BANKING
Banks reveal fresh rate cuts
Competition in the mortgage market is heating up, with a number of lenders announcing lower rates. First Direct has lowered rates by up to 0.4% and introduced two new mortgages for borrowers with a 5% deposit, while Halifax has revealed cuts of 0.46%. HSBC UK is also expected to reduce its mortgage rates. Perenna, a new bank authorised by the Bank of England, has released ultra long-term mortgages, allowing borrowers to borrow up to six times their salary. The rates start at 5.75%, higher than typical fixed-rate deals. Perenna hopes its loans will attract first-time buyers who face high house prices and expensive mortgages. Moneyfacts said the average two-year fixed homeowner mortgage rate on the market on Tuesday was 6.21%, down from 6.22% on Monday. Lewis Shaw of Shaw Financial Services said of the lower rates being offered: "Hopefully this will trigger other lenders to sharpen their pencils or risk losing out." Ashley Thomas, director at broker Magni Finance, said: "Lenders are getting more aggressive with rate cuts. I wouldn't be surprised to see rates drop below 4% by the end of the year." Nicholas Mendes, mortgage technical manager at John Charcol, commented: "We will continue to see mortgage rate repricing on a downward trend unless anything untoward happens across the market."
Co-op Bank customers to receive compensation
Co-operative Bank customers who were “unfairly” overcharged mortgage interest for more than a decade are set to receive compensation payouts worth thousands. The Financial Ombudsman Service ruled that the bank broke customers' contracts and applied unfair interest rate increases between 2009 and 2012. These increases affected mortgage prisoners who were unable to switch banks due to changes in lending rules. The Co-operative Bank claimed the rate increases were due to rising funding costs, but evidence showed no changes to these costs during that period. The ruling will result in undisclosed payouts to affected customers. The All-Party Parliamentary Group for Mortgage Prisoners has condemned the bank's actions and called for more customers to come forward.
Britain's biggest banks support crackdown on social media scams
Britain's biggest banks have backed a letter from the Daily Mail to the Prime Minister which calls for social media firms to crack down on scammers operating on their platforms. The banks support calls for technology companies to pay towards the cost of reimbursing victims, introduce tougher identity verification measures, offer secure payment systems, and face fines if they fail to stick to new regulations. Lloyds, Barclays, Santander, NatWest, HSBC, Nationwide, TSB, Starling Bank, Metro Bank, Virgin Money, Revolut, Co-operative Bank and Handelsbanken all support the Mail's call for action, having attended a fraud summit alongside officials from UK Finance, Security Minister Tom Tugendhat, and MP Anthony Browne — the Prime Minister's anti-fraud champion.
Deutsche Bank appoints UK chief
Deutsche Bank has appointed Vathany Vijayaratna as chief executive of its UK and Ireland division. She replaces Nicola Atkinson, who took the position on an interim basis after Tiina Lee left to join Citigroup. Ms Atkinson will remain in her role as chief operating officer. Ms Vijayaratna joined Deutsche Bank in 2002 and has been head of non-financial risk for the investment bank since 2022.
INTERNATIONAL
Loophole lets banks bypass ECB crypto supervision
EU rules to protect the financial system from risks stemming from cryptocurrencies contain a loophole that allows banks to circumvent some safeguards and should be fixed urgently, according to Andrea Enria, the European Central Bank's (ECB) chief supervisor. Mr Enria warned that the EU's framework places banks' activity as a 'crypto-asset service provider' outside of the ECB's purview, preventing the ECB from having a full view of a bank's exposure to cryptocurrencies and effectively applying safeguards. He also highlighted concerns about the provision in the EU Markets in Crypto-Asset Regulation that requires issuers of stablecoins to keep 60% of reserves in bank deposits, stating that it may have unintended consequences for financial stability. Mr Enria has called for crypto asset service providers to be added to the list of financial institutions that the ECB supervises.
