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Out Of The Industry

‘Lloyds ruined my trip of a lifetime’

The bank blocked the only card a Guardian feature writer had while on holiday in the US

Congratulations to Lloyds Bank for launching a timely mental health awareness campaign this month. In the Channel 4 adverts, famous people (including Jeremy Paxman and Victoria Pendleton) and members of the public, wear sticky notes on their heads featuring words and phrases such as bipolar disorder, agoraphobia, depression and anxiety. The voiceover tells us: “Mental health problems affect one in four of our customers, of our staff, of everyone. Let’s get it out in the open. Lloyds Bank – by your side.”

Of course we should get it out in the open. So let’s start with Lloyds Bank, and how it has contributed to my mental health problems by relying too heavily on algorithms and too little on human staff.

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Source: The Guardian

Metro bank refuses to refund scammed customer

Bank accuses businessman of gross negligence after his account is cleared of £20,000

Metro bank is one of the fastest-expanding new banks in Britain, aiming for 100 branches. But what if your account falls victim to fraud? One customer says he is outraged after Metro refused to refund £20,000 stolen from his account, despite accepting he did not authorise the payments.

Paul Graham*, a Kent-based businessman, lost £20,000 after fraudsters were able to go into the Brixton, south London branch of mobile phone company EE and take over his phone account, which they used to set up a series of new online payments, that subsequently emptied his Metro account.

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Source: The Guardian

The Guardian view on Labour and banks: not casino capitalism | Editorial

Jeremy Corbyn made a speech criticising big finance and got called a communist. But the Tories appear to have nothing to say about the economic crisis of our times

There should be no champagne corks popping because the Royal Bank of Scotland has made its first profit in 10 years. For years RBS got drunk on its own hubris. When the financial crisis struck in 2008, its balance sheet – at £2.2 trillion – was bigger than the entire UK economy. RBS ran to Gordon Brown’s government for a bailout. Over two years, RBS borrowed £45bn from the taxpayer. The government still owns 73% of the bank. Big finance’s reckless behaviour left the rest of us with the lowest wage growth in two centuries, record levels of inequality, and the UK’s economy shrunk by hundreds of billions of pounds. RBS certainly partied, but the public have been left with the hangover.

This week Kwasi Kwarteng, Tory aide to the chancellor, accepted that the public were angry over the fact no bankers had gone to prison. He’s right about the sentiment but offered nothing but words. It was Labour’s Jeremy Corbyn who offered an analysis and an answer: that banks were not supporting productive investment but “lending to households and inflating asset prices on a scale never seen before”. Mr Corbyn was right to argue that “deregulated finance has progressively become more powerful. Its dominance over industry, obvious and destructive; its control of politics, pernicious and undemocratic”. Similar ideas, more gently expressed, have been aired by the Bank for International Settlements, which in 2015 said there was a “pressing need to reassess the relationship of finance and real growth in modern economic systems”. Mr Corbyn’s honesty earned him absurd headlines about turning the “City into the last Soviet-era capital west of Pyongyang”.

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Source: The Guardian

RBS posts its first profit in 10 years

Boss of taxpayer-owned bank hails profit as ‘symbolic moment’ despite looming litigation

Royal Bank of Scotland has posted its first annual profit in a decade, but admitted it is braced for a multibillion pound hit from US regulators.

The bank, which is still 71%-owned by the government, made a profit of £752m in 2017, following a £7bn loss in 2016. Its chief executive, Ross McEwan, declared it a symbolic moment and an indication RBS had moved on. The bank, however, would still have been in the red if a long-anticipated fine from the US Department of Justice (DoJ) had arrived during the financial year.

Royal Bank of Scotland has made its first annual profit in a decade. Does this mean it is in good financial health?

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Source: The Guardian

RBS shares drop 4% on fears of heavy US fines – as it happened

2.51pm GMT

Royal Bank of Scotland has moved back into profit after nine years of losses, prompting chief executive Ross McEwan to hail “a symbolic moment”. But the bank has not included provisions for potential fines from the US Department of Justice, which are likely to knock results in the coming months.

