Biggest monthly decrease in mortgage rates since December 2022
Moneyfacts data shows that the average two-year fixed mortgage rate on the market recorded its biggest month-on-month fall since December 2022 in February. Analysis shows that across all deposit sizes, the average two-year fixed-rate mortgage had a rate of 5.56% at the start of February 2024, down from 5.93% at the start of January this year. The 0.37 percentage point fall was the biggest monthly decrease since December 2022. Five-year fixed mortgage rates fell from 5.55% to 5.18% on average, comparing the start of January 2024 with the start of February this year. Rachel Springall, a finance expert at Moneyfacts, said: “Those borrowers who have waited patiently in recent months to re-finance, or indeed are preparing for when their mortgage deal expires, would be wise to review rates, as lenders are closely monitoring the volatile swap rate market, which tends to influence fixed-rate pricing.”
Banks set to post strong profits
Some of the UK's biggest banks, including NatWest, Barclays, HSBC, and Lloyds Banking Group, are expected to report strong annual profits despite mounting margin pressure from peak interest rates. Analysts predict that the Big Four banks could post up to £47bn in profits collectively. While the banks have benefited from higher net interest income due to increased borrowing costs, the final quarter of 2023 is expected to show more pressure on banks' net interest margins as consumers adapt to the higher rate environment. HSBC is expected to drive much of the strong performance and post record profits. Lloyds and NatWest are also expected to see an increase in annual profits. Barclays, on the other hand, is undergoing a costly restructuring and is not expected to post a rise in annual profits.
Bailey questions banks' stock market valuations
Low stock market valuations for Britain's major banks are hard to explain, Bank of England governor Andrew Bailey has said. Mr Bailey said he disagrees with investors who think banks are required to hold too much capital or that they are regulated more harshly in Britain than in other major jurisdictions. He also emphasised the stability of Britain's financial system despite recent turmoil. However, this turmoil may have increased the amount of reserves banks will want to hold with the Bank. "I expect the future level of reserves to fall from where it is today: £467bn," Mr Bailey said, adding: "I will go a bit further and say that my best guess today is that the demand for reserves by the banks will settle at a level higher than we would even in the recent past have expected."
Metro Bank plans derailed
Metro Bank's plan to open branches and create jobs in the north of England has been derailed. Metro had pledged to take on 300 staff to serve 15 new high street sites, but it is now behind on its target. This comes after the firm was hit by uncertainty in October and had to agree to a £925m emergency refinancing. As a result, the bank is now looking for smaller sites for new branches and expects to fall short of its commitment to create 300 jobs.
Blackstone to create large warehouse business
The world's largest private equity firm, Blackstone, is planning to merge its Industrials Reit and St Modwen Logistics divisions under one roof and one management team. The combined group, to be called Indurent, will have over 200 warehouses totaling 26m sq ft of logistics space. This move could potentially lead to a future stock market float of Indurent. Blackstone bought St Modwen Properties, including a housebuilding division, for £1.25bn in 2021 and took Industrials Reit private in a £511m deal last year.
Private equity chiefs enjoy $40bn gain in share value as assets surge
Private equity groups saw shares rise by over $40bn in 2023 amid an increase in assets, with Blackstone, KKR, Apollo Global, Ares Management and TPG seeing stock near or pass record highs.
Eurozone banks face changed risk landscape
Eurozone banks face a permanently changed risk landscape that requires lenders to alter how they operate, according to Claudia Buch, the European Central Bank's (ECB) banking supervisor. She has highlighted surging interest rates, rising geopolitical risk, quicker deposit movements, multiplying cyber attacks, and climate risk as factors that are changing the fundamental nature of the banking business. Ms Buch warned that banks may not be sufficiently prepared for these changes and lack the expertise to work in such an environment. She also emphasised the need for banks to integrate new risks into their risk management processes and adhere to best practices.
Citi rebuked by regulators
US regulators have asked Citigroup for urgent changes to the way it measures default risk of its trading partners. The Federal Reserve last year told the bank to address how it measures risk of default by counterparties in derivative transactions. Separately, the Office of the Comptroller of the Currency has looked into whether Citi had made as much progress on data integrity as it claimed. Meanwhile, the bank's auditors have found a plan to improve internal oversight to be lacking.
