BANKING
Saving rates hit highest level in a decade
The average rates being offered on some savings accounts have reached their highest level in almost ten years. Analysis by Moneyfacts shows that the average easy access rate of 0.84% is the highest rate since the 0.87% recorded in December 2012 and is far higher than the 0.17% average seen in September 2021. The average easy access Isa currently pays 0.92%, with the typical rate at its highest point since September 2019’s average of 0.93%. The average one-year fixed Isa has a rate of 1.96%. This is the highest point since January 2013. The Moneyfacts report also shows that the choice of savings products is also growing. The market currently has 1,754 savings deals, including Isas. This is the highest total since March 2020, when 1,768 deals were available. Rachel Springall, finance expert at Moneyfacts, said: “The back-to-back base rate rises have had a positive influence on variable savings rates, and this, along with notable competition, has seen the average easy access rate rise to its highest level since 2012.”
Cash-rich banks do not need to pass rate rises on to savers
Analysis by Deutsche Bank suggests banks are unlikely to fully pass on Bank of England rate rises to savers, with a substantial rise in bank deposits during the pandemic meaning many banks do not need to compete for savers’ cash. This comes with deposits increasing by a quarter since 2019 while loans are up by just 7%. With household deposits currently totalling £1.8trn, Bank of England data shows this is close to matching the amount of outstanding loans in the economy for the first time since records began in 1997. Deutsche Bank analyst Robert Noble says that the surge in deposits has left banks “flush with liquidity,” meaning they do not need to pass on savings rates. This, he predicts, is likely to continue for “a couple of years.” Since December 2021, the Bank of England has increased interest rates from a record low of 0.1% to 1.75%. The Bank is expected to raise interest rates above 2% on Thursday, a level that would mark the highest rate since 2008.
City veterans question banker bonus plan
With the Treasury considering plans to scrap the bankers’ bonus cap, City veterans have warned that the move could be considered insensitive amid a cost-of-living crisis that has left many households struggling with bills. Sir Philip Hampton, former chairman of Royal Bank of Scotland, said the timing of the plan “could hardly be more unfortunate,” adding that he believes “many people will see it as very insensitive.” The current bonus cap, which was introduced in the fallout of the credit crunch, limits year-end payouts to twice a banker's salary. Sir Philip said he was in favour of removing the constraints on pay provided that the risky behaviour that led to the financial crisis is prevented, urging officials to be “mindful” of the fact that in banking “you can get an unhealthy relationship between bonuses and bad behaviour that imperils the bank.” Asda chairman Lord Rose said he does not think now is an appropriate time to lift the cap, saying: “There are other more important things to do and it sends the wrong message.”
Atom Bank finance chief quits
Atom Bank's finance chief since David McCarthy is stepping down. Shareholders in the digital-only lender have been notified about his departure in a memo from its chair, Bridget Rosewell. They were told that the search for his successor is already underway. Sources say Andrew Marshall, a senior finance executive at Atom Bank, is being lined up to replace Mr McCarthy. The change in CFO comes at a time when Atom is in the process of appointing investment banks to work on a stock exchange listing.
Revolut hit by cyber-attack
A cyber-attack on Revolut has compromised the personal details of more than 50,000 people. The breach at the app-based payments company occurred after a Revolut employee was caught out by a phishing scam. The attack has affected 50,144 people and involved an unauthorised third-party accessing some of their details, including contact and transaction information. Passwords, pin numbers and card details were not obtained. Revolut said the attack had affected 0.16% of its customers worldwide.
HSBC takes a slice of Monese
HSBC has invested $35m in London-based fintech firm Monese, which offers app-based current accounts and focuses on people who find it difficult to gain access to services from mainstream banks. Revenues at Monese climbed by 58% year-on-year to £16.3m in 2020, but the business suffered pre-tax losses of £31.1m.
