BANKING
Cash transactions climb to 6.4bn in 2022
While more than half of all payments are being made by debit card for the first time, UK Finance says it is too soon to write off cash, with the number of cash transactions rising by around 400,000 to 6.4bn in 2022. UK Finance says more people have been turning to notes and coins to help them budget amid the cost-of-living crisis. Overall, there were 45.7bn transactions in 2022, up from 40.4bn in 2021. Debit card payments rose by 18% to 23bn, while cash payments accounted for 14% of the total. The analysis shows that the number of people who mainly use cash fell from 2.2m in 2017 to 1.1m in 2021 - and slipped further to 900,000 in 2022. UK Finance expects the number of cash payments to fall to around 3.3bn by 2032, accounting for around 8% of all payments. Adrian Buckle, head of research at UK Finance, said: “During 2022 we saw increased use of contactless, online banking and mobile payments, although cost-of-living challenges meant that some people preferred to use cash to help with their budgeting.”
Public sector lenders invest two-thirds less than EU
Public sector lenders created by the Government since Brexit are investing two-thirds less than the EU's European Investment Bank (EIB), according to a report. The EIB invested an average of £6.4bn per year in the UK between 2009 and 2016, while the new Treasury-backed institutions, including the UK Infrastructure Bank (UKIB), invested only £2.4bn in 2022. The report suggests that the UK's domestic development banks lack staff, expertise, and the AAA credit rating of the EIB, making lending more expensive. Additionally, the new institutions are less focused on infrastructure projects compared to the EIB. UKIB CEO, John Flint, says investment will increase in the coming years, but the report argues that growth will be limited by strict Treasury limits on lending.
INTERNATIONAL
ECB criticises Italy's windfall tax on banks
The European Central Bank has criticised the Italian government's proposed windfall tax on bank profits, stating that it does not consider the long-term prospects of lenders and could make some of them vulnerable to an economic downturn. Italian officials last month announced a one-off 40% tax on bank profits resulting from higher interest rates and later had to clarify that the tax would amount to no more than 0.1% of lenders' total assets. Lawmakers are expected to propose amendments to soften the impact of the tax, including allowing banks to deduct the payment from their overall corporate income tax bill.
Citigroup announces reorganisation
Citigroup has announced a major reorganisation aimed at boosting its profit and share price. The move will give CEO Jane Fraser more direct oversight over the bank's businesses. The leaders of the bank's five core businesses - Shahmir Khaliq, who heads the services unit; Andrew Morton, who runs the trading division; Peter Babej, who is the interim head of banking; Andy Sieg, who will head the wealth management unit; and Gonzalo Luchetti, who leads the US personal banking unit - will report directly to Ms Fraser. The reorganisation is expected to enhance profitability and drive the scaling up of the wealth management unit.
HSBC hires former Deutsche Bank veteran
HSBC has hired former Deutsche Bank veteran Lok Yim as its Asia Pacific head of global private banking. Mr Yim, who was most recently chief executive of Deutsche Bank Hong Kong and spearheaded the bank's wealth management and international private banking franchises in Asia, succeeds Siew Meng Tan, who is retiring after an almost forty-year career in banking.
Goldman Sachs execs fired over policy violation
Goldman Sachs has fired several executives in its transaction banking business for violating the firm's communications policy. The firm, which said it takes its communications policy seriously and expects all personnel to comply with it, did not disclose the names of the individuals, saying: "We are not going to comment on individual disciplinary matters."
Macquarie to scrap cash transactions
Macquarie Bank, Australia's fifth largest bank, has announced a plan to eliminate cash transactions in all its branches. The bank will gradually phase out cash, cheque, and phone payment services, aiming for digital-only transactions. By November 2024, all in-branch cash transactions will cease.
AUTOMOTIVE
Banks call for incentives to boost used EV market
Banks are calling for more incentives to boost the used electric vehicle (EV) market, as the higher cost of new green vehicles stifles uptake. The expensive cost of buying an EV has been one the most significant barriers in holding back wider adoption, ahead of a looming 2030 ban on the sale of new petrol and diesel vehicles. The price of the average new electric model currently sits at around 37% more than combustion engine counterparts. Lisa Watson, director of sales at the motor finance division of Close Brothers, said: “Cost is perhaps the most overbearing factor stifling EV uptake, especially during the cost-of-living crisis.”
EU to investigate 'flood' of Chinese electric cars
The European Commission has launched an investigation into whether punitive tariffs will be used to protect EU automakers from cheap Chinese imports. The investigation, which will take up to 13 months, will look into battery-electric cars manufactured in China, including those made by non-Chinese brands like Tesla, Renault and BMW. Commission president Ursula von der Leyen said: “Europe is open to competition ... Not for a race to the bottom.”
