BANKING
Tough rules on banks pushing house prices sky high
Strict banking rules have triggered a mortgage price war which is helping to send house prices sky high, Goldman Sachs has warned. The US investment bank believes the performance of high street lenders is coming under mounting pressure as they compete to offer ever lower rates. Tough “ring-fencing” rules imposed on banks after the financial crisis were aimed at ensuring that billions in customer savings could not be funnelled into “casino” investment banking operations. But this has made banks pile into the mortgage market – considered low-risk lending – which has forced down the interest rates that they charge to generate profits. The warning comes after banks and building societies launched some of the cheapest mortgage deals on record. Halifax will tomorrow launch one of the cheapest two-year deals ever at 0.83% for borrowers with a 40% deposit. Last month, Nationwide offered a five-year deal with a rate of 0.99%.
Promising outlook for UK banks
The Times’ David Brenchley reports that UK banks are poised for a bounce back with positive profits figures coming out of Lloyds, Standard Chartered and HSBC while dividend payments have also been restored. He says shares in the five biggest UK banks are cheap and the prospect of higher interest rates gives hope of greater profitability. Callum Abbot, the manager of the JP Morgan Claverhouse investment trust said he preferred the UK-focused banks such as Barclays and NatWest to those that sell more into Asia such as HSBC and Standard Chartered. “We feel that the UK domestic economy is in good health,” he said. “We’re less confident on some emerging markets and we feel HSBC is between a rock and a hard place in Hong Kong.”
Can Monzo replicate Starling’s success?
The Sunday Times compares the fortunes of Monzo and fintech rival Starling. Monzo - considered a true disruptor five years ago - is still posting substantial losses and is considered by some as “gimmicky” with customers interviewed by the paper questioning the robustness of its platform. Starling on the other hand is portrayed as more “grown up” - offering traditional banking services, doubling its customer base every year and ramping up revenue by 600% in the year to March 31st, 2021.
HSBC issues warning over film scheme action
According to a disclosure in HSBC’s half-year results last week the potential impact of legal challenges relating to film investment schemes developed by the bank is “significant”. HSBC faces four court cases over Ingenious, which were brought in 2015, 2018 and 2019 by people who took part in the schemes, and two claims that were issued in June last year by investors in the Eclipse schemes. HSBC was also served with the High Court claim over Zeus in April.
PRIVATE EQUITY
Private equity could be the key to 'levelling up'
Writing in City A.M., Tom King and Matt Bevington of Global Counsel say private equity firms need to do more to explain the industry’s wider contribution to the economy and society. Private equity firms and the companies they own will likely be caught up in new corporate governance rules that will see the definition of Public Interest Entities expanded, and with growing interest in ESG issues among the public and political parties, “all corporate actors have to take more seriously their wider responsibilities to the societies in which they operate.” However, private equity has been lagging in this area, the authors say, but could better promote the ways it could contribute to the Government’s wider redistribution agenda. That said, Messrs King and Bevington conclude that the Government “should take a more proactive approach to shaping private equity investment towards its political priorities.”
Admiral issues warning over Ultra sale
The former head of the Royal Navy, Admiral Lord West, has warned against the sale of Ultra Electronics to private equity firm Advent International, saying it could pose a threat to the UK’s defence capabilities.
INTERNATIONAL
ING reports better than expected profits
Dutch banking giant ING reported better than expected second quarter results on Friday, posting a pre-tax profit of €2.07bn as fee income grew and some provisions for bad loans taken amid the coronavirus pandemic were reversed.
AVIATION
Virgin Galactic restarts space ticket sales
Virgin Galactic is offering tickets for flights to the edge of space for $450,000 following the successful test flight with founder Sir Richard Branson. The first commercial flights will take place in the third quarter of 2022, CEO Michael Colglazier said in an earnings call. Meanwhile, bosses at Virgin Atlantic have reportedly held talks with institutional investors ahead of a surprise public debut on the London Stock Exchange.
FINANCIAL SERVICES
TPR drops plans to cap investments for UK pension schemes
The Pensions Regulator (TPR) has scrapped plans to limit investment in unquoted assets to 20% of a portfolio following a call from the Government for pension schemes to invest more capital in long-term UK assets. "Trustees of pension schemes have an obligation to invest in the best financial interest of their members," David Fairs, TPR executive director of regulatory policy, analysis and advice, told the FT. "Pensions schemes generally have a longer-term investment horizon which enables them to consider investment in a wider range of assets." He added: “We look forward to working with the Government and industry to encourage an approach to investment which is in the best interests of savers.”
SPAC revolution unlikely with modest reforms
Merlin Piscitelli, Chief Revenue Officer for EMEA at Datasite, reviews the new rules around SPACs recently introduced by the UK’s Financial Conduct Authority. Special purpose acquisition companies raised over $75bn last year - with the bulk in the US and only £0.3bn of this raised in the UK. Piscitelli says that although the FCA has made SPAC listings more attractive the reforms are unlikely to usher in a revolution. “Instead, the FCA has elected to take a measured approach that encourages, within reason, SPAC activity. The true impact of these reforms will be revealed in the coming months.”