In other big UK results, there were positive reactions to Pearson but less so for British Airways owner International Airlines.

2.34pm GMT

US markets have followed up Thursday’s gains with a strong opening on the last trading day of the week.

The Dow Jones Industrial Average is currently up 186 points or 0.75%, while the S&P 500 opened up 0.57% and the Nasdaq Composite is 0.7% better. A dip in bond yields, which eased from recent highs after Federal Reserve member James Bullard seemed to warn against too many interest rate rises this year, helped lift share prices.

1.44pm GMT

The impact of Brexit on UK productivity growth will continue for some time, according to the Bank of England’s Dave Ramsden. In his speech in Cambridge, he said:

The dampening effect of Brexit on productivity growth – both through the effect of uncertainty on business investment in the short run and through the need to anticipate and respond to post-Brexit trading relationships – is likely to continue for some time.

Uncertainty about the extent to which Britain’s weak rate of productivity growth will improve over the coming years is a key factor for monetary policy, Bank of England Deputy Governor Dave Ramsden said on Friday.

Ramsden – one of two policymakers to oppose November’s rate rise – repeated some of the language used after the central bank’s February Monetary Policy Committee meeting.

1.16pm GMT

Here are IG’s opening calls for US markets:

US Opening Calls:#DOW 25147 +0.74%#SPX 2723 +0.70%#NASDAQ 6816 +0.78%#IGOpeningCall

12.28pm GMT

Looks like a mini flash crash in the pound, soon recovered:

Sudden unexplained drop in the pound, one of the more liquid emerging market currencies. Most of the drop already recovered. pic.twitter.com/Uf1M23g1qO

12.08pm GMT

Bank of England deputy governor Dave Ramsden is speaking on productivity in Cambridge:

BoE’s Ramsden: The weakness of and uncertainty around the path of UK productivity is a key consideration for monetary policyhttps://t.co/Q9HJMNXOhz

Productivity – how much output an economy can produce using a given amount of input, such as output per hour worked – is a key determinant of the evolution of inflation, and it is one of the most important factors affecting the outlook for the UK economy and a therefore a key issue over the MPC’s policy horizon. That is particularly true now.

11.52am GMT

RBS of course has been heavily criticised for the attitude to business customers shown by its GRG division .

And the Federation of Small Businesses believes the bank should re-invest some of its profits in helping smaller firms. National chairman Mike Cherry said:

The branch closures announced by RBS at the end of last year are set to limit access to banking for small firms all over the UK. Time that business owners spend travelling to and from bank branches that are miles away is time not spent running and growing their firms.

Now that RBS is profitable again, it should look closely at how it can support the communities it’s threatening to leave behind with waves of branch closures. The bank has benefitted from public support over the years. It’s important that it now returns support to the public and small businesses.

RBS might claim to have turned the corner, but with jaw-dropping losses of almost £60bn this is a horror story not a success story.

With the spectre of massive US fines looming and the details of the bank’s disgraceful mistreatment of customers revealed, it’s horrifying that RBS, which is still over 70% publicly owned, can somehow find £3.5m to dole out to its CEO Ross McEwan.

11.47am GMT

More on Royal Bank of Scotland, and a worst case scenario in terms of the US Department of Justice fine is not expected, says Ken Odeluga, market analyst at City Index:

RBS’s first headline profits this decade and a hint that dividends are “closer” have not been enough to trigger shareholder applause. The outstanding mortgage-backed securities case is too much of a worry. Lack of a clear update on the Department of Justice litigation means pay-outs are unlikely to start in 2018—dividends can’t be paid before the government has sold its 71% stake.

