Barclays to acquire Kensington Mortgage Company in £2.3bn deal
Barclays has confirmed that it will acquire specialist lender Kensington Mortgage Company in a £2.3bn deal. Barclays said the acquisition will allow it to offer more mortgage options to the self-employed and people who have multiple or variable incomes. The bank will also take ownership of a portfolio of mortgages offered by Kensington Mortgage Company, worth £1.2bn, in efforts to lend to a greater variety of customers. The deal comes after the pandemic led to an increase in the number of self-employed borrowers and those with complex incomes due to the impact of the Government’s furlough scheme and the wider effect on job volatility. Russ Mould, investment director at AJ Bell, said: “Barclays fancies its chances as a bigger player in the residential mortgage market. The timing might seem a bit odd given cracks appearing in the property market. However, Barclays is clearly taking a long-term view and its purchase of Kensington Mortgage together with a book of UK home loans is a logical strategic move.”
Removing mortgage stress test will lead to more tailored loans
Experts say a move by the Bank of England to remove a requirement for banks to check that borrowers can afford mortgage payments at higher interest rates will not result in a lending free-for-all. The mortgage market affordability test rules were introduced in the aftermath of the 2007-2008 financial crash, but opponents of the rules said the test was too strict and prevented some who could afford a mortgage from being given one. Those in favour of removing the test say it will be of particular benefit to first-time buyers and point out that banks and building societies are still restricted on how much lending they can do above 4.5 times salary and the Financial Conduct Authority still insists that lenders check affordability at one percentage point above the rate borrowers will move on to. UK Finance, the trade body for banks, says the rule change will make it possible “for firms to review mortgage applications in a more tailored way, while maintaining the underwriting standards required by the FCA and ensuring mortgages are affordable in the long-term”.
Britain is the £3bn fraud capital of the world
An investigation by the Daily Mail reveals that Britain has become the global capital of fraud, with losses from scams soaring to almost £3bn a year. Losses of £36.02 per person in the UK are far higher than in other leading Western economies. This is more than double the amount lost per capita that year in the US, according to figures from the Federal Trade Commission, more than five times that recorded in Australia and almost six times the amount logged in Canada. New Zealand had a rate of just £1.73 per person in 2021. UK Finance said: “The banking and finance industry is committed to stopping fraud.” The banking trade body added: “We agree that more needs to be done and have long called for a regulated code, backed by legislation, to ensure consumer protections apply consistently.”
Barclays to hunt down the £1bn Covid crooks
Barclays is hiring a team of investigators to claw back up to £1bn of Covid loans that have been siphoned off by criminals. The bank issued 345,006 loans worth £10.8bn to small firms under the Government's Bounce Back Loan Scheme at the height of the pandemic. These were fully guaranteed by the Treasury so that banks were not exposed to excessive risks. However, this has left taxpayers on the hook for potentially huge losses from borrowers who are either fraudulent or genuinely cannot pay. Barclays has held talks with the Cabinet Office over its move to outsource the Covid fraud investigation. It is likely to be given a green light by Ministers, who are keen to recoup as much of the losses as possible. Its elite team will include experts in insolvency, law and forensic accountancy.
HSBC executive in surprise move to run the Skipton
Stuart Haire, the group general manager and chief executive of HSBC's UK personal and private banking businesses, is to become the new CEO of the Skipton Building Society. Haire has worked at HSBC for six years, having spent nearly a decade prior to that in senior roles at Royal Bank of Scotland. Sky News understands that an announcement could be made as early as Monday morning.
Fintech minnow secures full banking licence
London-based financial services start-up Kroo has won a full banking licence in the UK. The firm, formerly called B-Social, plans to launch a current account immediately with CEO Andrea De Gottardo saying unsecured loans, mortgages and savings accounts will follow. The company is now likely to seek another £45m to £85m in expansion capital through a series C fundraising, De Gottardo said.
Kwarteng approves Ultra sale to Advent
Kwasi Kwarteng has waved through the sale of Ultra Electronics to US private equity firm Advent International. The Business Secretary was urged to block the takeover amid fears of the hollowing out of the UK's defence sector. But Advent has agreed legally binding undertakings to protect national security.
Time is ripe to snap up bargains, says debt investor Howard Marks
The FT interviews the co-founder of Oaktree Capital, Howard Marks, who says he has begun to invest aggressively since the widespread sell-off in financial markets.
Saudi Central Bank steps in to ease tight liquidity
The Saudi Central Bank has placed some $13bn with commercial lenders to ease a liquidity crunch as credit expansion outpaces growth in bank deposits. The funding from came in at least three separate tranches, according to reports. The move reflects growing concerns about costly liquidity for banks in Saudi Arabia and its impact on the economy.
Chinese banks lend Pakistan $2.3bn to avert foreign exchange crisis
A consortium of Chinese state banks has lent $2.3bn to Pakistan, increasing the country’s liquid foreign reserves of $8.2bn to $10.5bn and staving off the threat of defaulting on its international debt.
SEC chair urges ‘one rule book’ for crypto to avoid gaps in oversight
U.S. Securities and Exchange Commission chair Gary Gensler has said he is working with the Commodity Futures Trading Commission about creating a single rule book for cryptocurrency oversight.
