BANKING
European Commission slapped down over clearing demands
The European Banking Federation (EBF) has warned that the European Commission’s plan to punish banks for failing to shift lucrative clearing business out of the City of London would cause “serious market disruption” and “significantly weaken the attractiveness and competitiveness” of EU clearing houses. The statement comes after Mairead McGuinness, the European commissioner for financial services, last week pressed financial institutions again to shift their clearing business to the Continent. The EBF warned that international clients “will move their entire capital markets business (not only the clearing business) to non-EU institutions” if the Commission pushed ahead with its "forced relocation" plans.
Lending constrained as banks factor in cost of living
Banks are starting to factor in rising energy prices, inflation and tax rises when calculating how much they can lend. Santander is updating its affordability models as households experience a surge in the cost of living and mortgage brokers say they expect the other big lenders - HSBC, Barclays, Lloyds Banking Group and NatWest - to follow suit. Russell Galley, a managing director of Halifax, said: "Buyers are dealing with the prospect of higher interest rates and a higher cost of living. With affordability metrics already extremely stretched, these factors should lead to a slowdown in house price inflation over the next year."
Record results at Scottish Building Society
The Scottish Building Society has recorded its best annual results since being founded 174 years ago. The mutual made a record pre-tax profit of £2.4m in the 12 months to January this year, up from about £840,000 in the previous financial year. Mortgage lending was up by 10.9% to almost £454m, while savings balances grew by 6% to £464.9m. Chief executive Paul Denton said: "As a mutual, unlike the high street banks, we do not have shareholders, so all profits are reinvested into the business, in areas such as in new digital technologies, improving our member experience and increasing our capital base to support future growth."
NatWest criticised over CEO’s pay plan
Shareholder advisory group Glass Lewis has criticised NatWest for handing CEO Alison Rose £4.7m this year, rising to £5.2m in 2023. In what marks a return of cash bonuses at the state-backed lender, Ms Rose will receive a performance related annual bonus, split equally between cash and shares. Glass Lewis, said it was “concerned by the increase in overall incentive opportunity.” NatWest chairman Howard Davies said: “The board believes this is the appropriate time to normalise our executive pay policy and to bring it in line with other UK banks.”
Chancellor tells Bank of England to drop opposition to fossil fuels
The Chancellor Rishi Sunak has ordered the Bank of England to relax its opposition to fossil fuel investment as the UK seeks to bolster oil and gas production in the North Sea. The move comes as Threadneedle Street conducts climate “stress tests” on banks to judge their risk from the net zero transition.
Two-year mortgages dearer that ten
Two-year fixed rate mortgages are creeping up in price with some lenders now even offering five and ten-year fixes at lower cost than a two-year fix. The shift comes amid an adjustment in the swap rate reflecting expectations that banks think the base rate will be higher in two years’ time than they do in five or ten.
PRIVATE EQUITY
Venture capital replaces markets as chief funding source
A Life Sciences Summit in Aberdeen heard how British life sciences companies raised a record £4.5bn last year from public markets and private investors, up 60% on the 2020 total. However, although over £1.3bn came from IPOs, public funding has slowed considerably since. By contrast, venture capital investment was up to record levels in the first quarter of 2022.
INTERNATIONAL
US banks set for big hit to revenues as dealmaking dries up
America’s largest banks are expected to post a sharp drop in earnings this week with executives blaming Russia’s invasion of Ukraine and the subsequent market volatility. “For the first quarter, year over year, we were probably expecting capital markets revenue to be down like 10 to 20% [at the start of 2021], as a range across the banks. And now we’re down 30-50%. It’s pretty materially weaker,” said Matt O’Connor, head of large-cap bank research at Deutsche Bank. On average, analysts are forecasting overall revenues at the banks to fall around 10% with investment banking fees predicted to be down 26% on average, according to estimates compiled by Bloomberg.
