193k firms in bounce back loan arrears
Almost 200,000 small businesses have fallen into arrears on their bounce back loan repayments. Data from the British Business Bank, the state-run body administering the Bounce Back Loan Scheme (BBLS), shows that 193,000 firms had failed to meet their repayment terms as at June 27. This represents about one in eight of the 1.5m small businesses encouraged to take part in the scheme. The total, released following a Freedom of Information request by Purbeck Personal Guarantee Insurance, exceeds the most up to date official number of 106,000 as of September 30, 2021. Of those in arrears, 151,000 are behind by more than 90 days in making repayments – the timeframe which is normally considered the benchmark for being in serious financial distress. These firms owe an outstanding £4.5bn. Under the £47bn BBLS, loans of between £2,000 and £50,000 were made from May 2020 to March 2021. The six-year loans at 2.5% interest were extended by the high street banks and other accredited lenders, but the risk of default stayed with the taxpayer.
Banks accused of accelerating branch closures
Campaigners have voiced concern that banks are accelerating branch closures so they can exit sites before rules which make it harder for them to do so come into force. Derek French, a former bank executive and founder of the Campaign for Community Banking Services, says banks are “falling over themselves to get out of town before regulations are introduced to stop them fleeing.” He adds: “I fear at this rate, by the time rules are introduced it will be far too late for many.” New rules which prevent the last bank in an area closing without a full consultation are part of the Financial Services and Markets Bill, which is due to go before Parliament this year. While shared banking hubs – where banks share one outlet and offer basic banking services to all customers – have been heralded as one solution to branch closures, roll-out of the hubs has been hit by delays. Analysis shows that Lloyds is closing at least 88 branches this year – including some Bank of Scotland and Halifax sites. Barclays is shutting more than 130 branches, HSBC is to cut at least 69, and TSB is shutting 70. Santander and NatWest also plan to reduce branch numbers.
Rose: Cost of living crisis yet to deliver debt defaults
NatWest chief executive Alison Rose does not believe that a wave of debt defaults is looming from the cost of living crisis, saying that bad debts are not a worry for the lender. Ms Rose says that even with inflation passing 9%, defaults are low and there is no noticeable rise in the numbers of people falling behind on payments. With the Bank of England expected to lift interest rates to around 3%, Ms Rose comments: “You’re talking multiples of that before we would see any concern,” adding: “A lot of households and businesses came out of the pandemic in a very resilient way.”
Metro Bank appoints CFO
Metro Bank has appointed former Standard Chartered executive James Hopkinson as chief financial officer. He will join the challenger bank on September 5, leaving ClearBank, where he served as CFO since 2019.
Atom Bank poised for first yearly profit
Atom Bank has moved a step closer to its first annual profit after generating an operating profit for three consecutive quarters. Statutory pre-tax losses at the digital bank narrowed to £14.5m in the 12 months to the end of March, from £62.3m a year earlier.
TSB mortgage prisoners in £800m lawsuit
TSB is facing an £800m lawsuit from customers who claim the bank made them prisoners of high mortgage rates. In 2016, the lender snapped up 27,000 Northern Rock mortgages worth £3.3bn from the Government. Under TSB's Whistletree brand, the former Northern Rock borrowers claim they have been locked into mortgages with “excessively high” interest rates.
Citigroup exceeds earnings and revenue forecasts
Citigroup’s profits fell by less than expected in the most recent quarter. Income declined by 27% to $4.55bn in the three months to June as America's third largest bank bolstered its loan loss reserves, partially offsetting the impact of a sharp slowdown in dealmaking. Revenue rose by 11% to $19.6bn. Citigroup set aside $375m for potentially sour loans in Q2. A year earlier it was able to release $2.4bn of reserves on the back of government stimulus.
