BANKING
UK mortgage lenders promise more support for the vulnerable
Following a meeting with Jeremy Hunt, consumer champion Martin Lewis and the Financial Conduct Authority, Britain’s mortgage lenders have agreed to take a more consistent and supportive approach to homeowners struggling with the cost of living crisis. Bank bosses recommitted to protect mortgage holders by enabling them to switch to a new fixed rate mortgage, without a new affordability test, when their current deal ends if consumers are up to date with their payments. This covers 97% of the market. In addition, the financial watchdog published draft guidance outlining the main methods of support for customers, including forbearance programmes similar to those introduced at the start of the pandemic. “We expect every lender to live up to their responsibilities and support any mortgage borrowers who are finding it tough right now,” the Chancellor said after the roundtable on Wednesday.
Brussels forces banks to shift clearing business to the EU
The European Commission has unveiled legislation that will require derivatives traders in London to have accounts with clearing houses in the EU in order to ensure contracts that are deemed particularly risky by EU financial supervisors are cleared in the EU. Valdis Dombrovskis, the Commission's executive vice president, said: “We need to reduce our excessive exposure to non-EU clearing houses because it poses significant risks to our market stability." Under the new rules, banks will be encouraged to handle more transactions through an EU clearer or face capital charges. EU officials insisted the move was not a “power grab” but the Telegraph notes that efforts to encourage clearing relocation voluntarily to Europe after Brexit have so far failed.
Call for tougher action to ensure access to free ATMs
Rishi Sunak came under pressure during a debate on the Financial Services and Markets Bill on Wednesday to legislate to require the Government to intervene to ensure everyone has access to ATMs that offer free cash withdrawals. However, an amendment to the Bill making this law was voted down. Andrew Griffith, the Economic Secretary to the Treasury, explained that the Bill will give ministers the power to force banks to provide more free ATMs. "It's not acceptable when people have no option but to travel large distances or to pay ATM fees to access their own money,” he said. "I'm being very clear that it is our expectation that the industry will deliver on this important issue for our constituents. And if not this Bill gives any future government the ability to mandate that."
Jeremy Hunt to overhaul UK ‘senior managers’ regime’
The UK Chancellor will announce a review of the “senior managers’ regime” on Friday, with a source telling the FT the new framework would be “agile but proportionate”.
Elevation for Currie in Barclays reshuffle
A reshuffle at the top of Barclays will see the head of its consumer business, Alistair Currie, replace Mark Ashton-Rigby as chief operating officer.
PRIVATE EQUITY
Blackstone chief dismisses concerns over $69bn real estate fund
Stephen Schwarzman, the CEO of Blackstone, has defended the decision to limit withdrawals from one of its property funds after a spate of redemption requests from Asia. Speaking at a conference in New York, Schwarzman said that “the idea that something is going wrong” at the fund “because some people are redeeming” is incorrect. Starwood Capital Group also restricted withdrawals from a real-estate fund, the Wall Street Journal notes, while private real-estate funds in the UK have also taken steps to stem outflows. The rise in cash-out requests comes as rising interest rates threaten to push down property values, demand for office space weakens and rent growth in the apartment sector slows.
Labour to unveil new plan for supporting UK small business
Shadow chancellor Rachel Reeves will today announce that a Labour administration would set up a state-backed group to boost small businesses by linking up institutional investors and venture capital firms. Additionally, Labour will publish a review into the British Business Bank, led by Lord O'Neill, the former Goldman Sachs chief economist and one-time Treasury minister. It will recommend that Labour explores the state-owned lender's mandate, as well as its ability to leverage external funding.
INTERNATIONAL
Citigroup expects 10% rise in trading revenue in Q4
Citigroup boss Jane Fraser said on Wednesday that the bank expects revenue in its trading division to rise 10% in the current quarter from a year earlier, but investment banking fees will be down 60% in line with the industry. On strategy, Fraser said that Citi was moving on with divestitures, exiting consumer banking businesses in non-core international markets.
Saxo bank drops Amsterdam IPO
Saxo Bank has terminated discussions regarding a proposed business combination with special purpose acquisition company (SPAC) Disruptive Capital Acquisition citing challenging market conditions.
AVIATION
Border Force staff at airports to strike over Christmas
Border Force staff are going on strike for eight days over Christmas at Heathrow, Gatwick and several other airports, the Public and Commercial Services (PCS) Union has announced. Arrivals staff at Heathrow, Gatwick, Birmingham, Manchester and Glasgow will strike from December 23 - 26 and December 28. The PCS general secretary Mark Serwotka has had talks with government ministers, but he said they were refusing to increase a 2% pay rise. He said the strikes would "escalate" unless the Government "put money on the table now".
FINANCIAL SERVICES
Vanguard quits climate alliance in blow to net zero project
Vanguard Group is resigning from the Net Zero Asset Managers initiative, the asset manager said on Wednesday, declaring that it would pursue similar objectives independently instead. Members of the initiative, which as of November had 291 signatories with a collective $66tn under management, committed to net-zero carbon emissions by 2050. NZAM is a sub-unit of Mark Carney’s umbrella group, the Glasgow Financial Alliance for Net Zero, which Vanguard will also leave. The Pennsylvania-based company said initiatives such as the net-zero alliance “can advance constructive dialogue, but sometimes they can also result in confusion about the views of individual investment firms.” The group added: “We have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks - and to make clear that Vanguard speaks independently on matters of importance to our investors.”