PRIVATE EQUITY
Warburg eyes 30% stake in Vistaar
Sources say private equity firm Warburg Pincus is in talks to invest around $150m in Indian small-business lender Vistaar Finance. Warburg's discussions with Vistaar are for a 30% stake in the shadow lender, with talks at an advanced stage over a deal that will value Vistaar at roughly $450m.
INTERNATIONAL
Lebanese banks to shut amid economic crisis
A cash crisis in Lebanon has seen a number of instances of people breaking into banks to demand their frozen savings. The Association of Banks in Lebanon has said all branches will be closed for three days. Banks in the country have limited withdrawals of dollars since 2019, when the value of the Lebanese pound plummeted and inflation soared.
Turkish banks suspend Russian Mir payments
Two Turkish lenders, Isbank and Denizbank, have suspended use of Russian payment system Mir following the expansion of US sanctions last week to include the head of the entity running Mir. However, state lenders Halkbank, Vakifbank and Ziraat are still running the service.
FINANCIAL SERVICES
Firm linked to Woodford scandal in charge of £63bn of savings
Link Fund Solutions, which faces a huge compensation bill for its part in the Woodford fund scandal, is still in charge of more than £60bn of savers’ money. Link Fund Solutions has been warned by the Financial Conduct Authority (FCA) that it faces a compensation bill of more than £300m for its part in the collapse of the Woodford Equity Income fund. As the authorised corporate director of the Woodford fund, Link was supposed to ensure that the fund manager stuck to the rules. About 300,000 investors in the Woodford fund are still waiting for compensation. Of the £3.7bn in the fund when it was frozen in June 2019, about £2.5bn has been paid back. Investors have received 69p for every £1 they held when the fund was frozen. If the Link penalty, which the FCA suggests should be up to £309m, was paid as compensation - as well as the £109m left in the fund – it would boost investors’ returns to 80p for every £1. The FCA said it “considers that evidence gathered is likely to demonstrate that Link Fund Solutions committed misconduct in the course of its management” of the fund.
Accepting the end of equivalence hopes
Jim Armitage in the Sunday Times says that while Brexit talks had seen calls for equivalence for the City’s banks, over time it grew increasingly unlikely that Brussels would do anything that would help the City thrive. He says that while the previous Prime Minister and Chancellor “seemed to hold out hope” for some sort of equivalence deal, Liz Truss and Kwasi Kwarteng “have clearly, and rightly, calculated that it’s dead.” He adds that this week they “will be sticking up two fingers” to Brussels by removing the European cap on bankers’ bonuses, with EU rules that restrict how much pension funds can invest in infrastructure and other projects also likely to be scrapped.
Crypto set for regulation reform
Simon Jennings, executive director of the UK Cryptoasset Business Council, says the UK’s crypto economy “stands on the cusp of great change,” with it suggested regulation of crypto assets is set to be reformed. Looking at what the future may hold for the crypto-economy, he says that the progress of the Financial Services and Markets Bill is “encouraging,” noting that it will establish a stablecoin regime and enable the use of a wider set of payment methods in the UK. Mr Jennings calls for a “clear policy pathway,” saying there is a need for “tangible outcomes – a measured regulatory framework that balances innovation, market integrity and consumer protection.”
UK financial watchdog issues warning against crypto exchange FTX
The Financial Conduct Authority has warned consumers against dealing with the Bahamas-based cryptocurrency exchange FTX stating that it is targeting people in the UK without its authorisation. “Almost all firms and individuals offering, promoting or selling financial services or products in the UK have to be authorised or registered by us,” the FCA statement said, adding: “This firm is not authorised by us and is targeting people in the UK.”
LME faces new legal action over decision to cancel nickel trades
The London Metal Exchange faces legal action over the cancellation of trades amid a surge in the price of nickel. The Financial Conduct Authority and Bank of England have also launched an investigation.
