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Daily News Roundup: Monday, 4th April 2022

Posted: 4th April 2022

BANKING

Banks ‘boost profits’ but fail to pass on rate rises

Campaigners have criticised banks for failing to pass on a succession of interest rate rises while seeing profits climb, calculating that savers are losing almost £6bn a year due to rates remaining static. While the Bank of England (BoE) has raised the base rate three times since December as it looks to address soaring inflation, which currently stands at a 30-year high of 6.2%, very few banks have passed on the change in full to savers. Many have, however, upped interest rates in line with the BoE rate increases. The base rate now stands at 0.75%, up from 0.1% last year, and if banks had passed the increase, savers would be earning an extra £5.88bn a year in interest. Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “The high street banks don’t need our money, and they’re not afraid to offer us derisory rates in order to put us off.” She added that they have “used rate rises as a way to boost their profits, and left savers in their easy access accounts languishing on 0.01%.” Baroness Ros Altmann, a former pensions minister, said: “It is really frustrating for savers who have suffered so many years of paltry interest rates to now find that banks are not passing on the benefits of higher interest rates they are receiving from the Bank of England to their savings customers.”

Building society bosses see bumper pay boosts

Research by the Mail on Sunday has found that some building society bosses have received large pay increases while customers continue to see very little interest on their savings. The study shows that 13 chief executives in the sector received double-digit increases or more in their 2021 remuneration, with Skipton boss David Cutter leading the way as his financial package jumped by almost 103% to £1,309,000. Six other society chief executives received six-figure bonuses last year. Of the 35 CEOs whose remuneration was examined, only four saw their 2021 financial package shrink when compared with 2020, while all but five received annual bonuses. The study took into account basic salary, any performance bonus, pensions and other benefits. The Building Societies Association said that pay and bonuses for senior leaders is an “understandably sensitive topic”, adding that when deciding executive pay, societies' remuneration committees and boards “scrutinise competitive levels and benchmarks within the financial services sector, balancing the need for remuneration to be competitive whilst remaining true to building society mutual values.” 

Barclays urged to punish bankers over structured products error

Some Barclays shareholders have reportedly urged the bank to punish the bankers responsible for an error at its American structured products business that is expected to deliver a £450m loss. Investors are said to be putting pressure on the bank, with some calling for bonuses for outgoing CFO Tushar Morzaria to be docked. This comes after Barclays sold more structured products in the US than it had permission for from regulators, surpassing a $20.8bn cap by $15.2bn. A City fund manager who holds a stake in Barclays told the Times that “someone’s got to feel some pain because, as a shareholder, I’m feeling a lot of pain.”

FINANCIAL SERVICES

Crypto companies in regulation warning

The Telegraph’s James Titcomb looks at regulation of the cryptocurrency sector, highlighting concern from some crypto firms that the Financial Conduct Authority (FCA) has been “disproportionately obstructive and unhelpful.” Noting that almost 200 companies sought registration with the City watchdog before a deadline in January last year, he details how the watchdog had granted a licence to just three companies by the cut-off, with a backlog of dozens of firms. To date it has registered 34 companies it says meet its standards. Mr Titcomb says that issues with securing a UK licence have seen several companies opting to base themselves elsewhere and operate under a different regulator. A unnamed former executive at a cryptocurrency company tells the Telegraph that “dealing with the FCA’s crypto asset authorisation team was disastrous,” adding that the “net result of this hostile attitude is the majority of innovators have moved their activity to other jurisdictions.” Separately, Peter Smith, founder of Blockchain.com, recently said: “The UK has definitely fallen behind over the last two or three years. The FCA, of late, hasn’t been eager enough to foster innovation and to work with the industry.” Marcus Foster, head of crypto at UK start-up group Coadec, has called for a shift in attitude from the watchdog, saying: “The FCA's actions give the impression that the UK is not open for crypto business.” Mr Titcomb reflects: “Currently, Britain seems unlikely to be high on the list for any budding crypto businesses,” citing an executive who says that while the UK “had a good chance at building one of the global hubs for crypto asset businesses” until this year, this is now “firmly off the table.”

LV boss faces calls to quit

LV boss Mark Hartigan is facing calls to stand down after it emerged he is listed in company documents as the interim chief executive. The Mail on Sunday highlights that, having been appointed in December 2019, Mr Hartigan embarked on a plan to sell the mutual insurer to US private equity firm Bain -  a deal that was voted down in December. With the firm’s 2021 annual report showing that Mr Hartigan is “employed on an interim basis”, the Mail says it raises questions over why the board “allowed him to press on with his plan”. MP Gareth Thomas, chairman of the All-Party Parliamentary Group on Mutuals, said: “It beggars belief he is allowed to stretch LV to the very limits of its founding ethos without ever having had a full-time contract.” He added that the insurer “will never recover its reputation while Mr Hartigan remains in place.”

NatWest weighs £3bn bid for Tilney S&W

NatWest Group is reportedly considering an offer for Tilney Smith & Williamson. City sources say the lender is among a substantial number of banks and financial investors which were likely to explore bids for Tilney S&W. The wealth manager is owned by Permira and Warburg Pincus, who have appointed investment bankers at Evercore to examine a sale or stock market flotation of the business. A sale process for Tilney is scheduled to get under way in the next six weeks. Alison Rose, NatWest's chief executive, is said to be keen to expand the group's presence in wealth management, where it owns the Coutts brand.

BNP Paribas takes stake in asset manager

BNP Paribas Asset Management has acquired a majority stake in Dutch asset manager and specialist lender Dynamic Credit Group. The deal brings the total assets under management for BNP AM's private debt and real assets investment division to €20bn. BNP's David Bouchoucha said the deal “marks an important step” in the development of the group's private debt platform.