Pilots union to open pay talks with BA
British Airways pilots are joining ground crew colleagues with demands for a new pay deal. Union officials said that the timing of the industrial action was designed to “maximise leverage” over bosses at the UK flag carrier and the wider economy. Pilots are hoping to overturn a deal agreed during the pandemic which saw their pay slashed to pay for colleagues left out of work by the pandemic. As it stands the deal is open-ended, meaning that the salary sacrifice could last for years if not decades. It means that pilots would effectively suffer a 9% pay cut next year, union leaders said. Elsewhere, Ryanair boss Michael O'Leary has said that unlike his competitors, his company, based in Ireland, can take advantage of the European Labour market and has therefore been “completely unaffected” by the airport chaos brought on by staff shortages this summer.
FCA’s confusion over P2P revealed
Questions have been raised over whether the Financial Conduct Authority acted too slowly to limit the risks of peer-to-peer lending after an email cache revealed senior leaders at the regulator were discussing problems in the industry as early as 2016. By the time the regulator introduced rules for the sector, platforms with a quarter of a billion pounds in active loans had collapsed leaving investors with life-changing losses. The emails were disclosed during a recent employment tribunal which saw former FCA risk manager Walker Sigismund accuse the watchdog of forcing him out after he raised various concerns including problems in the peer-to-peer industry. Mark Bishop, a financial services campaigner, said the emails showed “smart and diligent people within the FCA knew the regulator’s stance on peer to peer was wrong, and that people would lose their money.” But “senior figures suppressed those voices, because they didn’t accord with the ’house line’ which was one of light-touch regulation and hoping for the best.”
UK to impose steel tariffs to protect British manufacturing
Boris Johnson is preparing to impose steel tariffs on several countries in an effort to protect UK manufacturers from a “flood of cheap steel” from overseas. The move, which is also designed to win back support in Red Wall seats, has been informally agreed by key Cabinet ministers, but final details will be signed off in the coming days. But opponents of the plan say the Prime Minister will be breaking World Trade Organisation rules and that a trade war could result from the “anti-free market and anti-capitalist” policy.
MEDIA & ENTERTAINMENT
Idris Elba in talks to join bid for Channel 4
The actor Idris Elba is discussing a joint bid for Channel 4 with media entrepreneur Marc Boyan. The channel could fetch between £750m and £1.2bn if its privatisation goes ahead. JPMorgan Chase has been appointed by the UK Government to oversee the sale of Channel 4 and has received at least 25 expressions of interest, according to the Sunday Times.
House price crunch coming for Western countries
Goldman Sachs is predicting that the property booms experienced in Western countries over the course of the pandemic are coming to an end as soaring interest rates, stretched affordability and weakening economic growth take the heat out of property markets. The UK will see prices flatline from next year onwards, rather than fall, the bank’s model predicts, while France and the US will see declines of 9% and 3%, respectively. Prices in Canada, Australia and New Zealand are already dropping. The worst price slump will be in Canada, at 12%. House prices in the UK have jumped 22% since Covid struck, fuelled in part by the stamp duty holiday, but Goldman attributed the stronger performance in the UK next year to a “smaller drag from rising mortgage rates than in North America” and scarcer housing supply than in France.
Rising rates raise prospect of property crash
As rates rise across the world, property investors are finding themselves out of pocket, particularly if they overpaid in the rush for defensive assets.
Retail sales down as shoppers cut spending
Data published on Friday by the Office for National Statistics show retail sales fell 0.5% between April and May, reversing the expansion seen in the previous month. Despite the volume of sales being 4.7% lower than a year ago, consumers spent 0.6% more than in the previous month, illustrating the impact of inflation. The deepening cost of living crisis was blamed by statisticians for a 1.6% month-on-month slide in food sales in May. The ONS also revealed that 43% of families are cutting back on their weekly food shop in the face of rising prices, up from 8% in September 2021.
Leading economies at risk of falling into high-inflation trap, BIS says
The Bank for International Settlements has said the world’s leading central banks should not be shy of inflicting short-term pain or even recessions to prevent a shift into a persistently high-inflation world. “The global economy could be set for a period of stagflation, involving both low growth, if not an outright recession, and high inflation,” the BIS said. Agustin Carstens, general manager of the Switzerland-based BIS, explained: “The key for central banks is to act quickly and decisively before inflation becomes entrenched. If it does, the costs of bringing it back under control will be higher. The longer term benefits of preserving stability outweigh any short-term costs.” Claudio Borio, head of the BIS’s monetary and economic department, told the Times that shadow banks faced a liquidity crunch that could trigger a chain of corporate bankruptcies as central banks raised borrowing costs to fight inflation. “There is a hidden liquidity mismatch which erupted in March 2020 and we cannot rule out further possibilities of strain in the shadow banking sector,” Borio said.
BoE faces demand for probe into forecast failures
The Bank of England's failure to predict soaring inflation should be the subject of a parliamentary inquiry, economists and MPs have argued. Doug McWilliams, deputy chairman of the Centre for Economic and Business Research consultancy, said: “We need to find out why – when others haven't been too far out in their inflation forecasts – [the Bank] has been consistently so far behind the curve.” Kevin Hollinrake, a Conservative member of the parliamentary cross-party Treasury Select Committee, backed calls for a probe, stating: “There are specific UK issues regarding inflation which we've raised with Andrew Bailey several times. We'll want to have a more in-depth look when we have more facts but there's mounting evidence the Bank was asleep at the wheel.”