BANKING
MPs criticise banks for not passing on rate rises
The Commons Treasury Committee have criticised Britain's four biggest banks for failing to pass much of the increase in interest rates onto savers, saying Barclays, HSBC, Lloyds and NatWest are “taking advantage” of customers to boost their profits and chief-executive pay. The MPs have written to the lenders' chief executives, asking them to explain why savings deals remain low when the Bank of England has increased the Bank Rate from a historic low of 0.1% in December 2021 to 4%, where it stands today. The MPs have also asked how the banks determine what proportion of interest rate rises to pass on to their savings customers. With the four banks seeing their net profit margins - the gap between what they charge borrowers and pay savers – hitting £35bn in 2022, committee chair Harriett Baldwin said: “It is difficult to avoid the conclusion that our biggest banks are taking advantage of their most loyal customers to increase profits and chief-executive pay.”
Revolut posts first annual profit
Revolut says its UK banking licence is “imminent,” with this coming after its much-delayed accounts for 2021 show that the fintech firm saw its first annual profit. Revolut made a net profit of £26.3m in 2021, compared to a loss of £223m in the 12 months prior. Customer deposit balances also grew to £7.4bn as of December 2021, up from £4.6bn in 2020. Mikko Salovaara, Revolut's chief financial officer, says that the company is on the brink of getting a banking licence from City regulators, commenting: “I think we’re at the very last stages. Really at the finish line.” Meanwhile, Revolut’s auditor was not able to independently verify three-quarters of the revenue reported by the fintech firm in its 2021 accounts. The annual report shows that £477m of the £636m total revenue could not be verified. Nor could the audit firm vouch for their “completeness or occurrence.”
Co-operative Bank profit surges to £132.6m
The Co-operative Bank saw an increase in profit due to higher interest rates. Pre-tax profit increased to £132.6m in 2022, up from £31.1m the year before. Interest income increased 41% on the previous year. The bank’s net interest margin widened to 166bps, up from 125bps last year. The Co-operative Bank set aside £6.4m in impairments, higher than the £1.1m last year. CEO Nick Slape said the bank is looking for acquisition targets, saying: “We know what would be a good fit but there’s nothing out there at the moment.” Mr Slape said the bank could target a larger rival to “bulk up” or a competitor with access to wholesale funding. Co-op Bank is reportedly mulling a bid to buy Sainsbury’s Bank’s £650m loan portfolio.
INTERNATIONAL
Haux to leave Credit Suisse
Credit Suisse’s head of personal and business banking, Anke Bridge Haux, is to leave the bank. Ms Haux is to take on a new role as CEO of the Swiss arm of LGT Bank in November. Credit Suisse's current chief operating officer of personal & business banking, Michael Sager, will take over leadership of the business on an interim basis with immediate effect and become a member of the executive board.
UniCredit’s board proposes 30% salary increase for chief Andrea Orcel
UniCredit’s board has proposed raising chief executive Andrea Orcel’s salary from €2.5m to €3.25m a year - just weeks after the head of the bank’s remuneration committee quit.
FINANCIAL SERVICES
Fund manager nominates directors to Salesforce board
Activist investor Elliott Management has nominated a number of directors to the board of software provider Salesforce. The move lays the groundwork for a boardroom challenge, with it coming after fund manager Elliott took a multi-billion dollar stake in Salesforce in January. While Elliott has not publicly disclosed what changes it is seeking at Salesforce, other activists have pushed for the company to increase growth and margins and buy back more shares. There have also been concerns raised about recent acquisitions. Other hedge funds with stakes in Salesforce include Inclusive Capital Partners, Starboard Value, ValueAct Capital and Third Point.
LEISURE & HOSPITALITY
BBPA warns of 2,000 closures
The British Beer and Pub Association (BBPA) has warned that a further 2,000 pubs are at risk of closure, threatening 25,000 jobs. The industry body cited research by Oxford Economics which forecast 288m fewer pints would be sold in the next financial year as the cost of living crisis combines with the cost of doing business crisis. The BBPA warned that 450 sites closed last year, despite Government support. The BBPA has urged Chancellor Jeremy Hunt to deliver further support in this month's Budget.
