BANKING
Which? reveals Britain's best and worst mortgage lenders
A poll conducted by Which? has revealed the mortgage lenders consumers rank the best and worst, with the annual lender survey asking mortgage holders to rate customer service and value for money. First Direct took the top spot, receiving a score of 81%, while Nationwide Building Society came in second with a score of 77%. The lenders were the only two to be named as Which? Recommended Providers. While Coventry Building Society was given the same 81% consumer rating as First Direct, it lost its Which? recommendation as it does not offer enough market-leading mortgage deals. Royal Bank of Scotland received the lowest score in this year's survey, with an overall customer score of 64%. Accord Mortgages, which is part of Yorkshire Building Society, scored 66%, while Virgin Money and Halifax each scored 70%. Across the 16 lenders evaluated, the average score was 73% - a score NatWest and Leeds BS each received. HSBC, Lloyds, Santander, TSB and the Co-operative all scored 71%, while Barclays ranked slightly higher at 72%.
Interest rate rise will push up cost of Covid loans
Businesses that used the Government’s emergency loan schemes during the pandemic face higher repayments once the Bank of England raises interest rates, increasing pressure on company finances amid rising inflation and labour shortages. The British Business Bank, which oversaw the emergency loan schemes, says just 51% of the lenders that offered £26.4bn of loans through the Coronavirus Business Interruption Loan Scheme did so at fixed interest rate, while 32% offered a mix of fixed and variable interest rates, and 17% only offered variable rates.
Barclays expected to reveal £1.6bn profits
Barclays is set to reveal a rise in profits this week. Analysts are expecting the bank to post profits of £1.6bn in the three months to October against £1.1bn made a year ago. The investment banking division is expected to post profits of £1.8bn for the period, with Barclays also set to release bad loan provisions set aside due to the pandemic. Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said: “Last year, the group put aside swathes of money in case customers defaulted on payments, but these provisions are being unwound – which helped profits substantially in the first half.” “It's a short-term tailwind, but one which we think will have continued into this quarter,” she added.
Banks shun adult entertainment workers
The Observer’s Kalyeena Makortoff looks at how some businesses and individuals who operate in adult industries have struggled to find banks willing to take them on as customers despite acting within the law. She notes that the Financial Conduct Authority does not have policies outlining how to serve the adult entertainment industry, while UK Finance does not provide any guidance on the issue for its members.
INTERNATIONAL
Goldman Sachs sees profit jump
Goldman Sachs has reported a 66% surge in third-quarter profit as global M&A volumes broke records. Goldman reported net earnings applicable to common shareholders of $5.28bn in the quarter to the end of September, from $3.23bn a year ago. Earnings per share rose to $14.93 from $8.98 a year earlier. Goldman's investment bank had its second best quarter on record, with revenue of $3.7bn. David Solomon, chairman and chief executive of Goldman, said: “The third quarter saw strong operating performance and an acceleration of our investment in the growth of Goldman Sachs. We announced two strategic acquisitions in our asset management and consumer businesses which will enhance our scale and ability to drive higher, more durable returns.”
China's central bank lists systemically important banks
The People's Bank of China, China's central bank, and the China Banking and Insurance Regulatory Commission, the banking regulator, have unveiled a list of 19 banks deemed to be systemically important. It identified six state-owned commercial banks, nine joint-stock banks and four urban commercial lenders as crucial to the financial system. The list includes the country's four largest lenders: Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China. The 19 banks will face additional capital requirements of between 0.25% and 1%, have to meet additional leverage requirements, and prepare contingency plans for major risk events.
FINANCIAL SERVICES
FCA chair to step down early
Charles Randell, chairman of the Financial Conduct Authority (FCA), will step down from the regulator a year earlier than planned. Mr Randell, who took up the role in April 2018 and was meant to serve a five-year term, will leave the FCA and the Payment Systems Regulator in spring 2022, having spent four years in the job. In a letter to Chancellor Rishi Sunak, Mr Randell, said he wanted to step down early so that his successor could oversee the completion of a wide-ranging overhaul of the financial watchdog. FCA chief executive Nikhil Rathi is pushing through an overhaul following criticism over the watchdog’s handling of collapsed investment firm London Capital & Finance.
