Britain's six largest lenders offer sub-5% mortgage rates
Falling inflation has led to hopes that the Bank of England will keep interest rates steady, prompting the six largest mortgage lenders in Britain to reduce their mortgage rates to less than 5%. Barclays is the latest lender to cut its home loan prices, offering a two-year fixed rate loan at 4.8% for residential house buyers with a 40% deposit. Other lenders, including Halifax and HSBC, have also reduced their rates. Experts predict that mortgage rates could drop to around 4% by the end of the year. The average two-year fixed rate deal is now 6.19% and the average five-year deal is 5.79%, according to the data firm Moneyfacts, down from nearly 7% in July.
Close Brothers braces for challenges ahead
Close Brothers expects challenges in its asset management and market-making divisions in the first quarter of 2024 due to "unfavourable market conditions." The banking group plans to hire more staff and make acquisitions to drive growth. Close Brothers' banking business has shown strong margins and a stable credit performance, with its loan book growing by 3% in the three months to October 31. However, shares in the FTSE 250-listed bank have declined by 29% this year. The group's asset management sector saw a £200m fall in managed assets, while Winterflood suffered an operating loss of £2.5m. Close Brothers' common equity Tier 1 ratio was 12.7% as of October 31.
Blackstone borrows to boost lending power of $52bn credit fund
Blackstone is in the final stages of raising about $400m for its Blackstone Private Credit Fund (BCRED) through collateralised loan obligations (CLOs) secured by the loans held by its flagship $52bn private credit fund. The private equity firm plans to sell loans that BCRED owns to the CLO to enhance competitiveness. It will also sell debt from software maker Zendesk, cyber security business Mimecast, and Unified Women's Healthcare.
Investec reports 15.3% profit increase
South African lender Investec has reported a 15.3% increase in half-year profit, driven by higher loan volumes, corporate deposits, and funds under management. The bank's headline earnings per share for the six months to September 30 were 36.9 pence, with an interim dividend of 15.5 pence per share. Investec's customer base, consisting mainly of wealthy private clients, helped the bank navigate through inflationary pressures and high interest rates. Although the credit loss ratio increased to 32 basis points from 15 basis points, it remained within the targeted range of 25-35 basis points.
Investors flock back to AT1 bonds
The market for AT1 bonds has picked up rapidly with Barclays now joining BNP Paribas, Société Générale, BBVA and UBS in issuing the debt. The UK lender received more than $13bn of demand from investors for an AT1 bond that could be redeemed in June 2030. This comes a week after UBS re-entered the market with the biggest sale of additional tier-one bonds for five years. The rebound of the asset class was supported by reassurances from the European Central Bank and the Bank of England that investors would not suffer the same fate as those holding worthless positions in Credit Suisse debt.
Commerzbank receives cryptocurrency custody licence in Germany
Commerzbank has obtained a cryptocurrency custody licence in Germany, allowing the bank to offer a range of digital asset services. The initial product will be a custody service for Bitcoin and Ethereum, catering to corporate and institutional clients.
Global banks criticise South Korea's ban on short selling as 'phantom farce'
Global investment banks have criticised South Korea's ban on short selling, accusing regulators of appeasing voters and undermining fair price formation.
Crest Nicholson prepares to cut jobs amid weak housing market
Crest Nicholson is preparing to cut jobs due to the "continued weakness" in the housing market. The housebuilder's forward sales have dropped by 22% year-on-year to £408.5m. In order to shore up the business, Crest Nicholson has announced cost cutting measures to free up £3m. The company's profit guidance has been slashed for the second time, with an expected profit of £45m to £50m for the year.
FTSE 100 chiefs demand reform to halt stock market decline
The Chancellor has been urged by FTSE 100 chiefs to introduce sweeping reforms to revive investment in the City. Dozens of members of the Capital Markets Industry Taskforce, along with Julia Hoggett, chief executive of the London Stock Exchange, signed a letter raising concerns with Jeremy Hunt over new figures showing £1.9trn has been pulled from UK stock markets by UK pension and insurance companies over the past 23 years. The letter urged the Chancellor to accelerate plans to boost investment by pension funds and raise the annual Isa allowance by £5,000 for savers who want to invest in UK-listed companies. The Capital Markets Industry Taskforce also called for the Financial Reporting Council to be given a clear objective to boost competition to make London markets more attractive for investors. “As a fundamental principle, UK-listed companies should not be subject to restrictions that non-UK companies listed on high-quality exchanges are not subject to unless they can be justified,” its letter said.
