Category: Business News

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AFP

The RBS department set up to help companies in trouble mistreated many of its clients, a leaked report for the Financial Conduct Authority says.

It found some “inappropriate action” – such as interest charges being raised or unnecessary fees added – was experienced by 92% of viable firms seen by RBS’s Global Restructuring Group.

GRG operated from 2005 to 2013 and at its peak handled 16,000 companies.

The banking giant denies systematic abuse of its customers.

GRG would step in when businesses had skipped a loan repayment, or seen their sales and profits dip notably and was marketed as an expert service that would turn around a business.

But the report, seen by the BBC, commissioned for the City watchdog, the FCA, found struggling companies that were placed in the recovery group had a slim chance of emerging from it.

It said just 10% returned intact to the main RBS bank.

As of the end of 2014, 69% of firms, were still in the successor to GRG, which was supposed to return them to health.

‘An undertaker’

Many of those businesses remained tied into complex loans with the bank in the form of derivatives linked to interest rates, from which it is often too expensive to leave.

Others ended up in administration, liquidation or a trade sale. According to one BBC source, instead of getting firms back on their feet, GRG was more like their “undertaker”.

The 361 page leaked report also says the bank provided only “narrow compliance” to investigators.

Sources told the BBC investigators would regularly ask for details from the bank on certain matters and RBS would only provide the absolute minimum information.

RBS disputes this though. It says it provided investigators with “circa 323 gigabytes of data, comprising more than 15 million physical pages and 270,000 emails.”

‘I became suicidal’

Tracy Standish ran a chain of 18 bowling complexes nationwide and banked with RBS for decades.

When sales dipped during the recession from 2008, his business was placed into the hands of GRG.

It applied a default charge of £100,000 to be paid immediately and raised the interest rate on some of his existing loans to 15% – greatly exacerbating Mr Standish’s financial burden.

Mr Standish and his family had to surrender 80% of their company to the bank. He’s now suing RBS.

He said he was “devastated” by the actions of the bank.

“It was to suddenly not know where to go, to be completely lost. It was like an out of body experience. I just really didn’t know what had happened to my world, and where to go next.” said Mr Standish, from Poole.

“I must have been in shock maybe for a month… That just descended into full blown depression.

“I had to be referred to a counsellor for treatment, I was prescribed anti-depressants. And I became suicidal, and was so, for some period.”

RBS says that the Standish case was currently the subject of litigation and that the bank would be “vigorously defending these claims”.

‘Limited powers’

The FCA provided a summary of the main findings last November.

The full report calls for a fundamental review by RBS of how it handles its SME customers in financial distress’ and RBS has already set up a £400m fund to compensate those customers mistreated by GRG.

The bank, which is 73% owned by the government, said it had apologised for previous mistreatment of some customers and had taken steps – agreed with the FCA- to put things right. That included a new complaints process overseen by a retired High Court Judge – and an automatic refund of complex fees paid by these customers.

The City watchdog also admitted that it may in fact lack the powers to take action when SMEs face mistreatment: “The activities carried out by GRG are largely unregulated; therefore, the FCA’s powers are limited in this area.

“However, we are investigating issues raised by the Report which fall within our remit.”

The issue of RBS’s treatment of business customers was first raised in 2013 by Lawrence Tomlinson, the ‘Enterprise Czar’ for the then Business Secretary Vince Cable.

‘Dreadful legacy’

Sir Vince, now the leader of the Liberal Democrats, said: “The story of GRG and RBS is a dreadful legacy.

“This happened a decade ago but the banks continued refusal to accept copious evidence that good firms were driven out of business to boost the profits of the bank by acquiring their property is to its great discredit.”

At its peak in 2011 and 2012, it handled 16,000 companies, with total assets worth £65bn.

RBS set up a £400m compensation fund to make redress. But some campaigners have suggested that the final figure could be closer to £2bn.

A separate BBC investigation last year found that that GRG earned profits of £1.2bn in 2011 and was a major contributor to RBS profits while its investment banking division was posting record losses.

RBS was and still is the UK’s biggest business bank. It lends to more companies than any other financial institution and this report adds to the reputational and financial issues already in play at RBS.

Only last month, it agreed to pay £3.7bn in fines for misselling mortgage-backed assets in the run up to the financial crisis in 2007-08.

The bank itself expects to have to pay further multi billion pound fines over the coming year.

Now, it faces a number of private lawsuits from current and former business customers who may feel they were mistreated by their own bank.

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A former Volkswagen engineer who helped develop a device that enabled cars to evade US pollution rules has been sentenced to more than three years in prison and ordered to pay $200,000.