Bonus bonanza for bankers on the cards
City bankers are in line for large bonuses as investment banking revenues soared in the first nine months of the year. Dealogic data shows that City banks have posted revenues of more than £4.1bn from advising on listings, acquisitions and capital raisings so far this year, marking a steep jump on the £2.2bn reported during the same period last year. Records show that over the the last 15 years, the only time 2021’s January to September total was eclipsed was by the £4.2bn reported in 2007. The strong performance comes as private equity takeovers hit record levels as buyout firms snapped up companies on the cheap, while listings on the London Stock Exchange have rebounded after several years of depressed activity.
Watchdog warned over FTSE listings reform
The Financial Conduct Authority (FCA) has been warned that plans to restrict the number of small companies on the London stock market could harm the City’s post-Brexit prospects. The City watchdog has proposed increasing the minimum market capitalisation of businesses listing on the stock exchange from £700,000 to £50m, saying those valued below £50m are “better suited” to a listing on the junior AIM market. However, the FCA has been warned that the proposals could deter entrepreneurs from listing in London. James Corsellis, managing partner of Marwyn, has written to the FCA, warning that its plans could make it harder to attract investors and “only go to undermining London’s competitiveness”. Martin Gilbert, a former Aberdeen Asset Management boss who now chairs AssetCo, said: “We should resist unnecessary barriers as businesses look to achieve their potential.”
FCA accused of ‘regulatory hibernation’
Jeff Prestridge in the Mail on Sunday criticises the Financial Conduct Authority (FCA) over its response to the collapse of investment fund Woodford Equity Income and asset manager Woodford Investment Management, saying it appears “oblivious to the need to take swift action” with nobody held to account 16 months on. This, he argues, is an “unacceptable state of affairs”. Mr Prestridge notes that the FCA has awarded its staff bonuses of more than £125m since 2016 before asking whether this is justified, saying it points to “rewards for failure” at a watchdog that has done “precious little to safeguard investors” from financial scandals such as that at Woodford and failed minibond issuer London Capital & Finance. Suggesting that the FCA will “bat away” demand for tougher rules, Mr Prestridge concludes: “Regulatory hibernation is the order of the day and night."
Fines for financial misconduct fall from post-crisis highs
The €5.8bn in fines levied by financial regulators across the world in the first nine months of 2021 mark a 63% decline compared to the same period in 2020.
Hargreaves' revenue drop 'in line with expectations'
Hargreaves Lansdown attracted £1.3bn worth of new business in its latest quarter and saw its client base grow, although revenue also dropped over the period. Some 23,000 new clients joined the firm in the three months to 30 September, taking active member figures to more than 1.6m. Net new business amounted to £1.3bn for the period, up from £0.8bn in Q3 2020, while the firm's assets under management jumped to £138bn in the period, up 2% since 30 June, the end of the financial year. Revenue for the quarter dropped 1% to £142.2m from £143.7m compared with the same period last year.
Klarna boss: Selling to a big bank would be ‘very sad’
In an interview with the Sunday Telegraph’s Lucy Burton, Klarna co-founder Sebastian Siemiatkowski discusses his ambitions for the buy now, pay later firm. Ms Burton suggests he “makes no secret of the fact that he wants to kill off the credit card while also competing shoulder-to-shoulder with the big banks,” with Klarna the first BNPL firm to join UK Finance. When asked if he would want to see the firm sold to a big bank, Mr Siemiatkowski says it would be “very sad”, pointing to an “unfortunate truth” that banks “haven’t played a nice game” and suggesting there have been “a lot of dirty tricks.” “I would be very sad if we sold to a big bank, as someone needs to participate in making this industry better for consumers and society, and create some nice competition,” he added.