Chairman faces criticism over FDIC allegations
The head of the US Federal Deposit Insurance Corporation (FDIC), Martin Gruenberg, has faced criticism from lawmakers following allegations of sexual harassment at the agency. Mr Gruenberg, who said he is committed to providing a safe working environment for staff, described the issue as "deeply disturbing" and pledged to review the allegations of widespread sexual harassment, inappropriate behaviour and discrimination. Mr Gruenberg, who denied personal involvement in sexual harassment, acknowledged the need for cultural change and told told the Senate Banking Committee that an outside law firm will review internal practices at the banking regulator. It is noted that in 2020, the FDIC Office of Inspector General reported that the FDIC's efforts to prevent sexual harassment were inadequate.
SEC collects $4.95bn in penalties
The US Securities and Exchange Commission (SEC) filed 784 enforcement actions in the year to the end of September, resulting in $4.95bn in penalties and other financial remedies. This marks the second-highest financial remedies in SEC history, following last year's record of $6.4bn. Additionally, the SEC has barred 133 individuals from serving as directors and officers of public companies, the highest number in a decade. The regulator has also settled with 25 broker-dealers, advisers, and others over employees' use of personal devices and messaging apps.
Japan's top banks announce big share buybacks
Japan's top two banks, Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Financial Group (SMFG), have announced big share buybacks. MUFG plans to buy back up to 3.31% of its own shares worth 400bn yen, while SMFG announced a buyback of 1.9% of shares worth 150bn yen. MUFG kept its full-year profit forecast at a record 1.3trn yen, while SMFG raised its annual net profit forecast by 12% to 920bn yen.
FINANCIAL SERVICES
Business leaders call for ‘British Isa’ to boost the economy
A group of investors, brokers, and chief executives have called on the Chancellor to create a 'British Isa' to end a “downward spiral of investment and lower valuations” on London’s markets. In a letter to the Times, they call for a dedicated incentive for backers of UK-listed companies that would put the £70bn invested each year into the tax-efficient savings accounts “to work on behalf of the UK.” Signatories say it is an “oddity of the current Isa regime” that it “offers the same incentives for savers to invest in overseas as domestic businesses.” A British Isa, they argue, would give taxpayers the chance to invest in growing the UK economy and supporting British companies, “reviving interest in raising equity in the UK, driving economic growth, spreading prosperity and boosting tax revenues.” The letter was co-ordinated by venture capital investor BGF and investment bank Singer Capital Markets. The 93 signatories include asset managers with £35bn under management and listed companies collectively employing more than 150,000 people.
Star investor’s pay hits seven-year low
Investor Terry Smith has taken home his smallest pay package in seven years due to a decline in profits at his investment management firm, Fundsmith. The billionaire stockpicker received £31.2m, with this down from the £36.4m paid out in 2022. This comes after profits fell by 14% to around £50m in the year to the end of March. Assets under management fell 8% to £36.4bn from £39.5bn.
HEALTHCARE
Pfizer to cut 500 jobs at Kent laboratories
Pfizer plans to cut 500 jobs at its laboratories in Kent as it aims to reduce costs by $3.5bn due to declining demand for its Covid drugs. The pharmaceutical company will be discontinuing its Pharmaceutical Sciences Small Molecule operations at its facility in Sandwich, Kent. This move is part of Pfizer's efforts to cut costs across its business. Pfizer employs about 940 people at its Sandwich site.
REAL ESTATE
Landlords selling up as mortgage arrears double
Analysis shows that by the end of 2023, private landlords will have sold almost 300,000 more homes than they have bought since 2016. While landlords are set to sell 139,820 buy-to-lets by the end of 2023, this is 53,000 fewer than in 2022 and 62,000 fewer than in 2021. A recent poll by the National Residential Landlords Association shows that landlords are now more than twice as likely to sell properties than they are to purchase them. This is partly driven by cost concerns, with UK Finance data showing that the number of landlords in mortgage arrears has doubled year-on-year from 5,760 to 11,540, with separate figures showing that the number of insolvencies among limited companies owned by buy-to-let landlords has increased by more than a third.
