BANKING
Account closures rise, cash restrictions create alarm
Figures obtained by the Mail on Sunday reveal over a million bank accounts have been shut since 2019 and the rate of closure is accelerating. Banks are on track to break the previous record of 343,500 accounts closed last year with almost 200,000 accounts axed so far this year because of concerns over financial crime activity such as fraud and money laundering. This is up from under 50,000 in 2016 when the Financial Conduct Authority introduced new reporting rules. Meanwhile, the Telegraph reports on plans by NatWest to limit cash deposits and withdrawals with the move stoking fears that increasing curbs on the use of physical money across the system could have negative consequences for consumers. NatWest says the move is part of efforts to limit fraud, but Tory MP Anne-Marie Morris says: “The fraud and money-laundering rules seem to be wagging the tail of the cash dog.” Separately, a survey by Redfield & Wilton Strategies found that 88% of adults in Red Wall constituencies believe everyone should have the legal right to pay for goods and services in cash.
Lenders face £1bn in claims for overcharging on car finance deals
A landmark class action at the High Court claims three of Britain’s biggest motor finance providers charged excessive interest on a million finance deals between 2015 and 2021. Lloyds Banking Group’s Black Horse, Santander and MotoNovo Finance are alleged to have overcharged consumers £1bn in interest through a network of anticompetitive agreements between car finance providers and dealers. Car dealers and credit brokers allegedly sold finance at higher interest rates in return for higher commission from the lenders. Such “discretionary commission” incentives were banned in 2021 by the Financial Conduct Authority after the regulator found individual buyers were paying up to £1,100 over the odds on a £10,000, four-year finance package. Doug Taylor, a consumer champion and Labour councillor in north London, is leading the campaign with international litigation finance business Woodsford paying for the action.
NatWest starts to sound out successors for departed CEO Dame Alison Rose
NatWest has begun its search for a replacement for Dame Alison Rose, the FT reports, but an appointment will not be made until a successor to chair Sir Howard Davies is in place. Paul Thwaite, who was chosen to take the helm for an initial period of 12 months following Rose’s resignation, would be among the names under consideration. Other potential candidates are Francesca McDonagh, the former CEO of the Bank of Ireland Group and current chief operations officer of Credit Suisse, as well as William Chalmers, the chief financial officer of Lloyds Banking Group, and Ewen Stevenson, a former NatWest CFO.
Shawbrook plans £3.5bn merger with Co-operative Bank
The private equity-backed small business lender Shawbrook has approached the owners of the Co-operative Bank with proposals for a stock-based merger. Shawbrook has hired investment bankers at Barclays to advise it on the bid in a deal that would value the Co-operative Bank, which has 2.7m retail customers, at £800m, according to Sky News. Shawbrook was founded in 2011 and is currently owned by private equity firms including British funds BC Partners and Pollen Street Capital. A merger would value the combined group at £3.5bn.
Lenders cut mortgage rates despite latest BoE rate rise
The FT explains how expectations of lower interest rates next year means banks have been cutting mortgage rates this week despite the latest hike in rates from the Bank of England. Meanwhile, the Governor of the Bank of England has accused high street lenders of not being "fair" to customers by failing to pass on rising interest rates to savers. Andrew Bailey backed moves by the Financial Conduct Authority to ensure customers get a fair deal.
UK charity lender amasses steep paper losses on bond portfolio
CAF Bank’s annual report reveals last week that the lender has unrealised losses of £33.4m on its bond holdings, nearly two-thirds of the bank’s capital of £51.5m.
City of London calls on BoE to delay bank capital rules until mid-2025
The UK finance industry is urging the Bank of England to match the June 2025 implementation date for Basel IV rules laid out by the US to avoid a problematic period of regulatory divergence.
PRIVATE EQUITY
Fears for childcare sector as private equity steps up investment
Private equity funds have more than doubled their investment in England’s childcare sector in just four years, analysis by the Guardian reveals, prompting concern that providers cold be left more vulnerable to closure. The Trades Union Congress said the early-years sector needed sustainable and long-term investment – not “fly-by-night merchants looking to make a quick buck”. Joeli Brearley, chief executive of the campaign group Pregnant Then Screwed, called on the Government to intervene and put measures in place to “guard against serious profiteering”, adding that private equity should have “no place in the education and care of our children”.
