Mortgage costs climb on rate rise expectation
With the Chancellor’s Budget prompting interest rate fears as the Office for Budget Responsibility warned that inflation is expected to reach 4.4% next year, a number of banks have increased mortgage rates. Barclays announced increases of up to 0.35 percentage points on a variety of fixed-rate mortgages, while Halifax revealed rises of up to 0.20 percentage points on some products from November 1. NatWest has increased rates on a range of its fixed mortgages by 0.1%, with HSBC and TSB also saying rates will rise. Lenders fear the Bank of England will lift its base rate from 0.1% to 0.25% at a meeting next week, squeezing the profit they make from mortgages. Mark Harris of broker SPF Private Clients said markets “have already factored in a rate rise, and maybe two or three by the end of 2022.” Laura Suter, of AJ Bell, said mortgage providers “don’t hang around when it comes to passing on rate rises.” Lib Dem leader Sir Ed Davey has called on ministers to “act now to defuse this mortgage time bomb”.
Lloyds doubles third quarter profit
Lloyds Banking Group saw profits double in the three months to September on the back of a £2.7bn net increase in its home loans that saw mortgage lending hit £15.3bn over the nine months to September. Lloyds posted a 96% rise in pre-tax profits to £2bn in the third quarter compared with £1bn a year earlier. The period also saw the bank release £84m that had been earmarked for potential loan defaults triggered by the pandemic. Lloyds has released £740m in loan loss provisions so far this year. Overall income has grown 8% to £11.6bn since January, and 20% to £4.1bn in the third quarter compared to the same period last year. Profits for the first nine months were £5.9bn. CEO Charlie Nunn said he saw “significant opportunities” for Lloyds to develop and grow, including through “disciplined investment”. He added: “As we move into the final quarter of 2021, the board, group executive committee and I are developing the next evolution of our strategy and longer-term priorities.”
TSB back in the black
TSB has reported £36m in pre-tax profits for Q3, with the increase driven by stronger mortgage lending and lower loan loss provisions. It compares with a £64m loss during the same period in 2020. Meanwhile, owner Sabadell, which bought TSB in 2015 for £1.7bn, has said it is not considering selling the lender after an approach from the Co-operative Bank. César González-Bueno, Sabadell’s chief executive, said: “We are not considering any corporate transaction in the near future.”
Carlyle reports big jump in earnings as private equity portfolio grows
Carlyle has reported net income of $532.8m in the three months to the end of September. This compares with net income of $295.5m in the same period last year. The amount of cash that could be returned to shareholders reached record levels, the firm said. Carlyle’s private equity portfolio rose by 4% during the third quarter, while its third-quarter distributable earnings came in at a record $730.6m compared with $151.8m a year ago. Fee-related earnings were $151.4m in the quarter to September 30, a 28% increase on the prior-year period.
Italy to extend bank merger incentives
Italy's government plans to extend tax breaks aimed at encouraging tie-ups in the country's banking sector by 6 months, according to a draft of the 2022 budget. The incentives are due to expire on December 31 but are set to be rolled over to mid-2022. Officials are also looking to set a new cap on incentives for bank mergers at between a minimum of €500m and the current cap of 2% of assets of the smaller company involved.
UniCredit ups 2021 guidance
UniCredit raised its 2021 profit and revenue guidance after reporting stronger than expected quarterly results. Italy's second-biggest bank, which walked out of a deal to rescue state-owned rival Monte dei Paschi at the weekend, posted a net profit of €1.06bn for the three months to the end of September.
Volkswagen and Stellantis hit by chip shortage
Operating profits at Volkswagen fell by €500m in the third quarter of 2021. It made €2.8bn before one-off items between July and September, down from €3.2bn in the same period last year, as it struggled to produce enough cars to meet resurgent demand amid the global semiconductor supply crisis. The world's largest carmaker by output said its larger volume brands, including Volkswagen, Skoda and Seat, were worst affected, with shortages particularly acute in China. Elsewhere, Stellantis, formed from a merger of Fiat and Peugeot in January, reported a 14% decline in revenues as it produced 600,000 fewer vehicles than planned because of the chip shortage.
