Banks see increase in defaults
Data from the Bank of England shows that banks and building societies have seen an increase in defaults. In the three months to February, lenders said that default rates on secured loans to households, such as mortgages, and unsecured loans, such as credit cards, increased and are expected to increase further in the next three months. The Bank’s credit conditions survey found that the availability of credit for secured lending remained steady in the period. However, lenders expect it to dip in the next three months. Ashley Webb of Capital Economics suggested this was because lenders expect “wholesale funding conditions to deteriorate further” following the recent turmoil in the banking sector. While provision of credit for unsecured loans dipped in the three months to February, it is expected to increase slightly in the following quarter. Credit for businesses held steady and is expected to do so again over the coming months.
UK banks cut fossil fuel investment by 31%
Most of the UK’s largest banks cut back on fossil fuel financing in 2022. According to analysis by the Rainforest Action Network, the five large FTSE 100 banks invested $35.7bn into fossil fuel companies last year, down from $51.6bn in 2021. Barclays invested $16.5bn, marking a 23% reduction, while HSBC invested 44% less in fossil fuels last year, at $11.0bn. Standard Chartered invested $5.1bn, down from $7.1bn the year before, while NatWest cut its fossil financing by 37% to $1.2bn. Lloyds was the only UK bank to increase funding for fossil fuels, with the $1.8bn pumped into fossil fuel companies marking a $500m increase on the year before. Globally, Royal Bank of Canada was the biggest financier of the fossil fuel industry in 2022, knocking JPMorgan from the top spot.
Former TSB executive fined over IT meltdown
Carlos Abarca, the former IT chief at TSB has been fined £81,620 by the Bank of England for failings when the bank switched IT systems in 2018. The Prudential Regulation Authority (PRA) said Mr Abarca had assured TSB’s board that an outsourcer was prepared for the migration, despite having failed to obtain proper assurances that this was the case. Sam Woods, head of the PRA, said: “Senior managers have an essential role to play in ensuring that firms manage and supervise outsourcing effectively.” He added that Mr Abarca’s management of a key outsourcing relationship “fell below the standard we expect.” Mr Abarca, who was TSB’s CIO during the migration project, would have received a £116,000 penalty but was given a 30% discount for agreeing to resolve the matter. The PRA and the Financial Conduct Authority last year imposed fines of £48.65m on TSB for the IT disaster.
Network International reveals private equity bid
CVC Capital Partners and Francisco Partners have made a takeover approach for Network International. The payments company said it has received a "preliminary and conditional" proposal from the private equity firms.
Dechra in takeover talks
Dechra Pharmaceuticals revealed it was in talks with private equity group EQT over a possible £4.6bn deal. Dechra, which makes drugs to treat pets, will recommend the takeover if the private equity group announces a firm intention to make an offer.
LSEG plans crypto derivatives platform
The London Stock Exchange Group (LSEG) is set to offer a regulated platform for trading crypto derivatives. LSEG said the platform, LCH DigitalAsset Clear, would be run by its French clearing arm, LCH, and GFO-X, a marketplace for digital assets which is regulated by the Financial Conduct Authority. Frank Soussan, head of LCH DigitalAssetClear, said institutional investors wanted to trade bitcoin but that needed “a framework which they are familiar with and comfortable with, which at this stage is traditional market infrastructure, a regulated market venue.” Derivatives allow investors to speculate on the price movements of underlying assets without owning the asset itself.
More FTX customer funds recovered
FTX has recovered $7.3bn of customer funds, the company’s lawyers have said, adding that defunct cryptocurrency exchange could be restarted as a going concern as soon as next year. Attorney Andy Dietderich told a hearing at a bankruptcy court: “The situation has stabilised, and the dumpster fire is out.” When the company filed for bankruptcy in November, it had had collected just $3.3bn of assets to distribute among stakeholders. FTX collapsed in November and founder Sam Bankman-Fried is facing fraud charges.
FCA adds to board
The Treasury has appointed Sophie Hutcherson to the board of the Financial Conduct Authority (FCA) as a non-executive director. Ms Hutcherson’s career includes various senior positions at Deutsche Bank UK and she has served as a senior advisor to the CEO at Wells Fargo. Meanwhile, Bernadette Conroy has also been reappointed to the FCA board as a non-executive director for a second three-year term, while Ben Broadbent has been reappointed for a third term to the Prudential Regulation Committee, the board of the Prudential Regulation Authority. Commenting on the appointments, FCA chair Ashley Alder said: “As the remit of the FCA continues to grow, it is vital our board can draw on a range of experiences.”
Tesco profits halve to £1bn as costs rise
Tesco has reported a jump in annual sales but profits halved as it grappled with higher costs. While sales rose 7% to £66bn, pre-tax profits dropped 51% to £1bn with Tesco saying it had faced "unprecedented" rises in prices charged by suppliers. The sharp fall in pre-tax profits was mainly due to a big write-off in the value of its property portfolio. Tesco's operating profit also fell, dropping by 6.9% to £2.6bn. The UK's biggest supermarket said customers had faced "an incredibly tough year", with prices soaring.
Amazon sees record shareholder proposals
Amazon is facing 18 shareholder proposals, with this exceeding the record of 15 set in 2022. The increase comes as ESG-focused investors push for more changes at the online retail giant and proposals include a request to change Amazon's executive compensation package and calls for an audit to ensure that Amazon's technologies are not used for human rights violations. Amazon's board has recommended shareholders vote against each of the 18 proposals. Last year, all shareholder proposals were rejected by investors' votes.
Economy will avoid recession, says Hunt
Data from the Office for National Statistics (ONS) shows that the economy saw flat growth in February. The 0.02% growth seen in February follows a 0.4% increase recorded in January. Despite February delivering minimal growth, Chancellor Jeremy Hunt said the economic outlook was "brighter than expected," with the UK "set to avoid recession." The ONS data shows that GDP grew by 0.1% in the three months to February. Analysts at Capital Economics believe that the UK "probably avoided recession" but said more interest rate rises were likely as the Bank of England looks to get inflation under control.
BoE economist expects inflation to fall
The Bank of England predicts that inflation will ease in the coming months. Chief economist Huw Pill said the Bank expects Consumer Price Index inflation to fall in Q2, “as large rises in energy prices from last year drop out of the annual comparison.” He also suggested that slowing pay growth could mean wage rises will ease as inflation falls. Mr Pill added that the Bank’s Monetary Policy Committee needs to see an increase in unemployment to “reassure” the rate setters that inflation is headed back towards their 2% target.
Hunt: Pay rises above inflation would be a mistake
Chancellor Jeremy Hunt has warned that it would be a "terrible mistake" to give pay rises above the rate of inflation, saying that while strikes are hitting the economy, wage increases that fuelled inflation would have a "more damaging" impact. Mr Hunt said agreeing pay awards without making inflation worse was an "incredibly difficult balancing act that we have to get right." The Chancellor told the BBC that ministers are aiming to "put this high inflation period behind us," saying that by sticking to its plan, the Government could bring inflation down from 10.4% to below 3% by the end of the year. He added that the “worst possible thing” that ministers can do for striking junior doctors, nurses, train drivers, teachers is to “manage the economy in a way that they are still worried about 10% cost of living increases, in a year's time."