INTERNATIONAL
Commerzbank Q2 net profit rises 20%
Commerzbank reported a better-than-expected 20% rise in net profit for Q2, driven by higher interest rates. Profits were up from €470m a year earlier to €565m. Analysts had forecast €538m. The bank raised its outlook for full-year net interest income but cut its net commission income forecast and slightly raised its cost expectations.
Citigroup's Asia family office business expects 25% increase in clients
Citigroup's Asia family office business expects a 25% increase in clients this year, according to the bank's regional head of its family office advisory business. The bank saw client numbers increase by around 50% year-on-year in Asia in 2022.
Credit Agricole reports record Q2 earnings, sales
Credit Agricole reported better-than-expected quarterly earnings, with net income rising 25% to €2.04bn. The bank's sales also rose by 19% to €6.68bn. The strong performance was driven by the insurance business and its special financial services unit.
AUTOMOTIVE
Car sales jump on strong EV demand
A new battery electric car was sold every 60 seconds in the UK, driving the country's automotive market in July, according to the Society of Motor Manufacturers and Traders (SMMT). The SMMT cut its growth forecast for next year due to cost-of-living concerns, but expects battery electric vehicles to capture 22.6% market share in 2024. However, despite a 28% increase in registrations last month, the overall market still lags behind pre-pandemic levels.
AVIATION
Virgin Atlantic facing pilot strike
Virgin Atlantic is facing strike action from its pilots over “serious concerns relating to fatigue and wellbeing around scheduling and rostering arrangements” at the airline. Balpa, the pilots’ union, said 96% of members have voted in favour of being formally balloted for strike action. The demands centre on reversing changes that were implemented during the pandemic to help save the airline from bankruptcy. Virgin Atlantic cut thousands of staff across the business during the pandemic and imposed changes to rostering that unions now claim is leading to pilot fatigue.
BA workers to get 13% pay rise
Around 24,000 staff at British Airways will get a pay rise worth more than 13% over 18 months from September. According to the Unite union, workers will also get a one-off payment of £1,000, but pilots and management are excluded from the deal. The agreement restores and increases pay after British Airways used so-called “fire and rehire” tactics during the pandemic, leading to many workers suffering pay cuts.
CONSTRUCTION
Construction makes surprise return to growth
The latest purchasing managers’ index from S&P Global and the Chartered Institute of Procurement & Supply shows a rise in civil engineering and commercial work pushed the UK’s construction industry back into growth last month, offsetting further contraction in residential development. John Glen, chief economist at the CIPS, said the eighth consecutive fall in residential building levels demonstrates how interest rate rises and cost of living pressures have dealt a “hammer blow” to the housing sector.
FINANCIAL SERVICES
Bold reforms needed to persuade firms to list in London
Writing in the Times, Ross Mitchinson, the co-chief executive of Numis, says further bold reforms will be needed to encourage companies to choose Britain when looking to take the leap into public markets. Recent efforts by the Government and the Financial Conduct Authority to boost the competitiveness of the City are encouraging, but “only by addressing long-term, structural issues more directly and completely will London retain, solidify and build upon its position in international markets.” Mitchinson says FTSE bosses support the idea of mandating pension schemes to invest in UK equities and changing accounting rules requiring companies to hold defined-benefit deficits on their balance sheets. “Less rigid corporate governance and reporting regimes, which sometimes can deter small companies from going public, would be another step forward,” Mitchinson continues, “alongside maintaining the high-quality governance standards that the UK is recognised for.”
Interest rate rises attract pension funds to UK debt
The UK’s largest workplace pension scheme by members will start buying gilts regularly as part of the change in its investment strategy, the Telegraph reports. The National Employment Savings Trust (Nest) has shunned UK debt for years, but is now preparing an initial investment of hundreds of millions of pounds. The move will come as a relief to the Chancellor, Jeremy Hunt, who needs to borrow around £131bn this financial year to plug the gap between tax revenues and public spending. Recent interest rate rises have made gilts more attractive, and other funds such as the People’s Pension are also looking planning to increase their investment in gilts.
Bank of England to stress test hedge funds
Many of the world's largest hedge funds will undergo stress tests conducted by the Bank of England to assess their impact on the UK's financial system. Over 50 City institutions, including HSBC, Goldman Sachs, JP Morgan, Aviva, and Legal & General, will participate in the exercise. The shadow banking sector, which has doubled in size since the 2007-08 financial crisis, will be evaluated as it accounts for about half of global corporate loans but lacks the same level of oversight as traditional banks.
