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Daily News Roundup: Wednesday, 28th September 2022

Posted: 28th September 2022

BANKING

Poll: Banks should do more to help customers

Almost two-thirds of people believe banks and other financial providers should be doing more to help their customers during difficult economic times. A report from consumer and business credit information provider CRIF shows that 64% of people surveyed said banks and other financial providers are not doing enough to help their customers. The survey saw 57% of people say banks have a duty to help people during challenging financial conditions, second only to the Government (64%). The poll of 2,000 people found that 35% would be prepared to share more of their data if it improved their ability to borrow or access higher credit limits. The Banking on Banks report also reveals that 46% would be willing to share more information if it meant banks could warn them in advance of potential financial issues. It was also found that 19% of respondents expect to borrow more from their bank this year to handle rising living costs. Sara Costantini, CRIF’s regional director for the UK & Ireland, said: “The majority of people in the UK feel lenders aren’t doing enough to help and want to see them offer more tailored products and services that meet their specific needs.” Eric Leenders, managing director of personal finance at UK Finance, said: “Lenders in the UK are ready to help customers who might be struggling with their finances, having trained specialists to provide tailored support to suit their individual circumstances – and are working closely with their regulator, the Financial Conduct Authority to ensure that the best support possible can be provided.”

More lenders pull mortgage deals

Santander, HSBC and Yorkshire Building Society suspended mortgage deals yesterday after a fall in the pound prompted forecasts of rising interest rates, with the lenders joining Virgin Money and Skipton Building Society in halting mortgage offers for new customers. Meanwhile, Nationwide said it will lift rates on a range of fixed mortgages, Lloyds has paused some of its products and Halifax has removed mortgage products that come with a fee "as a result of significant changes in mortgage market pricing." Others to have pulled or amended deals include Clydesdale Bank, Scottish Building Society, Leek United Building Society, Nottingham Building Society, Bank of Ireland and Paragon Bank. The number of residential mortgages on offer by lenders fell to 3,596 yesterday, according to financial information firm Moneyfacts. This marks a drop from 3,961 on Friday – the day of the Chancellor’s mini-Budget. Economists expect interest rates to more than double to 5.8% by April, from the current level of 2.25%. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said if interest rates rise as predicted, the average household refinancing a two-year fixed rate mortgage in the first half of next year would see monthly payments jump to £1,490 from £863.

Close Brothers ‘well positioned’ says CEO

Close Brothers chief executive Adrian Sainsbury says the merchant banking group is in a strong position to deal with rising interest rates and inflation. Close has posted a 13% fall in annual adjusted operating profits to £234.8m, with its Winterflood division hit hard by the post-pandemic slowdown in trading activity and volatile markets. Winterflood saw a 77% dip in profits to £14.1m, while the retail and property banking arms also saw declines. However, the commercial banking operation saw profits jump 72% to £91m in the 12 months to the end of July. Although the asset management operation saw adjusted profits fall to £21.7m, an 8% year-on-year fall, it continues to attract client assets, with net inflows up 5%. Mr Sainsbury said: “I am confident that our … business model, strong financial position and deep expertise leave us well positioned.”

PRIVATE EQUITY

Biffa accepts £1.3bn private equity bid

The board of rubbish clearance company Biffa has accepted a materially reduced takeover offer from private equity firm Energy Capital Partners as it warned shareholders to take the money before the UK economy worsens. Biffa has accepted a 410p-a-share cash takeover valuing the FTSE 250 company at £1.2bn. The private equity firm’s offer is an almost 8%, £110m downward revision on what Biffa’s board said it was willing to recommend to shareholders in June.

INTERNATIONAL

US regulators fine firms $1.8bn over staff communications

US watchdogs have fined 16 financial firms over “widespread and longstanding failures” to track employees’ messages, with a probe uncovering “pervasive” communications on unofficial channels. Between January 2018 and September 2021, bankers and traders were “routinely” exchanging messaging about business matters via apps on personal devices, according to the regulator. While the US Securities and Exchange Commission announced fines collectively worth more than $1.1bn, the Commodity Futures Trading Commission separately charged institutions more than $710m for “failing to maintain, preserve or produce records that were required to be kept.” Those hit with charges included Barclays, Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS. Gary Gensler, chairman of the SEC, said: “As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications.”

