BANKING
Five banks broke competition law over gilts, UK watchdog provisionally finds
The Competition and Markets Authority has provisionally found that traders at Citigroup, Deutsche Bank, HSBC, Morgan Stanley and Royal Bank of Canada unlawfully shared sensitive information when trading British government bonds in the wake of the financial crisis, consequently denying “the full benefits of competition” to those they were trading with. The information exchanges took place in one-to-one Bloomberg chatrooms between a small number of traders. The CMA’s findings are provisional. Deutsche Bank and Citi have admitted to participating in the alleged one-to-one conversations that apply to them. HSBC, Morgan Stanley and Royal Bank of Canada have not admitted any wrongdoing. The CMA’s probe is ongoing and if it finds any two or more of the banks engaged in anti-competitive activity, the regulator will publish an infringement decision and may issue fines.
Barclays boss: Homeowners and renters face 'huge' interest rate shock
The CEO of Barclays has warned that UK homeowners and renters are facing a "huge income shock" as rising interest rates hit mortgages and monthly costs. CS Venkatakrishnan estimates that payments by mortgage holders and tenants will take between 28% and 30% out of their income, compared to an average of 20% in previous years. Data released on Wednesday shows inflation slowed to 8.7% in the year to April but remains higher than some economists predicted. It has prompted expectations of a further increase in borrowing costs when the Bank of England's rate-setting Monetary Policy Committee (MPC) meets in June.
HSBC reviews global footprint to focus on Asia expansion
HSBC is reviewing a possible exit from up to twelve countries in an acceleration of its Asia-pivot strategy. CFO Georges Elhedery told Reuters in his first interview since taking the role: "Some of these will have slower progress than others, and none of them is material enough on its own to change the profile of the overall business, but as we progress through and execute on these assessments, we do expect them to contribute towards that shift to Asia.”
Close Brothers recovers from bruising start to the year
In a trading update for its third quarter, Close Brothers reported a 2% increase in its loan book to £9.2bn, driven by growth in commercial lending as well as a slowdown in repayments in property finance. Its year-to-date net interest margin remained at 7.8%. Meanwhile, fellow merchant bank Arbuthnot reported a rise in deposits and an increase in profits to £20m, up from just £4.6m the year before.
Ulster Bank to cut 250 jobs
Up to 250 Ulster Bank staff who live in Northern Ireland but who work for the bank's Republic of Ireland operation are at risk of redundancy. They are among about 800 staff at risk of losing their jobs across the firm as parent company NatWest continues to wind up the business in Ireland.
INTERNATIONAL
EU sticks with post-Brexit clearing trade deadline despite objections
The EU’s financial services commissioner has refused to budge on plans to end London’s equivalence on euro-denominated clearing at the end of June 2025 despite warnings the move threatens financial stability.
Citigroup abandons long-planned sale of Banamex to pursue IPO
Citigroup plans to spin off its Mexican retail bank Banamex through an IPO after failing to attract adequate offers for the unit.
US regional banks swap $220bn in deposits to soothe insurance nerves
Deposits in so-called reciprocal accounts soared to a new record high of $221bn for US regional banks at the end of the first quarter, up from $158bn at the end of 2022.
AUTOMOTIVE
Tata to build car battery plant in UK
The boss of Jaguar Land Rover-owner Tata is expected to finalise a deal to build a multi-billion-pound electric car battery plant in Somerset next week. Tata was considering another site in Spain and the expected decision to choose Somerset will be presented as a major achievement for the UK Government, albeit at a cost of up to £500m in subsidies. Up to 9,000 jobs would be created at the Bridgwater site, close to the M5.
Car making up for the third month running
Figures from the Society of Motor Manufacturers and Traders show car production rose to 66,527 in April, up almost 6,000 on the month last year. The rise was driven by exports, with more than four out of five cars built in the UK heading overseas.
FINANCIAL SERVICES
Blanc: Aviva against forcing pension funds to back UK start-ups
Aviva CEO Amanda Blanc has said the insurer is against the idea of forcing pension funds to contribute to a Government-run fund for start-ups. The proposal is aimed at stemming the flow of technology firms snubbing London for New York. But Blanc said: "We're big supporters of investing in the UK. However, we are not supportive of a mandated participation. We do not feel that creating a complex and bureaucratic fund is the right way forward at all." The comments came after the insurer and asset manager reported mixed first quarter trading - sending shares down 5%. The company reported an 11% jump in general insurance premiums to £2.4bn but net flows into its wealth arm were down by 15% year-on-year to £2.3bn. However, sales of private medical cover rose 25% as the ongoing backlog at the NHS persuade more people to go private. Meanwhile, Cevian Capital has sold down its entire stake in Aviva, ending its campaign to drive up investor payouts at the FSTE 100-listed insurer. The activist investor said Ms Blanc and her team had done an “excellent job” in improving the company's fortunes, despite mixed quarterly trading figures. Aviva has paid out more than £5bn to its shareholders since 2021, when Cevian first revealed its stake in the company.