Goldman shareholders urged to vote against executive bonuses
Goldman Sachs investors have been urged to vote against special bonuses awarded to its top two executives at the bank’s upcoming AGM. Glass Lewis argues that a plan to pay a $30m one-time bonus to Chief Executive David Solomon and a $20m bonus to Chief Operating Officer John Waldron is excessive. “We are concerned about special, one-off grants to the CEO and COO,” the proxy adviser said in a note to shareholders. “Such awards have the potential to undermine the integrity of a company’s regular incentive plans, the link between pay and performance or both.”
UniCredit delays Q1 results
UniCredit has pushed back the publication of its first-quarter earnings to May 5th, citing the need for more time to manage its cross-border exposure to Russia. The Italian bank has a €4.5bn euro cross-border exposure to Russian clients, net of guarantees worth around €1bn.
AUTOMOTIVE
TVR seeks fresh funds
British sports carmaker TVR is seeking to raise fresh funds after auditors warned its debt constituted a "material uncertainty" over its future. The firm needs to repay £12m in the next year.
FINANCIAL SERVICES
Peter Thiel: Finance gerontocracy suppressing de-fi
PayPal co-founder Peter Thiel has spoken out against the financial “gerontocracy” trying to halt the spread of Bitcoin. Speaking at a conference in Miami, Mr Thiel pointed to Warren buffet as the chief enemy of a crypto revolution with JPMorgan chief executive Jamie Dimon and Larry Fink, boss of BlackRock, all accused of lining up behind Mr Buffett’s conspiracy against cryptocurrencies. Thiel went on to describe the financial elite as wielding ESG as a virtue signalling weapon of hate against a revolutionary youth movement. “Woke companies are sort of quasi-controlled by the government in a way that bitcoin never will be,” Thiel asserted before declaring: “We have to just go out from this conference and take over the world.”
UK’s post Brexit approach to crypto could put EU in the shade
Andrew Orlowski says in the Telegraph that the UK Treasury has made a smart move in setting up a sandbox to explore the benefits of crypto finance. The Treasury’s approach to crypto, although tentative, is welcomed by crypto enthusiasts who have been dismayed by the EU’s stance, which includes imposing draconian rules on reporting crypto transactions. “Anyone who does serious crypto in the EU was already considering moving. [Rishi] Sunak wants them to come to the UK; it's a smart move,” one successful de-fi investor tells Orlowski. “Whitehall has actually woken up to the fact the UK has left the EU, allowing, perhaps, British pragmatism to forge a path for others to follow,” Orlowski concludes.
Venture trusts raise more than £1bn
UK investors poured a record £1.13bn into venture capital trusts in 2021-22, a 65% increase on the previous tax year, with the high demand put down to greater limits on pensions tax relief.
How the UK risks undermining crypto consumer protection
Ian Taylor, the CEO of trade body CryptoUK, says regulations around cryptocurrency should allow for the development of the sector so “the UK can take its rightful place as a global hub for fin tech.”
LME chief calls for scrutiny of private deals in nickel probes
The London Metal Exchange is being probed by the Financial Conduct Authority and the Bank of England over what went wrong in the nickel market last month, with the LME also launching its own independent review.
REAL ESTATE
London house prices rise at fastest rate since 2016
London house prices grew at an annual rate of 7.4% in the first quarter of this year, up from 4.8% in the same period last year and the fastest rate since 2016, according to the mortgage provider Nationwide.
ECONOMY
Inflation set to hit 30-year peak
New data from the Office for National Statistics is expected to show this week that inflation has hit a 30-year high. Analysts say the ONS will reveal inflation rose half a percentage point to 6.7% last month - the highest level of CPI inflation seen since March 1992, when it hit 7.1%. But inflation is forecast to rise further, hitting 8.5% this month due to the increase in the energy price cap. That would beat the all-time high of 8.4% set in April 1991. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "We expect CPI inflation to jump to 8.5% in April and to ease to only about 7.5% by the end of the year. Consumers, however, should see some relief in 2023, when energy prices should fall back to Earth."