BANKING
Lenders under scrutiny as low rates questioned
Lenders have been told to justify their low savings rates after the Financial Conduct Authority (FCA) found that only 28% of interest rate rises were passed on to savers by nine of Britain's biggest saving providers between January 2022 and May 2023. Banks offering the lowest savings rates will be required to explain their positions by the end of August or face “robust action” from the FCA. The review comes amid concerns that banks are profiteering from rising interest rates. The FCA also plans to review the timing of banks' savings rate changes and publish a league table of lenders' rates. Sheldon Mills, head of consumers and competition at the FCA, said the City watchdog wants a competitive cash savings market that delivers better deals for savers. Banks will also need to improve their communications with customers. While the big four UK banks – Lloyds, HSBC, NatWest and Barclays – say they offer a range of products with higher returns, interest rates on easy-access savings accounts have broadly languished below 2%. That is despite the Bank of England base rate rising to 5%.
Consumer borrowing hits five-year high
Bank of England data shows that the amount of money borrowed by consumers rose to a five-year high in June, with £1.7bn borrowed last month following a £500m decrease in lending in May. The increase came as people took out £1bn on personal and car loans, with this up £500m on the month before. Borrowing on credit cards remained stable at £600m. Ashley Webb at Capital Economics said extra borrowing has supported spending amid tough conditions, but is unlikely to last as “households may cut back on borrowing and spending as the drag from higher interest rates grows.” The report also revealed that households have £215bn of consumer debt, with just over £66bn on credit cards and almost £149bn of other debts, including overdrafts and hire purchase agreements. Meanwhile, rising interest rates have encouraged consumers to return to saving after a record amount was withdrawn in May. An additional £3.4bn was deposited with banks and building societies in June, following net withdrawals of £3.1bn the month before.
Mortgage approvals up in June
Mortgage approvals in the UK rose unexpectedly in June, reaching the highest level since October 2022. Data from the Bank of England shows that there were 54,700 approvals in June, up from 51,100 in May. Analysts had forecast a fall to 49,000. The data also shows that remortgaging activity also increased last month. Despite the month-on-month rise, approvals were still down by 15% year-on-year. Experts say the rise in mortgage approvals could stem from people looking to secure cheaper deals before mortgage products were pulled from the market amid an expected increase in interest rates. Andrew Wishart, senior property analyst at Capital Economics, says it may take a while before approval numbers reveal the impact of climbing mortgage rates. He expects the number of approvals to drop to 40,000 a month, forecasting a 30% drop between 2022 and 2023.
Watchdog denies role in Farage account row
A senior official at the Financial Conduct Authority (FCA) has refuted allegations that the regulator's efforts to improve inclusivity within banks contributed to the closure of Nigel Farage's account. Sheldon Mills, an executive director at the FCA, clarified that the watchdog did not expect banks to apply its diversity initiatives when making decisions on customers. The FCA has been focusing on enhancing diversity and inclusion in the financial sector and critics argue that these efforts may have influenced Coutts' decision to close the former UKIP leader's accounts. Mr Mills has insisted that terminating an account based on someone's views is not aligned with the FCA's work on diversity and inclusion.
PRIVATE EQUITY
BC Partners sells IMA stake
Private equity firm BC Partners has agreed to sell its 45% stake in IMA, the Italian automatic packaging machines maker, to merchant bank BDT & MSD Partners. The deal values IMA at around €6.5bn.
INTERNATIONAL
Bank of Ireland sees 192% jump in pre-tax profit
Bank of Ireland reported a 192% increase in pre-tax profit in the first half of 2023, hitting £860m. However, the bank's UK retail division, including its Northern Ireland business, saw its profit fall by almost 30% due to increased provisions for bad loans. The bank attributed this to the current macroeconomic environment, including rising UK interest rates and inflationary pressures. Rising interest rates have contributed to the bank's increased net interest margin, which rose from 1.73% to 2.96% over the year.
Mizuho reports 53.9% rise in Q1 net profit
Mizuho Financial Group, Japan's third-largest lender, has reported a 53.9% rise in net profit. The banking group posted a profit of $1.73bn in the three months through June.
