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Daily News Roundup: Friday, 6th May 2022

Posted: 6th May 2022


Banks up loan rates after Bank of England move

TSB was the first lender to confirm it will increase mortgage rates after the Bank of England raised the base rate to 1%, saying its standard variable and homeowner variable mortgages would match the rise and increase by 0.25 percentage points from June. HSBC said its tracker deals would rise by 0.25 percentage points and that it would “review” its standard variable and other deals. Barclays will increase its standard variable rate from 5.24% to 5.49%, while Santander’s variable mortgage rates will go up to 4.25% in June. Alliance & Leicester will lift its rates to 5.24%. Lloyds said it was "reviewing" what the interest rate rise increase would mean for its variable mortgages and savings accounts, with Nationwide, Skipton Building Society and Yorkshire Building Society also reviewing their prices. Leeds Building Society - the first lender to confirm it would pass on higher interest rates to savers in full - said it would not be increasing the costs of its standard variable rate, which stands at 5.54%.

UK banks the most transparent over climate risks

Analysis shows that UK banks are the most transparent in the world at disclosing their exposure to climate change risks. Researchers said UK banks were “ahead of the pack” largely in part to an accounting framework set out by the Prudential Regulation Authority in 2019 that incentivises British lenders to update markets on their green credentials. The study, which analysed annual reports of 35 of the world’s top banks, found that those based in other countries are lagging behind British lenders in improving their climate-related disclosures.

Virgin Money profit climbs, year-on-year

Virgin Money saw pre-tax profit increasing to £315m in the six months to the end of March from £72m in the same period a year ago. This was down on the profits for the previous six months to the end of September, which sat at £345m. The company, which operates under the Clydesdale Bank, Yorkshire Bank and Virgin Money brands, said volume growth saw a stable loan book at £71.9bn, with unsecured lending up 7% to £5.8bn, while business lending declined 2.5% to £8.3bn. The amount of money the bank was earning in interest on loans compared to the amount it is paying in interest on deposits expanded 1.83% in the first half of the year, compared to 1.56% in 2021. CEO David Duffy said: “We’ve made good progress against our strategy, while delivering a significant increase in profit.” He also noted record credit card sales, “good growth” in personal current account openings and strong uptake of a new digital fee-free business current account.

Co-operative Bank sees profitability for fifth consecutive quarter

The Co-operative Bank has recorded a profit for its fifth quarter in a row, having posted pre-tax profits of £30.5m for Q1. The bank said earnings were bolstered by its mortgage business. Expenditure included £1.7m on a business simplification programme to “rationalise” its mortgage and savings platforms and bring them in-house. Chief executive Nick Slape said the investments would help Co-operative Bank “improve recruitment and retention in light of the challenging environment.”


French banks post Q1 numbers

Credit Agricole saw net income fell 47.2% to €552m in Q1 as it took more than half a billion euros in provisions against its exposure to Russia and Ukraine. France's second-largest listed bank wrote down €195m for the total equity value of its Ukrainian arm and took a €389m provision for its Russian exposure. Credit Agricole's first-quarter revenue rose 8.1% to €5.938bn. Corporate and investment banking saw underlying revenue rise 4.3% but activity slipped 2.8% in capital markets with fixed income, currencies and commodities down 9.1% while equity jumped 40.1%. Elsewhere, Societe Generale, France's third-biggest listed bank, has beat first-quarter earnings expectations, with net income up 3.4% to €842m and revenue up 16.6%. SocGen's equity trading revenue was up almost 20% at more than €1bn while fixed income and currency trading revenue rose 21.7%.

UniCredit considers exit from Russia

Italian bank UniCredit has put aside €1.3bn to cover potential losses linked to its €1.9bn direct exposure to Russia as it considers an exit from the country. The bank reported a 70% dip in Q1 new profit, year-on-year. Net profit came in at €247m, below an average analyst forecast of €413m.


Car industry cuts sales forecast by 9%

The Society of Motor Manufacturers and Traders (SMMT) has cut its annual sales prediction from 1.89m new cars to just 1.72m, with the sector hit by semiconductor shortages and additional supply chain issues resulting from the conflict in Ukraine. SMMT data shows that the number of new cars registered in April fell by 15.8% year-on-year, with 119,167 logged compared to 141,583 in April 2021.


