BANKING
Brokers predict mortgage price war
With lenders hopeful that inflation is starting to fall, brokers believe there could be a mortgage price war as firms continue to reduce rates. This comes with Nationwide reducing prices on some of its fixed products by up to 0.55 percentage points, while HSBC has reduced rates by up to 0.2 percentage points and TSB has lowered rates by up to 0.4 percentage points. Halifax, the UK’s biggest lender, will be cutting fixed rates on various products by as much as 0.71 percentage points. Chris Sykes of Private Finance said: “More lenders are likely to follow this trend, and we may even see further rate reductions from those lenders who have already lowered rates.” He went on to note that while rates are coming down, lenders are slower to decrease rates than they were to increase them. Meanwhile, Rob Gill, managing director at mortgage broker Altura Mortgage Finance, said that if official data due next week shows a further fall in inflation, there could be a “mortgage price war” in September. Nick Mendes of broker John Charcol believes it will take a few months before the market sees any “substantial” decreases in fixed rate pricing.
FCA begins probe into debanking
The Financial Conduct Authority (FCA) is to look into account closures and hopes to ascertain how many customers have been debanked by UK banks. This comes in the wake of a scandal which saw Coutts decide to close the account of prominent Brexiteer Nigel Farage and resulted in the resignations of the bosses of Coutts and its owner, NatWest. Chancellor Jeremy Hunt last week wrote to the FCA urging the regulator to investigate the issue of debanking and share the information it gathers with the Treasury. The FCA has issued a questionnaire to the UK’s largest banks and building societies, asking for information on the number of customers who have had their accounts terminated or suspended, or been denied banking services, and the reasons why – including whether there were any issues around freedom of expression. Banks and building societies are being told to respond to the FCA by August 25.
INTERNATIONAL
ABN Amro beats profit expectations
Dutch bank ABN Amro has reported an 83% growth in net profit for Q2, beating expectations. The increase was driven by high net interest income and impairment releases. CEO Robert Swaak attributed lower costs to reduced regulatory levies and delayed investments in a tight labour market. The company's CET1 ratio, a measure of capital strength, fell to 14.9% from 15.5% a year ago. ABN Amro expects full-year costs for 2023 to be around €5.2bn.
CONSTRUCTION
Bellway to build fewer homes
Bellway will build fewer homes this year as sales plunge and mortgage rates rise. The house builder's reservation rate is 28.4% lower than last year, with a cancellation rate of 18%. Bellway's average selling price dropped 1.4% to £310,000. The company expects revenues to fall by £120.6m to £3.4bn, with housing completions dropping from 11,198 to 10,945. Bellway is cutting jobs and keeping a tight grip on costs due to a weak housing market, with higher interest rates impacting the housing market.
FINANCIAL SERVICES
Global insurers see $50bn natural disasters bill
Global insured losses from natural disasters hit $50bn in the first six months of the year, according to data from Swiss Re. This is the second highest half-year global insured losses from natural disasters since 2011. The analysis shows that severe storms in the US account for almost 70% of these costs. Around $34bn of costs – 68% of the total – were linked to severe thunderstorms in the US. Noting the impact of increasingly extreme weather events, Jean Haegeli, Swiss Re’s chief economist, said: “The effects of climate change can already be seen in certain perils like heatwaves, droughts, floods and extreme precipitation.”
Watchdog improves time taken to process authorisations
The Financial Conduct Authority (FCA) has improved its authorisation process and is currently processing applications faster than it was a year ago. In the April-June quarter, the FCA saw an improvement in the processing time for the approved persons category for both the Senior Managers and Certification Regime (SMCR) and appointed representatives (AR) when compared with Q1 2022/23. The financial services watchdog processed 94.5% of applications within three months for SMRC, up from 78.9% a year ago, and 97% of AR applications, up from 86%. It was also shown that 97% of new firm authorisations were completed within six to 12 months of an application being submitted, compared to 92.2% a year earlier.
Regulator warns over loan fee fraud
The Financial Conduct Authority (FCA) has warned of an increase in loan fee fraud, where a consumer pays a fee for a loan they never receive. The City watchdog said there was a 26% increase in complaints from consumers who had fallen victim to the scam last year compared to 2021. It also highlighted that such scams typically result in a £260 loss. Steve Smart, executive director of enforcement and market oversight at the FCA, said that the impact of inflation, energy costs, and rising mortgage bills makes the current climate “a time of enhanced vulnerability for many,” warning that for fraudsters, “this provides the perfect opportunity to take advantage of people considering how to make ends meet.”
Hiscox profit spikes on premium rise
Lloyd's of London insurer Hiscox posted a sharp rise in pre-tax profit on rising premium rates, but its shares fell on Wednesday as analysts focused on a disappointing retail outlook. Pre-tax profit for the first half of 2023 rose to $265m, from $25m a year earlier. Commercial insurers who have faced hefty claims in recent years relating to hurricanes and wildfires, the pandemic and war in Ukraine, have responded by raising rates and restricting coverage.
LEISURE & HOSPITALITY
Restaurant chains serve up higher profit margins
Research shows that the UK's top 100 restaurant groups increased their profit margins from 0.5% to 3% in the six months to March. In total, the chains made a combined profit of £241.8m in this period, up from £19.9m in the previous half-year.
MEDIA & ENTERTAINMENT
Avid Technology to go private
Avid Technology will be acquired by an affiliate of Symphony Technology Group in an all-cash deal worth $1.4bn. The deal values the media editing software company at $1.19bn, excluding debt.
REAL ESTATE
High loan rates drive 'sharp downturn' in demand
A survey of agents and surveyors suggests that high mortgage rates have hit property sales, with a net 44% saying they saw a decline in sales agreed in July. The Royal Institution of Chartered Surveyors poll saw a net 45% of estate agents and surveyors say inquiries from new buyers fell last month, with the report declaring this a “sharp downturn in buyer demand.” Simon Rubinsohn, the institution’s chief economist, said: “The continued weak reading for the new-buyer inquiries metric is indicative of the challenges facing prospective purchasers against a backdrop of economic uncertainty, rising interest rates and a tougher credit environment.” The poll found that near-term sales expectations “have turned increasingly subdued of late”, while a net 53% of respondents reported a drop in prices last month.
RETAIL
Wilko suspends home deliveries in bid to avoid collapse
Wilko has suspended home deliveries as it seeks a rescue deal to avoid collapse. The company, which has 400 shops and 12,000 staff, has instructed online customers to use its click-and-collect service or visit its stores. Wilko filed a notice of intent to appoint administrators last week, giving it ten working days to find a buyer for all or part of the business. Investment firm Gordon Brothers, which bought the Laura Ashley brand in 2020, is understood to have held talks with Wilko's advisers over a potential deal.
ECONOMY
Investors’ expectations of eurozone inflation hit 13-year high
A gauge of long-term inflation expectations in the eurozone has reached 2.66%. This marks its highest level since 2010 and is above the European Central Bank’s 2% target.
OTHER
Britain faces soaring retirement bill
Britain will spend more on old-age pensions in two years' time than on education, policing and defence combined, official figures show. Pension costs have risen sharply for years because of the Government's triple lock, the mechanism by which pensions rise by whichever is higher of the annual increase in average earnings, inflation or 2.5%. Last year, pension costs increased by £6bn to £110bn. By 2025, they are expected to have ballooned to £135bn, a figure £2bn more than the combined day-to-day budgets for the Department for Education, the Home Office, and the Ministry of Defence. The number of people receiving a state pension has risen by 130,000 to 12.6m.