Santander is the first to pass on higher mortgage rates
Santander was the first major lender to raise rates on its mortgage deals following the Bank of England’s move to increase interest rates to 1.75%. All the lender’s tracker mortgage deals linked to Bank Rate will increase by 0.50 percentage points from September 3, including its standard variable rates. Barclays also announced four of its five-year fixed-rate loans would be withdrawn from sale immediately with purchase and remortgage deals among those cut from the bank’s range. While some major lenders raised rates after the BoE’s raise, others made decisions in the days leading up to the announcement. Leeds Building Society has withdrawn its 3.25% fix, while HSBC has raised selected deals by 0.25 percentage points. NatWest and Royal Bank of Scotland raised selected fixed-rate deals by 0.26 percentage points on Wednesday, while Halifax raised some rates by 0.4 percentage points on Monday. BoE Governor Andrew Bailey highlighted on Thursday that the average easy-access savings account had only increased by 0.3 percentage points since last November, despite the fact that the bank rate had climbed up by almost four times as much. Mr Bailey said: "The evidence suggests that the pass through has been faster to borrowers than it has been to savers so far."
Apollo Global posts second quarterly loss in a row
US private equity giant Apollo Global posted its second quarterly loss in a row on Thursday as rising interest rates hurt asset values. The firm reported a loss of £1.7bn in the second quarter, wider than a £715m loss in the previous quarter and down from a £534m profit in the same period a year ago. Apollo also said that by July it had raised £10.7bn for a new flagship buyout fund, with a £20.6bn target by the end of the year.
Bain & Co mulls legal action against UK over state contract ban
Bain & Co is considering legal action against the UK Government after a three-year ban on bidding for state contracts was imposed on the firm for its “misconduct” in a corruption scandal in South Africa.
Goldman credit card business probed
The US consumer finance regulator is investigating how Goldman Sachs manages accounts at its credit card business, the bank admitted in a regulatory filing on Thursday. Goldman’s consumer finance arm launched six years ago and credit card lending is a key factor in expanding the division. The business, which also includes Marcus-branded savings accounts and lending, generated $1.5bn in revenues last year. The bank is aiming to push revenues above $4bn by 2024.
Credit Suisse mulls thousands of job cuts
Credit Suisse is looking at cutting thousands of jobs across its operations as well as examining inefficiencies in its middle and back office, according to Bloomberg. The move comes after the Swiss bank named restructuring expert Koerner as CEO to scale back investment banking and slash costs to help the bank recover from a string of scandals and losses.
ING Groep posts better-than-expected profits
ING Groep posted better-than-expected second quarter pre-tax profit of €1.74bn on Thursday, with low new loan provisions despite the worsening economic outlook. Net income margin at the Dutch lender was flat at 1.36% and net interest income rose 3.7% to €3.47bn. "Our resilience is underpinned by our strong capital position and risk management framework, with limited risk costs in the second quarter," said CEO Steven van Rijswijk.
Credit Agricole reports positive Q2 profits
Credit Agricole's shares jumped nearly 5% on Thursday after it joined rivals BNP Paribas and Société Générale in announcing better-than-expected quarterly profits. Net income was €1.98bn, about €800m higher than expected, while revenues rose 8.8% to €6.33bn, roughly 10% higher than predicted.
SMMT cuts 2022 forecast as new car sales fall again
Supply chain problems forced down sales of new cars by 9% in July from a year earlier to 112,162 vehicles. New car registrations fell for the fifth month in a row, although the decrease was the smallest recorded this year. The Society of Motor Manufacturers and Traders (SMMT) subsequently cut its full-year forecast, even though it expects chip shortages to ease in the coming months and lowered its sales forecast for next year to 1.89m, down from 2.02m.
Rolls-Royce’s profit hit by inflation and supply chain headwinds
Shares in Rolls-Royce fell almost 10% on Thursday as the company missed forecasts for profitability in the first half of the year by 24%. Underlying operating profit fell to £125m, from £307m a year earlier. However, outgoing chief executive Warren East insisted the company’s recovery remains on track with profits expected to recover in the second half of the year as flying hours increase.
Construction industry hit by first slowdown in 18 months
The construction industry contracted in July as soaring inflation and recession fears dragged the sector into its first slow down for 18 months. The purchasing managers' index data from S&P Global fell to 48.9, where any reading below 50 indicates a contraction, versus 52.6 in June. Housebuilding fell for the second consecutive month, and civil engineering firms reported their worst result for almost two years, with a reading of 40.1. Commercial construction work grew, but more slowly than during the previous month.