LDI pension managers dismiss claim that leverage strategies caused gilts turmoil
Claims by the Bank of England that “poorly managed” leverage was the primary cause of September’s gilt market crisis have been rejected by some of the UK’s biggest asset managers. Liability-driven investing (LDI) strategies that were used by thousands of UK pension schemes to invest in growth assets using leveraged gilt funds were at the centre of the crisis. But investment managers said the market was already jittery before former Chancellor Kwasi Kwarteng unveiled his mini-Budget while confidence in the gilt market was totally absent. Addressing MPs on Wednesday, the Investment Association said LDI managers had doubled the size of collateral buffers since the crisis and lowered leverage on the strategies. Finally, Schroders boss Charles Prideaux said regulators needed to develop better oversight of aggregate data as part of efforts to improve the market.
FTX has informed FCA plans for crypto regulation
The Financial Conduct Authority will ensure crypto firms properly separate products and services in the wake of the collapse of FTX and its sister firm Alameda. The FCA’s director of payments and digital assets, Matthew Long, said FTX was minting its own coin and offering it for trade in the same place. He told MPs on Wednesday the watchdog will ensure crypto firms have “sterile corridors” between the different products and services they offer. The FCA will gain oversight of cryptocurrency businesses as a result of an amendment to the Financial Services and Markets Bill.
Norwegian oil fund to vote against companies without net zero targets
Norway’s sovereign wealth fund has said it intends to be more aggressive on ESG issues, executive pay and diversity, and “absolutely” will vote against companies without a target to reach net zero emissions. Nicolai Tangen, chief executive of Norges Bank Investment Management, added that many investors were unwilling to criticise high pay because their own top bosses were paid so much. “Executive pay and corporate greed has just reached a level that is really unhealthy,” Tangen said. He went on to say that he was not optimistic about the future predicting that global financial markets are likely to remain “difficult” in the time ahead.
Planned redundancies in financial services soar
Analysis of ONS data show more financial services firms are planning job cuts as the economic downturn hits leading to a decline in the number of mergers and acquisitions and corporate finance activities. Planned redundancies in the sector have jumped by 46% from the last quarter, up to 9,249 from 6,337. Across the economy, planned redundancies are up 15% according to employment law firm GQ|Littler.
HEALTHCARE
Zantac ruling boosts GSK shares
Shares in drug companies GSK, its spin-off Haleon and Sanofi rose yesterday after a judge in Florida dismissed tens of thousands of cases claiming that the heartburn drug Zantac caused cancer. Ranitidine, marketed as Zantac, helped to fund GSK’s global expansion, becoming one of the first prescription blockbusters and generating more than $1bn in annual sales. However, litigation continues in US state courts, with a large number of cases in Delaware and California, but this is seen as less likely to succeed following the Florida ruling.
LEISURE & HOSPITALITY
Mitchells & Butlers returns to profit
Mitchells & Butlers has reported that in the year to September 24, profits had broadly recovered to pre-pandemic levels, while like-for-like sales for the year were up 1.1% on 2019 levels. The owner of the Toby Carvery and All Bar One brands also revealed that total revenue doubled to £2.2bn, while it swung from a pre-tax loss of £42m to a profit of £8m. Adjusted operating profit jumped from £29m to £240m, ahead of consensus forecasts of £222m. Despite the cost of living crisis, like-for-like sales were up 9.2% against 2019 in the past ten weeks, an acceleration from growth of 1.5% in the previous ten weeks. Compared with last year, like-for-like growth was 6.5%. The company said the easing of Covid restrictions this Christmas and a “mildly beneficial” World Cup had combined to positive effect, while price rises had partially offset problems caused by inflation.
ECONOMY
Job vacancies slow amid fears for the economy
Growth in job vacancies fell to its lowest level in nearly two years in November as economic uncertainty led businesses to scale back hiring. The latest recruiter survey by the Recruitment and Employment Confederation shows the rate of inflation in wages for new starters as well as temporary employees fell to its lowest level in a year and a half despite inflation in double digits. Neil Carberry, chief executive of the confederation, said the latest results did not indicate that there had been a major slowdown in hiring. “While permanent recruitment activity has dropped from the very high levels of earlier in the year, the pace of that drop has tempered this month,” he said.
Bank of England set to raise rates to 3.5%
Investec is predicting a 50 basis point rise in the Bank rate next week to 3.5%, in line with a majority of market pricing. However, HSBC economist Liz Martins said another 75-basis-point rate rise was a possibility, if official figures on economic output, inflation and the labour market due next week were stronger than expected.
OTHER
Small firms happy to share trading data with lenders
A survey by software company Codat has found that nine in ten small companies would share their trading performance with their lenders if it resulted in lower borrowing costs and more clarity on terms. The Times notes that Codat is among the companies lobbying ministers to extend open banking, which enables data sharing in financial services, typically current accounts and payments but not yet lending or other services such as insurance.