Lloyds’ half-year profits hit £3.9bn
Lloyds Banking Group says pre-tax profits for the six months to the end of June came in at £3.9bn, marking a rebound from losses of £602m seen during the same period last year. Lending increased by £7.5b but it also saw £425m of remediation charges, which hit its bottom line. Lloyds announced a cut in provisions for pandemic-related bad loans, releasing £837m during the first half of the year. The bank also confirmed it will resume the payment of dividends to shareholders, offering 0.67p a share. Lloyds has increased pay as a result of improved profits and impairments, saying costs would be about £7.6bn this year, up from previous guidance of £7.5bn – with the increase reflecting increased variable pay. The bank also said it expected to report a full-year return on tangible equity of about 10%, against previous guidance of between 8.5% and 10%. Interim chief executive William Chalmers said: "During the first six months of 2021, the group has delivered a solid financial performance with continued business momentum, bolstered by an improved macroeconomic outlook for the UK”. Meanwhile, the bank has also announced the acquisition of online savings and pensions operator Embark in a deal worth around £390m that will give Lloyds 410,000 new customers.
Co-op Bank posts profit
The Co-op Bank has seen a rebound in fortunes, with profit of £21.4m recorded in H1. This comes after a £44.6m pre-tax loss in the opening six months of last year. Co-op Bank said it had managed to cut costs by 9% compared with a year ago because of efforts to simplify its business. CEO Nick Slape said the company is well on its way to “sustainable profitability”, with a “relentless focus” on its plan driving a strong financial and operational performance. “As a result of a disciplined approach to cost alongside taking opportunities swiftly as they arise, we have delivered a second consecutive quarter of underlying and statutory profit”, he added.
TSB swings to £42.9m profit.
TSB swung from a loss of £65.5m in H1 2020 to a £42.9m profit in the first half of this year. Stronger mortgage lending drove customer lending 13.7% higher compared to a year ago, while the bank’s loan-loss provisions fell £86.4m annually. Chief executive Debbie Crosbie said: “With a relentless focus on what our customers want and innovating to serve them better, we have grown our balance sheet and increased income, while reducing operating costs further."
YBS profits climb on loan demand
Yorkshire Building Society has seen profits almost double over the past six months, with demand for mortgages surging. It posted a pre-tax profit of £147.7m for the past half year, compared with £67.3m in H1 2020. YBS gave mortgages to a record 9,931 first-time buyers in the six months to June 30, with this around three times the number from the same period in 2020. Total residential mortgages were up almost a third to 41,750 and total mortgage balances rose by £2.2bn to £41bn. Chief executive Mike Regnier said: “The housing and mortgage markets have been strong in the first six months of 2021 … This has enabled us to end the first half of the year with good profit levels and strong capital and liquidity positions.”
Carlyle raises $10.4bn in Q2
Carlyle Group took in $10.4bn from investors in the second quarter and nearly doubled its earnings, with distributable earnings rising to $395.4m from $198.4m in Q2 2020. Assets under management rose 12% on the year to date to £276bn, while its fee-earning assets under management hit a record $175bn. The investment firm's total fundraising for the year-to-date now stands at $18.2bn. CEO Kewsong Lee said: “Industry and macro conditions are favourable and that resulted in increased activity. We're seeing growth in private equity opportunities from disruptors and companies that want our capital to grow”.
Credit Suisse profit slides in Q2
Credit Suisse has recorded a 78% fall in second-quarter net profit, with a total of $278.45m after it took a hit from the collapse of family office Archegos Capital. Revenues were down by 41% to $1.7bn compared to a year earlier. A Credit Suisse commissioned report by law firm Paul, Weiss, Rifkind, Wharton & Garrison said its “lackadaisical” attitude to risk and a lack of action on red flags led to its $5.5bn loss from the collapse of Archegos. Credit Suisse said that it will “put risk management at the heart of our decision-making processes” as a result of the Archegos failure.
Sabadell's Q2 net profit trebles
Spain's Banco Sabadell saw its second quarter net profit almost treble from the same period a year ago, with the bank reporting a net profit of €147m in the April to June period. The increase was driven by lower costs and provisions and higher lending revenues. Sabadell increased its net interest income, earnings from loans minus deposit costs, by 3.9% to €852m.
UniCredit enters Monte dei Paschi talks
UniCredit has entered exclusive talks with Italy's government as it looks to acquire parts of Monte dei Paschi di Siena. The move could see Monte dei Paschi return to private ownership four years after it was rescued by the state.