Jupiter prepares for restructuring under new chief
Incoming chief executive Matthew Beesley is preparing to restructure Jupiter Asset Management following a detailed operational review of the business, with costs to be cut and growth targeted.
AmEx to hire 1,500 tech staff
American Express has announced plans to hire around 1,500 tech employees by the end of the year, shrugging off fears of an economic slowdown that has prompted other US financial companies to cut jobs in recent months.
LEISURE & HOSPITALITY
Restaurants hit by cost pressures
The Observer looks at the challenges hospitality businesses are facing amid the cost of living crisis, with consumers’ budgets under pressure and energy costs soaring. Analysis found that restaurant insolvencies had risen 64% year-on-year in July and last month it calculated that a record 60% of the UK's top 100 restaurants are making a loss.
REAL ESTATE
UK commercial property value expected to drop 15%
UK commercial property values could drop by 15% by the end of next year as rising interest rates make financing deals more expensive and the risk of recession threatens to slow rental growth, an asset manager has warned. The full impact of rising borrowing costs is yet to show up in official data, according to Nick Montgomery, Schroders' head of UK real estate investment, but transactional evidence shows that investors are becoming more cautious about how much they are willing to pay for some types of property. The value of commercial real estate such as warehouses and central London offices has risen sharply over the past decade, which has compressed the yield generated for institutional investors by owning these assets.
Soaring prices force buyers into 30-year mortgages
A record number of borrowers are signing up for mortgages of more than 30 years as soaring house prices make the traditional 25-year home loan increasingly hard to afford. Figures from UK Finance show that almost two-fifths of first time buyers and home movers in June took out a mortgage with a term of 30 years or longer. There were 23,069 mortgages taken out with a term of up to 40 years in June, with this representing 38% of the total. UK Finance data shows that more than a quarter of households taking out a loan of over 30 years had owned a property for several years, while 47% were first time buyers.
Prime office rents set to hit a record
Rents for Grade A offices in the City of London are set to hit record highs, with figures showing prices have risen from £77 per sq ft in Q2 2021 to £83 per sq ft. The analysis shows that there have been 65 office lettings in the City achieving a rent of over £70 per sq ft so far this year. This marks a jump on the 16 recorded in the whole of 2021 and 30 in 2020.
RETAIL
Retail sales slide and pound hits 37-year low
Figures from the Office for National Statistics (ONS) show that UK retail sales fell sharply in August, slipping 1.6% as rising prices saw households cut back on spending. The ONS said: "All main sectors - food stores, non-food stores, non-store retailing and fuel - fell over the month". Olivia Cross, an economist at Capital Economics, said the sales figures back up a view that the economy is "already in recession." She added that due to the Government’s cap on energy bills, any recession would be "smaller and shorter" than had previously been expected.
ECONOMY
Half of households are finding it difficult to cover energy costs
Office for National Statistics (ONS) research shows that 48% of Britons are struggling to pay energy bills, saying they are finding it 'very or somewhat difficult' to cover the costs. The ONS said the proportion was three percentage points higher between August 31 and September 11 than a fortnight earlier. The fortnightly ONS cost-of-living survey saw 82% of respondents say they are ‘very or somewhat worried about rising costs of living.’ This marks a slight increase on the 81% recorded the fortnight before and a steeper jump on the 74% who said the same in May. The poll also found that 26% are unable to save as much as usual.
World Bank issues recession warning
The World Bank says interest rate increases rolled out by central banks looking to tackle soaring inflation could trigger a global recession in 2023. The World Bank said central banks have increased rates "with a degree of synchronicity not seen over the past five decades." Its report pointed to a steep slowdown in the global economy, warning: “Under the circumstances, even a moderate hit to the global economy over the next year could tip it into recession.” It has called on central banks to coordinate their actions and "communicate policy decisions clearly" to "reduce the degree of tightening needed.” This comes with the Bank of England and US Federal Reserve both expected to increase key interest rates at upcoming monetary policy meetings.