FSCS to review website after savers’ complaints
The Financial Services Compensation Scheme is reviewing the information on its website after pension savers complained it was unclear and led them to miss out on tens of thousands of pounds in redress.
Climate laggards could ‘let down’ Lloyd’s of London
Lloyd’s of London chairman Bruce Carnegie-Brown has warned that insurers slow to remove their backing for the most carbon-intensive activities put the reputation of the marketplace at risk.
HEALTHCARE
Oxford Nanopore bosses share £160m float jackpot
Oxford Nanopore shareholders have agreed to hand 6.5% of the equity to chief executive Gordon Sanghera and three other executives. The award comes as the gene-sequencing company prepares to go public in a listing expected to value it at more than £2.5bn. Nanopore has opted to list in London, hiring advisers from Bank of America, Citigroup and JP Morgan, but will utilize a dual-class share structure to give takeover-blocking rights to Sanghera for three years.
MANUFACTURING
BAE adds new weapons to Typhoon fighter jets
BAE, part of the Eurofighter consortium which builds the RAF's Typhoon fighter jets, will improve the Typhoon's ability to use the Meteor air-to-air and Brimstone air-to-surface missiles under a £135m contract that will protect 100 highly skilled jobs at BAE's bases in the north-west of England.
MEDIA & ENTERTAINMENT
Adam Crozier appointed new chairman of BT
Adam Crozier, the former chief executive of Royal Mail and ITV, has been appointed the new chairman of BT. Under CEO Philip Jansen the company has been focusing on delivering super-fast broadband and is also exploring the sale of a stake in BT Sport.
PROFESSIONAL SERVICES
Specialist headhunting firm hired to help Bank replace Haldane
The Bank of England has hired Audeliss, a headhunter that specialises in "diverse" recruitment to replace the outgoing chief economist, Andy Haldane. Audeliss was founded by Suki Sandhu, who is also chief executive, and "specifically represent LGBT+, ethnic minorities and women".
REAL ESTATE
Broadbent: Home working will continue to support house prices
Property prices are likely to be supported in the long term by the shift to working from home, despite the ending of the stamp duty holiday, the Bank of England's deputy governor Ben Broadbent has said. He pointed out that throughout the world trends show growth in house prices, with no changes in taxes and activity particularly strong outside cities. Meanwhile figures from the Halifax show house prices rose again in July after dipping the previous month, leaving prices 7.6% higher than at the same time last year.
Debt levels for homebuyers highest for five years
Soaring house prices mean UK buyers are having to borrow a greater proportion of their salary to secure property, with analysis finding 12.6% of mortgages taken out in the first three months of the year were by homebuyers borrowing at least four times their income. This was up from 11.4% last year and was the highest since 2016.
RETAIL
Morrisons agrees to raised £6.7bn takeover offer from Fortress
Supermarket chain Morrisons says it has agreed to a revised takeover offer worth £6.7bn, up from £6.3bn, from a private equity consortium led by Fortress Investment Group. The increased offer, worth 272p a share, comes after some key investors rejected a previous 254p a share offer. Their approval is also needed for this fresh offer.
Burnley makes abrupt departure from Asda
Asda chief executive Roger Burnley is leaving the supermarket chain despite the company saying in March that he would be staying on for a year until his long-term successor was in place. In a statement on Friday, Asda, now owned by the billionaire Issa brothers and TDR Capital, said Burnley’s departure was “mutually agreed”.
SPORT
CVC’s La Liga bid stumbles
CVC Capital’s attempt to buy a 10% stake in Spain's La Liga for £2bn is facing opposition from Real Madrid and Barcelona who accuse the private equity firm of underpaying.
OTHER
Hammond accused of breaching ministerial code after seeking access for bank
Former Chancellor Philip Hammond, now Lord Hammond of Runnymede, has been accused of breaking the ministerial code after he emailed a senior Treasury figure to advocate for the Government’s use of a “toolkit” designed by OakNorth Bank, which Hammond had become a paid adviser to after leaving the Government in July 2019. A spokesman for Hammond insists no rules were broken as the approach “was not a commercial offer”, but Labour’s deputy leader Angela Raynor has demanded Lord Hammond is investigated by the Cabinet Secretary. She stated: “If the rules are treated with such derision by the former Chancellor then the whole system is rotten.”
Metro shuts down Reform Party’s account
The Reform Party, which in its former incarnation was named The Brexit Party, has had its account shut down by Metro Bank in what leader Richard Tice has described as an "outrageous" and politically motivated move. Mr Tice told the Sunday Telegraph: “If we're a proper functioning democracy then new disrupters need to be able to operate. You can't operate if you don't have a bank account that you can pay bills with.” A Metro Bank spokesman insisted the decision was commercial only and the lender remained politically neutral.