Lenders expect a rush of defaults
A survey of lenders suggests people may be offered longer interest-free periods on credit cards. The Bank of England’s quarterly Credit Conditions Survey saw respondents say that the length of interest-free periods on credit cards, for both balance transfers and purchases, had increased in the previous three months, with further increases expected in the next three months. Mortgage availability also increased in the three months to the end of May, with lenders saying this is also expected to increase further in the three months to the end of August. While demand for mortgages increased over the last quarter, it is expected to decrease for house purchase in the next three months, with the recent tapering of the stamp duty holiday set to have an impact. The survey also suggests banks expect default rates on unsecured lending – or credit card lending – to jump in Q3, with the number of borrowers defaulting on secured lending also forecast to rise. There is concern that household finances are likely to worsen as coronavirus support schemes designed to lessen the economic impact of the pandemic are wound down. Andrew Montlake, managing director of mortgage broker Coreco comments: “Banks know that there are a lot of struggling borrowers out there.”
Mortgages refused for self-employed who received coronavirus grants
Some high street banks are refusing to give mortgages to self-employed people who received government grants during the pandemic. NatWest and the Royal Bank of Scotland are refusing mortgage applications from people who took the Government's Self-Employment Income Support Scheme (SEISS) grant, while Yorkshire Building Society and TSB said they would need to see evidence of the businesses having recovered from the pandemic. BBC News research also found that most lenders will not accept mortgage applications from people currently on furlough, including Lloyds, Yorkshire Building Society, TSB and Virgin Money. It was also found that many do not include furloughed income as part of their affordability assessment. The report also highlights that self-employed people may have to find larger deposits, with Metro Bank saying customers who have taken out an SEISS grant will need a deposit of 20% or more, while Santander says a deposit of 25% is the minimum for self-employed applicants. Some of these policies seemingly go against assurances from the Financial Conduct Authority, with a spokesperson for the regulator saying coronavirus support schemes “should not, of themselves, prevent people from being able to access credit."
Revolut sets tech firm value record
Digital banking and payments start-up Revolut has set a record as the UK's most valuable private tech company ever, reaching a £24bn valuation in its latest funding round. The firm is now worth six times more than it was valued at in 2020 and is more valuable than NatWest. The investment round raised £579m from Japan's SoftBank and Tiger Global Management, with both investment groups now holding a 5% stake in Revolut.
Blackstone in AIG housing assets deal
Private equity firm Blackstone is lining up a $7.3bn deal for AIG’s housing assets. AIG is to sell a 9.9% stake in its life and retirement business to Blackstone for $2.2bn and sell off some of its affordable-housing assets for another $5.1bn.
Morgan Stanley’s earnings and revenue exceed forecasts
Morgan Stanley has exceeded analysts’ expectations for Q2 earnings and revenue, with record levels of capital market activity boosting its investment banking business. Revenue came in at $14.8bn, well ahead of an $13.98bn estimate, while earnings per share hit $1.85 when analysts had suggested it would sit at around $1.65. Investment banking revenue was up 16% to $2.38bn. Morgan Stanley advised on 216 deals in the first six months of the year, ranking third in the global M&A league tables during Q2 behind Goldman Sachs and JPMorgan. James Gorman, CEO of Morgan Stanley, said: “The firm delivered another very strong quarter, with contributions from all of our businesses.”
Deutsche Bank’s Spanish mis-selling scandal widens
Sources close to the matter say Deutsche Bank may have mis-sold foreign exchange derivatives to more than 50 companies in Spain, with an internal probe examining the cases of up to 100 companies.
Infrastructure spending boosts Galliford
Galliford Try has revealed profits towards the top end of expectations, as the construction firm was lifted by a surge in infrastructure spending. Galliford also reported a £3.3bn order book as its focus on public and regulated sectors has allowed it to benefit from Government investment in infrastructure. Galliford expects profits for the year to June to be near the top end of the £9m and £11.2m range, having announced a return to profitability in March. CEO Bill Hocking said: "The group has an excellent order book and is strongly positioned to contribute to the UK's economic recovery."
FCA vows to 'raise its game'
The Financial Conduct Authority has admitted it must “raise its game” after a string of scandals including the collapse of mini-bond firm London Capital & Finance (LCF). The City watchdog said £120m will be invested in improving its data capabilities over the next three years to crack down on fraud and misconduct, with the regulator set to strengthen rules on financial promotions to protect investors, improve standards on pension advice and take a more proactive approach to spot scams and high-risk investments. Chief executive Nikhil Rathi said there are “areas where we need to raise our game considerably”. Insisting that the FCA “must continue to become a forward-looking, proactive regulator”, Mr Rathi added: “One that is tough, assertive, confident, decisive, agile. One that is not only purposeful but that is fit for purpose.” His comments come less than a month after the Treasury Select Committee said the FCA needs a culture change following the LCF scandal.
London sees strongest IPO performance since 2014
Research shows that the UK remains the most attractive European IPO venue by funds raised. The first half of 2021 saw 10 IPOS raising £3.1bn on the main market and 13 IPOS raising £664m on the Alternative Investment Market (AIM). Total funds raised during Q2 were ahead of other European markets at £9bn, bringing the total equity capital raised in London in the first half of the year to £27bn. Globally, $111bn was raised in 599 deals – making H1 2021 the best six-month listing performance in over 20 years.
