BANKING
Mortgage arrears rise in Q3
The number of people falling behind on their mortgage payments rose by 18% year-on-year in Q3, according to figures from UK Finance. The data shows that of the UK’s 8.8m outstanding mortgages, 87,930 mortgage holders were in arrears in the July to September quarter. The number of homeowners in arrears was up 7% in Q3 compared with Q2. The analysis also shows that the number of buy-to-let mortgages in arrears in Q3 was 11,540, with this up 29% on Q2 and double the level seen in the third quarter of 2022. The UK Finance report said: “The increases in arrears are driven by the combined impact of both cost-of-living pressures and higher interest rates,” adding: “In particular, interest rate pressures are felt more acutely in the buy-to-let sector, where landlords may not be able to raise rents to cover the increases in their payments."
Banks accused of dragging their feet on fraud refunds
Banks have been accused by a senior MP of "dragging their feet" when it comes to refunding victims of fraud. Harriett Baldwin, chair of the Treasury Committee, says banks are getting better but need to go further, faster, urging poorly performing banks to increase their refund rates. A report from the Payment Systems Regulator shows that £485.2m was stolen through authorised push payment fraud in 2022, with banks refunding around 59% of the stolen money. TSB leads the way with a refund rate of 91%, followed by Nationwide at 78%. UK Finance says the financial services sector invests the most in countering fraud and is the only sector that reimburses victims.
High street banks reluctant to lend to SMEs
High street banks are pulling back from lending to SMEs, while demand for capital is set to rise, according to a survey of more than 100 brokers by fintech firm iwoca. The survey found that 83% of SME finance experts believed major banks were becoming more reluctant to fund small firms, while 82% said SME demand for capital would rise in the next six months. Three quarters of experts predict that major banks will continue to reduce SME access to working capital over the next year. It was found that 51% of brokers surveyed hold a negative opinion of high street banks.
Lloyds reports 23% rise in crypto scams
Lloyds Bank has seen a 23% increase in reports of cryptocurrency investment scams by customers in its group, including Halifax and Bank of Scotland, between January and September 2023. On average, victims are losing £10,741.
Rose to lose most of £10m NatWest payoff
NatWest is set to scrap the bulk of a possible £10m-plus payout to former chief executive Dame Alison Rose. The board has reportedly opted against paying most of the discretionary elements of Dame Alison's pay package. While she will forfeit millions of pounds in unvested share awards, the former CEO is expected to receive a seven-figure sum in the form of her basic salary and fixed share allowance. Dame Alison stepped down in late July after admitting that she discussed former UKIP leader Nigel Farage’s banking arrangements with a BBC journalist.
Santander appoints new CFO
Santander UK has appointed Angel Santodomingo as its new chief financial officer, replacing Duke Dayal. Mr Santodomingo, who has worked in the financial services industry for nearly 40 years, will take over the position in December. Mike Regnier, CEO of Santander UK, said Mr Santodomingo's experience will be valuable as the bank rolls out its new group operating model.
Banks urged to detail AI plans
Banks are facing increasing pressure to discuss their AI strategy, but only a quarter of banking CEOs are speaking publicly about it. Despite over half of the world's biggest banks establishing AI as a strategic objective, few CEOs have mentioned it in their annual letters to shareholders. Alexandra Mousavizadeh, chief executive officer of Evident AI, says CEOs need to address concerns about data security, privacy implications, and future AI regulation.
INTERNATIONAL
HSBC aims to expand personal banking in India
HSBC aims to further expand personal banking in India to serve the country's fast-growing pool of high-earning professionals. In addition to wealth management services, HSBC's new private banking business in India will also provide digital credit cards and personal loans to affluent customers. HSBC India reported a profit before tax of $766m in the first half of this year.
SEC faces fierce pushback on plan to police AI investment advice
Brokers, hedge funds, and investment advisers are resisting Securities and Exchange Commission attempts to regulate the use of AI in providing advice to investors, saying the proposals are unnecessary and impossible to implement.
CONSTRUCTION
Housebuilding to fall to lowest level since the financial crisis
A new report from former Treasury economist Chris Walker shows that the number of private homes completed in England is set to fall from 249,100 last year to 151,000 next year, the lowest figure since the financial crisis, while the number of new housing starts is also set to slump by almost 50% in two years. The report identifies the lack of a national housing strategy as a key issue, while taxes on builders to fund the replacement of dangerous cladding are also named as a factor.