SEC asked Coinbase to halt trading in all cryptocurrencies except bitcoin
The US Securities and Exchange Commission (SEC) reportedly asked Coinbase to cease trading in all cryptocurrencies other than bitcoin. This request came prior to the SEC's lawsuit against the cryptocurrency platform in June. The SEC has accused Coinbase of operating illegally as it failed to register as an exchange. It also says that Coinbase traded at least 13 crypto assets that are securities that should have been registered.
FINANCIAL SERVICES
FCA ready to act on Consumer Duty non-compliance
The Financial Conduct Authority (FCA) is prepared to take action against firms failing to comply with a new duty to justify charges to customers. The new duty requires firms to ensure "good outcomes" and no "foreseeable harm" for customers across products and services, price, and value. Firms could be asked to adjust prices or change products if fees or charges. The FCA hopes the Consumer Duty will improve trust in financial services and prevent mis-selling scandals. The FCA estimates that implementing the duty will cost firms £2.4bn and is spending £5.3m on "embedding" it. The next step for firms will be strategic revaluations, potentially leading to some leaving the market.
Vanquis Banking Group acquires fintech firm Snoop
Vanquis Banking Group has acquired fintech firm Snoop for an undisclosed sum. Snoop provides customers with personalised insights using AI and open banking data to manage their finances. The deal will give Snoop access to Vanquis' 1.7m customers.
MEDIA & ENTERTAINMENT
BT appoints first female CEO
BT has appointed board member Allison Kirkby as its first female chief executive. Ms Kirkby, who has been a non-executive director at BT since 2019, will leave her current role as CEO of Swedish telecoms company Telia at the end of January. She will receive a salary of £1.1m, the same as current CEO Philip Jansen, although her total pay package could be quadruple that under a bonus and share award scheme. Her appointment will take the number of female FTSE 100 chief executives back to 10, with the number recently falling due to the departure of NatWest boss Alison Rose.
REAL ESTATE
IHT warning over property prices
Research by law firms Shakespeare Martineau and Mayo Wynne Baxter shows that a house bought in 2022 is three times more likely to deliver an inheritance tax bill than in 2009 when the levy was first frozen. In 2009, just 13% of all property purchases in England and Wales cost £325,000 or more. However, this number has more than trebled, hitting 40% in 2022. The tax-free allowance, the amount a person can pass on after death tax-free, has been frozen at £325,000 since 2009. A poll of 1,000 people found that more than one in five do not ever expect to consider estate planning, prompting the law firms to warn that more families could find themselves being burdened by IHT.
RETAIL
Shop price inflation falls
A slowdown in food price rises and a wave of discounting by clothes retailers helped to drive down shop prices inflation last month. Overall annual shop prices inflation fell to 7.6% in July, from 8.4% in June. Food price inflation slowed from 14.6% in June to 13.4% in July - its lowest rate of 2023. This came as the falling cost of key staples eased pressure on consumers. Helen Dickinson of the British Retail Consortium said: “These figures give cause for optimism, but further supply chain issues may add to input costs for retailers in the months ahead. We expect some global commodity prices to rise again as a result, and food prices will be slower to fall.”
ECONOMY
Eurozone economy grows and inflation dips
Europe´s economy has grown modestly after months of stagnation, with 0.3% growth across the 20 countries that use the euro currency in Q2 when compared to Q1. The overall figure was boosted by 0.5% growth in France and 0.4% in Spain, while Ireland's growth of 3.3% was the largest in the bloc. Meanwhile, inflation in the eurozone fell to 5.3% in July, from 5.5% in June.
FTSE 100 sees best performance since April
London's FTSE 100 has recorded its best month since April, ending July 2.2% higher than at the start of the month. The positive performance was driven by hopes that UK inflation has turned a corner, boosting investor confidence. The index also started the week on a positive note, as markets anticipate another interest rate hike by the Bank of England.
OTHER
Fintech investment drops 57%
Analysis shows that fintech investment in the UK dropped by 57% in the first half of the year, reaching $5.9bn (£4.6bn), compared to $13.8bn in the same period last year. The decline in investment was attributed to rising rates, high inflation, and geopolitical tensions. The number of fintech deals also decreased, with 215 completed in the first six months, down from 392 the previous year. Despite the decline, the UK remained the European centre for fintech investment, attracting more funding than its peers in the rest of EMEA.