FCA launches appointed representatives unit

The Financial Conduct Authority (FCA) has launched a dedicated appointed representatives department. The unit will focus on tackling harm posed by appointed representatives (AR) and their principal firms. In a report published in December the FCA said it will require firms to run verification checks on ARs annually after detecting a "wide range of harm across all sectors" containing this model. The City watchdog said firms will be required to annually verify their ARs' details, report whether these remain accurate and confirm the activities they permit their ARs to carry out. The regulator is currently recruiting for 30 senior associate roles in the new department.

Watchdog calls for improvements in advice for later life borrowers

Sheldon Mills, executive director of consumers and competition at the Financial Conduct Authority (FCA), says the watchdog “wants to see improvements” in the quality of later life lending advice. Saying the FCA has seen a “huge growth” in the sale of lifetime mortgages, he pointed to concerns over how they were sold, highlighting “insufficient personalisation of advice; insufficient challenging of customer assumptions; and lack of evidence to support the suitability of advice.”

Pension schemes warned not to ‘speculate’ with savers’ cash

While US pension schemes have been edging toward digital currencies in recent weeks, British pension schemes are unlikely to follow suit after the Pensions Regulator warned that fund managers should not “speculate” with savers’ cash. A spokesperson for the watchdog said: “While pension schemes are permitted to invest in a wide range of instruments, they should always be appropriate to the long term nature of pension obligations.” They added: “We would not expect trustees to speculate with savers’ retirement savings.”

Fund flows improve in April

Fund flows showed signs of recovery in April after outflows surged for a third consecutive month in March. With investors faced with uncertainty linked to tightening monetary policy and Russia’s invasion of Ukraine, total outflows from retail funds jumped from £2.5bn in February to £3.4bn in March, according to Investment Association data. While March saw a decline amid volatile equity markets, Emma Wall, head of investment analysis at Hargreaves Lansdown, said: “It is worth noting that April flows data has been more positive,” noting inflows over the past month, “particularly into broad-based active and passive equity funds.”

Hiscox sets aside $40m for Ukraine

Hiscox has set aside about $40m to cover losses that it expects to suffer from Russia’s invasion of Ukraine. The insurer said that the bulk of the hit would be felt in its political violence, war and terrorism book. The war is expected to result in losses running into tens of billions of dollars across the insurance industry. 

Axa reports 2% rise in Q1 revenue

Axa has posted a 2% rise in revenue, with strength in its health and casualty insurance business offsetting weakness in savings. Europe's second-biggest insurer said it was confident of reaching its financial targets for 2023 despite geopolitical tensions linked to the Russia-Ukraine conflict.

Jupiter has ‘lost its way’ and risks takeover, says former board director

In an open letter to Jupiter chair Nichola Pease, former board director Jon Little says the asset manager has “lost its way.” He calls for a change in management and strategic overhaul.


McColl's close to collapse

Convenience store chain McColl's is on the brink of collapse, warning that it was "increasingly likely" it would fall into administration unless talks around a rescue deal were successful. Morrisons has reportedly proposed a rescue deal to McColl's lenders in recent weeks, with this said to involve the supermarket chain injecting new capital.

Easter boosts High Street footfall

New figures reveal that total UK footfall was down by 13.1% last month on pre-pandemic April 2019, but a 2.3% improvement from March, thanks to improved weather and Easter festivities. Figures show high street footfall was down by 17.2%, 0.6% better than March, while retail parks and shopping centres were 3.3% and 8.2% higher respectively.


BoE raises rates and warns of recession

The Bank of England has increased interest rates to the highest level in 13 years and warned that the cost of living crisis could push the economy into recession this year. The Bank’s Monetary Policy Committee (MPC) voted to raise the base rate from 0.75% to 1%. Three of the nine-strong MPC voted to raise rates further, calling for a 0.5% increase. The Bank expects inflation, which currently stands at 7%, to hit 10.25% by the end of the year, far exceeding its 2% target. While officials do not expect two consecutive quarters of negative growth, they predict the economy will decline by 0.25% next year. It also warned that household disposable income is projected to fall by the second largest amount since records began in 1964 this year.


16m would have to borrow to pay unexpected £300

A new poll shows that 16m adults in the UK would have to borrow money to afford an unexpected bill of £300. The study also found that around one in three may struggle to access credit from high street lenders, representing a 50% rise in the last six years.

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