James Liang, 63, was the first person prosecuted in the emissions scandal.

The US investigation has led to charges against seven others in the US and sparked probes in other countries.

Volkswagen has admitted guilt, agreeing to spend as much as $25bn to address US claims.

Liang co-operated with prosecutors, who argued that his help with the investigation warranted a reduction in the possible punishment to three years in prison and a $20,000 fine.

But US District Court Judge Sean Cox opted for a harsher penalty of 40 months and a $200,000 penalty, saying he wanted to send a message to others in the car industry.

“This is a very serious and troubling crime against our economic system,” he said.

Volkswagen has admitted that it used software installed in diesel vehicles to deceive environmental regulators in the US and Europe between 2006-15.

The German company sold about 11 million such vehicles globally, including almost 600,000 in the US.

The devices, which allowed vehicles to perform better in test conditions than they did on the road, came to light after a study of emissions by researchers at West Virginia University.

In a memo submitted to the court last week, prosecutors acknowledged that Liang did not “mastermind” the plan, but argued that he abdicated his responsibility to speak out.

They wrote: “Unless individual actors are also punished, future corporate employees and contractors may be tempted to justify their criminal behavior as just ‘doing their jobs’ or ‘following orders’.

“Sentencing Liang to a three-year term of imprisonment will deter others from making similar rationalizations.”

Liang’s lawyer had urged the judge to consider a lighter penalty in recognition of his assistance with other cases.

Liang, who is still employed by Volkswagen but does not work as an engineer, can appeal.

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Federal Reserve Chair Janet Yellen defended financial rules introduced to the US after the 2008-2009 financial crisis, backing policies that President Donald Trump has deemed “a disaster”.

The Trump administration has said the rules have stifled economic growth and lending.

It is working with Republicans in Congress and financial firms to roll back some regulations.

Ms Yellen said the bank was open to changes but they should remain modest.

Ms Yellen spoke in Jackson Hole, Wyoming, where top economists and central bankers have gathered for an annual conference.

What happens at Jackson Hole?

Republicans take aim at Dodd-Frank financial rules

“The evidence shows that reforms since the crisis have made the financial system substantially safer,” Ms Yellen said in her remarks.

Ms Yellen, whose term is due to expire early next year, rejected arguments that the rules are to blame for the relatively slow recovery from the crisis, while conceding that some areas could be improved.

The Federal Reserve is looking at changes to ease regulations for smaller banks, she said.

There may also be benefits to modifying the so-called Volcker Rule, which limits the ability of large banks to trade with their own money, she added.

But Ms Yellen cautioned against any sweeping rollback: “The balance of research suggests that the core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth.”

Tenure in Washington?

Her speech did not address speculation about her tenure. In July, she told Congress that staying on had not come up in conversations with the president.

Appointed by former President Barack Obama, Ms Yellen is viewed as a less conservative economist than some others at the bank, with a focus on economic growth rather than inflation.

Mark Hamrick, a senior economic analyst for Bankrate.com, said the remarks are likely to have little impact on the debate in Washington, where the banking rules known as Dodd-Frank are viewed as anathema by many Republicans.

“Despite her urging that any future adjustments to post-crisis financial reforms be only modest, her defence of financial reforms in the wake of the financial crisis that hit its zenith a decade ago will not largely… change minds in the Congress,” he said.

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As many as 40,000 householders sought help from Citizens Advice last year on home improvement jobs, mostly for shoddy workmanship.

Roofing and fitted kitchens were the worst offenders, attracting nearly 5,000 complaints each.

In one case, a builder failed to finish work on the roof, leading to thousands of pounds’ worth of water damage.

In another typical example, a kitchen contractor disappeared, leaving no doors on the cupboards.

The top five building jobs which caused problems were:

• Roofing – 4,971 cases
• Fitted kitchens – 4,766 cases
• Fitted windows and doors – 3,879 cases
• Plumbers – 3,210 cases
• Driveways, patios and decking – 3,116 cases

“People trying to improve their homes are finding them in a worse state than before they started,” said Gillian Guy, the chief executive of Citizens Advice.

“Dealing with botched jobs and unfinished work means many are left out of pocket and face huge disruptions to their lives.”

The charity is advising householders to get references before hiring a builder, to find out if they are a member of a trade body, and to get written quotations and contracts.

If things do go wrong, and the builders are not co-operative, consumers should consider using an Alternative Dispute Resolution (ADR) scheme, said Citizens Advice.

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Provident Financial

Troubled doorstep lender Provident Financial has made a management change at its consumer credit division.