Hammerson in talks to sell stake in Value Retail
Hammerson, Britain's biggest shopping centre-owner, is in detailed talks to sell its stake in Value Retail, owner of the Bicester Village retail complex, for about £1bn. Rival property industry executives believe a deal could be struck before the end of the year. Hammerson stated that Value Retail, a luxury shopping outlet operator, is an attractive portfolio but not part of their core proposition.
RETAIL
Asda pays off £300m debt
Asda has paid off £300m worth of debts as its billionaire owners, Mohsin and Zuber Issa, race to slash borrowing levels across their business empire. The supermarket paid off a £200m loan used to acquire convenience stores and petrol stations from the Co-op, as well as an additional £100m of borrowings. This reduced Asda's net debt from £4.2bn to £3.9bn. However, the figure has since risen to £4.6bn due to the recent acquisition of EG Group's UK business. Sales excluding fuel were £5.4bn during the third quarter. Like-for-like sales in clothing and general merchandise slid by 3.4% year-on-year.
Thai company takes control of Selfridges in debt-for-equity swap
Thailand's Central Group is set to take control of Selfridges in a debt-for-equity swap, diluting the stake of its co-owner, Signa Group. The sale of Signa's stake in Selfridges was among options to provide the business with cash to appease lenders. Central Group has exercised its right to convert a loan into equity, making it the majority shareholder and gaining control of the joint venture. Signa will retain a minority stake in the group.
The Body Shop sold to private equity
The Body Shop has been sold to private equity firm Aurelius for £207m, a significant drop from its previous valuation of £870m. The retailer, with 250 stores in the UK, has seen declining sales due to slowing consumer demand and increased competition from rivals adopting ethical practices.
ECONOMY
Pay outpaces inflation at fastest rate since 2021
Wages have risen faster than inflation by the most for two years, Office for National Statistics (ONS) data shows. Annual growth in regular pay – which excludes bonuses – was 7.7% in July to September, with this down from the 7.9% pay growth recorded in the three months to August. With bonuses included, average wage growth came in at 7.9%. This was down from the 8.2% growth logged in the three months to August. The figures mean that, once inflation was taken into account, regular pay was up 1% in real terms in the year to September. The ONS estimates that average weekly earnings hit £621 for regular pay in September and £673 for total pay, which includes bonuses. The ONS figures also show that the unemployment rate was unchanged at 4.2%, while the number of job vacancies has continued to fall, slipping by 58,000 to 957,000 between August and October.
Soaring inflation equivalent to 3p income tax rise
Higher prices have cost workers the equivalent of a 3p rise in income tax over the past two years, new research suggests. An analysis by the House of Commons library found that for 22 months of the last two years, average salaries increased by less than the rising cost of living. Workers earning £28,400 in October 2021 were £697 worse off than they would have been if pay had kept pace with inflation. For those earning £55,000 a year, the loss was even greater, with average salaries now £1,348 less than expected. The study shows that these losses were greater than if the Government had increased income tax by 3p in the pound and average earnings had kept pace with inflation.
OTHER
Chancellor urged to act on investment
An influential panel of City figures have urged the Chancellor to advance his financial services programme in the Autumn Statement, calling on Jeremy Hunt to accelerate pensions reform, hand a competitiveness objective to the audit watchdog and incentivise retail investors to back British companies. In a letter to Mr Hunt, the Capital Markets Industry Taskforce (CMIT) said Britain now sees far lower domestic investment by UK-based pension funds in domestic capital markets than other G7 countries, warning: “The withdrawal of domestic capital starves our companies of financing, diverts UK tax-payer support to investments in non-domestic companies and ultimately impacts the efficacy of our markets.”