Blackrock shrugs off climate resolutions
Blackrock has seen off a potential rebellion over its environmental, social and governance (ESG) policies after two resolutions raising climate concerns won less than 10% of support from shareholders. One of the resolutions asked the New York-based fund giant to report on how it could improve pension fund client returns by focusing its stewardship efforts and proxy voting to "engineer decarbonization in the real economy." But CEO Larry Fink said that is not BlackRock's role. "We have clients who wish for that, but we also have clients who are not interested in that, and our job is to be working with our clients," he said during the firm’s AGM. Additionally, each of Blackrock’s director nominees received "well over a majority" of votes cast at the meeting and 92% supported the pay of Mr Fink and other leaders.
Students boycott insurers supporting fossil fuel projects
More than 500 students and recent graduates from top UK universities have pledged a “career boycott” of major insurers, including Lloyd's of London, if they support controversial fossil fuel projects. The students have warned that they will not work for firms that fail to shift to climate-friendly policies. The letter sent to Lloyd's of London and individual firms including Beazley, Hiscox, Chaucer and Tokio Marine Kiln said: “We refuse to put our professional careers at the service of climate wreckers that insure those responsible for the climate crisis.”
Bailey: Lack of risk taking threatens economy
The Governor of the Bank of England said on Wednesday that regulatory reforms were needed to encourage greater risk taking by City firms. The comments made during the Wall Street Journal CEO Summit come amid calls for pension funds to take a less risk-averse approach and boost returns for savers. Mr Bailey’s words appeared to mark an about turn in his approach to deregulation, since he’s been a primary obstacle to reforms, the Telegraph says.
REAL ESTATE
London rent rises outpace record UK increase in April
Figures from the Office for National Statistics published on Wednesday show higher borrowing costs and a shortage of properties have pushed up prices for renters in the UK. Property rental prices across the country rose 4.8% in the 12 months to April, the biggest increase since 2016, while renters in London faced an even bigger increase of 5%, the highest rate since November 2012. “As long as mortgage rates remain elevated, more Britons will be inclined to rent rather than taking the plunge into home ownership,” said Myron Jobson, finance analyst at Interactive Investor.
RETAIL
M&S profits beat expectations
Marks & Spencer has posted an increase in annual sales and profits, with sales up 9.9% to almost £12bn in the year to April 1. Pre-tax profits rose from £391.7m to £475.7m. M&S now plans to reintroduce a modest dividend to shareholders from November after it suspended payments at the start of the pandemic to protect its balance sheet. Food sales were up 8.7% to £7.22bn, while its clothing and home performance increased 11.5% to £3.72bn. M&S's grocery market share stands at 3.6%, and it has a 9.3% share of the clothing and footwear market. However, M&S warned that it faces a challenging year ahead, with £100m extra expected to be spent on staff wages and £50m on energy. The company plans to offset these costs with measures such as more automated tills and the closure of around 20 stores, half of which will be relocated. The group's Ocado Retail joint venture also made a loss of £29.5m from its share in the business.
ECONOMY
Gilt yields soar after inflation disappoints
Figures released by the Office for National Statistics on Wednesday show that UK inflation, as measured by the consumer prices index (CPI), came in at 8.7% for April, down from March’s 10.1% but far above the 8.4% hoped for by the Bank of England. The news sent expectations of further interest rate rises soaring and pushed the yield on two-year gilts up 0.24 percentage points to 4.37% - close to the levels seen last year when Liz Truss’s unfunded tax cuts rattled financial markets. Traders are now betting that rates will peak at about 5.3% by the end of the year. Core inflation for the month jumped to 6.8%, up from 6.2% in March, while food price inflation remained close to its 45-year peak, at 19.1% compared with 19.2% the month before. Quentin Fitzsimmons, a senior portfolio manager at US asset manager T Rowe Price, argued that the inflation pressure would force the BoE to raise interest rates aggressively beyond their current level of 4.5%. “I can’t see what will stop it, short of a very substantial recession,” he said.
Labour sets out economic agenda
Labour revealed its economic vision for the UK on Wednesday, with shadow chancellor Rachel Reeves unveiling the plans during a trip to the US. Ms Reeves pledged to rebuild Britain's "industrial foundations" if Labour wins power, claiming the strategy would insulate the country against "global shocks". As chancellor, she said she would aim to create high quality jobs in British businesses, and reduce the country's dependence on foreign workers and goods. "Globalisation as we know it is dead," she told an audience of economists in Washington DC. "We must care about where things are made and who owns them. We must foster new partnerships between the free market and an active state and between countries across the world who share values and interests."