Sabadell and Unicaja deny potential tie-up
Spanish banking group Sabadell and smaller rival Unicaja have denied rumors of a potential tie-up. According to a report, Sabadell had been in touch with supervisors and politicians to prepare for a potential merger with Unicaja. However, both banks have denied any contact or consideration of takeover deals. Unicaja says it is focused on improving profitability, while Sabadell's focus is on continuing to improve profitability.
Chancellor urged to scrap share tax
Investment bank Peel Hunt has called on the Chancellor to scrap a “pernicious” tax on share trading, saying the move could boost the London Stock Exchange after a drop-off in new listings. The broker says a stamp duty on shares is pushing investors away from the UK towards the US and Europe. Traders to pay a duty of 0.5% on every transaction, a charge which generates £3.3bn in tax revenue for the Treasury every year. Peel Hunt's head of research, Charles Hall, said: “It is clear that stamp duty should be removed as part of a series of reforms to help the recovery in UK capital markets,” adding: “At the very least we believe stamp duty on small and midcap shares should be removed, and materially reduced for larger companies.”
BoE acts on reinsurance deals risk
The Bank of England plans to stress test insurers on their exposure to reinsurers through pension deals, amid concerns about offshore arrangements.
MEDIA & ENTERTAINMENT
Macquarie eyes TalkTalk wholesale deal
Australian bank Macquarie is in talks to buy a large minority stake in TalkTalk Telecom's wholesale arm. The deal, which could be finalised this week, would see Macquarie invest £450m in TalkTalk's wholesale platform, known as X, in exchange for a stake of around 40%. The proceeds from the investment would be used to pay down TalkTalk's debt. TalkTalk has already sold its business arm to existing shareholders and is expected to put its consumer arm up for sale in the future.
One in 10 homes see values climb 5% or more in 2023
Zoopla estimates that around one in 10 homes across Britain increased by 5% or more in value last year, while around one in five (21%) properties held their value last year, with no significant change. A further 25% of homes are estimated to have gained between 1% to 5% in value last year. Almost a third (31%) are estimated to have lost between 1% and 5% of their value, while one in seven (13%) lost 5% or more. Zoopla said that homeowners who saw their property increase in value in 2023 had an average rise of £7,800. Zoopla expects house prices to fall by 2% in 2024.
Matalan finance chief to step down
Stephen Hill is stepping down as Matalan’s chief financial officer after 23 years at the fashion retailer. He will be replaced by Dave Williams, who joins from Poundland.
BoE risks being ‘too slow’ in cutting rates – Haldane
Former Bank of England chief economist Andy Haldane says he would have already voted to cut interest rates. Noting the UK’s slow growth rate and progress on bringing down inflation, he said: “I’d be cutting rates now, and probably would have been from the tail end of last year.” Mr Haldane added that while inflation is likely to be within “spitting distance” of the Bank’s 2% target by spring, officials are likely be too slow in cutting rates, saying: “The risk as inflation comes down at a fair old click is that the Bank might be a bit slow in cutting in the same way as it was a bit slow in raising [rates].”
Inflation set to climb to 4.1%
Experts expect Office for National Statistics data released this week to show that inflation hit 4.1% in the year to January, having climbed to 4% in December. Sanjay Raja of Deutsche Bank says this will be driven in part by an increase in energy prices. Looking ahead, Ashley Webb of Capital Economics expects inflation to fall, saying it is likely to dip back to 4% in February and below the Bank of England’s 2% target in April.
Bailey downplays shallow recession
Bank of England governor Andrew Bailey says the UK economy shrinking in Q4 and entering a shallow technical recession is not overly important, saying: “I would not put too much weight on that.” He said that if there are two successive negative quarters, “it will be very shallow,” adding: “What I would put more weight on is that the indicators we have seen since have shown some signs of upturn."
UK economy 5% smaller due to Brexit
Britain's economy is 5% smaller than it would have been if the country had chosen to stay in the EU, according to an analysis by Goldman Sachs. The UK has significantly underperformed other advanced economies since the referendum, with lower growth and higher inflation. Consumer prices in Britain have leapt by 31%, compared to 27% in the US and 24% in the eurozone. The report adds that greater trade frictions and lower EU immigration have contributed to higher inflation rates. While investment levels have been weak since 2016 , with Brexit uncertainty resolved, some improvement is expected.