But Friday’s share price reaction doesn’t assume the worst-case scenario. The loss of about $2.1bn in market value implies RBS is expected to pony up more than the $4.4bn it had set aside by the end of last year. But the total would still be around half the most pessimistic charge expected. It would be painful, but absorbable, given RBS’s key capital buffer had strengthened to 15.9% by the end of the year, the highest ratio amongst UK rivals. The scenario does of course require the DoJ to stick to its pattern of mandating settlements below the highest possible; usually contingent on humble co-operation (hello, Barclays). But the scenario is a plausible base case. And it would still allow RBS a tentative path to growth and shareholder returns.

11.39am GMT

Markets remain in the doldrums, although they have come off their worst levels. Connor Campbell, financial analyst at Spreadex, said:

Despite the prospect of a positive US open the European markets couldn’t shake their losses this morning.

With RBS investors more concerned with the impending DoJ [fine] than the bank’s first profit in a decade, IAG slipping after missing full year earnings and the pound up 0.2% against the euro, the FTSE had little reason not to wallow in the red this Friday. And wallow it did, with the UK index dipping 0.3% to lurk below the 7250 mark it has struggled around all week.

11.14am GMT

Much earlier, Germany released its latest growth figures, and here is the Reuters take:

Foreign trade drove a 0.6 percent expansion in Europe’s largest economy between October and December, German data showed on Friday, and the momentum from the fourth quarter is widely expected to carry over into the start of 2018.

The data, which confirmed a preliminary reading, shows the German economy ended last year on a strong footing despite unaccustomed political uncertainty in a country that prides itself on its stability.

11.00am GMT

Back with the eurozone inflation figures, and Kay Daniel Neufeld, managing economist at the Centre for Economics and Business Research, said:

Given the recent trajectory of inflation in the Eurozone and the stubbornly low levels of core inflation, the members of the ECB’s Governing Council are indeed well-advised to be patient and not withdraw monetary stimulus measures too early or too rapidly. Looking at the year ahead, Cebr identifies two main downside risks to the future trajectory of inflation and the Eurozone economy more broadly.

Firstly, the strengthening euro could act as a serious headwind to Eurozone exporters as well as dragging inflation rates down. In unusually clear language the ECB minutes criticised the US and warned of competitive currency depreciations following remarks by US Treasury secretary Steven Mnuchin, who claimed a weak US dollar was good for the American economy. The second risk for the ECB is a slowdown in the global economy and the Eurozone more specifically as the current economic upswing runs out of steam. While this is unlikely to happen in the first half of the year, early indicators hint at a levelling out of the growth cycle. Growth in air freight volumes has moved sideways since August 2017 hinting at a possible cooling of the current world trade boom. In January, the European Commission’s consumer confidence index slipped, albeit from record-high levels. Political risks persist as well; the Italian election on Sunday will in all likelihood unsettle the Eurozone’s third-largest economy for some time and important question on Eurozone reform will remain up in the air at least until coalition talks in Germany are successfully concluded.

10.54am GMT

Here’s an interesting read for eurozone aficionados -a Financial Times interview with Bundesbank boss Jens Weidmann, favourite to take over from Mario Draghi as the president of the European Central Bank. The article, part of the Lunch with the FT series, is here (£).

10.35am GMT

The EU inflation figures could mean more pressure on the European Central Bank, says Dennis de Jong, managing director at UFX.com:

This morning’s inflation reading highlighted there’s still work to be done to reach the ECB’s target of 2%, after figures echoed market expectations at 1.3%.

While Mario Draghi has tempered expectations of reaching the ECB’s target within the first quarter, he’ll be eager to see positive movement with the second quarter on the horizon.

10.07am GMT

Eurozone inflation has come in at 1.3% in January, in line with expectations and down from 1.4% in December.

In the wider European Union, the rate was 1.6% compared to 1.7% in December, according to statistics agency Eurostat. It said:

The lowest annual rates were registered in Cyprus (-1.5%), Greece (0.2%) and Ireland (0.3%). The highest annual rates were recorded in Lithuania and Estonia (both 3.6%) and Romania (3.4%). Compared with December 2017, annual inflation fell in twenty-one Member States, remained stable in one and rose in six.

