeXET3FT
NatWest haven’t, yet, revealed what is happening about departed CEO Alison Rose’s pay packet.
Rose has accrued millions of pounds worth of long-term share options, which could potentially be cancelled after she left the bank in July after admitting discussing Farage’s case with a journalist.
NatWest says its bank’s board is considering the key findings of the Travers Smith inquiry, and deciding on appropriate outcomes.
As we would with any other employee, we have a duty of confidentiality to Dame Alison Rose.
However, given her role as the former CEO of NatWest Group, there is a disclosure obligation in relation to her remuneration. The bank will disclose the relevant outcomes, as soon as possible.
Sky News reported on Wednesday that Rose was considering challenging “a looming decision by the taxpayer-backed lender to cancel millions of pounds in unvested share awards she was due to receive”.
FCA: review has found potential regulatory breaches
The UK’s City regulator, the FCA, has responded to the release of the report into NatWest’s treatment of Nigel Farage.
The FCA says the review conducted by law firm Travers Smith, and “additional information we have considered”, has highlighted potential regulatory breaches and a number of areas for improvement.
These include:
the firms’ processes, systems and controls around how they consider potential closure of accounts and handle complaints from their customers.
the allocation of responsibilities and effectiveness of the firms’ governance mechanisms.
The FCA says it has told NatWest, and its private bank Coutts, in recent weeks that it is reviewing their governance, systems and controls, to find and fix any significant shortcomings.
Howard Davies: review found 'serious failings' in treatment of Farage
NatWest Group chairman, Sir Howard Davies, said today’s report into the handling of Nigel Farage over his Coutts bank account shows ‘a number of serious failings’.
Davies (who has faced calls to resign from Farage) says:
“This report sets out a number of serious failings in the treatment of Mr Farage. Although Travers Smith confirm the lawful basis for the exit decision, the findings set out clear shortcomings in how it was reached as well as failures in how we communicated with him and in relation to client confidentiality. We apologise once again to Mr Farage for how he has been treated. His experience fell short of the standards that any customer should expect.
“Our job now is to make sure that does not happen again. The bank is committed to implementing all the recommendations made by Travers Smith and we are making substantive changes to our policies and procedures, in particular to ensure that the lawfully protected beliefs or opinions of customers do not play any role in our decision making.
“The Board is considering the findings and deciding on the appropriate outcomes on other matters. It is important we have regard to all necessary processes and due consideration of issues including the bank’s obligations around privacy and confidentiality.”
New: NatWest publishes independent review into the Nigel Farage debanking scandal - finds the exit decision to be lawful, but highlights shortcomings in decision-making and communication
— Tom Boadle (@TomBoadle) October 27, 2023
Chairman Sir Howard Davies acknowledges "serious failings in the treatment of Mr Farage"
Updated
NatWest posts profits
NatWest has also reported a rise in profits for the last quarter.
The bank made an attributable profit of £866m in July-September, up from £187m in the third quarter of 2022.
Operating profits grew to £1.3bn, up from £1.086bn a year before, close to the £1.4bn forecast by analysts.
However, its net interest margin (which measures increased profits from rising interest rates) fell, as customers moved their money into “interest bearing savings accounts”.
Paul Thwaite, who become NatWest’s chief executive after Alison Rose lost her job after speaking to a BBC journalist about Nigel Farage’s bank account, says:
“Today’s Q3 2023 results show that NatWest is a strong bank which is performing well, generating sustainable profits and returns.
This performance is built on the foundations of strong customer franchises and a robust balance sheet with high levels of liquidity and a well-diversified loan book. As a result, credit losses and impairments remain low and we are ready and able to stand by our customers and businesses through the current economic uncertainty.
Introduction: Shortcomings found in Farage debanking row
Good morning, and welcome to our rolling coverage of business, the financial markest and the world economy.
There were ‘shortcomings’ in UK bank NatWest’s handling of Nigel Farage’s bank account at Coutts, according to a review of the ‘debanking’ row that gripped the sector this summer.
However, the independent review into the closure of Farage’s bank account, by law firm Travers Smith, has also found that the decision to ‘exit’ Farage from Coutts was lawful and was made in accordance with the relevant bank policies and processes.
However, there were shortcomings in how the decision was reached, how the bank communicated with Mr Farage and how it treated his confidential information, according to the key findings of the report, which has just been released alongside NatWest’s latest financial results.
The review found that, “on balance”, the exit decision was predominantly a commercial decision. It says:
Coutts considered its relationship with Mr Farage to be commercially unviable because it was significantly loss-making.
Farage, though, insisted last summer that he lost his account at Coutts due to his political views – with a internal dossier saying that the former UKIP leader was “considered by many to be a disingenuous grifter.
Travers Smith also found that there were other factors – such as “the risk Coutts perceived to its reputation in the eyes of its stakeholders”. But these were not factors that drove the exit decision, the review finds.
Mr Farage’s public statements on various issues were not a determining factor in the exit decision. Rather, Travers Smith consider them to have supported the decision.
BUT, the review finds several failings too, including:
The way the exit decision was communicated to Mr Farage was not in accordance with the bank’s policies and processes, in particular giving reasons to customers in non-financial crime exits. No adequate reasons were given.
• Coutts did not comply with the FCA’s Dispute Resolution: Complaints sourcebook, in part because no complaint was logged for several months after it was made.
• The decision taken in May 2022 to continue to classify Mr Farage as a PEP [politically exposed person] was incorrect.
NatWest says it has accepted - and will implement - all of the recommendations made by Travers Smith.
It explains:
Alongside the report, the bank will make a number of other changes to its policies and procedures designed to deliver better outcomes for its customers and to ensure that the lawfully protected beliefs or opinions of customers do not play any role in exit, retention or onboarding decisions.
The agenda
7.45am BST: French consumer confidence for October
8am BST: Spanish Q3 GDP report
11.30am BST: Bank of Russia sets interest rates
1.30pm BST: US PCE survey of inflation
3pm BST: US consumer confidence survey from University of Michigan
Updated
