BANKING
New mortgage lending falls
Mortgage lending fell by over a fifth in December, figures from the Bank of England show, with this the fourth consecutive month that the number of borrowers has declined. The data reveals that 35,600 mortgages were approved in December, the lowest level since May 2020. The total amount borrowed fell by a quarter, from £4.3bn in November to £3.2bn in December. The report also shows that the average interest rate paid on new mortgages in December increased by 0.32% to 3.67% - the largest monthly increase since December 2021. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “House purchase mortgage approvals continued to fall sharply in December, despite more lenders returning to the market after they ran scared in the immediate aftermath of the mini-Budget.” Ashley Webb, a UK economist at Capital Economics, said: "Overall, the cumulative downward effect from higher interest rates appears to be starting to weigh more heavily on the economy. And given the large share of fixed-rate mortgages, this effect is only going to grow throughout this year." Karen Noye at Quilter said the BoE data showed the housing market “is now in the midst of a significant slowdown.”
Consumer credit down in December
Bank of England data shows that consumers borrowed an additional £500m in consumer credit in December, with this a steep drop on the £1.5bn borrowed in November and below the previous six-month average of £1.2bn. Net credit card repayments came in at £0.5bn, while £1bn of borrowing came through other forms of consumer credit – such as personal loans and car finance. Households deposited an additional £3.9bn with banks and building societies in December, compared with a rise of £5.7bn in November. Business borrowing rose to £1.9bn in December compared with £1.5bn in November.
INTERNATIONAL
UBS profits rise
UBS saw pre-tax profits jump 23% to $1.7bn in Q4, taking the group’s profit for the year to $7.6bn. While net interest income in its wealth management business increased 35%, revenues at its investment bank fell 24% to just under $1.7bn and its pre-tax profits slid 84% year-on-year to $112m. UBS repurchased $5.6bn of shares in 2022 and said it planned to distribute a further $5bn to shareholders in buybacks this year. It returned a total of $7.3bn to shareholders in 2022 and said it would increase its dividend by 10%. CEO Ralph Hamers said: “We delivered good full-year and solid fourth-quarter results in a difficult macroeconomic and geopolitical environment. Our performance proves that our strategy is the right one. Clients turned to us for advice and stability.”
UniCredit posts record profit
UniCredit posted record profits in 2022 and said it intends to return €5.25bn to shareholders this year. The Italian bank plans to boost capital distribution by 40% this year as it looks to return €16bn by 2024. UniCredit recorded net profits of €2.46bn in Q4, while annual profits hit €5.2bn in 2022 - an increase of almost 48% from 2021.
FINANCIAL SERVICES
FCA: Firms should rethink client communications
The Financial Conduct Authority (FCA) says the consumer duty should benefit firms by reducing complaints and driving healthy competition. With the consumer understanding outcome of the duty designed to reduce poor outcomes by improving the information individuals are given about a product or service, Richard Wilson, the FCA’s consumer policy manager, said firms will benefit “because they won't be competing against other firms who are perhaps misleading or manipulating consumers with their communications.” Mr Wilson also suggested firms may need to rethink how some existing mandatory communications are presented to make them more efficient and offer plain English explanations of technical information. He noted that as more complex language can confuse consumers - “and cause them to disengage” - firms may look to take the opportunity to make such communications simpler.
Treasury to set out crypto regulation plan
Britain will today set out plans to tackle market abuse in cryptocurrencies. In a consultation on its plans, the Treasury will outline what it calls a “robust approach to regulation [that] mitigates the most significant risks, while harnessing the advantages of crypto technologies”. It includes rules for crypto exchanges, custodians and lending platforms, as well as a regime to regulate market abuse. This will bring crypto fully under the oversight of the Financial Conduct Authority.
Darktrace hit by short seller's accounting allegations
Short seller Quintessential Capital Management (QCM) has accused cybersecurity firm Darktrace of accounting errors, with a report from the asset management business claiming that questionable marketing, sales and accounting tactics were used to inflate the company's value before it was publicly listed in 2021. QCM said it was “deeply sceptical about the validity of Darktrace's financial statements.” Darktrace insists it has “rigorous controls in place across our business to ensure we comply fully with IFRS accounting standards.”
REAL ESTATE
Equity release borrowing doubles in five years
Homeowners borrowed £6.2bn against the value of their properties through equity release in 2022, with this marking a 29% increase on 2021’s total. Equity Release Council figures show that the total has more than doubled in size since 2017, when £3.06bn was released. The number of owners who chose to release wealth from their properties hit 93,421 in 2022 - a 23% year-on-year increase. The number of new equity release plans taken out was up by a fifth to 50,000. While the amount of money borrowed via equity release jumped in 2022, the number of plans agreed in Q4 fell 17% from the previous quarter amid an increase in interest rates. Data from equity release broker Key Later Life Finance shows that in Q3 the typical interest rate for equity release was 4.54%, but in Q4 the average climbed to 5.7%. The Equity Release Council report also shows that 52% of new customers opted to receive their money in one go, up from 43% in 2021. The average new lump sum plan was £128,382 in October to December, down 4% from £133,770 in July to September.
RETAIL
Supermarkets scrutinised over discount pricing
The Competition and Markets Authority (CMA) is to look at whether supermarkets are showing pricing by weight or volume in ways that let customers compare like-for-like. As prices rise across the board, "people shopping for food and other essential products need confidence that they have the right information to make choices and are getting fair deals", the regulator said. In 2015, the CMA looked into a complaint by consumer group Which? which claimed supermarkets were carrying out "misleading and opaque" pricing practices.
Tesco overhaul to affect 2,100 jobs
Tesco has announced a plan to shake-up management and close hot counters and delis which will affect 2,100 roles. The supermarket is axing 1,750 lead and team manager roles at its larger stores and replacing them with 1,800 new “shift leader” roles. Shift leaders will be paid by the hour and will be responsible for the day-to-day operations of the stores. A further 350 roles across Tesco’s UK business will be lost as a result of localised changes.
ECONOMY
Bank could be near the end of rate hiking cycle
The Bank of England is expected to increase the base rate by 0.5% tomorrow, taking it from 3.5% to 4%. Some analysts believe that following the expected rise, the end of the bank’s hiking cycle could be in sight, forecasting that the Bank will deliver a final 25 basis point increase next month that takes the interest rate to 4.25%. Looking ahead to the Monetary Policy Committee’s (MPC) decision, analysts at UBS said they expect that after a 50bps hike on Thursday, the Bank will add a 25bps rate rise on March 23. They said: “We view the risk to our call as balanced and dependent on incoming inflation and labour market data and inflation expectations,” adding that they will be “closely watching for signals” that the MPC is getting closer to the end of the hiking cycle. ING analysts said that while the MPC’s December meeting “appeared to open the door to a potential downshift to a 25bp move in February … if we get a 50bps hike on Thursday then it’s likely to be the last.”