In January 2018, the highest contribution to the annual euro area inflation rate came from services (+0.56 percentage point), followed by food, alcohol & tobacco (+0.39 pp), energy (+0.22 pp) and non-energy industrial goods (+0.15 pp).

9.45am GMT

European markets may be drifting lower but Wall Street is forecast to open higher.

After Thursday’s 164 point rise on the Dow Jones Industrial Average, the futures are indicating a similar opening when trading starts this afternoon.

8.59am GMT

More on RBS. Laith Khalaf, senior analyst at Hargreaves Lansdown, said:

RBS has broken its ten year duck and managed to squeeze out a profit in 2017, thanks in large part to a big fall in litigation and conduct costs. This is a stay of execution rather than a pardon however, because the bank is still facing a multi-billion dollar penalty from the US Department of Justice, which is now going to impair profitability in 2018.

The UK part of RBS is going great guns, and even the investment bank has held up reasonably well, considering a lot of the bad bank has been rolled into it. The bank’s capital position has improved again, though the prospect of a dividend still hinges on the final settlement with US authorities…

With a widely anticipated top-up provision for any US DOJ settlement de facto “deferred” until 2018e, RBS has delivered a full-year profit for the first time in ten years (2017 attributable profit +£752m). In the fourth quarter of 2017, underlying profit before tax of £512m was a £195m (28%) miss versus consensus, and guidance for 2018/19 restructuring charges is raised from around £1bn to £2.5bn. Nevertheless, we still dream of a return to private ownership in 2024e.

8.30am GMT

Housebuilder Persimmon has been in the middle of a row over excessive executive pay – not least over a £110m bonus awarded to chief executive Jeff Fairburn.

Fairburn recently said he would give some of the money to charity, although he would not spell out how much.

8.18am GMT

Predictions of opening gains for European shares have not exactly panned out.

France’s Cac is up 0.23%, Germany’s Dax is up 0.25% but Spain’s Ibex is down 0.06%.

8.09am GMT

Neil Wilson, senior market analyst at ETX Capital, also points to the US Department of Justice investigation. He said:

Not quite ten in a row – after nine years and £50bn in losses since the financial crisis, RBS is back in the black – for the moment at least.

A return to profit for RBS but the underlying strength of the business remains a bit of a doubt and with major legacy issues still unresolved it’s hard to get a firm read on where profits will be in the medium term…

8.02am GMT

RBS is back in profit partly because it has not yet taken a provision for US mortgage mis-selling, says Gary Greenwood at Shore Capital:

RBS has reported full year results to 31st December 2017 which show adjusted profitability slightly below our own and consensus forecasts, but with a much stronger than consensus expected year end core tier 1 ratio (albeit slightly below our own forecasts). In addition the group reported its first statutory attributable profit in a decade, albeit this was largely thanks to the fact that a settlement with the US DoJ (Department of Justice) regarding historical US RMBS (Residential Mortgage Backed Securities) mis-selling has yet to be reached. The outlook statement notes the group has made a positive start to 2018F, but warns that the pace of investment in the business needs to be increased to support its transformation, resulting in a slower pace of operating cost reduction in 2018F and significant incremental restructuring charges versus previous guidance. Overall, we expect the shares to respond negatively to this news.

7.56am GMT

Here’s more from the bank on GRG:

The bank has received significant media attention for its treatment of some small business customers between 2008 and 2013. To those customers who did not receive the experience they should have done while in GRG we have apologised. We accept that we got a lot wrong in how we treated customers in GRG during the crisis. However, these were complex and subjective cases with each case having unique facts about what was the right thing to do. The bank welcomes the FCA’s confirmation that the most serious allegations made against the bank have not been upheld and that the steps the bank announced in November 2016 to put things right for customers are appropriate.

We have made significant progress in improving our culture since then.

7.33am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It may be a Friday but the corporate world is having a final splurge of results before the weekend.