FCA must insist PayPal protects free speech before granting licence
Campaigners are calling for the Financial Conduct Authority (FCA) to revoke PayPal’s temporary licence to operate in the UK in the wake of the de-banking scandal. UsForThem, a group that fought to keep schools open during the pandemic, and the Free Speech Union and its founder Toby Young are among those whose accounts with the US online payments company were shut down without explanation. After “subject access requests” were made PayPal allegedly failed to meet its legal requirements to hand over information on customers. Ben Kingsley, head of legal affairs at UsForThem, said: “The FCA must ensure that the only international financial businesses permitted to operate in the UK are those which commit to comply with applicable UK law and regulatory standards.”
Revolut to close cryptocurrency trading service in the US
Revolut is closing its cryptocurrency trading service in the United States due to the evolving regulatory environment and uncertainties surrounding the crypto market. The decision was made in conjunction with Metropolitan Commercial Bank, Revolut's American partner. US regulators have become increasingly hostile towards the crypto market, with concerns over financial crime and investor risks. The move will affect around 15,000 of Revolut's US customers, representing less than 1% of its total crypto clients. Revolut has yet to secure a UK banking license and faces doubts over regulatory approval.
Coinbase asks judge to dismiss SEC lawsuit
Coinbase has filed a motion in federal court in Manhattan to dismiss the US Securities and Exchange Commission's (SEC) lawsuit accusing the cryptocurrency exchange of violating federal securities laws. Coinbase argues that the assets and services in question do not qualify as securities and therefore the SEC has no authority to pursue the lawsuit. The SEC has been filing lawsuits against major crypto platforms, claiming that they need to register and operate like traditional stock or bond dealers, while the crypto sector says that new legislation is needed.
LionTrust deal deadline extended
A deadline to approve the takeover of GAM Holdings by LionTrust Asset Management has been extended for a fourth time after failing to win investor support. The deal faces competition from activist investors who argue that Liontrust's bid "grossly undervalues" the Swiss group’s potential. But investor advisory group ISS is backing LionTrust arguing that the counter bid was not "compelling enough”. The deadline has now been pushed back to August 23.
MEDIA & ENTERTAINMENT
WPP trims forecasts as Big Tech cuts ad spending
WPP has trimmed its full-year forecasts after a number of its US technology clients cut back on their spending. The world’s biggest advertising agency had pencilled in growth of between 3% and 5%, but this has been revised down to between 1.5% and 3% The group’s like-for-like revenue, less pass-through costs, rose 2% to £5.81bn in the first half of this year, up from £5.51bn in the opening six months of 2022. However, pre-tax profits halved to £204m from £419m, largely the result of a one-off £180m charge relating to a review of its property requirements. Shares were down 7% on Friday morning.
ECONOMY
Huw Pill: Interest rate rises are ‘working’
The Bank of England’s chief economist said on Friday that successive interest rate rises are starting to work, with inflationary pressures easing. Speaking to businesses the day after the Bank’s Monetary Policy Committee raised interest rates by a quarter point to 5.25%, Huw Pill said monetary tightening is working, although he admitted that over-tightening would push the country into a recession due to the UK’s weak productivity, long-term sickness and the country’s revised trading arrangements. Analysts fear that raising rates too far will wipe out growth and push up unemployment more than is needed to get inflation back down to the Bank’s 2% target. Julian Jessop, at the Institute of Economic Affairs, said: “It is already clear there is plenty of disinflation in the pipeline, so they have increased the risks of tipping the economy into an unnecessary recession. By the time you realise you have done too much, it is too late because the damage has already been done.” However, Mr Pill also warned of doing too little, arguing that if demand was allowed to grow too fast there would be a risk of “greater persistence of inflationary pressures” leaving families suffering the cost of living crisis for longer.
Pessimistic outlook results in hiring slowdown
The latest UK jobs report by the Recruitment & Employment Confederation reveals a decline in permanent staff appointments due to concerns over the economic outlook. Growth in billings for temporary workers also slowed down. The survey data shows a steep rise in staff availability and total labour supply. Businesses are freezing hiring and some redundancies are being made, leading to an imbalance in supply and demand. Hiring intentions and business confidence fell in both the services and manufacturing sectors.