BANKING
Nationwide records best ever year
Nationwide has logged its best ever annual results, with profits more than doubling. Britain's largest building society saw earnings jump £814m to £1.6bn in the year to April 4. Over half of earnings growth came from net interest income climbing by £416m. Nationwide's gross mortgage lending was up by £6.9bn to £36.5bn. Nationwide said it had performed well across its three core areas in capitalising on a “buoyant and competitive” mortgage market, whilst also attracting more current account holders and boosting deposits. The firm said its overall mortgage lending to homebuyers and landlords grew “substantially” during the pandemic, as it said it had been able to capture a larger share of the mortgage market. Outgoing CEO Joe Garner said the strong year was partly down to a decision to go back into 90% mortgages in June 2020.
Banks braced for surge in bad debt
Banks are preparing to cover the cost of £7bn of unsecured loans over the next two years. The amount of debt is expected to be around a third higher than levels before the pandemic, with the cost of living crisis set to hit household spending power and leave some borrowers struggling to repay credit cards and loans. With banks setting aside cash to cover the increase in bad debts, analysis by AJ Bell shows that provisions for impaired loans at Lloyds are expected to rise from £820m this year to more than £1.3bn by 2024. Nationwide Building Society has warned that it expects more people to default on personal loans, credit cards and overdrafts this year. Nationwide has lifted its provisions on its £4.6bn unsecured lending from £502m to £529m.
Cheapest mortgage deals disappearing
The cheapest mortgage deals have all but disappeared as banks prepare for the prospect of further interest rate rises. Consumers battling rising inflation are struggling to access cheap mortgage deals after four of the lowest rates were withdrawn from sale this week. Leeds Building Society has pulled its 2.42% five-year fixed-rate mortgage, while Barclays has withdrawn a 2.77% two-year fix, 2.28% two-year fix and 2.45% five-year fix. Allied Irish Bank's 2.1% two-year fix now has the lowest rate on the market. This week high street bank HSBC launched two five-year fixed-rate deals, offering rates of 2.34% and 2.39% respectively, both with free evaluation and legal work for remortgages. Longer-term fixes have become increasingly popular in recent months as homeowners have looked to secure their costs amid the cost-of-living crisis. Pantheon Macroeconomics said both the growth in house prices and buyer demand were reaching their peak, marking the “start of a more pronounced slowdown”.
HSBC suspends banker over climate change comments
A senior HSBC executive has been suspended pending an internal investigation after he accused central bankers and policymakers of overstating the financial risks of climate change. During a presentation he made at an event last week Stuart Kirk, global head of responsible investing at the bank’s asset management division, said throughout his career “there was always some nut job telling me about the end of the world”. He bemoaned the “amount of regulation coming down the pipes” and the number of people at the bank dealing with financial risks from climate change, risks he claimed were “heresy”. Despite the content of the presentation being agreed in advance, HSBC CEO Noel Quinn said Kirk’s position was “inconsistent” with the bank’s strategy while HSBC Asset Management’s chief executive, Nicolas Moreau, reiterated the bank’s commitment to reach net zero emissions by 2050.
Wilbur Ross in talks to buy Atom Bank
Former US commerce secretary Wilbur Ross is planning a £700m bid for Atom in a deal that could see the online bank join the ranks of UK start-ups to go public in the US. Mr Ross, also a former adviser to Donald Trump, would merge Atom with the special purpose acquisition company (Spac) he listed on the New York Stock Exchange last year. The Telegraph suggests Atom could attract further interest given investor appetite in UK fintech.
Lawyer quits ‘defective’ banking compensation scheme
Lawyer Cat MacLean, a key adviser to a banking industry compensation scheme, has quit, having concluded that it was “completely defective.” The Business Banking Resolution Service, thought to have cost banks more than £30m in set-up costs, started looking at cases almost two and a half years ago but has produced only six financial awards. In her resignation letter, Ms MacLean, who is head of dispute resolution and a partner at law firm MBM Commercial, wrote that she “had significant concerns about my professional credibility” if she remained. She also warned that a post-implementation review of the scheme that was meant to help to resolve issues had “systematically ignored” evidence “that did not fit the brief.”
INTERNATIONAL
Credit Suisse hires Barclays dealmaker
Credit Suisse has hired a senior Barclays dealmaker to lead its investment banking business in Spain and Portugal. Nacho Moreno will become Credit Suisse's head of investment banking and capital markets for the region. He replaces Wences Bunge who will continue as Credit Suisse chief executive for Spain and Portugal while also running the Swiss bank's real estate group as global chairman.
