Jeremy Hunt was denied a bank account by Monzo
Jeremy Hunt recently revealed to colleagues that he was denied an account by online bank Monzo before becoming Chancellor. Mr Hunt suspected that regulations covering “politically exposed persons” (PEPs) were responsible for the decision. The news comes after a slew of peers and other politicians recounted their treatment by lenders or credit card companies under PEP rules, ramping up pressure on the Financial Conduct Authority to take action. The Telegraph points out that the regulations in question derive from a global initiative to help root out corruption, but the EU-derived version applied in the UK failed to take account of a qualification recommended by the inter-government Financial Action Task Force, that only those in a “higher risk business relationship” should be subject to the checks - as opposed to parliamentarians with run-of-the-mill savings and investments. Meanwhile, UK banks have been accused of putting national security at risk with their interpretation of ESG guidelines. The Ministry of Defence has launched a review into the treatment of defence contractors after reports they faced more expensive financing or were denied accounts altogether. Research from the defence, security and aerospace trade body ADS found the proportion of investment funds that exclude the defence sector on ethical grounds has risen from 59% in 2021 to 91% this year. Finally, the former business secretary Sir Jacob Rees-Mogg is to table an anti-discrimination law that would prevent banks from blocking accounts over customers’ political views.
MPs to question mortgage lenders on high interest rates
Britain's biggest mortgage lenders, including Lloyds, Santander, Nationwide, Skipton, and Paragon Bank, are to face questioning from MPs regarding their efforts to assist homeowners dealing with the highest interest rates in 15 years. A spokesman for the MPs said: "The crossparty committee of MPs will examine the current state of the mortgage market, including levels of mortgage stress, arrears and forbearance, and the outlook for the market in light of higher interest rates." They added: "The committee will question mortgage providers on consumer behaviour following recent rate rises, the impact on house prices and the wider housing market, and mortgage affordability and availability." MPs will also question the banks on how they will stick to their obligations under the new "mortgage charter", a voluntary agreement brokered by Jeremy Hunt, and whether customers have started to seek out fixed-rate deals which last longer than the five-year term that is the usual maximum.
Atom Bank boss accuses big lenders of profiteering
The CEO of Atom Bank, Mark Mullen, has criticized leading lenders such as Barclays and HSBC for not raising interest rates for savers. Mullen accused the banks of profiteering and using higher rates to boost their profits instead of helping customers. He stated, "Savers have had a pretty rotten time since the global financial crisis and through no fault of their own interest rates have been on the floor." Mullen also rejected the idea that bigger banks are unable to act quickly in passing on rates due to their size. He emphasized that the issue is about enjoying widening spreads. The row over profiteering comes as savers face a growing tax bill, with rising interest rates pushing even those with modest savings over the threshold for paying tax. Savers are set to pay £6.6bn in tax on interest this year, up from £3.4bn last year and £1.2bn in 2021.
OneSavings Bank says profits will be hit by refinancing rush
A race among struggling homeowners for fixed-rate mortgages has put profits for OneSavings Bank (OSB) at risk, the lender said, sending shares down nearly a third on Friday. Customers of its Precise Mortgages brand have rushed to mitigate the impact of rising interest rates by refinancing their loans earlier than the bank anticipated, meaning profits will be as much as £180m lower during the first half of the year. Analysts at Jefferies said: “We do not think there is read-across to other parts of OSB, nor to Paragon Bank, but OSB’s underwriting looks less good in this light than before.”
Meta singled out by UK financial lobby group over digital scams
UK Finance has said that the social media sites of Facebook owner Meta are carrying more than half of digital payment scams suffered in Britain.
What the cost of capital means for PE
Private equity barons are weighing the threat of rising interest rates to the industry, as the cost of debt rises fast. But problems started appearing before rates surged with assets failing to attract the interest post-pandemic that investors had hoped for. Guy Hands, the founder of Terra Firma, predicts an “extremely challenging” time ahead, as PE moves from a relatively benign period of declining interest rates to the exact reverse. For a PE deal to work now you need either substantial increases in efficiencies or huge top line growth, he says. “There will be relentless pressure across all aspects of society and some businesses will go over the cliff.” But Archie Norman, a non-executive director at Bridgepoint and chairman of Marks & Spencer, is less pessimistic, stating that higher interest rates mean bosses will have to stomach lower returns. Even so, “PE has outperformed on average and will probably continue to do so.”