Liz Truss to set out economic plans to finance sector
Tory leadership frontrunner Liz Truss will meet with finance bosses today to outline her economic plans should she become prime minister. The meeting will take place at Aviva's London offices and attendees will include Nigel Wilson, chief executive of Legal & General, and Amanda Blanc, Aviva chief executive. Sources told Reuters the Foreign Secretary will lay out her agenda for attracting new investment, including reform of Solvency II and MiFID regulations, which Britain introduced while a member of the EU. "For too long, we have allowed those who create wealth and high-quality jobs - dynamic businesses and hard-working people - to be weighed down by onerous EU bureaucracy," Truss said in a statement before the meeting. "We haven't moved fast enough to take full advantage of Brexit. I’ll make it a priority to slash EU red tape and ensure we have the right tools in place to attract investment and deliver growth."
Phoenix keen on more takeovers after Sun Life deal
The UK's largest retirement business, Phoenix Group, is targeting £1bn of takeovers after reaching a deal to buy Sun Life's UK unit for £248m. The purchase brings a closed book of about 480,000 policies and £10bn of assets under administration into Phoenix. CEO Andy Briggs said the group was “enthusiastic to pursue further M&A opportunities” beyond Sun Life UK. “We would happily look at any size of deal, nothing would be too big,” he said.
Coinbase forges deal to give BlackRock clients access to crypto
Coinbase has struck a deal with BlackRock to give the asset manager’s clients more seamless access to digital asset markets. BlackRock clients will be able to use its Aladdin investment-management system to oversee their exposure to Bitcoin along with other portfolio assets such as stocks and bonds, and to facilitate financing and trading on Coinbase’s exchange.
Digital GP cancels NHS contracts
Digital GP app Babylon has cancelled a 10-year contract with an NHS trust eight years early, warning the work was “not economically viable”. However, Tim Rideout, Babylon’s UK General Manager, insisted the company had no plans to cut back on its GP at Hand service.
London-listed hospital group Mediclinic accepts £3.7bn offer
Mediclinic, the London-listed private hospital group, has accepted a £3.7bn takeover bid from a consortium made up of its largest shareholder, Remgro, and the world’s biggest container shipping group, the Mediterranean Shipping Company.
MEDIA & ENTERTAINMENT
Informa offloads “shipping bible” as part of £385m deal
Lloyd's List has been sold by Informa in a £385m deal that offloads its maritime intelligence arm to private equity firm Montagu. The sale completes a restructuring of Informa, which has been selling its data and business intelligence operations to concentrate on events and high-end academic publishing.
Next lifts full-year forecast after Q2 sales growth
Next delivered better-than-expected quarterly sales growth of 5% on Thursday, prompting the retailer to lift its annual sales and profit outlook. Next now expects full-price sales to rise by around 6.2% in the 2022/23 year, compared with an earlier forecast of 5%. It raised its pre-tax forecast by £10m, to £860m. supply chain disruption and freight costs had started to ease, the company added, noting also that its stores had outperformed its online business as trends from the pandemic were reversed. Commenting, Next boss Simon Wolfson said warm weather had encouraged people to spend on clothes in the three months to end July. He added that although he expects rising inflation to hurt consumers, the UK’s high level of employment should protect the economy from a 1990s-style recession.
BoE raises rates to 1.75% and warns of year-long recession
The Bank of England raised interest rates by 0.5 percentage points to 1.75% on Thursday, the biggest increase in 27 years, with a prediction that inflation would hit 13% by the end of the year. It was the sixth consecutive raise and the biggest single increase since 1995 and officials said the Bank was ready to act “forcefully” on interest rates if inflation persists. The Bank said Britain would enter five consecutive quarters of recession with GDP falling by as much as 2.1%, while real household incomes are expected to fall by 3.7% across 2022 and 2023 – the largest hit since records began in 1963. BoE Governor Andrew Bailey said families faced a "very big" shock to their finances but it was right to take a strong hand to inflation. "The alternative is even worse in terms of persistent inflation," he said. Meanwhile, the BoE’s Monetary Policy Committee said on Thursday it was "provisionally minded" to start a bond sale programme next month, offloading some of the debt it purchased during more than a decade of quantitative easing. Sales of UK gilts by the Bank will launch at a pace of roughly £10bn per quarter, with the aim of reducing the total stock by £80bn within 12 months. Commenting on the move, James Smith, an economist at ING, said: "Assuming a reduction of £80bn per year, this means private investors will have to increase their exposure to gilts by the same amount, on top of regular deficit financing. This is clearly a risk.”