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Daily News Roundup: Tuesday, 29th August 2023

Posted: 29th August 2023

BANKING

Banks earn £2bn by failing to pass on rate rises

Analysis shows that high street banks are benefitting from not passing interest rate hikes to savers. If interest rates on savings accounts had kept pace with the Bank of England base rate, customers could have seen more than £9bn more. Financial Conduct Authority research shows that 40% of all cash held in easy access savings accounts with Britain’s nine biggest banks was earning less than 1% in interest at the end of June. These lenders passed on just 28% of the Bank rate rise to easy-access accounts between January 2022 and May 2023. This amounts to £260bn. If this were switched to any of the 21 easy-access accounts paying 4.5% or more, it could earn about £9.1bn more a year. The Bank of England base rate currently stands at 5.25% and the best accounts pay 5%. However, Barclays, Halifax, HSBC, Lloyds and NatWest pay between 1.4% and 2% on their easy-access accounts. UK Finance said: “Savings rates have increased recently and there are a lot of good products on the market. UK banks have passed through a greater proportion of interest rate rises to savers than in other countries. There is a competitive market for savings and we always encourage people to shop around for the interest rate best suited to their needs.”

Challenger banks irked by delays to regulatory approvals

Challenger banks Metro Bank, Close Brothers, and Paragon are pushing the Prudential Regulation Authority to allow them to use their own internal models to calculate their risk-weighted assets.

INTERNATIONAL

Swiss competition commission investigates Credit Suisse takeover

Switzerland's Competition Commission is investigating UBS's takeover of Credit Suisse, following the merger of the two largest banks in the country. The competition watchdog is currently holding hearings on the matter and plans to send its findings to the financial regulator, FINMA, at the end of September.

Goldman Sachs offloads investment advisory business

Goldman Sachs has announced a deal to sell its investment advisory business to Creative Planning. The transaction is expected to close in Q4. The sale allows Goldman Sachs to focus on its ultra-high net worth wealth management and workplace growth strategy.

US proposes new tax rules for crypto brokers

Cryptocurrency brokers, including exchanges and payment processors, would have to report new information on users' sales and exchanges of digital assets to the Internal Revenue Service under a proposed US. Treasury Department rule. The rule aims to crack down on crypto users who may be failing to pay their taxes.

Judge dismisses most of Commerzbank lawsuit against BNY Mellon

A US judge has dismissed most of a lawsuit in which Commerzbank wanted Bank of New York Mellon to be deemed liable for more than $1bn of losses on toxic mortgages purchased before the financial crisis. The judge rejected Commerzbank's claims on all but 13 of the 100 certificates and notes it bought. He also dismissed all negligence claims against BNY Mellon.

AVIATION

Standard Chartered sells aviation finance leasing business

Standard Chartered is selling its global aviation finance leasing business to Saudi Arabia-based jet lessor Avilease for approximately $3.6bn. Avilease will pay an initial consideration of $700m and will also fund the repayment of $2.9bn of net intra-group financing from Standard Chartered.

CONSTRUCTION

Interest rate hikes wipe £15bn off UK builders

Analysis shows that the Bank of England’s interest rate rises have stripped more than £15bn off the value of the UK's largest housebuilders. While shares in Barratt have dropped 40% since the Bank started increasing rates in December 2021, Taylor Wimpey and Berkeley have declined by about a third and 17% respectively. Persimmon, meanwhile, faces demotion from the FTSE 100 index after losing nearly two-thirds (64%) of its value. David O'Leary, executive director at the Home Builder Federation, says: “The challenging economic picture coupled with an increasingly anti-growth, anti-business policy environment is putting tremendous strain on the homebuilding industry.”

FINANCIAL SERVICES

Star fund managers losing their shine?

Turbulence in financial markets has seemingly shaken investor’s faith in fund managers such as Terry Smith and Nick Train. Data from investment research firm Morningstar shows that investors have pulled £754m out of Terry Smith’s £23.8bn flagship fund, Fundsmith Equity, this year. Meanwhile, £486m has been withdrawn from Nick Train’s £4.4bn Lindsell Train UK Equity. Rob Burgeman of wealth manager RBC Brewin Dolphin suggests that the outflows show investors are anxious about whether the fund manager’s strategies can continue to deliver above-average returns in the long-term. Jason Hollands of investment platform Bestinvest said that while there was a time that “star managers were feted like pin-striped rock stars ... that is now largely a thing of the past.”

UK approach on crypto promotion sets a dangerous precedent

Bovill founder Ben Blackett‑Ord says ministers have approached the regulation of cryptocurrency “in a misguided way,” blurring the distinction between companies authorised by the Financial Conduct Authority and those registered with the regulator.

Annuity sales jump on high interest rates

Soaring annuity rates have prompted a surge in sales, with the Association of British Insurers saying £2.3bn of lifetime annuities were sold in H1 2023 - up from £1.7bn in H1 2022.

