BANKING
Lenders raise mortgage rates faster than Bank of England
UK lenders are raising interest rates at a faster rate than the Bank of England while failing to pass on higher rates to savers. Lloyds increased some of its fixed-rate mortgages for new customers by as much as 0.81 percentage points on Thursday, while Halifax raised some two-year fixed-rate deals by up to 0.6 percentage points, five-year fixes by up to 0.3 percentage points and a ten-year loan by 0.25 percentage points. The rises are significantly more severe than the Bank of England’s hike last month, when it increased the Bank Rate by 0.25 percentage points to 1%. Aaron Strutt of broker Trinity Financial said: "Some of the rate increases are pretty huge. The cheapest two- and five-year fixes are now priced around 2.5%, but they will almost certainly become more expensive over the coming months.”
NatWest chief says mortgage demand remains strong
Alison Rose, the CEO of NatWest, told a conference on Thursday that mortgage demand remained strong with no “sign of stress” in the bank’s loan book but customers were looking to lock rates in for longer.
British Business Bank appoints new boss
The British Business Bank has appointed Louis Taylor as its new chief executive. Currently chief executive of UK Export Finance, Taylor will take over from Catherine Lewis La Torre, the bank's interim chief since September 2020.
PRIVATE EQUITY
FirstGroup dismisses takeover offer from I Squared
FirstGroup shares slipped on Thursday after the FTSE 250-listed bus and train operator publicly rejected a £1.2bn takeover approach from US private equity firm I Squared Capital. The transport group said that the latest offer from the Miami-based infrastructure investor “significantly undervalues” its existing operations and future prospects.
Lina Khan vows ‘muscular’ US antitrust approach on private equity deals
Federal Trade Commission chair Lina Khan has vowed to take a tough line on private equity dealmaking to ensure buyout-backed mergers don’t concentrate too much power in the hands of powerful Wall Street groups.
INTERNATIONAL
ECB prepares markets for interest rate rise
The European Central Bank on Thursday signalled that its planned quarter-point interest rate rise in July would be followed by a further increase of half a percentage point in September. The first rate rise will take the ECB’s headline deposit rate from minus 0.5% to minus 0.25% and September’s increase will lift interest rates above zero for the first time in a decade. ECB president Christine Lagarde also said the bank will stop its programme of bond-purchases at the start of July. The moves follow criticism of the ECB for being asleep at wheel while inflation runs rampant across the continent. Price rises hit 8.1% in May and are expected to average 6.8% this year, more than three times the 2% target.
State Street knocks down Credit Suisse takeover rumours
After initially declining to comment on rumours it was in talks to acquire Credit Suisse, State Street on Thursday denied it was pursuing an acquisition of the troubled Zurich-based lender.
AVIATION
Melrose shares rise as aerospace business recovers
GKN owner Melrose Industries has upgraded forecasts for its aerospace business and announced a £500m share buyback. The company said it expected profit margins in the GKN aerospace components business to hit 14% against previous guidance of 12%. Melrose also said it is getting closer to a sale of GKN’s automotive and powder metallurgy businesses, helping to send shares up 11%.
FINANCIAL SERVICES
CMC Markets reports positive income figures
Shares in CMC Markets fell 12% on Thursday after the spread betting company revealed that pre-tax profit for the year to 31st March had more than halved from £225.8m the year before to £94.3m. But net operating income came in at £282m - a record performance outside of pandemic restrictions. Founder and CEO Peter Cruddas said: “Excluding the exceptional COVID-19 impacted prior year, which due to market volatility saw unusually significant trading volumes, this is a record net operating income result for the group.” He will receive a dividend payment of more than £20m after the board recommended a final dividend of 8.88p a share.
Apple ditching banking partners for in-house BNPL scheme
Apple will offer loans directly to consumers for its new buy now, pay later product rather than using banking partners such as Goldman Sachs and Barclays. Apple will handled the lending for Apple Pay Later itself through its wholly-owned subsidiary Apple Financing. Apple said its decision to go it alone was in part taken to avoid sharing personal data with third parties. The company will not charge fees for late payments, in line with Klarna and Affirm, but will restrict access to further short-term credit.
HEALTHCARE
Mediclinic rejects £3.4bn bid
Mediclinic International has rejected a £3.4bn offer from a consortium made up of South African conglomerate Remgro and MSC Mediterranean Shipping Company. Mediclinic is one of the London market’s largest private healthcare companies and is best known in Britain as the largest shareholder in Spire with a 29.9% stake.
REAL ESTATE
Questions raised over PM’s 'benefits into bricks' plan
Boris Johnson outlined his plan to allow people on housing benefit to use their welfare payments to pay mortgages. The PM wants the £30bn a year paid in housing benefit to count as “income” in mortgage applications. Lenders broadly welcomed the proposal but questioned how people on housing benefit - who cannot hold more than £16,000 in savings to qualify - would secure a big enough deposit to buy a home. Mr Johnson also promised to reform the market so mortgages were available to those with deposits of as little as 2% and extend the right-to-buy policy to housing associations tenants.
RETAIL
Reliance and Apollo launch £5bn bid for Boots
Indian business magnate and Asia's richest man Mukesh Ambani is teaming up with US private equity giant Apollo Global Management to launch a £5bn bid for Boots. Mr Ambani's Reliance Industries is part of a consortium that has lodged a binding offer for the chemist chain owned by US retail giant Walgreens. The move comes after a rival consortium of the Issa brothers, who own Asda, and TDR Capital were reported to be going cold on a deal.
CMA approves Morrisons takeover
The Competition and Markets Authority has confirmed that Morrisons can complete its £7bn takeover by US private equity firm Clayton, Dubilier & Rice after agreeing to the new owner’s plan to sell dozens of petrol stations.
ECONOMY
Rishi Sunak blamed for losing £11bn in servicing debt
Calculations by the National Institute of Economic and Social Research suggests the Chancellor squandered £11bn of taxpayers money by paying too much interest servicing the Government’s debt. Last year, when the official interest rate was 0.1%, the institute recommended the Government insure the cost of servicing £895bn of debt created by quantitative easing against the risk of rising interest rates. Jagjit Chadha, the institute’s director, said the Chancellor’s failure to do so had saddled the UK with “an enormous bill and heavy continuing exposure to interest rate risk.”
Price rises hit UK shoppers hardest
Poundland owner Pepco has revealed that British shoppers are suffering from the cost of living crisis more than European customers. It said high wage growth in central and eastern Europe was offsetting the rising cost of living while customers in the UK were cutting back on core purchases as widespread inflation knocks disposable incomes. UK inflation hit 9% in April, its highest level for more than 40 years, while wage growth sits at a little over 4%. Elsewhere, shares in DFS Furniture fell more than 16% after the sofa retailer warned of a slump in profits as the cost-of-living crisis dented demand for big ticket items.
OTHER
City economist picked to be Lord Mayor of London in 2023
Michael Mainelli, an economist and former accountant, is to become Lord Mayor of London in 2023 following a secret ballot held by a group of grandees of the Square Mile.