FINANCIAL SERVICES
FCA in crypto asset warning, with concern over celeb endorsements
Nikhil Rathi, chief executive of the Financial Conduct Authority, has warned that people inspired to invest in crypto assets must be prepared to lose everything. He warned that the value of many crypto assets is “exceptionally volatile” and advised that those considering putting money into the products “need to be ready to lose the entire amount.” He also highlighted that there would be no compensation, adding: “It wouldn't be reasonable for healthy financial firms and their consumers to be paying for losses from these assets.” Flagging concern that celebrity endorsements are inspiring investors to take on risky assets, FCA chairman Charles Randell asked how the watchdog can curb people's enthusiasm “to do something that may seriously harm their financial lives” considering the range of celebrities “willing to take money to promote speculative crypto.” The global cryptocurrency market has boomed in recent years, increasing from around £624bn at the start of 2021 to around £984bn this year. The latest official figures show that there are more than 2.3m crypto investors based in the UK.
Scheme aims to close financial sector pay gap
A new membership body has been launched as part of efforts to bring people from less privileged backgrounds into senior roles across the City. Progress Together will offer workshops, resources and mentoring schemes to people who might otherwise struggle to reach top-tier positions in financial services. This comes as analysis shows that employees whose parents did not have professional careers were 30% less likely to reach a senior position compared with their colleagues. About nine out of every 10 senior roles in the financial services sector are held by someone from a higher socioeconomic background. The disparity has led to a class pay gap in which people from lower socioeconomic backgrounds earn on average £17,500 less than their colleagues.
Train demands Woodford parties be ‘sued or cleared’
Fund manager Nick Train has called on the Financial Conduct Authority to “sue or exonerate” as an investigation into the collapse of Neil Woodford’s investment empire enters its third year. The pensions and savings of thousands of investors in Woodford’s suspended Equity Income Fund remain in limbo, with assets worth £140m still being broken up and sold by Link, the administrator. Mr Train is motivated by concerns that the Financial Conduct Authority’s inquiry is weighing down the performance of Hargreaves Lansdown, in which funds of his Lindsell Train finance house hold a 12.8% stake.
PROFESSIONAL SERVICES
ICAEW faces scrutiny over fines
Patrick Hosking in the Times looks at the ICAEW as its “somewhat unorthodox and opaque finances come under scrutiny,” with Darren Jones, chairman of the Commons’ Business, Energy and Industrial Strategy Committee, writing to the institute asking it to explain why it banks the fines stemming from misconduct by its own members. The channelling of misconduct fines stems from the accountancy scheme, an arrangement which requires professional bodies to fund the initial costs of Financial Reporting Council investigations. Since 2004, the ICAEW has been handed £123.4m of the fines imposed on accountants by the audit watchdog.
REAL ESTATE
Nationwide: Inflation may trigger fall in house prices
Nationwide has warned house prices could fall later this year, with the rising cost of living and surging inflation set to have an impact. The building society expects market activity to slow and the rate of price growth to moderate in the coming quarters, saying: “There is a risk of a downward movement in house prices, given the pressure on household budgets." Nationwide analysis shows that the average house price climbed 0.3% month-on-month to £267,620 in April. This represented a slowdown on the 1.1% rise recorded in March and the smallest increase since September 2021. Meanwhile, the latest figures from Halifax show that the average house price hit a record £286,079 in April, with year-on-year growth of 10.8%.
RETAIL
Retail sales up 1.4% in April
Office for National Statistics data shows that UK retail sales rose in April. Sales volumes were up 1.4% last month, following a fall of 1.2% in March, while the overall value of sales rose by 1.9%. Experts had forecast a decline in sales, with consumers expected to have cut back amid rising living costs. The rise was in part driven by an increase in sales from food stores, which rose by 2.8%. While sales volumes at non-food stores were down 0.6% in April, online sales rose by 3.7%. Sales of alcohol and tobacco helped push up sales volumes, while clothing sales were also strong. While sales climbed last month, in the three months to the end of April, they declined by 0.3%, revealing a longer-term downward trend.
ECONOMY
Central banks drove inflation, says King
Mervyn King, a former governor of the Bank of England, says central banks have pushed up inflation by printing money during the pandemic. He said banks printed more money through quantitative easing while the economy was shutting down, meaning there was more cash and less to buy with it, causing prices to increase. Mr King told Sky News: “It’s interesting that it was common to all central banks,” adding: “They basically felt: ‘We must demonstrate that we’re here, we must do something’.”