Passion Capital fires founder

Venture capital fund Passion Capital has fired its founder Stefan Glaenzer following a sexual assault charge. Funded by the British Business Bank, Passion Capital – which is Monzo's majority shareholder – severed all ties with the tech tycoon. Passion said it is “in the process of removing his involvement and membership in all Passion entities.”

LEISURE & HOSPITALITY

Carnival faces backlash over pay deal

Cruise operator Carnival faces a backlash from shareholders over a huge pay deal for chief executive Arnold Donald that comes despite the company receiving Government support and laying off staff. Mr Donald was given a package that could pay out as much as $15m, including a $6m bonus. Investors in the world's largest cruise company are preparing to vote against its pay policy at its AGM. Proxy adviser ISS said it had “material concerns” with Mr Donald's pay package.

888 boss doubles pay package despite firm’s failings

Itai Pazner, chief executive of online betting group 888, doubled his pay package to £4m last year, with this including his £675,000 salary, a £1m bonus and shares worth £2m. This comes despite the firm being fined £9.4m by the UK Gambling Commission for social responsibility and money laundering failings.

MANUFACTURING

Growth in manufacturing falls to 13-month low

Growth in the UK’s manufacturing sector has fallen to its lowest levels in 13 months, according to S&P Global’s Purchasing Managers Index (PMI). Growth slipped to lows of 55.2 in March from highs of 58.0 in February amid soaring inflation, supply shortages, and the war in Ukraine. Companies say they are being charged higher prices, with costs driven up by supply shortages, supply chain disruption, material shortages, and higher energy costs. These costs were passed on to customers, with average selling prices climbing at their fastest rates in three months. The report also found that new orders sank to their lowest levels since January 2021 and UK exports fell for the sixth time in seven months. Reflecting on the findings, Jonathan Andrew, CEO of Bibby Financial Services said: “Many small to medium sized businesses in the manufacturing industry are struggling to keep their heads above water as the costs of energy, raw materials and transport reach record highs.”

REAL ESTATE

Homeowners rush to secure cheaper mortgages

Banks have seen a 40% increase in remortgage approvals over the past year as homeowners rushed to lock in new deals before rates increased. Loan rates have been going up since October on the back of rising inflation and three consecutive increases in the Bank of England base rate. Some 48,200 people remortgaged in the past 12 months and a record £9.8bn worth of remortgage loans was approved in February. The previous record was £9.42bn in August 2018. In October the lowest two-year fixed rate at 60% loan-to-value (LTV) was 0.79% and the lowest fiveyear fix was 0.91%. The lowest comparable rates are now 1.25% and 1.51% - £41.71 and £55 more a month on a £200,000 loan. “Borrowers no longer want to wait to remortgage with their own lender, something known as a product transfer, because you are often able to lock in a better rate if you go to a different lender up to six months before the end of your fixed rate. We've seen this happen since rates started to increase in October," said Andrew Montlake from the mortgage broker Coreco.

Retirees turn to property wealth to help pay the bills

Pensioners have turned to their property wealth to pay for rising living costs and experts have warned rising costs and higher taxes will force even more people into using equity release this year. British property wealth reached a record £5.2trn by the end of last year, with £1m added to the value of the housing market every minute. Customers using equity release withdrew £125,000 on average as a single lump sum or via drawdowns last year, according to new data published by the Equity Release Council. This is the equivalent of withdrawing seven years of retirement income.

RETAIL

Second activist investor takes Ted Baker stake

Activist investor Oasis Management Company, which took an activist role at Premier Foods and joined the board after agitating for a change in management, has taken a 2.47% stake in Ted Baker. Ted Baker is already under pressure as Toscafund, an activist hedge fund, is its biggest investor after doubling its position to 27% during a refinancing in 2020. A Ted Baker spokesman said Oasis had invested in the business a couple of years ago but its position has now been made public due to UK takeover rules. This comes after the fashion chain rejected a £254m takeover approach from private equity firm Sycamore Partners.

ECONOMY

UK economy less exposed to risks from Ukraine war

Analysis by the Economist Intelligence Unit consultancy suggests that the UK economy will not be as hard hit by Russia’s invasion of Ukraine as European peers who are more dependent on Russia for energy and goods. While the war is expected to set back growth in the UK by about 0.2 percentage points this year, Germany, Italy and France are likely to see around a percentage point trimmed from growth rates. Growth in the UK is expected to average 3.9% in 2022, compared with 2.5% in Germany and 3.4% in France and Italy. Global growth will, the study estimates, take a hit of 0.5 percentage points this year, falling to 3.4%. The consultancy said the invasion will hit growth in G7 economies through three main ways: The impact of western sanctions; higher global prices for commodities, fuelling inflation; and supply-chain disruptions which come on top of existing bottlenecks caused by the pandemic.

OTHER

Cost of household debt up £1k per family

The average household will spend an extra £1,000 more on paying off debts over the next two years, according to an Office for Budget Responsibility (OBR) forecast. It is estimated that the cost of servicing household debts – including mortgages, credit cards and personal loans – will rise by 52%. The increase means almost 5% of families’ disposable income will go toward debts, the highest proportion since 2008/09. The OBR calculates that households spent £55bn servicing debts in 2021/22, with the total set to jump to £83bn by 2023/24. The increase will be driven by the higher interest rates imposed by the Bank of England as it looks to tackle inflation, with variable-rate mortgage borrowers set to face steeper bills.

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