Wizz Air executive sacked over secret share-dealing
Wizz Air has fired chief supply officer András Sebők after an investigation by the Financial Conduct Authority (FCA) revealed he had breached rules governing trading by company insiders. The executive bought and sold shares on 114 different occasions without notifying the FCA, with £2.3m of shares bought and £1.8m sold in his name between April 2019 and November 2020. Wizz said that it was unaware of Mr Sebők’s dealings. His employment has been terminated with immediate effect. Although Mr Sebők did not sit on the company’s board, he was a senior executive deemed a “person discharging managerial responsibility”.
Airbus maintains forecast for 600 jet deliveries this year
Airbus has raised its full-year profit guidance and cash flow target for the second time this year, and stood by a closely-watched target to deliver 600 aircraft by the end of 2021. The plane maker reported a 19% drop in third-quarter operating profit to €666m as revenues fell 6%. The company said it was looking for full-year operating profit of €4.5bn and free cashflow of €2.5bn, ahead of previous targets of €4bn and €2bn respectively.
PRA considers capital rules for climate risks
The Prudential Regulation Authority has revealed that it is prepared to adjust the amount of capital banks hold to reflect climate risk. In its Climate Change Adaptation Report, the PRA said that there is scope to use the existing capital regime to address the “financial consequences” of climate change, and that it will “be prepared to impose an additional capital charge or scalar where appropriate” for particularly exposed firms. It also acknowledged the specific challenges of managing climate-related risks, which involve high levels of uncertainty, and said that it would consult on whether new approaches are needed in 2022. Sam Woods, CEO of the PRA, said: “Climate change and the transition to net-zero emissions will affect our planet, our economy and our financial system. As a prudential regulator, it is our job to ensure the financial institutions we regulate are prepared for these changes and able to play their part in supporting the transition.”
MEDIA & ENTERTAINMENT
Facebook changes corporate name to Meta
Facebook has changed its corporate name to Meta as part of a major rebrand, saying the new moniker would better "encompass" what it does as it broadens its reach beyond social media. The change does not apply to its individual platforms, such as Facebook, Instagram and Whatsapp, with only the parent company that owns them rebranded. Facebook boss Mark Zuckerberg said the existing brand could not "possibly represent everything that we're doing today, let alone in the future".
House price surge set to slow
The Office for Budget Responsibility (OBR) says the UK’s house price boom is likely to come to an end but property prices are still expected to rise in each of the next five years. The OBR has predicted that house prices will go up by 8.6% this year compared with a year earlier. The annual rise will then slow to 3.2% in 2022 before dipping to 0.9% in 2023. The Government's official, independent, forecasters also said that mortgage rates are likely to rise from record lows. Laura Suter from investment platform AJ Bell commented: “Homeowners need to be aware that it is a case of if, not when, for an interest rate rise now and the clock is ticking on the record low mortgage rates we've all become accustomed to.”
Shop closures stabilise
Shop vacancy rates have stabilised after rising for three years, with British Retail Consortium figures showing that the rate was 14.5% in the third quarter, the same as the second. While no UK regions saw an increase, the vacancy rate is still at a record high. The proportion of empty stores in shopping centres was flat at 19.4%, while on high streets it remained at 14.5%. Retail parks saw a 0.2 percentage point fall in the vacancy rate to 11.3%.
OBR chair: Brexit to have bigger impact on economy than Covid
Office for Budget Responsibility (OBR) chairman Richard Hughes has said the economic impact of Brexit will be worse than that of the coronavirus pandemic. He said the while leaving the EU would reduce the UK's potential GDP by about 4% in the long term, forecasts showed the pandemic would reduce GDP "by a further 2%". In the long term, he commented, “it is the case that Brexit has a bigger impact than the pandemic.”