ETF industry on track for record year as investor inflows reach $659bn
Money is being invested into exchange traded funds at an unprecedented pace. ETFGI said $659bn flowed into ETFs in H1 2021 compared with the record $767bn invested in 2020.
Pay boost for BlackRock workers
BlackRock employees are set to see an ‘off-cycle’ salary increase, with the asset manager planning to boost pay by 8%. CEO Larry Fink and president Rob Kapito said staff’s “initiative, commitment and teamwork” helped ensure that clients were supported through the pandemic. BlackRock this week reported $9.5tn in assets under management in its second-quarter earnings results.
Cairngorm acquires wealth manager
Cairngorm Capital has acquired wealth manager Whitefoord and robo-adviser Munnypot to launch a new digital firm combining financial advice with investment management.
LEISURE & HOSPITALITY
Brits spend big on gigs
Brits are predicted to spend at least £8.3bn on gigs, festivals and shows after COVID-19 restrictions are lifted next week, according to Barclaycard. One in five consumers have already booked to see events they wouldn't usually attend because they are excited to return to live experiences. Buyers are predicted to spend at least £102 each on a festival ticket this year, in addition to more than £70 each on food and drink at the event.
A fifth of house price rises outstrip local salaries
Booming house prices mean more than one in five properties have made more money in the past year than their owners. The average worker took home £30,500 in the past year, but 21% of homes in Britain have seen values rise by more than this amount, Zoopla estimates. It found that homes in the South West are most likely to be earning more than the average salary in the region. In the past 12 months, 29% of homes in the region increased in value by more than the average regional salary of £29,000. The lowest percentages were in Scotland and the North East, where 9% of homes have gone up in value by more than the average salaries.
Commuter and coastal towns see biggest rent rises
Analysis shows that city suburbs, commuter towns and coastal locations recorded the biggest rises rent increases last year. Rightmove’s quarterly survey of rental prices shows that asking rents were 2.6% higher in April to June compared with the first three months of the year - and 6.2% higher than a year ago. The study found that 8 out of 10 of the biggest city centres are seeing higher rents than in June 2020, while rents outside London have risen to an average of more than £1,000 per month for the first time.
Hammerson ends rent relief
Hammerson has announced that it will no longer offer rent concessions to hard-hit retailers and businesses. The firm said "all avenues to collect rents due are being pursued". During the pandemic, Hammerson said £26m in rents were waived, written off or still not yet due for 2020, with £15m in the same situation so far this year. Hammerson's announcement came as bosses revealed that the company has still only managed to collect 62% of the £154m rents due so far this year and 89% of the £264m that was due in 2020.
Bank of England could step in to curb rising inflation
A Bank of England (BoE) policymaker has warned that surging inflation could prompt the Bank to end its bond buying programme early. Michael Saunders, a member of the BoE’s Monetary Policy Committee, said that “if activity and inflation indicators remain in line with recent trends”, it might become appropriate to rein in some of the stimulus provided to support the economy “fairly soon”. He said that activity “seems to have recovered a bit faster” than forecast in May’s monetary policy report, going on to suggest that “the question of whether to curtail our current asset purchase program early will be under consideration” at upcoming MPC meetings. His comments came just a day after Dave Ramsden, one of the Bank’s deputy governors, said he could see inflation – currently at 2.5% – rising to 4% for a period later this year. Departing chief economist Andy Haldane last month said he expects inflation to hit at least 4%.
Lords reveal QE concern
A House of Lords report has hit out at the Bank of England’s “dangerous addiction” to quantitative easing (QE), saying the programme has done little for growth, consumer spending and investment during the past decade. The Economic Affairs Committee said QE has become the Bank’s “main tool”, with chairman Lord Forsyth of Drumlean saying: “It’s like playing a round of golf with only one club. They reach for it whatever the economic problem”. The report says that while QE “has been very effective at stabilising financial markets during periods of economic turmoil”, it has had a limited impact on growth and aggregate demand. Lord Forsyth said that the Bank “has become addicted” to QE and warned that it is “a serious danger to the long-term health of the public finances.”
ONS: Unemployment falls and vacancies hit pre-pandemic level
Office for National Statistics (ONS) figures show that the unemployment rate dropped in the latest quarter. Between March and May the unemployment rate fell 0.2 percentage points to 4.8%, with the employment rate climbing 0.1 percentage point to 74.8%. The data reveals a month-on-month increase in the number of workers on payrolls, with the total up 356,000 in June to 28.9m. While showing an increase, this remains 206,000 below pre-pandemic levels. The ONS report also revealed that there are more job vacancies now than there were before the pandemic, with 862,000 roles available in April to June. This is 77,500 above the number recorded in January to March 2020. Annual pay growth in the three months ending in May stood at 7.3% – up from 5.7% in April. Reflecting on the ONS figures, Chancellor Rishi Sunak said: “We are bouncing back", adding that with the country approaching the final stages of reopening the economy, “I look forward to seeing more people back at work and the economy continuing to rebound”.