Handelsbanken's Q2 profit hit by hedging loss
Handelsbanken’s Q2 profit came in well below forecasts. Operating earnings at the Swedish bank fell to 5.25bn Swedish crowns from 5.67bn crowns a year ago. The mean forecast in a Refinitiv poll of analysts had been for a profit of 6bn crowns. It made a loss on financial transaction, which includes hedging instruments, of 147m Swedish crowns, versus a profit of 429m crowns a year ago. Net interest income, which includes income from mortgages, came in at 8.39bn crowns, higher than 7.57bn crowns recorded a year ago.
Wells Fargo profit falls
Wells Fargo has reported a fall in Q2 profit. The US’ fourth-largest lender reported a profit of $3.1bn for the quarter ended June 30 compared with $6bn a year earlier. This came as the bank was forced to set aside more funds to cover potential loan losses, with its provision for bad loans at $580m compared with a release of $1.26bn a year earlier. Wells Fargo also noted that its mortgage lending business came under pressure from higher interest rates, with home loans down 53% from a year earlier.
ANZ to buy Suncorp banking arm
Australia and New Zealand Banking Group plans to buy the banking arm of insurer Suncorp for A$4.9bn. ANZ aims to raise A$3.5bn by issuing new stock to pay for the deal. The buyout would boost ANZ's mortgage book by A$47bn to A$307bn.
Opperman to lead taskforce on social element of ESG
Pensions and Financial Inclusion Minister Guy Opperman will lead a newly established taskforce to help pension schemes in regard to the risks and opportunities related to the social element of ESG. The Department for Work and Pensions said the taskforce will support scheme trustees and the wider industry with the challenges around managing social factors, including the identification of reliable data sources. It will span both public and private sectors and set out metrics by which fund managers can be held to account on the social impact of their investments. The Government issued a call for evidence on the consideration of social risks and opportunities by UK pension schemes in 2021. Its response, published last week, contained no new policy suggestions, saying that “it is up to schemes to determine how to consider financially material social risks and opportunities.”
Pensions Ombudsman's anti-scam unit working on 48 cases
The Pensions Ombudsman's anti-scams unit, which launched in November, is working on 48 cases with assets of more than £40m under consideration. The Pensions Dishonesty Unit was created following a number of high-profile determinations where breaches of trust and the misappropriation of scheme funds were found to have occurred. The Ombudsman said its officials have held “close discussions” with the Pensions Regulator and the Fraud Compensation Fund “in order to coordinate our work and identify which body is best placed to undertake the investigation on different schemes.” Data shows that the Ombudsman received 6,216 new pension complaints during 2021/22, up from 5,567 in the previous year.
BlackRock income cut by a fifth
BlackRock, the world’s largest asset manager, has reported a bigger fall in quarterly profit than had been expected, as turmoil in global markets shrank its fee income. Private investors withdrew roughly $10bn from BlackRock in the quarter to the end of June, the first drop since the beginning of the pandemic in March 2020, although the money manager had $89.6bn in total net inflows from clients. Net income at BlackRock fell by 22% to $1.08bn in the three-month period, while revenue declined by 6% to $4.53bn. Assets under management, which ended last year at a record $10.01trn, stood at $8.49trn by the end of June.
LEISURE & HOSPITALITY
Tip law boost for hospitality staff
A bill to force restaurants to hand over all tips to their staff, including any service charge, will come into law, having won backing from MPs. Under the new rules, it will be unlawful for employers to withhold tips and service charges from staff. Workers will also be given the right to see an employer’s tipping record in order to bring an employment tribunal.
Starbucks exploring sale of UK operations
Starbucks is exploring a potential sale of its UK operations as it faces rising costs and competition from newer operators. The coffee chain has reportedly asked its adviser, Houlihan Lokey, to canvass interest for its UK business, which oversees more than 1,000 coffee shops and employs 4,000 people.
MEDIA & ENTERTAINMENT
Vodafone and Three consider merging UK divisions
Vodafone Group and Three are considering a merger of their UK divisions, according to City sources who say the move would be a joint venture with ownership split equally between the two groups. A tie-up would bring together the third and fourth largest mobile network operators in the UK, behind BT's EE and Virgin Media O2.
