Record £59.1bn spent on debit cards in July
UK Finance figures show that a record £59.1bn was spent on debit cards in July. This marks a 7.9% month-on-month increase and a rise of 9.4%, year-on-year. The report shows that credit card spending was below levels seen a year earlier, falling 24.8% as fewer high-value items like holidays and home appliances were bought. It was also found that online card spending hit a record £21.8bn in July, with 41% of total card spending by value carried out online during July. The analysis reveals that the average contactless payment rose to £12.08 in July, up from £9.42 in February. UK Finance attributed the increase to the change in the maximum that can be spent in a contactless transaction, with the limit lifted from £30 to £45 amid the pandemic.
Banks pull low deposit deals
Home buyers face having to stump up more toward buying their property after TSB withdrew two-year mortgage deals requiring a deposit of less than 40%, while Barclays has ended mortgages for borrowers with less than a 25% deposit. The moves mean no high street banks are currently offering mortgages for those with equity under 15%. Bank of England analysis shows that the cost of the average five-year fixed mortgage has risen from 2.26% to 2.62% since June, with the typical two-year deal climbing from 2.02% to 2.38%. It was also found that September saw the biggest monthly increase in mortgage rates since 2009. Jonathan Harris, managing director of the mortgage broker Forensic Property Finance, said: “First-time buyers and those requiring high loan-to-value mortgages have found it tricky to get finance for a while”, adding: “Now those with big deposits or similar levels of equity are also being affected."
Interest-only loans return
The interest-only mortgage could be set for a comeback as banks try new ways of helping borrowers whose incomes have shrunk. As the Government's enforced period of mortgage-repayment holidays comes to an end at the end of October, lenders believe that many people will still find it hard to make payments. Some banks have said they will offer the chance to move to temporary interest-only deals to prevent hardship. For HSBC borrowers, interest-only will be available for no more than six months, and arrears would need to be cleared within 12 months, while Nationwide is offering mortgage members a conversion to interest-only as a short-term forbearance option "where appropriate”.
CMA tipped off about excessive rates a year before probe
The Telegraph reports that the Competition and Markets Authority (CMA) was tipped off about "excessively high" day rates for contractors at the Open Banking Implementation Entity (OBIE) a year before it opened an investigation. A whistleblower voiced concern over rates at OBIE in 2019, but the CMA did not open a full investigation until after a separate whistleblower complaint was made in regard to the matter earlier this year. With the CMA having called in law firm Mishcon de Reya to investigate "extremely serious" allegations, OBIE, which was formed by the CMA in 2016 to promote open banking, has said it is fully cooperating and is committed to lending its full support to the probe.
End of free banking if rates turn negative?
David Duffy, the boss of Virgin Money, has warned that banks could start charging for basic services if interest rates turn negative. He said banks would make “slow and incremental” changes over the next three to five years to test which services customers are willing to pay for. Mr Duffy said: “There will be no decisions until everyone sees what happens over the next year with Covid, but certainly you have to think about how you are going to provide the service, the technology, the branches and the card. It can’t all be free.”
Banking bosses call for return of dividends
The bosses of Barclays and Santander have called on regulators to allow lenders to restart payouts to shareholders, with dividends blocked due to the COVID-19 pandemic. Barclays CEO Jes Staley told the Institute of International Finance online event: “Being able to distribute excess capital is very important if the broader economy is going to have confidence in its financial system”, while Santander chair Ana Botin added: “Going back to dividends is going to help the economy because it helps the flow of capital, it lowers the cost of equity”.
Lloyds to widen compensation HBOS review
Lloyds Banking Group has agreed to widen a compensation review for victims of the £245m scandal at HBOS’ Reading branch that saw bankers deliberately ruin customers’ businesses. Lloyds, which bought HBOS in 2009, is acting after its original scheme was found to be “neither fair nor reasonable”.
Barclays faces rate quiz
Barclays will kick off the autumn reporting season on Friday and the lender is likely to face questions about a Bank of England letter that has asked lenders how they would cope with a negative interest rate. Barclays is expected to record a pre-tax income of £1.8bn, down from £3.3bn at the same stage in 2019, with analysts forecasting pre-tax profit of £507m – up on the £246m recorded a year ago.
HSBC considered tech share
HSBC has discussed the idea of selling its software for combating financial crime to its rivals, reports the Mail on Sunday, which says the technology makes money laundering checks fully automatic.
Is it time to invest with banks?
Laura Shannon in the Mail on Sunday debates whether it is worth investing with the big high street banks as they all operate investment platforms for customers. She notes that NatWest has recently raised the stakes by cutting service fees – from 35p per £100 invested down to 15p, in a bid to entice more customers into its investment fold.
US banks warn bonuses will not keep pace with profits
Citigroup, JPMorgan Chase and Bank of America have warned staff that loan loss charges ahead of an expected surge in defaults mean bonuses may not tally with investment banking profits.
Investors pull over £1bn from Merian
Investors withdrew £1bn from Merian Global Investors funds in the third quarter of 2020 following the firm’s acquisition by Jupiter, with further outflows expected in the final quarter of the year. Out of Merian’s £1bn outflows, £200m were from the Global Equity Absolute Return fund, £400m from the Systematic strategy and £100m from “funds where there was a change of fund manager relating to the acquisition”. Jupiter’s total AUM stood at £55.7bn on September 30.
