Banks failing to pass on interest rate increase
Data from Moneyfacts suggests the majority of banks have so far failed to raise savings rates since the Bank of England increased the base rate last month. Fewer than one in ten have raised savings rates since the Bank increased the cost of borrowing from its record low of 0.10% to 0.25%, while Tesco Bank and Beverley Building Society have cut some of their rates. The average easy-access savings rate on the 300 accounts on the market offers 0.2%, unchanged on a month ago. There has also been no change in the average rates offered across one-year and two-year fixed-rate accounts. The analysis by Moneyfacts says the best-paying easy-access savings account is the Chip account by Allica Bank, which offers 0.7%. Reflecting on the findings, Rachel Springall of Moneyfacts commented: “The base rate rise last month is only gradually being passed on to savers, and as we have seen in the past, it could take a few more months yet for customers to see any change.”
Barclays urges late-payers to settle up
Barclays has called on large businesses to settle bills to SME suppliers on time, warning that the late payments are damaging cashflow; preventing new hiring and investment opportunities; and potentially putting suppliers at risk of collapse. Analysis by the bank shows that more than nine in ten medium-sized companies are waiting on overdue invoices to be paid, with the rate at three in five across all SMEs. Four in five of the 500 SMEs quizzed said that they would refuse a job with a potential customer if they were known for paying late. Hannah Bernard, head of business banking at Barclays, said: “We want to unite the small business community in tackling this issue and raise the social conscience of larger businesses who don’t pay on time.” She added: “Having a constant cycle of late payments will hamper the future growth of the economy.”
‘Collective amnesia’ concern over Obie investigation
Alison White, the corporate governance specialist called in to investigate a bullying scandal at the Open Banking Implementation Entity (Obie), said she was "concerned and frustrated" about "the collective amnesia, obfuscation and wish to communicate through lawyers" of executives. Her report, which was submitted in August, found that a culture of bullying and intimidation existed at Obie, a unit set up by the Competition and Markets Authority (CMA) in 2016 in an effort to increase competition in banking. In a letter to the chairs of the CMA and the Treasury Select Committee, Ms White warned that the process set up to address further complaints and offer whistleblowers potential redress may lack independence, saying: “Consultants appointed and paid for by Obie and working to terms of reference set by Obie, can never have the independence that this situation requires”.
Lloyds set to buy back shares
Lloyds Banking Group is reportedly planning to buy back about £1bn of its shares as it begins a sweeping new strategy under CEO Charlie Nunn. The bank revealed in October that it had more than £4bn in surplus capital. Rivals Barclays, HSBC and Standard Chartered all used their extra capital to buy back shares last year while NatWest has bought back stock from the Government, reducing the state's shareholding to just over 50%. AJ Bell analyst Russ Mould comments: “The key here is how much excess capital does the firm have relative to regulatory requirements. That excess could in theory be used for buybacks – as the cash will be earning so little it will start to depress returns otherwise.”
Government cuts NatWest stake
The Government has sold almost £500m of shares in NatWest in the past two months as it looks to return the bank to private ownership. NatWest said that the Government had disposed of 170m shares since November 8, with these worth about £420m at present prices. The move leaves the state with less than 52% of the bank, with this down from the 79% held after the £45.5bn bailout to save the lender from collapse more than a decade ago.
HSBC could restrict new mortgages
HSBC is considering tightening its mortgage lending criteria, with the bank said to be assessing whether to impose stricter affordability tests over concerns that a squeeze on household finances driven by soaring energy costs will reduce how much customers can afford to borrow.
Credit Suisse’s Horta-Osorio resigns
Credit Suisse chairman Antonio Horta-Osorio has resigned with immediate effect following an internal investigation which reportedly found that he broke the UK's Covid-19 quarantine rules. Mr Horta-Osorio, who served as chairman of Credit Suisse for less than a year, has been replaced by board member Axel Lehmann. Mr Horta-Osorio, the former boss of Lloyds Banking Group, said: “I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally.” He added the he believes his resignation “is in the interest of the bank and its stakeholders.”
Citigroup sees profits slip
Citigroup has reported a 26% fall in Q4 profit, having taken a hit from higher expenses and weakness at its consumer banking unit. Profit fell to $3.2bn in the quarter, from $4.3bn a year earlier. The decline was driven by an 8% surge in the bank's operating expenses. The bank's global consumer banking revenue dropped 6%, although its investment banking business posted a 43% jump in revenue. Citigroup has also announced that has agreed to sell its consumer businesses in Indonesia, Malaysia, Thailand and Vietnam to Singapore-based lender United Overseas Bank.
Wells Fargo profit rises
Wells Fargo saw profit climb in Q4, with the sale of its corporate trust and asset management businesses pulling in $943m. Profit rose to $5.8bn in the three months to the end of December, from $3.09bn in Q2 2021. Total revenues rose 13% to $20.9bn. Wells Fargo has been operating under a $1.95trn asset cap imposed by the Federal Reserve in 2018, which has hurt its ability to boost interest income by improving loan and deposit growth.
JPMorgan profits decline
Profits at JPMorgan came in at $10.4bn in Q4, with this marking a 14% year-on-year decline. Loan growth, the bank's core business, was up 6%, while net interest income from lending and investments in Treasury securities was up 3%.
Activist investor hits out at Hill
Metro Bank founder Vernon Hill has come under pressure from Driver Management, an activist investor pushing for the sale of Republic First, a US-based bank and wealth management company run by Mr Hill. Mr Hill quit Metro Bank in 2019 amid a major accounting scandal, with it found that the bank had miscalculated £900m worth of risky loans. Abbott Cooper, founder of Driver Management, said: “I am acutely aware of what happened at Metro on Vernon's watch and the impact it has had on shareholders and do not want to see Republic First shareholders suffer a similar fate.”