CONSTRUCTION
Redrow profits to halve
Profits and dividends at one of Britain's biggest housebuilders, Redrow, are expected to halve over the coming year due to higher mortgage rates and the cost of living crunch. Redrow's order book has almost halved from £1.44bn to £850m. The company has been selling half as many homes as it did a year ago, highlighting the difficulty of the current market. The firm expects sales rates to improve as the year progresses but still come in below previous levels. Redrow hopes to achieve annual sales of £1.65bn to £1.7bn and a pre-tax profit of £180m to £200m. Last year's profits fell 4% to £395m.
FINANCIAL SERVICES
PRA chief refutes ‘captured regulator’ claims
Sam Woods, chief executive of the Prudential Regulation Authority (PRA), has hit back at accusations that the banking and insurance regulator has been “captured” by the insurance industry. Mr Woods told a Treasury Committee hearing that he “categorically denied” the claim that the PRA was “a captured regulator.” The claims come as the watchdog considers an overhaul of EU regulations that govern capital requirements in the sector, with some critics arguing that reforms to the Solvency II regime would ultimately benefit the companies rather than consumers. Mr Woods said the reforms look to “reduce bureaucracy” for the sector, adding that benefits to policyholders would depend on the level of competition in the market.
SJP appoints new CEO
St James's Place has appointed Mark Fitzpatrick, former boss of Prudential, as its new chief executive. He will take over from Andrew Croft, who has been with the firm since 1993 and served as CEO since 2018. The changeover comes after a challenging period for money managers, with skittish investors and volatile markets impacting investments. St James's Place reported a decrease in funds under management to £148.4bn in 2022.
Binance.US CEO departs
Brian Shroder, the CEO of Binance's US affiliate, has departed the crypto trading platform. The cryptocurrency exchange did not specify when or why Mr Shroder departed, but said that chief legal officer Norman Reed is now serving as interim CEO.
Blackstone merges insurance and credit businesses in strategic move
Asset manager Blackstone is to merge its insurance and credit businesses as it aims to combine its expertise in both sectors to create new opportunities and enhance its offerings to clients.
REAL ESTATE
House prices decline at fastest rate since 2009
House prices are falling at their fastest rate since 2009, with a net balance of 68% of property professionals reporting declining prices. The Royal Institution of Chartered Surveyors attributes this decline to high mortgage rates. New buyer inquiries also fell, with a net balance of 47% of professionals reporting a drop. Chief economist Simon Rubinsohn warns that there is "little sign of any relief" and a net 67% of those polled believe prices will continue to fall.
RETAIL
The Range buys Wilko brand
Homeware retail chain The Range has agreed to buy the Wilko brand in a deal reported to be worth £5m. While The Range has acquired the Wilko brand and intellectual property rights, it has not bought any of its stores. Poundland’s owner, Pepco, this week struck a deal to acquire up to 71 Wilko sites that it intends to reopen under its own brand, while discount retailer B&M last week agreed a £13m deal to buy up to 51 Wilko properties that will also be rebranded.
ECONOMY
Economy shrinks more than expected in July
Office for National Statistics (ONS) data shows that the economy shrank more than expected in July, with some sectors subject to strike action and others hit by poor weather. While the economy contracted by 0.5% - more than the 0.2% that analysts had predicted – the ONS said the "broader picture" looked "more positive." Chancellor Jeremy Hunt said the latest ONS figures showed "many reasons to be confident about the future," adding that the UK economy is on course to grow faster than Germany, France and Italy. Paul Dales, chief UK economist at Capital Economics, said July's economic figures could mean a "mild recession" has begun, adding that July’s decline would mean the Bank of England’s forecast of 0.4% growth in Q3 was unlikely to be met. James Smith, developed markets economist at ING, said that while a recession "can't be ruled out," the economy "seems to be still growing, albeit fractionally." With the data coming ahead of a Bank of England decision on whether to increase interest rates again, Kitty Ussher, chief economist at the Institute of Directors, has urged Bank to forego another rate rise “rather than risking an overdose.”
OTHER
6 in 10 adults anxious over retirement finances
A poll from asset manager Abrdn shows that 58% of UK adults over 40 are anxious about the prospect of retiring, with many having to dip into savings as the cost-of-living climbs. It was found that almost 40% are concerned they might not have enough money to last them through retirement, with 13% delaying their retirement plans because of the cost-of-living crisis. Shona Lowe, financial planning expert at Abrdn, said: “The prospect of retiring can be a daunting one, whatever your age, particularly against a backdrop of rising interest rates, high inflation levels and an ongoing cost of living crisis.”