The firm lost two-thirds of its share value on Tuesday after it issued its second profit warning in three months.

Chris Gillespie has been appointed managing director of the home credit business, replacing Andy Parkinson.

His task is to re-establish relationships with customers, bring collections back to a normal level and stabilise the operation of the company.

The FTSE 100 company expects to make losses of £80m to £120m after its debt collection rates fell to 57%, compared with a 90% rate in 2016.

Bradford-based Provident recently changed the way it collected its loans, replacing self-employed agents with “customer experience managers”.

Chief executive Peter Crook resigned earlier this week.

Manjit Wolstenholme, Provident Financial executive chair, said she was seeking to “turn the home credit business around and to putting a plan in place to deliver good results for the company”.

Also joining the firm’s home credit business are Luke Enock, who currently works for Provident subsidiary Satsuma, and Greg Cant, also currently employed at Provident.

FCA probe

The company has some 2.5 million customers, many of whom would not qualify for a standard bank loan and are therefore categorised as “sub-prime”.

Provident had first flagged up problems in June.

At the time, it said not enough of its self-employed debt collectors had applied to become employed by the company.

It had also been less effective at collecting money and selling new loans, while a greater number of agents than normal had left.

The company said then it expected profits to be £60m at its consumer credit division.

Its other divisions – Vanquis Bank, sub-prime car loan business Moneybarn and consumer credit brand Satsuma – are trading in line with expectations.

However, Vanquis has been under investigation by watchdog the Financial Conduct Authority, which had concerns about one of its products.

Provident agreed to suspend all sales and is awaiting the outcome of that inquiry.

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Australia’s biggest airline, Qantas Airways, has delivered its second highest profit in its 97-year history.

Pre-tax profit came in at A$1.4 billion (£860m; $1.11 bn) for the year to the end of June. The airline’s highest ever profit was delivered the previous year.

Although down nearly 9% from that record, Chief Executive Alan Joyce says the company’s turnaround is complete.

The strong result is down to cost cuts and its robust domestic business which helped offset global competition.

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“Three years ago, we started an ambitious turnaround program to make the Qantas Group strong and profitable. We tackled some difficult structural issues, became a lot more efficient and kept improving customer service.

“Today’s announcements show this plan has well-and-truly paid off,” Mr Joyce said in a statement.

Qantas also confirmed plans to sell non-stop flights from Sydney to London and New York by 2022.

But the plan will depend on the airline securing planes from Airbus or Boeing that are capable of travelling the distance.

“From next year we will be flying direct from Perth to London, which is a huge leap forward,” Mr Joyce said.

“We believe advances in technology in the next few years will make Sydney to London direct a possibility,” Mr Joyce said in a statement.

Summer holidaymakers returning to the UK from the world’s busiest airports have suffered the longest average delays from Rome, BBC analysis shows.

Passengers waited an average of nearly 29 extra minutes to travel back to the UK from Rome Fiumicino Airport.

Venice, Nice and Barcelona were next on the list of longest UK-inbound delays among the 50 airports with the most flights on these routes.

The data comes from figures collected by the Civil Aviation Authority (CAA).

Worst routes

The analysis, by the BBC’s data journalism team, is based on the last two years of CAA data for all flights from or to UK airports during June to August.

Earlier analysis showed that, on flights leaving the UK, holidaymakers heading from Gatwick Airport and on Easyjet flights suffered the longest delays.

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Flight calculator: At the top of the page you can enter your UK departure city, and your destination, to find average delays for the airlines serving this route in the last two summers.

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Now, data on the routes used by UK residents returning home, show that six of the 50 airports with the most flights back to the UK had typical delays of more than 25 minutes.

This even included internal flights from Gatwick.

If the less frequently flown routes are included in the data, then flights to UK airports from Kingston, Jamaica, had the longest average delay of nearly 53 minutes.

Six airports on this list recorded average delays of more than 45 minutes in the last two summers.

On specific routes, travellers flying from Keflavik Airport in Iceland to Glasgow saw the longest average delay of 55 minutes, followed by Malaga in Spain to Heathrow (54 minutes) and Kingston, Jamaica, to Gatwick (53 minutes).

Among the 50 busiest airports for flights to the UK, the worst delays were from Barcelona to Gatwick (31 minutes), followed by Chicago O’Hare Airport to Heathrow (30 minutes) and Palma de Mallorca Airport to Gatwick (30 minutes).