Metro Bank founder launches fintech accelerator

Anthony Thomson, the founder and former chair of Metro Bank and Atom Bank, has launched Archie, a venture designed to support fintech start-ups during their go-to-market stage.

Lazard executives to receive $34m bonuses

Two executives at Lazard are set to receive performance-based bonuses worth about $34m in total. Peter Orszag, the incoming chief executive, and Evan Russo, who leads the asset management business, will be handed the awards over seven years. Lazard estimated that Mr Orszag's stock grants were worth $18.8m, while Russo's bonus is $15.1m.

LEISURE & HOSPITALITY

Blackstone to sell 22% stake in Vegas resort

Blackstone Group is selling a 22% stake in the Bellagio Las Vegas resort, operated by MGM Resorts, for $5.1bn. Realty Income is buying the stake for $300m and is also investing in a $650m preferred equity stake in the property. Blackstone had purchased Bellagio from MGM for $4.25bn in 2019.

REAL ESTATE

CMA flags concerns over rental sector

The Competition and Markets Authority (CMA) is planning a crackdown for the private rental sector, having found a number of issues that it says may need addressing. Warning that a “significant minority of landlords and letting agents may not be following consumer protection rules,” the competition watchdog highlighted the “possible unlawful discrimination” against those receiving benefits as an “area of concern.” It also flagged concern over "sham licences", which make evictions easier, and zero-deposit schemes. Meanwhile, the CMA is set to investigate land banking by housebuilders, saying there are concerns that developers are not delivering homes at an adequate pace or scale. 

Family funding set to hit record

The Bank of Mum and Dad is expected to provide record levels of financial support to the property market this year, with families predicted to contribute £8.1bn to homebuyers. This funding is set to support 47% of all homes purchased by buyers under the age of 55. The average amount given by each family is expected to be £25,600.

RETAIL

Food prices edge lower

Price rises in the shops are slowing sharply although retailers have warned that this is not the end of the cost of living crisis. According to the British Retail Consortium, the rate of inflation across all shop purchases came down from 8.4% in July to 6.9% in August. The decrease was driven by a fall in food inflation from 13.5% to 11.5%.

SPORT

Transfer spending passes £2bn

Premier League spending has passed the £2bn mark for the first time in a single transfer window. Analysis shows that top flight clubs have already exceeded the record £1.92bn spent last summer. With £815m spent in January and the window to sign new players not closing until Friday at 11pm, clubs could still pass the £3bn milestone for the calendar year.

ECONOMY

Broadbent: Rates need to remain high

Deputy governor Ben Broadbent says the Bank of England will have to keep interest rates high for longer as inflation will not fall as quickly as it climbed. He told the Federal Reserve’s annual gathering of central bankers that it is “unlikely” that second-round effects will “unwind as rapidly as they emerged.” He added: “As such, monetary policy may well have to remain in restrictive territory for some time yet.” Mr Broadbent also said that headline inflation will fall “over the next few months” and living standards will start to improve. The Bank has raised rates to 5.25%, the highest level in almost 16 years, as it looks to tame inflation. While the rate of price growth has dropped from a peak of 11.1% peak to 6.8%, it is still far exceeds the Bank’s 2% target.

Economists: Autumn tax cuts unlikely

Economists have predicted that Jeremy Hunt’s autumn statement is unlikely to deliver tax cuts, saying the Chancellor has been given little room for manoeuvre by a climbing debt interest bill and subdued medium-term economic growth. James Smith, research director at the Resolution Foundation think-tank, believes that interest rate increases since the spring Budget left “limited” options for the Chancellor, while Carl Emmerson, deputy director of the Institute for Fiscal Studies, said: “All of the pressures that the Chancellor was grappling with in March are still there. The UK has elevated public debt, higher borrowing costs and low growth.” Meanwhile, analysts at Capital Economics told clients in a note: “We still think the Chancellor will have limited scope to unveil large-scale permanent tax cuts and/or spending rises in the autumn statement without jeopardising his fiscal rules.”

OTHER

More than half of pension savers believe they will never save enough to retire

More than half of people saving into pensions believe they will never put away enough to stop working when they get older, new research reveals. The report shows that 39% of homeowners are worried they are not saving enough for a comfortable retirement, with it found that 34% will not even meet their basic living costs. The poll also reveals that 8% of pension savers who own their homes stopped or cut pension contributions in the six months to February 2023. The Living Wage Foundation says the survey shows that even people who own their own home struggle to save and plan for the future. "Homeowners on low pay will be feeling the pressure the most, and the cost of living crisis is making it worse," says Katherine Chapman, director of the Living Wage Foundation. The Living Pension campaign is pushing for an increase in the overall savings target from 8% to 12% overall. 

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