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MANUFACTURING
Factories report improved performance
British factories are performing better than expected, according to the latest S&P/CIPS UK manufacturing PMI survey. The index rose to 49.3 points last month, exceeding a consensus forecast but still below the 50-point threshold that separates growth and contraction. February’s reading marked an increase on the 47 recorded in January and December’s 45.3. The report shows that price increases were shallower as supply chain pressures eased and cost inflation came down, while output rose for the first time in eight months. S&P director Rob Dobson said: “Input prices increased at the slowest pace since July 2020 and supplier performance improved for the first time in three-and-a-half years.” This, he added, “offset some of the ongoing negative impacts from strikes, the cost-of-living crisis and lower order intakes.”
Inmarsat takeover given provisional approval
The £5.4bn takeover of UK satellite firm Inmarsat by US firm Viasat has been given the provisional go-ahead by the Competition and Markets Authority, saying customers will not be adversely affected by the deal. The competition watchdog said the deal does not substantially reduce competition, with it likely that the merged business will face “significant competition” from both emerging and established rivals as the sector expands. Viasat agreed the takeover of Inmarsat in November 2022 and shareholders approved the deal in June 2022.
REAL ESTATE
House price growth at a decade low
UK house prices fell by 1.1% in the year to February, according to Nationwide’s House Price Index, with this marking the first annual fall in property values since November 2012. Prices also fell month-on-month, dipping 0.5% between January and February. This means prices have fallen on a monthly basis for six consecutive months. The average property is now valued at £257,406, down from £258,297 in January and 3.7% lower than a peak recorded in August. Looking ahead, Nationwide’s chief economist, Robert Gardner, said it would be “hard for the market to regain much momentum in the near term,” pointing to uncertainty over whether the UK will enter a recession and high inflation.
Mortgage approvals dip in January
Bank of England data shows that January saw UK banks approve the lowest number of mortgages since 2009, barring a dip seen at the start of the pandemic. The report shows that 39,637 mortgages for house purchase were approved during the month, down from 40,540 in December. This marks the fifth consecutive month where the number of approvals was down.
RETAIL
LVMH announces €1.5bn buyback
LVMH has confirmed plans to repurchase €1.5bn of its own stock, sending shares in the retail group up 0.4%, giving the company a market valuation of €397bn. In a statement, LVMH said it would buy back the shares between now and July 20. It said the repurchased shares would be cancelled. The company has regularly engaged in buybacks and last May announced a plan to repurchase up to €1bn worth of its stock.
ECONOMY
Bailey: Nothing decided on further interest rate rises
Bank of England governor Andrew Bailey says interest rates may need to increase again in an effort to ease the cost of living, saying higher rates may be "appropriate" to control inflation. "I would caution against suggesting either that we are done with increasing Bank Rate, or that we will inevitably need to do more," Mr Bailey said, adding: “Some further increase in Bank Rate may turn out to be appropriate, but nothing is decided.” Pointing to the balancing act the Bank faces, he told an event hosted by PR firm Brunswick: “If we do too little with interest rates now, we will only have to do more later on.”
OTHER
Government loan sales trap mortgage prisoners
A new report suggests that the Government made £2.4bn by selling mortgages from collapsed lenders to investment firms, with 200,000 mortgages sold to firms which cannot offer new deals. With other lenders refusing to accept these homeowners, they have been left as so-called "mortgage prisoners," trapped on high rates. The London School of Economics report, which was commissioned by MoneySavingExpert founder Martin Lewis, suggests that ministers could offer free financial advice and loans to mortgage prisoners, or could guarantee loans from other mortgage lenders. The report says measures to solve the issue would cost between £50m and £347m over 10 years. The Treasury said that it had "already taken steps with the Financial Conduct Authority (FCA) to update mortgage lending rules, removing the barrier that prevented some mortgage prisoners from being able to switch.” The FCA said it has “removed regulatory barriers to switching and set clear expectations for firms to support borrowers.”