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PA

Travellers flying from the EU or on European airlines do have a right to compensation. This means:

• If your flight departed the European Union or was with a European airline, you might have rights under EU law to claim if the delay or cancellation was within the airline’s control
• If your flight’s delayed for two or more hours the airline must offer food and drink, access to phone calls and emails, and accommodation if you’re delayed overnight – including transfers between the airport and the hotel
• If you arrive more than three hours late in a journey of less than 1,500km (932 miles) you are entitled to 250 euros (£225) in compensation from the airline
• If you arrive more than three hours late in a journey spanning more than 1,500km, but within the EU, you can get 400 euros in compensation from the carrier
• Journeys to non-EU destinations more than 3,000km away that arrive between three and four hours late put you in line for 300 euros in airline payouts, while delays longer than four hours to these destinations are due 600 euros in compensation

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Methodology

All data used on this page is compiled and made available by the Civil Aviation Authority, which publishes aggregated statistics on punctuality for all flights taking off or landing at major UK airports.

The BBC has combined the CAA’s data for June, July and August of 2015 and 2016 and used this to calculate the average (i.e. mean) delay per flight across these months for all routes listed in the data.

Routes with fewer than 50 flights over this period were excluded, as were airlines that registered no flight data for the summer months of 2016 (even if they had been active in 2015). Chartered flights were not distinguished from scheduled flights in the calculations for airlines that fly both categories on the same route.

The data for outbound delays is based on the time the aeroplane takes off from the UK runway, and the data for return delays is based on the time the aeroplane arrives back on the UK runway.

Flights that take off or land early are recorded as having a delay of zero minutes.

Produced by Ryan Watts, Ed Lowther, Nassos Stylianou, Ransome Mpini, Daniel Dunford, Gerry Fletcher, Becky Rush, Joe Reed, and Kevin Peachey.

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Investors dumped food and grocery stocks on Thursday after Amazon said it would complete its takeover of Whole Foods on Monday and immediately embark on price cuts.

The news drove losses at retailers including Walmart, Target and Costco and helped push US markets lower.

The Dow Jones Industrial Average fell 0.1% to 21,783 points.

The wider S&P 500 dipped 0.2% to 2,438.9 points and the Nasdaq slipped 0.1% to 6,271.3 points.

Wall Street has been relatively quiet this week, as the results season wraps up and investors await any news from central bankers at an annual conference in Wyoming.

Amazon’s news reignited fears for the supermarket industry.

In addition to lower prices, the e-commerce giant said it plans to sell Whole Foods brand products on its website, integrate its systems to offer Prime members discounts and provide Amazon pick-up spots at Whole Foods stores, among other changes.

Roger Davidson, a former Whole Foods executive now with consultancy firm Oakton Advisory Group, said Amazon “will lower prices on consequential items to drive traffic and sales, but not do a whole store price reduction, which could really damage gross margin and potentially wipe out operating margin.

“It does not look like they will go kamikaze on pricing.”

Prices at Whole Foods can be an average of 15% to 20% higher than those charged by some rivals.

Amazon’s move send Walmart down 2%, with Target slipping almost 4% and Costo down 5%.

Food companies also took a hit: Campbell Soup fell 3% and Kellogg dropped 2.9%.

Against that backdrop, shares of Signet Jewelers, which owns diamond brands such as Kay’s, were a rare gem, rising more than 16%, after the firm announced a plan to buy an online retailer for $328m.

The company also reported that sales in the three months to July reached almost $1.4bn, up 1.9% year-on-year.

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Shares in troubled doorstep lender Provident Financial continue to rebound, closing 13% higher.

The stock had gained 12% on Wednesday, although that paled in comparison with its 66% plunge on Tuesday.

Advertising giant WPP clawed back some losses after falling on Wednesday on poor sales news, ending 2.9% higher.

The FTSE 100 closed up 0.3% at 7,407 points. Among the main fallers were Easyjet, down 4.4%.

The airline’s shares were hit by a downgrade to “underperform” from analysts at Exane BHP Paribas.

Dixons Carphone stoked fears about consumer spending. The FTSE 250 company, which owns Carphone Warehouse and PC World, said slower mobile phone sales would hit profits.

Dixons Carphone shares initially fell by as much as 30%, but eased back later to close about 23% lower.

The company’s chief executive, Seb James, told the BBC that he was shocked at the size of the share price fall.

“Thoughtful investors will begin to see quite soon that we look a bargain and the shares should recover,” he said.

But Neil Wilson, senior market analyst at ETX Capital, said: “After the Provident Financial collapse, another profits warning is probably the last thing the City needs right now.”

Provident tumbled on Tuesday after issuing the profit warning in three months and saying that its chief executive was leaving.

One the currency markets, the pound was flat against the dollar at $1.2801, and fell slightly against the euro at 1.0837 euros.