Recruitment in financial services jumps in Q4
A new report from Morgan McKinley has found that there was a 40% increase in the number of jobs available in the City in the final three months of 2021 compared to the same period in 2019 and a 118% jump when compared with the end of 2020 as the UK was in lockdown and under restrictions. The report also found that financial workers were keen to look for new opportunities, with a 34% increase in job seekers compared to pre-pandemic levels. The average salary increase of moving from one job to another was 19% in Q4.
City looks to shake up listing structure
Officials are drawing up plans to reform the City’s listing structure, with the London Stock Exchange (LSE) proposing a move that would shift the divide between public and private companies. The proposed change would see private firms given access to a special market to allow them trade shares on specific days. The plans, which come amid efforts to boost London’s post-Brexit appeal and attract fast-growing tech companies, have reportedly been put to the Treasury and the Financial Conduct Authority. The proposals say the special market “would act as a stepping-stone between private and fully public markets.” The mooted change would follow a new listing regime which came into force last month and enables company founders that float in the City to retain control over their business via the introduction of dual-class share structures.
Manufacturers in 'survival' mode
Industry bodies have warned that UK manufacturers are in “survival” mode, with businesses under pressure from soaring energy bills that could see energy-intensive firms across a number of industries facing the prospect of plant closures and job cuts. Dave Dalton, chief executive at industry body British Glass, said energy cost hikes have left firms facing “death by 1,000 paper cuts”. British Glass has written to ministers, warning that officials are yet to “appreciate the severity” of the situation as companies are being left in an “impossible position”. “We are beyond the margins, we are not making money. We can survive but survival is no mechanism for life and business,” the letter warned. Stephen Elliot, chief executive of the Chemical Industries Association, has urged ministers to deliver support, saying: “We don't want Government to leave it until we have a closure.”
House prices still going up
Average property prices increased £852 in a month, according to Rightmove, as estate agents experience their busiest ever January. The property website said the average asking price for a home in Britain was now £341,019. The price of starter homes has risen, with first-time buyers paying an average of £214,176 - 1.4% more than the previous month. The latest figures also show significant regional variation. House prices in the majority of areas fell slightly but high growth in a few areas drove a national rise. Tim Bannister, Rightmove's director of property data, said: "The signs suggest that prices are likely to continue to rise until more choice is available."
CMA to review fashion retail sector in greenwashing probe
The Competition and Markets Authority will review potentially misleading environmental boasts made by the fashion retail sector as part of its investigation into greenwashing. The competition watchdog will look into the validity of several common green claims, including ones around recycled materials and ranges of clothing branded as "sustainable" or "eco-friendly". This makes fashion the first specific sector to be singled out for further investigation over concerns about sustainability claims.
UK economy hit pre-pandemic levels in November
Figures from the Office for National Statistics show that the UK economy surpassed pre-Covid levels for the first time in November. While GDP was up by 0.9% between October and November, exceeding the level recorded in February 2020 and outdoing the 0.1% rise seen in October, there is concern growth has since slowed again due to the impact of the Omicron variant and resulting restrictions. On a quarterly basis, the ONS said that the UK economy will reach or surpass Q4 2019’s pre-Covid levels if GDP grows by at least 0.2% in December and there are no downward revisions to figures for October and November. Chancellor Rishi Sunak said the stronger growth was "a testament to the grit and determination of the British people". Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said GDP “almost certainly” dropped in December, but added: "Omicron looks set to fade almost as quickly as it arrived”, meaning GDP should “bounce back” in February. Confederation of British Industry lead economist Alpesh Paleja commented that the near-term outlook is “clouded by additional challenges” such as shortages of labour exacerbated by absences, supply chain disruption and a “cost of living crunch.” Suren Thiru, head of economics at the British Chambers of Commerce said: "Stronger growth in November is likely to be followed by a modest fall in output in December and January,” adding that “surging” inflation and supply chain disruption may mean the UK's economic growth prospects “remain under pressure for much of 2022”.
OBR chair: 3% GDP growth could clear the deficit in five years
Richard Hughes, chair of the Office for Budget Responsibility, says economic growth returning to its previous long-term pattern would allow the Government to clear the deficit almost completely within five years. Under the GDP growth of 1.6% per year currently forecast, the Treasury will still be borrowing £44bn annually by 2026/27 - but Mr Hughes says that increasing growth to 3% would cut the deficit by £38.7bn because of higher tax receipts. However, he warned that if higher economic growth drove inflation, the outlook for the public finances might prove less positive. He also noted the possibility of “downside surprises” in the form of growth falling short of current forecasts.
Banks predict BoE rate rises
US banks believe the Bank of England will increase interest rates in an effort to tackle rising inflation. JPMorgan expects the Bank to raise the base rate as soon as February, foreseeing an increase from 0.25% to 0.5%. Robert Wood, an analyst at Bank of America, is expecting a rates hike in February and another in November - and believes inflation is set to peak at 6.2% in April. Goldman Sachs, which expects inflation to peak near 7%, forecasts interest rate rises of 0.25% in February and May.
BoE to publish market surveys after MPC meetings
The Bank of England is to publish the findings of the financial markets surveys which are utilised by its interest rate-setting Monetary Policy Committee (MPC). As of February 4, the Bank will publish the surveys the day after the publication of the MPC’s minutes. The Bank said the survey, which has “previously been run in pilot form as a quantitative complement to the Bank’s routine market intelligence gathering functions” will “collect information on market participants’ expectations about monetary policy and financial markets.”