C4 CEO pay passes £1m
Channel 4 chief executive Alex Mahon received a 20% pay rise last year, taking her total salary to £1.2m. Ms Mahon received a maximum £476,000 bonus, with this up 62% on the £293,000 she earned last year. Ian Katz, Channel 4’s chief content officer, received a 16% rise to £620,000, while chief operating officer Jonathan Allan was paid £728,000, with this 6% up from the previous year. Total pay for all Channel 4 employees dropped 4% during the year.
FRC writes to accounting firms over exam cheating
The Financial Reporting Council (FRC) has written to the accounting industry's largest firms to voice concern over staff cheating in exams. In a letter to chief executives, the FRC asked the sector's biggest firms to set out how they are preventing and detecting exam cheating. It has also asked professional bodies such as the ACCA and ICAEW to detail how the integrity of exams is ensured.
Property appeals to investors again
Investors are putting their money in to property for the first time in nearly four years, with analysis by data company Calastone showing that around £134m was invested into property funds in June. This breaks a sequence that saw investors withdrawing their cash from the sector for a record 44 consecutive months. Calastone said that the inflows into property funds were mainly due to a wave of new buyers, rather than a reduction in the number of investors selling. Ben Yearsley, an investment consultant at Fairview Investing, said the popularity of property funds “will be down to the decent relative performance, the stable income and the fact it is a physical asset.”
Securing a mortgage 'set to get tougher’
More banks reined in home loans than offered easier money in the three months to June, the Bank of England's quarterly Credit Conditions Survey has found. The drop in mortgage lending was the most dramatic since 2020, when the onset of the pandemic and lockdowns brought the property market to a standstill. Households could also find it tougher to get a mortgage or other forms of credit over the summer, with an expectation that default rates on loans are set to increase. While demand for mortgages continued to rise in the second quarter, it is expected to fall across the next three months, the Bank's report said.
Credit card and loan rates near 20-year high
Bank of England figures show that people turning to credit cards and loans to cope with the cost of living crisis are being hit by higher interest rates. Average credit card rates hit 21.43% in June, with this an 0.87 percentage point rise on a year ago when the average credit card rate was 20.56%. Analysis by Freedom Finance shows the rate is approaching levels not seen since 1998, with this the last time that average rates surpassed 21.5%. Data on personal borrowing shows that someone borrowing £10,000 faces an average rate of 4.11%, compared to 3.43% a year ago. For someone taking out a £5,000 personal loan, typical rates have risen from 7.84% to 8.2%.
Inflation expected to climb again
Figures from the Office for National Statistics are expected to show consumer prices rose by 9.2% year-on-year in June, climbing from 9.1% in May. Inflation is now at a four-decade high and expected to hit 11% later in the year. Bank of England officials are under pressure to prevent soaring prices becoming entrenched and it has been suggested that better-than-expected growth figures may embolden the Bank’s Monetary Policy Committee to deliver a steeper interest rate increase. Deutsche Bank economist Sanjay Raja says inflation data “will be of paramount importance” to any decision, with signs of accelerating wage growth or that fewer workers are available also set to be closely watched.
ECB set to increase interest rates
The European Central Bank (ECB) is set to hike interest rates for the first time in 11 years, with it likely to increase its base rate by 0.25 percentage points this week. This would still leave the rate in negative territory, at minus 0.25%. The ECB’s stance is in contrast to a more aggressive fight against inflation seen in the UK and the US, with the Bank of England having increased its rate to 1.25% and the Federal Reserve recently hiking rates by 0.75 percentage points – the steepest rise since 1994. Martin Weder, a senior economist at Swiss bank ZKB, said: “The ECB is far behind the curve and risks losing its credibility by not taking decisive action.”
1.3m families have no savings
Analysis by the Resolution Foundation think-tank shows that more than a million families have no savings to help them through the cost-of-living crisis. The report shows that the poorest 10% of families are four times as likely to have no savings as the richest 10%, with around 1.3m families having no financial buffer. Resolution Foundation economist Molly Broome says there is a need to “break this cycle of low growth and weak savings that leaves so many families brutally exposed to economic shocks.”