BANKING
MPs press FCA on savings rates
The Treasury Select Committee has written to the Financial Conduct Authority to demand the watchdog takes action to ensure banks pass on higher interest rates to savers. According to the Committee, all the UK's major banks offered less than 1% for their easy access savings accounts even though the base rate was 4% earlier in March. Conservative MP Harriett Baldwin, who chairs the committee, said in a letter to Nikhil Rathi, the chief executive of the FCA: “While consumers should continue to shop around for the best rates, the information we’ve received from the UK’s biggest high-street banks demonstrates there is much more that can be done. We anticipate that the financial regulator will want to look into this issue in further detail, in particular whether the market is truly competitive and if retail banks are relying on customer inertia to keep savings rates low.” The chiefs of Barclays, HSBC and Lloyds all refused to provide hard data, each pleading commercial sensitivity, in replies to the committee published yesterday. But NatWest decided to disclose that the bank made 14 times more from its savers last year than in 2021, booking notional net income from them of more than £1bn.
BoE says it warned US regulators over SVB risks before its collapse
The Governor of the Bank of England, Andrew Bailey, told MPs on Wednesday that the central bank had warned US regulators over the risks building at Silicon Valley Bank (SVB) well ahead of its collapse. He went on to criticise the US government’s decision to bail out SVB’s depositors, saying the blanket guarantee increased the risk of “moral hazard” in the banking industry. By contrast, the UK deposit guarantee limit “is set at a level which balances financial stability, moral hazard, and adequate depositor protection,” Mr Bailey said. He went on to defend the BoE’s record of supervising SVB in the UK and said a sale to HSBC was agreed to protect British tech start-ups.
INTERNATIONAL
US bondholders prepare to sue Swiss over $17bn Credit Suisse wipeout
Investors in distressed debt are gearing up to sue the Swiss government over its decision to write down $17bn of Credit Suisse bonds as part of its sale to UBS. “If this is left to stand, how can you trust any debt security issued in Switzerland, or for that matter wider Europe, if governments can just change laws after the fact,” David Tepper, the billionaire founder of Appaloosa Management, told the Financial Times. “Contracts are made to be honoured.” Pimco, Invesco and Blackrock are among the biggest losers from the right off of AT1 debt. The law firm Quinn Emanuel Urquhart & Sullivan has now said it has put together a multi-jurisdictional team of lawyers from Switzerland, the US and the UK to act on behalf of burnt bondholders.
Fitch downgrades First Republic Bank again
Fitch has further cut its credit rating on First Republic Bank citing increased costs to its funding profile. Due to the higher cost of funds, “First Republic is currently operating at a net loss that is not sustainable over the longer term absent a balance sheet restructuring,” the ratings agency said. “Furthermore, to the extent that FRC is required to repay the $30bn at the end of its term, it will have to raise liquidity by selling assets.” Meanwhile, First Republic’s top executives will forego their bonuses for 2023 as they try to restore investor confidence in the lender.
Yellen says White House not considering ‘blanket’ guarantee on bank deposits
Janet Yellen, the US Treasury secretary, said on Wednesday that the Biden administration would not be moving to protect deposits in small and regional banks across the country. Yellen’s comments fuelled another sell-off in shares of smaller US banks with the KBW Bank index falling 5%, reversing all the gains it made on Tuesday when Yellen indicated that she could provide further backing for deposits at smaller American banks if needed.
CONSTRUCTION
Vistry Group flags signs of improvement in UK property market
Vistry Group has reported a 21% increase in adjusted pre-tax profit to £418.4m. On a statutory basis, the firm's annual pre-tax profit fell by 22.5% to £247.5m, with £97m was set aside for fire safety provisions. The housebuilder’s private average selling price increased to £376,000, up from £356,000 a year ago, as 'affordable' average selling prices increased to £163,000 from £158,000 in 2021. Meanwhile, annual revenue rose 13% to £2.7bn, while completions increased 8% to 11,951. Vistry, which snapped up rival Countryside last year, said the merger had boosted growth across its Partnerships arm and it was confident of achieving annualised synergy benefits of about £60m, up from a previous target of £50m.
FINANCIAL SERVICES
European insurance M&A deals hit record high
Despite concerns over the state of the global economy, M&A deals involving European insurance companies surged in 2022, new research from FTI Consulting shows. Investors completed a record 435 M&A deals in 2022, up from 285 in 2020 and 379 in 2021. Private equity funds continued to drive the market taking part in 60% of deals. The research also shows efforts by insurance companies to grow their business through consolidation also drove an uptick in activity. However, over the coming year deals are likely to slow down as it becomes harder to raise funds.