MP demands mis-selling investigation
MP Nick Smith has urged the National Audit Office to investigate the handling of the 2017 financial scandal involving Tata Steel plants. The Financial Conduct Authority (FCA) says more than 235,000 final salary style pension scheme members received transfer advice from financial advisers who were incentivised by commissions and high fees between April 2015 and September 2018. While around 69% were advised to transfer, in 2018 the FCA found only 48% of the recommendations were suitable. Mr Smith said: “Our experience of the FCA in relation to the scandal has been one of delay and failure to lead.” The Financial Services Compensation Scheme has so far settled 482 compensation claims totalling around £21m, with an average pay-out of around £43,000. Another 153 claims are being processed.
Director barred over risky pension advice
Omar Hussein, a former director and senior financial adviser at pension switching firm Consumer Wealth, has been barred from financial services and fined £116,000 by the Financial Conduct Authority (FCA). The watchdog found that Mr Hussein advised customers to switch their existing pensions when this was often unnecessary and not in their best interest. His firm advised 620 customers to switch their pension into a self-invested personal pension between 2015 and 2017, putting an estimated £13.5m of his customers’ retirement savings at risk.
MANUFACTURING
Manufacturers call for action over shipping costs
MakeUK, the trade body which represents Britain’s manufacturers, has warned of “cartel-like” behaviour and soaring fees in the shipping industry and called on the Competition and Markets Authority (CMA) to look into whether the increasing costs can be justified. The British Chambers of Commerce has made a similar demand and the two groups are preparing an open letter to the CMA appealing for “urgent action” to investigate whether charges are being co-ordinated or inflated by shipping companies. The trade bodies say an “investigation of anticompetitive practices or cartel-like practices affecting UK companies is now becoming more urgent”. They are urging the CMA and Government to “work at pace to discuss the evidence on the functioning of the shipping market”.
MEDIA & ENTERTAINMENT
Netflix paid £4m in UK corporation tax
Streaming company Netflix paid £4m in UK corporation tax in 2020, despite making an estimated £1.15bn from its 13m British subscribers. Netflix UK reported a 43% increase in revenues to £172m, with pre-tax profits increasing by 50% to £19.4m. The small tax bill comes as the money Netflix makes from the monthly fees paid by its British users is funnelled through its European headquarters in the Netherlands. The firm is working to abandon the practice and started declaring British income to HMRC in January. It is noted that the tax is paid on profits, not revenues, and the company re-invests at least half the revenues it makes in the UK into original productions.
REAL ESTATE
House prices rise across all regions
Data from Rightmove shows that the price of every type of property in every region of Britain is rising, with this the first time the clean sweep of property inflation has been seen since 2007. Property prices rose by 1.8% month-on-month in October, with strong demand outstripping supply despite an increase in the number of properties being listed. Analysis of 88,694 listings show house prices rose from an average of £338,462 in September to a new high of £344,445 in October. The report says September saw 15.2% more sales being agreed than in the same month in 2019. On the gap between supply and demand, Tim Bannister, Rightmove’s director of property data, comments: “Although more properties are coming to market, the level is still not enough to replenish the stock that’s being snapped up.”
ECONOMY
Bailey: BoE will have to act to contain inflation
Bank of England governor Andrew Bailey has suggested an increase in interest rates may be on the horizon, saying that while recent increases in inflation would be temporary, climbing energy prices may drive it up and extend its climb, raising the risk of higher inflation expectations. Monetary policy cannot solve supply-side problems - but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations," Mr Bailey told a discussion organised by the Group of 30, a consultative group. He added that the Bank of England has “signalled, and this is another such signal, that we will have to act.” The Bank forecasts that inflation will exceed 4%, more than double its 2% target. Investors believe the Bank may become the first of the world's biggest central banks to raise rates, with an increase possible later this year or early in 2022.
OTHER
Business insolvencies rose in September
The number of businesses in England and Wales that failed last month was the largest since the pandemic began, with Insolvency Service data showing that 1,446 company insolvencies were logged in September. This marks an increase on the 1,349 recorded in August and comes in 56% higher than September 2020 – although the total was down 4% on September 2019.