News, Culture & Society

ALEX BRUMMER: Banking on a safe future

Banks, fintech firms and shadow banks are all about trust, so it is never a good look if published accounts are delayed.

Tax campaigner Dan Neidle fairly asks why Revolut, valued at £27.5billion at its last fund raising, is breaking the law by failing to file its accounts for the financial year ending September 30, 2022, on time.

Not surprisingly, the delay has raised alarm bells given the past involvement of the challenger bank in the distressed bitcoin sector. A pall has descended over the whole thriving fintech sector as a result of the failures of former heroes Greensill, Wirecard and FTX.

A pall has descended over the whole thriving fintech sector as a result of the failures of former heroes Greensill, Wirecard and FTX

The delay in the release of Revolut accounts looks to be more prosaic. The bank, which claims to have more than 25m customers across the globe, has been caught in the crossfire between its auditors BDO and the accounting watchdog, the Financial Reporting Council (FRC). 

The audit of BDO clients has been ‘called in’ by the regulator after a series of mishaps among its clients, which include the housing-for-the-homeless investment group Home REIT, the concierge firm Quintessentially and Revolution Beauty.

Special measures require auditing firms to provide a series of detailed reports on how the key metrics in company accounts are arrived at. 

BDO finds itself in distinguished company after KPMG was in a similar position following faulty audits at the Co-op Bank, Carillion, Conviviality and others.

In the Revolut case, it is understood that BDO has now largely provided the reports and data requested by the FRC and the long delayed accounts should be released in the next two weeks or so. 

They are expected to show that Revolut was profitable over each of the last two years. Most of the income has been generated by its rapid-speed foreign exchange services, which offer the customer currency at ‘spot’ rates.

Among the concerns about Revolut is that even years or so after it was founded in London by Nikolay Storonsky and Vlad Yatsenko, it has still failed to win Bank of England approval and operates under a Lithuanian banking licence. 

Reassurance about its stability has been provided by the presence at the helm of City grandee Martin Gilbert, formerly of Aberdeen Asset Management.

Revolut is still being scrutinised by the Bank as its seeks Authorisation with Restrictions, or ‘AwR’, the preliminary to obtaining a full banking licence. If the accounts hurdle is passed then the initial approval from the Old Lady could come through later this spring.

Hope springs eternal.

Good value

My son Gabriel recently noticed that of all the funds he holds, the only one showing a gain is Fundsmith.

It is disappointing that founder Terry Smith’s remuneration ends up in Mauritius, almost certainly beyond the reach of HMRC. 

There is a lesson there for Keir Starmer as he eyes up an estimated £3.5billion from abolishing non-domiciled tax status. Labour is set on a dangerous course unless its aim is to drive UK strivers overseas.

Yes, 2022 was a down year for Fundsmith and nobody wants to see 14 per cent wiped off their savings. 

As long as it isn’t the start of a trend, then Smith’s followers, who have seen gains of 478.2 per cent over the last 13 years, are not going to grumble.

Smith again chooses to make Unilever a big feature of his letter to investors and seems unembarrassed that the FTSE 100 stalwart actually outperformed Fundsmith last year.

He has no mercy, describing the explanation for Alan Jope’s pending departure as chief executive as coming from Miracle On 34th Street and poking fun at the ‘woke’ marketing of Lux.

Nevertheless, as a 13-year shareholder in the Marmite and Ben & Jerry colossus, he is not for selling.

If only such long-term thinking were more common among UK asset managers.

Grant aid

Britain’s financial communications industry is a great export to the rest of the world.

So congratulations to Andrew Grant and colleagues at Tulchan in securing a remunerative £70million deal linking it to cleaned-up US-based outfit Teneo, which is backed by private equity behemoth CVC. 

It would have been preferable if the traffic were the other way. But when it comes to equities, the pull of New York is irresistible.

No one should underestimate the prospect of clashing egos as two people’s enterprises are brought together. Well worth watching.


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