Concerns raised over FCA reform
Concerns have been voiced over Financial Conduct Authority (FCA) plans to reform its decision-making process to enable it to make faster and more effective decisions. The City watchdog is consulting on moving some decision-making from its Regulatory Decisions Committee (RDC) to its authorisations, supervision and enforcement divisions, shifting responsibility from board level to senior staff members. This, it says, will allow it to stop and prevent harm more swiftly. Emily Shepperd, executive director of authorisations at the FCA, said: “The proposed changes will allow us to be more efficient by making best use of the breadth of expertise across the FCA and by putting certain decisions back to the subject matter experts.” However, Imogen Makin, head of financial services regulatory investigations at DWF, said that while the firm and those it represents would welcome faster and more effective action, the plans “could be a recipe for the exercise of more arbitrary – and potentially excessive - power in relation to authorised firms struggling with compliance issues and individuals who merely made mistakes”. Pippa Tasker, a financial services partner with CMS, said the removal of the objective decision maker from the critical authorisation and permissions processes, “could create a dangerous cocktail for firms.”
FCA to review mortgage prisoner numbers
The Financial Conduct Authority (FCA) is to review the number of mortgage prisoners across the UK, saying previous estimates may not reflect the true number of people trapped paying interest rates of up to 9%. The watchdog has previously said that there are 250,000 mortgage prisoners but in a statement yesterday said: “We believe that our July 2020 assumptions led to a low estimate of the number of customers who have mortgages with inactive firms and are unable to switch despite being up to date with payments.” The FCA added: “We expect that the change in economic conditions, more recent data and updated assumptions are likely to lead to an increase in our estimated number of mortgage prisoners.” Economic Secretary to the Treasury John Glen has promised that the Treasury will work with the FCA on a new solution for mortgage prisoners. He noted FCA analysis which suggests that half of mortgage prisoners would be eligible to switch mortgages if they chose to.
Adviser revenue falls after years of growth
Financial Conduct Authority (FCA) data shows that adviser revenue has fallen for the first time since such data was published in 2016, slipping 1% to £4.4bn in 2020. The figures, which are based on the Retail Mediation Activities Return, show that mortgage advisers saw a dip of 4.2% to £1.22bn. The figures also reveal that the number of firms operating in the retail investments market has fallen for the second year running, with 5,017 investment advice firms in 2020 compared to 5,111 in 2019 and 5,131 in 2018. The report also shows that the share of retail investment revenue accounted for by commission fell from 16% in 2019 to 14% in 2020. While commission has decreased each year since 2016, fees and charges have increased from £2.3bn in 2016 to £3.6bn in 2020.
Mortgage borrowing hits record high
Mortgage borrowing hit a record monthly high in June, Bank of England (BoE) data shows, climbing to £17.9bn. This marks a 163% jump on the £6.8bn recorded in May. The increase came as buyers looked to complete deals before the stamp duty holiday started to taper. While the threshold at which tax on property sales applies was lifted to £500,000 from £125,000 amid the pandemic, as of June 30 it was reduced to £250,000. Chris Sykes, a mortgage consultant at Private Finance, said: “Almost everyone purchasing in the first 6 months of this year were aiming to complete by the stamp duty holiday tier end.” The BoE report also showed that mortgage approvals reduced over the last month, falling 6% to 81,300, having totalled 86,950 in May.
Number of empty shops grows
The British Retail Consortium (BRC) has reported that the number of empty shops in Britain has continued to rise in the past three months. The overall vacancy rate was measured at 14.5%, up from 14.1% in the first quarter of the year. Shopping centres were the worst hit with a 19.4% vacancy rate in the second quarter, followed by high streets (14.5%) and retail parks (11.5%). The BRC said more than one in eight units in shopping centres had been empty for more than a year, and noted a sharp North-South divide, with the South of England, including London, having lower vacancy rates compared with the North.
Deposits up £9.8bn in June
Figures from the Bank of England show that households increased deposits with banks and building societies by £9.8bn in June, with this outdoing the £7.3bn increase recorded in May. While June’s deposits were down from the £14.7bn average seen in the six months to May, the total was still far above pre-pandemic levels. It was also shown that consumers repaid £100m in credit card debt. Households borrowed £300m using consumer credit in June. Among UK businesses, large non-financial firms borrowed the highest amount for seven months in June, at £800m, while small businesses repaid £300m of loans on a net basis.
BoE to end euro liquidity facility
The Bank of England is to end a facility allowing British-based financial institutions to access funds in euros, saying improved market conditions have removed the need for the Liquidity Facility in Euros (LiFE) programme. The facility was started in March 2019 amid concerns over a disorderly Brexit. Its last scheduled operation will take place on September 29 and the facility will close on October 1. The Bank said: “The Bank of England, in co-ordination with the European Central Bank, stands ready to re-adjust the provision of euro liquidity, including restarting LiFE, as warranted by market conditions”.
£28bn in old banknotes and coins not cashed in
The Bank of England says more than £28bn in old bank notes have not been cashed in. Despite paper £10 and £5 bank notes no longer being legal tender - and paper £20 and £50 notes no longer being accepted after September 2022 – 114m of the £5 notes, 76m £10 notes, 510m £20 notes and 341m £50 paper notes have not been returned. Research also shows that, according to the Royal Mint, there are about £109m in old-style pound coins that have not been banked despite the round coin being replaced by a 12-sided version in October 2017.