FINANCIAL SERVICES
FSCS levy set to increase
The Financial Services Compensation Scheme (FSCS) has forecast that its levy will rise to £415m in 2024/25, with advisers set to contribute £140m – up from £101.1m in 2023/24. The £39m increase is due to lower expected surpluses being carried forward from 2023/24 than were carried forward the year before. The FSCS also confirmed this year's levy would remain at £270m, as forecasted in May, with no additional levy from firms for the rest of the financial year. Total compensation costs for the year are now forecast at £435m - £36m less than forecast in May.
Finance sector pay gap remains high
The gender pay gap in the finance sector remains high, according to the Equality and Human Rights Commission (EHRC). The EHRC highlighted that the gap in the finance sector, excluding insurance and pension funding, stands at 36.6%, compared to the national average of 14.9%. The EHRC also noted that progress towards equality in the sector has mainly focused on executive-level roles. However, the target of having 40% of women on the boards of FTSE 350 companies was achieved earlier this year, three years ahead of schedule.
BNPL sector faces challenges, says Moody's
The buy now, pay later sector is facing challenges as competition intensifies, according to a report from Moody's which warns that tightening financial conditions and rising competition have made profitability a pressing issue for independent lenders. The report predicts that rising competition and regulatory changes may push many BNPL lenders out of the market, saying that companies that survive are likely to be those that can achieve profitability quickly or provide additional value-added services to consumers.
Lloyd's insurer announces special dividend
Lancashire Holdings, a Lloyd's of London insurer, has declared a $119m special dividend and a share buyback of up to $50m after a strong operating performance in the first nine months of the year. The company's gross written premiums increased by 23.2% to $1.6bn.
EU watchdog cautions over rules for non-bank financial sector
Regulators should avoid rigid one-size-fits-all approaches when writing rules for the non-bank financial sector, according to the European Securities and Markets Authority. The sector, which includes hedge funds, real estate funds, insurers, and private investments, now accounts for about half of the world's financial sector.
RETAIL
B&M raises profit guidance after strong first half
B&M European Value Retail has reported a 10.5% rise in interim pre-tax profit to £222m from £201m in the same six months a year ago. As a result, the company increased its forecast on earnings before interest, taxes, depreciation and amortisation on the 2024 financial year to be between £620m and £630m. The company’s UK arm reported that total revenues increased by 8.1% to £2.1bn in the first half against £1.9bn a year ago. It said sales growth slowed to 3.1% in the second quarter and added that in the present three-month trading period, sales in B&M UK were up 1.6% in the first six weeks.
WH Smith profits soar as travellers return to airport stores
Profits at WH Smith have nearly doubled in a year, reaching £143m in the year to August, compared with £73m in 2022. Group revenues increased 28%, to £1.8bn, helped by a 43% rise in sales in the travel divisions to £1.3bn, as the retailer was boosted by the return of travellers passing through its airport convenience stores. However, the group reported a 1% decline on the high street business to £469m.
ECONOMY
Recession warning over money supply
With Bank of England data showing that the flow of broad money – notes, coins, bank deposits, and other financial instruments - contracted 4.2% annually in September, analysts have warned that the UK is facing a “severe recession.” Damian Pudner, director of the Institute of International Monetary Research, said this marks an “alarming monetary squeeze,” adding that a recession in 2024 is “all but inevitable.” “The money supply has consistently proven itself to be a crucial indicator for forecasting economic growth and inflationary trends, and one that our policymakers can ill afford to neglect,” Mr Pudner warned. Julian Jessop, economics fellow at the Institute of Economic Affairs, said: “You do not have to be a die-hard ‘monetarist’ to worry that money and credit growth are collapsing.” He added: “At best, this means that inflation is set to fall much more sharply. At worst, it is signalling a severe recession.”
BoE chief economist: 'Crucial' rates stay at 5.25%
Bank of England chief economist Huw Pill says it is essential that interest rates stay at their current level in order to tame inflation. With the Bank forecasting that inflation will not dip to its 2% target for another two years, Mr Pill, in a presentation to the ICAEW, said: “We do seem to have persistence there … That's what, for me, makes it crucial that the restrictive stance of monetary policy, as reflected in Bank Rate being at 5.25%, that that restrictive response also has to be persistent, in order to squeeze the inflationary situation out of the system.”
OTHER
UK productivity almost flat since the financial crisis
Office for National Statistics data shows that productivity in 2022 was just 1.7% above the level recorded in 2007. Productivity fell by an annual rate of 0.1%, following a 0.3% fall in 2021.