This is a symbolic moment for this bank and a clear indication of the progress we continue to make in putting the past behind us, while at the same time investing to build a bank which delivers for both customers and shareholders.

RBS 2017 results have now been released. Read the details here: https://t.co/LMDVfEIAXW pic.twitter.com/ThJCFpSAgq

European Opening Calls:#FTSE 7258 +0.07%#DAX 12523 +0.49%#CAC 5334 +0.47%#MIB 22523 +0.26%#IBEX 9916 +0.40%

That we haven’t seen any sort of follow through from last week’s gains should be a bit of a worry and probably speaks to a wider concern that the current down move in stocks may not be quite over.

Investors appear to be wrestling on the horns of a dilemma in the wake of this weeks Fed minutes which suggested that the prospect of four Fed rate rises this year might not be outside the realms of possibility, despite FOMC member and St. Louis Fed President James Bullard’s warnings about being too aggressive on the hiking cycle yesterday.

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Source: The Guardian

Barclays reveals big gender pay gaps across UK banking group

International division’s median hourly pay gap was 43.5% with 73% gap for bonuses, report says

Men working for Barclays’ international division got paid bonuses that were more than double those of their female colleagues last year, with far fewer women occupying senior roles.

Released on the day Barclays slid to a near-£2bn loss, the bank’s 2017 gender pay gap report shows there are big pay gaps between men and women in all three parts of the banking group in the UK.

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Source: The Guardian

Barclays reports £1.9bn loss amid Trump tax changes

A £900m charge for US tax changes, litigation bills, cost of exiting Africa and Carillion collapse all blamed

Hefty charges related to Donald Trump’s corporate tax changes, the cost of exiting Africa, the collapse of Carillion and legal battles pushed Barclays nearly £2bn into the red last year.

Chief executive Jes Staley, who hailed a year of “considerable strategic progress”, collected a pay package of £3.9m, down from £4.2m, with his annual bonus cut to £1.07m from £1.3m and benefits also down, while his salary stayed at £2.4m.

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Source: The Guardian

Skin in the Game by Nassim Nicholas Taleb review – how risk should be shared

Hawkish politicians and reckless bankers never face the consequences of their actions – but they should, according to this arresting but flawed book

Skin in the Game is Nassim Nicholas Taleb’s fifth book. He presents it sometimes as part of a triptych with his earlier works The Black Swan and Antifragile, and at other times as a continuation, each book “just as Eve came out of Adam’s ribs”, seeding the central idea of the next. The Black Swan, a soaraway success praised for its prophetic power and intense relevance, looked – just before the financial crash of 2007 – at “high-impact, unexpected” events; at those disasters that result when you underestimate the complexity of systems and, at its simplest, when you assume that because you’ve never seen one, black swans don’t exist.

Antifragile, which had more of a pop-philosophy feel, advised how to take advantage of modern randomness and volatility. Skin in the Game has more in common, in the way its ideas are structured and their application, with Black Swan. Yet a style runs strong and consistent through each of the three books, trenchant beyond all imagining, and is its own kind of wit. Every economist, journalist, book reviewer, professor, anyone who is not part of an “active and transactional life” is an inveterate idiot, unless he or she is one of a handful Taleb respects, who also seem to be his very close friends. “I am never bothered by normal people,” he says, though given the emphasis he puts on his “fuck-off” wealth, the reader might be permitted to wonder how many normal people he engages with.

Every idea that sounds as if it might work in the abstract fails in the particular

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Source: The Guardian

Zimbabwe and Kenya lead the way in Africa's dash from cash

Efficiency and safety of mobile money has millions forgoing notes and coins

“Drunks love paying by M-Pesa,” the owner of a bar in a low-income area of Kenya’s capital, Nairobi, explained drily. “It’s easy to get conned when you have cash.”

The well-known mobile money platform may not choose to commandeer this observation as a marketing slogan, but it does capture some of the reasons why M-Pesa is starting to shift Kenyans away from using cash.

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Source: The Guardian