UK banks boosted by interest rate hikes, but braced for mortgage hit
Barclays reported on Wednesday that pre-tax profits were up 6% on last year to £2bn, driven by the lender’s investment banking division which saw income jump 93% to £1.5bn. The bank put aside £381m for bad loans in the third quarter, up from £120m a year earlier. Standard Chartered’s profits soared 40% to $1.4bn as interest rate rises in the lender’s main markets drove net interest income to more than $2bn. This comes after HSBC reported a rise to $6.5bn from $5.5bn on Tuesday. Santander UK reported pre-tax profits of £1.5bn for the nine months to September 30, 4% higher than the £1.4bn it made last year. Higher net interest income this year drove up the group’s earnings, jumping 11% to £3.3bn from £3bn last year. However, the UK’s fourth biggest lender revealed that it has set aside £256mn in credit impairment charges as it warned that rising mortgage rates will be challenging for households and businesses.
HSBC boss warns against cutting off polluting energy companies
Noel Quinn, the chief executive of HSBC, has criticised climate protesters who want to “switch off today's energy sources”, saying abandoning oil and gas immediately would harm society. Speaking at an investment summit in Saudi Arabia, Mr Quinn argued that transition to net zero would be hampered if banks pulled financing to oil and gas companies. “There are many protesters taking place now, where people just want to switch off today’s energy sources,” Mr Quinn said. “You can’t. It’s not right to do that to society, and society would not react well to that. So we have to continue to support [existing energy companies] today as well.”
Start-ups rely on debt to fuel growth after funding frenzy
City AM talks to Erin Platts, chief of Silicon Valley Bank UK, who says venture capital investors “lost discipline” in a funding frenzy last year when capital was cheap and now, faced with soaring energy costs, sharp rate rises and market volatility, investors have pulled back from bets on growing technology firms. Ms Platts says the lack of funding was pushing firms towards borrowing to fuel their growth.
Profits up at Europe’s big banks
Banco Santander reported an 11% year-on-year increase in net income to €2.42bn in the third quarter. Although higher than expected, the Spanish bank also increased its reserves for potential loan losses 24% to €2.76bn. Elsewhere, Deutsche Bank more than doubled pre-tax profits to €1.6bn, its highest third-quarter pre-tax profit since before the financial crisis, and Italy’s UniCredit also beat forecasts revealing that net profit this year would exceed €4.8bn.
Instant payments law could boost EU economy
Banks across the European Union could be forced to offer instant payments in euros at the same cost as traditional credit transfers, according to a draft EU law proposed by European Commissioner Mairead McGuinness. "Moving from 'next day' transfers to '10 seconds' transfers is seismic and comparable to the move from mail to e-mail," McGuinness said in a statement, adding that delays in transfers tie up €200bn euros in transit daily.
Heathrow boss accuses airlines of setting prices artificially high
A war of words has broken out between airlines and John Holland-Kaye, the chief executive of Heathrow, over passenger demand at the airport. Airlines accuse Heathrow of downplaying demand in order to convince regulators to increase charges. But Mr Holland-Kaye says it is airlines keeping fares artificially high that has suppressed demand. Heathrow turned a heavy £1.4bn loss in the first three quarters of last year into a £643m profit this year. Revenue grew 200% to £2.1bn in the same period.
CMA Approve LSEG's Quantile takeover
The Competition and Markets Authority (CMA) has given the London Stock Exchange Group the go ahead for its takeover of Quantile, a third-party interest rates compression provider. The deal will significantly strengthen the LSEG's post-trade business which provides clearing services for over-the-counter derivatives.
UK urged to lay out ‘clear plan’ on new infrastructure projects
Melbourne-based pension fund manager IFM Investors has called for a “clear plan” for infrastructure projects from the UK Government if it wants to attract more foreign investment.
LEISURE & HOSPITALITY
Heineken observes changing consumer backdrop
Heineken has warned of a softening of consumer demand as the Dutch brewer revealed beer volumes rose by 8.9% on a like-for-like basis in the third quarter.
Manufacturers suffer worst skills shortage since 1973
The Confederation of British Industry (CBI) has warned that Britain is suffering from its worst shortage of skilled industrial workers in five decades. In its latest quarterly industrial trends survey, the number of manufacturing companies citing of a lack of key personnel has soared to 49%, up from the 39% only three months ago. Although UK manufacturers were hopeful of an uptick in output in Q4, the backdrop of rising costs “remaining exceptionally strong” and new orders were falling sending sentiment on a rapid downward track. “It’s a tough time for manufacturers,” Alpesh Paleja, the CBI’s lead economist, said. “Price pressures remain acute, availability of materials is still a big issue and it is 49 years since manufacturing firms were this worried about being able to find workers with the skills they need. It’s really no surprise that sentiment has deteriorated further.”
Older homeowners increasingly turning to equity release
A record number of homeowners aged over 55 have turned to equity release to support their cash-strapped families through the cost of living crisis. According to the Equity Release Council, 13,452 plans were taken out by older homeowners between July and September – an increase of 8% from the previous three months. Total lending to new and returning customers grew by 49% compared to last year, the trade body added. Stephen Lowe, of the Equity Release Council, said: “These figures highlight the increasing appetite for people to make use of the wealth stored in their homes to meet their lifestyle aspirations whether they are seeking to help their families, generate extra retirement income, or pass on lump sums as part of an inheritance planning strategy.”
Banks upbeat on house price growth
UK banks are predicting that house prices will continue to rise over the next two years despite rising interest rates. Barclays, HSBC and Santander were all positive, but Halifax is predicting a sustained slowdown amid soaring inflation and mortgage rates that are hovering near 14-year highs.
Hedge funds bets against Asos
Hedge funds on both sides of the Atlantic have shorted Asos stock since Mike Ashley’s Frasers Group revealed it has built a 5% stake in the business. Asos was forced to launch a cost-cutting initiative after posting a pre-tax loss of £32m last week. About 8.4% of Asos stock is on loan to short-sellers, the highest on record.
Budget delay could provide more fiscal room
The Telegraph suggests that Rishi Sunak may be able to row back on some of the tax rises and spending cuts pencilled in for the Hallowe'en statement after it was delayed for two weeks. Analysis by the Resolution Foundation think tank said that the fortnight delay would save the Treasury between £10bn and £15bn, as falling interest rates on government debt can be factored in to the Treasury’s decisions. The yield on 30-year gilts climbed as much as 0.11 percentage points following the announcement, before falling back to 3.67%, little changed on the day and well below the levels reached before markets knew Mr Sunak would be installed as PM. Ministers had been facing an estimated black hole of around £35bn. However, the later Autumn Statement also means the Bank of England will now set interest rates on November 3rd without knowing the new taxation and spending policy.
Young professionals targeted by investment scams
A survey by UK Finance reveals young professionals looking to make extra money to cope with the soaring cost of living are being targeted on social media by fraudsters offering investments promising quick, high returns. The poll found more than a third (34%) of 18 to 34-year-olds said they would respond to an unprompted approach from someone offering an investment opportunity or a loan, with 30% saying they might also provide their personal or financial details to secure the arrangement. "The rise in the cost of living can be worrying and stressful and for many, keeping on top of finances might be a struggle," said Katy Worobec, managing director of economic crime at UK Finance. "It's important for everyone to be conscious of criminals taking advantage of people's anxieties around finances by staying alert for fraud.”