Ashmore suffers revolt over new pay plan
Almost a third of fund manager Ashmore’s shareholders have voted against an executive pay policy with uncapped bonuses that proxy advisers ISS, Glass Lewis and Pirc had voiced concern about.
Pfizer could apply for vaccine green light in November
Pfizer says it is likely to apply for emergency use authorisation (EUA) of its experimental coronavirus vaccine by the end of next month, saying it is awaiting data from its late-stage human trials on the vaccine's effectiveness, safety and ability to be consistently manufactured. If the results prove to be positive, the drugmaker and partner BioNTech SE will submit an EUA application to US authorities by the third week of November. Drugmakers Moderna, AstraZeneca and Johnson & Johnson have all said they expect to submit for EUA later in the year.
LEISURE AND HOSPITALITY
JD Wetherspoon reports losses
JD Wetherspoon is to cut 450 jobs at its airport pubs after reporting a £105m pre-tax loss after sales declined by almost a third to £1.26bn for the year to July 26. The loss before exceptional items came in at £34.1m.
Pret A Manger to cut further jobs
Pret a Manger has confirmed it is closing a further six shops and cutting another 400 jobs amid increasingly strict coronavirus restrictions. The company has already axed 2,800 roles as part of a restructuring which saw it close 30 sites.
MEDIA AND ENTERTAINMENT
BBC chair must meet independence criteria
The Government has ruled that Sir David Clementi's successor as BBC chairman must be entirely independent from the corporation. The Department for Digital, Culture, Media and Sport’s advertisement for the post says criteria used to determine a candidate’s independence will include whether they have been an employee of the BBC within the last five years or had a "material business relationship" with the broadcaster.
G4S takeover could see £312m in fees
Bankers, lawyers, accountants and PR advisers could share £312m in fees as GardaWorld looks to buy security firm G4S, with a takeover document suggesting advisers Barclays, Jefferies, UBS and Bank of America would share up to £100m.
End of stamp duty holiday to hit buyers
Up to 200,000 people risk missing out on stamp duty savings because of backlogs in the property market, with people agreeing a sale by next week said to only have a 50% chance of benefitting from the stamp duty holiday rolled out amid the coronavirus crisis. According to Centre for Economics and Business Research analysis, the tax break has boosted transactions by 6%. With the relief set to end on March 31, there are calls for an extension, with Vic Darvey, chief executive of Purplebricks, saying a further six to 12 months of the stamp duty holiday will “allow the pent-up demand to progress through the system," while housebuilders Barratt and Redrow say an extension will help avoid a slump in sales.
Luxury retailers urge tax-free shopping rethink
Leading luxury and fashion retailers have written to Rishi Sunak warning that abolishing tax-free shopping for tourists will be a "hammer blow" to the sector. With the Chancellor planning to levy 20% VAT on purchases made by international shoppers, bosses of fifteen firms – including Ted Baker, The White Company and Paul Smith – have warned that the move "is bad for business and bad for the Treasury's coffers". The Centre for Economics and Business Research says the Treasury could lose out if visitors opt to shop elsewhere, noting that tourists in Britain spent over £28bn last year, with £2.5bn of VAT reclaimed. It also warns that the move could cost up to 41,000 jobs.
Bailey warns of risk and uncertainty
Bank of England Governor Andrew Bailey has warned that there is a significant risk of economic growth being hit, noting the uncertainty that the increasing number of coronavirus cases brings. With the economy shrinking 20% in Q2, Mr Bailey has said he expects output to be down 10% in Q3 when compared to where it was at the end of 2019. Speaking during an online seminar for central bank governors yesterday, he said 10% is “still a huge gap”. He went on to say: “We’re operating at an unprecedented level of economic uncertainty. Of course, that is heightened now by the return of COVID.... The risks remain very heavily skewed towards the downside.” Mr Bailey also commented on below-zero interest rates, saying: “Our assessment of negative interest rates, from the experience elsewhere, is that they probably appear to work better in a more wholesale financial market context, and probably better in a nascent economic upturn”.
McFarlane flags negative rate risks
John McFarlane, the former chairman of Barclays, has warned that, with the Bank of England said to be considering negative interest rates, it risks a “massive dislocation” in financial markets. “Economies are interconnected, and low or negative rates has become the norm in developed economies, particularly Europe, and it is virtually impossible for any single economy to depart significantly.” He added: “The issue at some point is how to raise rates without massive dislocation.”
16% of self-employed pay into pension pot
Just 16% of Britain’s self-employed workers are saving into a pension, according Institute for Fiscal Studies, a marked decline on the 48% recorded in 1998. This equates to more than 3.5m people of working age who are not putting money aside into a private pension. For those not paying into a pension fund, the most common reason given was affordability, with a lack of trust in pension firms and not understanding how pensions work also common reasons. In contrast, automatic enrolment, rolled out in 2012, has increased the number of employees saving into a pension, with nearly 80% of working-age employees contributing to a scheme in 2018.