Cenkos and finnCap to merge
Cenkos Securities and finnCap Group, two of the City of London's best-known investment banks serving small-cap growth companies, are in advanced talks to merge in an all-share deal, according to Sky News. Mark Kleinman, the broadcaster’s City Editor, says that if it goes ahead, “it will accelerate the consolidation among London's smaller broking firms during a challenging period for capital markets specialists.”
Coinbase receives SEC warning about potential legal action
The U.S. Securities and Exchange Commission (SEC) has threatened to sue Coinbase over some of the crypto exchange's products, turning up the heat on the largely unregulated sector. Shares of Coinbase dropped nearly 13% to $67.33 in extended trading after the company said on Wednesday that the regulator had issued it a Wells notice - a formal declaration that SEC staff intend to recommend an enforcement action.
REAL ESTATE
House price growth slows
Official figures reveal that the average UK house price increased by 6.3% in the 12 months to January 2023, down from 9.3% in December 2022. The Office for National Statistics found the average UK house price was £290,000 in January 2023, which was £17,000 higher than 12 months earlier. Private rental prices paid by tenants in the UK also increased by 4.7% in the 12 months to February 2023. Meanwhile, private rental prices in London increased by 4.6% in the 12 months to February 2023, accelerating from a 4.3% rise in the 12 months to January 2023. The average UK house price recorded a monthly fall of 0.6% in January 2023, following a 0.4% drop in December 2022. ONS head of housing market indices, Aimee North said: “Annual house price inflation, measured using final transaction prices, slowed again in January, consistent across all nations and regions. UK rental prices continued to climb, with the strongest growth since records began in 2016. The surge in London's rents remained evident with the highest annual percentage increase in over a decade.”
RETAIL
Amazon increases starting pay for UK workers
Amazon is increasing pay for its British workers again as it struggles to recruit amid a labour shortage. The online shopping giant said that from April, its minimum starting wage will rise by up to 50p to between £11 and £12 an hour, depending on location. Amazon said its latest pay rise meant starting wages had gone up by 10% in the last seven months. The announcement comes a week after Amazon staff in Coventry went on strike demanding higher wages.
ECONOMY
UK inflation jumps unexpectedly in February
Figures from the Office for National Statistics (ONS) show UK inflation rose more than expected last month to hit 10.4%, up from 10.1% in January. Economists had predicted a slight drop to 9.9%. The rise was driven by a continued rise in food costs, which increased by 18.2% in the year to February, the fastest rise since 1977. Rising prices in restaurants and cafes, and for food and clothing also pushed the figure up. Core inflation, which strips away volatile components like gas and energy, rose from 5.8% in January to 6.2% in February. Ruth Gregory, of Capital Economics, says: “The rebound we saw in core inflation was much stronger than anticipated. I think that was the most worrying.” Craig Erlam, a senior market analyst for OANDA, said the inflation figures came as a “crushing blow” for the Bank of England. He said: “Whatever flexibility the Bank of England may have thought it would have on Thursday was wiped out by Wednesday morning's inflation data and once more, the topic of conversation has shifted to whether 0.25 percentage points will be enough.”
Fed goes ahead with quarter-point rate rise
The US Federal Reserve proceeded with another interest rate rise on Wednesday, lifting the federal funds rate to a new target range of 4.75% to 5%, the highest level since 2007. Fed Chair Jerome Powell said the Federal Open Market Committee had considered a pause in rate hikes, but unanimously agreed on the need for a further raise because of persistent inflation.
OTHER
Fears grow over London’s allure
Data from Bloomberg show London’s stock market has shrunk in value as companies choose New York over the City and political and economic malaise continues to put investors off. Brussels has also been pulling business over to the continent. London was last year stripped of its crown as the largest centre for trading equities in Europe for the first time after being leapfrogged by Paris. But the market value of stocks in Paris has jumped by more than a tenth to $3.1trn between November and this week, according to the data, while London’s combined market capitalisation has only grown by 2% to $2.9trn during the same period.
Lindsay Lohan and Jake Paul hit with SEC charges over crypto scheme
Eight celebrities, including Lindsay Lohan and Jake Paul, have been charged by US regulators with participating in an illegal crypto scheme. The stars allegedly used their social platforms to boost two crypto tokens without disclosing they were paid to promote them. The group is accused of illegally promoting TRX and BTT crypto assets “without disclosing that they were compensated for doing so and the amount of their compensation”, the US Securities and Exchange Commission said.