Mark Kleinman: Healey unlikely to resist clamour for bank windfall tax
Mark Kleinman is Sky News’ City editor and the man who gets the Square Mile talking in his Morning Wire column.
The sense of déjà vu among Britain’s bank chiefs is palpable. Eight weeks ahead of new Chancellor John Healey’s inaugural fiscal statement and the industry is engaged in another frantic round of lobbying against tax rises.
This time, it would be surprising if their fears were not justified. Such is the scale of the challenge facing Healey and the bumper round of half-year earnings enjoyed by the main UK lenders and their shareholders, the sector has become an even more obvious target for the Treasury’s tax-extracting tentacles.
Add to that pressure from the TUC to raise the banking surcharge on lenders’ profits from three per cent back to eight per cent – the noise around which will inevitably increase during the Labour Party conference later this month – and it will take some steadfast resistance from Healey not to treat the industry as a cash cow in his Budget on 28 October.
That’s not to say a tax raid would be economically rational. In a letter sent by UK Finance to the Chancellor last month, well-rehearsed arguments about risks to the competitiveness of British banks were trotted out – arguments which had already been made by the JP Morgan chief Jamie Dimon during an earlier call with Healey.
Notably, the letter did not address another crucial element of the narrative often utilised by the banks, which is that an increased tax burden leads to an increase in their cost of capital, which in turn, they say, means lower lending and investment in the economy.
“Banking reaches every part of the economy and every region of the country, providing credit to households and SMEs, supporting investment, and acting as the UK’s gateway to global markets. A strong banking system and a growing economy reinforce each other,” was as far as UK Finance chief executive David Postings would go.
Many industry figures believe it is now simply too tempting a target for Healey to resist, and that an acceleration of reforms to the ring-fencing regime might be offered as an olive branch in exchange for what would be billed as temporary increase in their tax burden. While Treasury officials insist no decisions have been taken, the surprise now would be if Healey leaves the industry untouched.
AA owners may be better off selling rather than risking IPO breakdown
For decades, Britain’s breakdown recovery duopoly has prided itself on rapid response times to callouts from stranded members. The same principle, it turns out, doesn’t apply to monetising the investments of the AA and RAC’s owners.
Both companies have been preparing for sales or stock market flotations for months, having begun preparations as long ago as the summer of 2025. The RAC is, apparently, focused on an initial public offering while the AA’s backers are open to the broader alternatives provided by a dual-track process.
To date, there’s been little substance to show for it, as unpredictable equity market conditions have conspired against London IPOs far more widely than simply these two long-standing rivals. That may be about to change, though. As I reported on Sky News last weekend, the AA has drawn takeover interest from Allianz, the German insurance behemoth, with the company’s trio of private equity backers adamant that the business is worth £5bn.
An offer at that price, roughly equivalent to 11-12 times last year’s EBITDA, Towerbrook Capital Partners, Warburg Pincus and Stonepeak would bite Allianz’s hand off. Take into account any synergies that a deal would offer the buyer, that valuation still feels punchy, regardless of how much the AA’s management team has achieved in improving the business over the last four years.
Allianz is not the only suitor for the AA, according to bankers, with several others, including buyout firm EQT, having explored a bid earlier this year. I suspect, though, given the AA’s decades-long run being passed from one owner to the next, that the current shareholders might need to temper their valuation to get a sale away. Better that than risking a complete breakdown on London’s fragile public markets.
Aldermore auction a surprisingly hot contest after motor finance crisis
At first glance, it should be the lender that nobody wants to own. Aldermore, the challenger bank ensnared by a £750m motor finance mis-selling bill, has been placed at the checkout by Firstrand, its South African parent.
FirstRand’s fury when it announced its decision in the spring was obvious, casting doubt on the investibility of the UK banking sector as it hoisted the for sale sign.
Sensibly, it has split the business as part of the sale process, with parties able to bid for the core bank or the motor finance division – with an indemnity being provided by the parent against future liabilities.
Indicative bids for Aldermore are said to be due early next week and, contrary to expectations, there appears to be a wave of interest in buying it.
Several parties, including Metro Bank and Shawbrook, have explored potential offers but may have now backed away, partly for financing reasons.
Elsewhere, though, interest is strong. I understand that Lloyds Banking Group has retained Goldman Sachs to advise on its interest in Aldermore, although a number of bankers believe a private equity buyer is more likely to win the auction.
In that arena, CVC Capital Partners has been evaluating a deal for months, while rumours suggest that the likes of Cerberus Capital Management may also be interested. Let battle commence!