Aviva on track for higher profits this year
Aviva has confirmed an increase in profits this year with a 13% increase in general insurance premiums and a 23% jump in sales for healthcare, critical illness, and life assurance. The company's investments in workplace pensions also rose by 26% after securing over 350 new corporate customers. CEO Amanda Blanc expects to exceed medium-term financial targets and achieve a 5-7% growth in operating profit, despite higher weather-related claims. Aviva is set to acquire AIG's UK protection business, expanding its customer base by over 2.5m.
Allfunds considers potential suitors for sale
The fund distribution platform, Allfunds, is considering potential suitors for a sale. Cinven, CVC Capital Partners, Permira, KKR, and Warburg Pincus are reportedly in the running. Allfunds is working with advisers at Goldman Sachs and Citigroup on a strategic view that could lead to a sale. The potential buyer would need to win the support of French lender BNP Paribas and US private equity firm Hellman and Freidman, which own a combined 46% stake in the group.
Britain's bulk annuity providers should limit reinsurance exposure
British life insurance companies which provide insurance for defined benefit or final salary pension schemes - known as bulk annuities - should limit exposure to reinsurers because of possible counterparty risk, the Bank of England's Prudential Regulation Authority said yesterday. The reinsurance counterparties may be highly exposed to illiquid assets and their investment profiles may be too closely correlated to one another, the regulator said.
Reverse takeover deal involving Amigo Holdings terminated
A reverse takeover deal involving Amigo Holdings, Craven House Capital and various individuals signed last month has been terminated, the British subprime lender said on Thursday. "As a result, it will wind itself up, which will completely wipe out its investors. Amigo chief executive Danny Malone said: "This is disappointing news. The transaction offered a solution that could have provided a future for shareholders."
LEISURE & HOSPITALITY
City Pub Group sold to Young's in £162m deal
Serial entrepreneur Clive Watson is set to sell City Pub Group to pub giant Young's in a £162m deal. The deal values City Pub Group at a 46% premium on yesterday's closing share price. Young's CEO Simon Dodd sees the acquisition as a strong opportunity to accelerate their growth strategy, citing City Pub Group's "really good portfolio that is predominantly freehold and in premium locations." The move will bring a further 50 pubs into the Young's business, taking its total estate to 279 pubs and bolstering its position as one of the biggest operators in London and southeast England.
MEDIA & ENTERTAINMENT
Barclay family faces £600m liability despite Telegraph sale
The Barclay family will still be liable to repay a possible £600m to Lloyds even if, as expected, the bank secures a sale of their prized media assets. The bank is preparing a formal auction of the Barclays' media assets after calling time on a four-year period of debt negotiations with the family earlier this year. Court documents show the bank puts outstanding debts owed by a key holding company as well as operating companies at £1.2bn. Lloyds wants full repayment and analysts expect the sale of the Telegraph and its sister publication The Spectator to fetch about £600m. The Barclays will be liable for the shortfall.
Lloyd's signs long-term HQ deal
Lloyd's of London has signed a long-term deal to remain in its landmark City headquarters until 2041. The insurance marketplace has been negotiating a new lease with Chinese landlord Ping An, which bought the building in 2013. The deal allows Lloyd's to continue working in its distinctive Richard Rogers-designed HQ for the next two decades.
Burberry blames VAT-free shopping cut for poor UK performance
British fashion house Burberry has attributed its poor performance in the UK to the cutting of VAT-free shopping for international tourists. The company reported a 6% loss in adjusted operating profits to £223m and a 10% decline in sales across the Americas. Burberry stated that the withdrawal of VAT refunds in the UK since January 2021 has caused the country to lag behind Continental Europe in attracting tourism spend. Burberry warned that if the weaker demand continues, it is unlikely to achieve its previously stated revenue guidance for FY24. The company's adjusted operating profit is expected to be towards the lower end of the current consensus range (£552m-£668m).
Hotel Chocolat bought by Mars
Hotel Chocolat has been bought by US confectionery giant Mars in a £534m deal that will net co-founders Angus Thirlwell and Peter Harris £144m each. Chief executive Mr Thirlwell said: "By partnering with Mars, we can grow our international presence much more quickly using their skills, expertise and capabilities." Mars offered 375p for the business, more than two and a half times its closing price of 140p immediately prior to the deal. The sale highlighted the “absurdity” of UK valuations, Crystal Amber’s Richard Bernstein said.
Investment in net zero ‘will keep interest rates higher for longer’
Megan Greene, a member of the Bank of England’s Monetary Policy Committee, has warned that spending on the “green transition” was likely to mean interest rates stay higher for longer. The American economist said a renewed focus on defence spending and net zero would require significant investment, helping to reverse a global trend towards higher saving, which has helped to keep average interest rates down. Over the longer term, however, investment in net zero could improve productivity, helping to keep rates down. Greene went on to warn that high wage growth and low productivity will make it harder for the UK compared with other large economies to bring inflation down to the Bank’s 2% target.