Dealmakers target UK mid-market as larger transactions prove scarce
Persistent domestic inflation and rising interest rates is driving dealmakers to focus on mid-market companies, where prices are lower and cheaper to finance.
JP Morgan set to report robust quarterly profits
America's biggest bank, JP Morgan, is expected to announce a significant rise in earnings during the second quarter. Analysts predict that higher interest rates will help offset weakness in its investment banking and trading divisions. The bank is forecast to report total revenue of $39.3bn, up by 28%, and net income is projected to climb by almost 42% to $12.2bn. In comparison, rival Citigroup is expected to report roughly flat revenues of about $19.5bn, with net income forecast to have fallen by a third to $2.978bn. The US banking industry has been hit by higher interest rates and a slowdown in dealmaking, with smaller lenders particularly affected. Despite these challenges, JP Morgan's strong earnings demonstrate the resilience of lenders in the current environment.
China's banks hit over concerns over debt
Concerns over the exposure of Chinese banks to non-performing loans and diminishing returns sent shares down sharply last week. Investors were worried about the risk from local government financing vehicles and a crisis-hit property sector with some analysts stating that debt risk may ultimately need to be borne by the state sector.
Investment banks squabble over carbon footprint of underwriting deals
Global investment banks are calling for a large proportion of their underwriting deals to be excluded from net zero targets, leading to accusations of double standards and greenwashing.
MJ Gleeson reports shrinking first-time buyer numbers
Low-cost builder MJ Gleeson has reported a fall in the number of homes sold in the year to June. It completed the sale of 1,723 homes in the latest financial year, compared to 2,000 the previous year. The downturn in the wider economy and the immediate impact of higher mortgage rates on confidence led to the fall in sales, the company said.
Hunt moves to refresh Britain’s capital markets
Jeremy Hunt will today set out new measures to heighten the appeal of British markets to firms seeking to float in its stock exchanges. In his Mansion House speech, the Chancellor will also address a pledge by pensions companies to put 5% of their investments into high-growth businesses, up to £50bn, but will also propose regulatory reforms and threaten to intervene if inefficient small pension firms do not merge. Meanwhile, writing in the Sunday Telegraph, the Economic Secretary to the Treasury, Andrew Griffith, contends that the financial services reforms already underway and the Chancellor’s plans for further regulatory adjustments will “make the UK an even more attractive place for firms to start, scale, and grow.”
Revolut’s US payment flaws allowed thieves to steal $20m
The FT reveals that over £20m was stolen from Revolut’s corporate funds before the payments firm could rectify a flaw in its systems around spring 2022. The problem stemmed from differences between the finance app’s US and European subsidiaries which meant Revolut wrongly refunded accounts when certain transactions were declined. The company has faced long delays in securing approval for a UK banking licence and earlier this year its auditors warned Revolut’s revenues for 2021 “may be materially misstated” owing to flaws in the company’s internal systems.
LSE boss warns of perpetual cycle of decline
London risks falling into a "perpetual cycle" of decline without urgent action to stem the flight of successful companies overseas, according to the CEO of the London Stock Exchange. Julia Hoggett warned that any "great" company born in the UK would eventually become an overseas company. She expressed frustration at the indifference towards capital markets activity leaving the UK and emphasized the need to recognize the economic loss. Hoggett called for reflection on the differences between public and private markets and urged an examination of why private markets are becoming more attractive.
Ant Group fined for violating corporate governance laws
Chinese regulators have fined Ant Group 7.123bn yuan ($985m) for violating corporate governance and consumer rights laws. The People's Bank of China imposed the fine, and Ant Group has stated that it will comply with the penalty and enhance its compliance governance. The violations concern laws and regulations related to corporate governance, financial consumer protection, participation in business activities of banking and insurance institutions, payment and settlement business, and anti-money laundering obligations.
Fund managers must work harder as rates rise
The Telegraph reports on how savings accounts are beginning to offer a decent alternative to investment funds as interest rates continue to rise. A saver can secure a 5% return on their cash in a one-year fixed bond – around the same as the British stock market’s annualised return over the past decade. Rob Morgan, of the wealth manager Charles Stanley, said: “When saving rates were next to nothing, a possible return if 5% or 6% in stocks would have been appealing. But now they need to be more like 10% to make the risk worth it.”
Car insurance costs rise by 34% in a year
Research carried out by Consumer Intelligence reveals that the cost of car insurance has risen by 34% in a year as the average policy topped £1,000 for the first time in six years. The average policy is now £1,082, while those under 25 could face paying £2,145 as they are deemed higher risk.
BP in talks over insurance deal for £30bn pension scheme
Trustees for BP’s £30bn UK defined benefit scheme are in talks with multiple insurers over what could be a record-breaking buy-in deal.
Private equity bets on NHS backlog with recruitment agency deal
Fremman Capital has bought UK-based Medinet, an agency that employs NHS doctors and nurses outside their contracted hours to treat patients on NHS premises.
LEISURE & HOSPITALITY
Hospitality sector concerned over summer staffing
The UK's hospitality sector is still short-staffed and businesses fear they will struggle to cope over the busy summer holiday season. That’s according to trade body UKHospitality, whose CEO Kate Nicholls said: "The workforce shortage is creating a serious crisis as we head deeper into the peak summer season. Nearly half of businesses are reducing trading hours per day, and a third are having to close on some days each week." Figures from the Office for National Statistics show there are 132,000 unfilled roles in the sector – 48% above pre-pandemic levels.
MEDIA & ENTERTAINMENT
BT chief drawing up plans to step down
BT chief executive Philip Jansen is drawing up plans to quit next year, according to City sources. Jansen has led the telecoms giant since 2019 and has launched the company's biggest ever shake-up. The £12bn business has seen its share price fall by more than a third since Jansen joined and is aiming to slash between 40,000 and 55,000 jobs by the end of the decade in a wide-ranging effort to cut costs.
UK house prices fall 2.6% in biggest annual drop since 2011
House prices fell last month at the fastest annual pace since 2011, according to the Halifax, with the average UK property price down 2.6% in June compared with the same month last year. The drop was more than double the fall of 1.1% in May, marking the largest such fall for twelve years. Prices for June fell for the third month in a row, dipping 0.1%, Halifax said, taking the average to £285,932. The figures come as mortgage rates hit their highest levels since the financial crisis. On Friday, the average two-year fixed rate mortgage had climbed to 6.54%. Halifax's director of mortgages Kim Kinnaird said the "resulting squeeze on affordability will inevitably act as a brake on demand" as buyers consider what they can realistically afford.
Bank of England warned against 7% interest rates
JP Morgan economist Allan Monks has predicted that interest rates may have to rise to 7% to curb inflation as prices continue to climb. Craig Fish, managing director at London-based mortgage broker Lodestone, warned that if rates hit this level it could send shock waves through Britain's housing market and send average prices tumbling.
UK economy expected to have shrunk in May
The UK economy shrank in May due to a combination of industrial action and the Coronation of King Charles, data from the Office for National Statistics is expected to show on Thursday. Economists believe UK GDP fell by 0.4% in May, versus a 0.2% gain it made the previous month. The decline in output in May will send the three-month rolling GDP figure down to -0.1%.
Britcoin ‘could be used to check ages and nationalities’
The developer working on the UK’s central bank digital currency has said the so-called “Britcoin” could be used by shoppers to prove their age or nationality. Alastair Johnson, founder of Nuggets, went on to say that a decentralised system could be more private than holding a bank account, with no access to data for the Bank of England or the system’s developers. But privacy campaigners are unconvinced. Susannah Copson at Big Brother Watch said: “The proposal to use a CBDC to verify personal details, such as age or citizenship, raises serious privacy concerns.” Danny Kruger, a Conservative MP and member of the Treasury Select Committee, added: “Any move towards a digital pound should explicitly address the need for people’s data to be protected - and there must be no opportunity for the state to monitor or control people’s spending.”