Credit Suisse loses two executives

Credit Suisse has announced the departure of two senior executives, Jens Welter, global co-head of banking and EMEA co-head of investment banking and capital markets, and Daniel McCarthy, global head of global credit products. Citigroup has announced that Mr Welter is joining in December as co-head of EMEA Banking, Capital Markets and Advisory.

Commerzbank to take hit due to mBank

Germany's Commerzbank is set to take a €490m hit to its Q4 operating profit after its Polish mBank unit booked additional provisions for its Swiss franc loans. Despite this, the German lender said it still expects to reach its net profit target of more than €1bn for the full year.

FINANCIAL SERVICES

Morrissey quits AJ Bell after founder is denied board seat

Baroness Helena Morrissey has quit as chairman of fund supermarket AJ Bell after just nine months, with this following a clash with the Financial Conduct Authority (FCA) over plans to appoint founder Andy Bell to the firm’s board. Mr Bell, who owns a 23% stake, resigned as AJ Bell’s chief executive in June and was set to become non-executive deputy chairman. However, the FCA objected to the plan, citing the “risk to effective board governance that would arise if a founder chief executive with a significant shareholding remained on the board after stepping down as chief executive.” Evelyn Bourke, AJ Bell’s senior independent director, said: “We were unable to agree our preferred role for Andy with the FCA and Helena believes it is the right thing for her to step aside so a new chair can take the board forward.”

FOS complaints flat in H1

The Financial Ombudsman Service (FOS) received 72,978 complaints in the first half of the year. This marks a 56% fall from H1 2021 but is flat when compared to the second half of last year. Between January 1 and June 30, the FOS upheld 37% of complaints, compared to 34% in the first six months of last year. In the first half of 2022, banking and credit remained the most complained-about sector, with a total of 44,200 complaints, followed by 17,530 for general insurance and protection and 4,193 for decumulation, life and pensions.

Revolut given green light to run crypto business

The Financial Conduct Authority (FCA) has approved Revolut’s crypto operations. The firm had been granted temporary permission to operate its cryptoasset business, having been among businesses given an extension after a deadline passed in March. The FCA yesterday confirmed that the firm has been removed from the temporary register after strengthening its money laundering controls. Revolut joins 37 other crypto companies granted permanent registration by the FCA. More than one hundred firms had applied, with many pulling out or seeking EU approval instead.

Pension fund crisis as gilt yields climb

City chiefs have expressed concern that an unprecedented rise in yields on long-dated government bonds is inflicting huge and sudden cash calls on traditional pension funds that could damage the gilts market. Investors dumped 30-year gilts yesterday, sending their price sharply lower and their yield soaring 45 basis points to 4.97%. Other gilt yields also rose yesterday, with ten-year bonds rising by 26 basis points to 4.5% and five-year bonds rising 15 points to 4.67%. Ben Gold, head of investment at pension consultants XPS, said that while rising gilt yields were, in general, good for pension funds, the speed of change was now causing “very significant operational challenges for some”.

LEISURE & HOSPITALITY

Domino’s appoints interim chief

Domino’s has confirmed that Elias Diaz Sese will take over as interim chief of the firm in October, as the company continues the search for a permanent replacement for outgoing boss Dominic Paul.

MEDIA & ENTERTAINMENT

Entertainment and media sector set for growth

Analysis points toward long-term confidence and growth in the entertainment and media industry, despite short-term uncertainty in the market. The report forecasts that the industry in the UK will climb at a compound annual growth rate of 4% over the next four years, with revenues reaching £97bn by 2026. This growth is reflected by an increase investor appetite, with deal activity in the sector up 72% in 2021 compared to the previous year.

REAL ESTATE

Rate hike could see house prices fall by a fifth

City economists have warned that house prices could fall by more than 20% if the Bank of England is forced to hike interest rates steeply. Mortgage affordability – the ratio of a home purchase loan to the size of the borrower’s income – may have to drop from 3.5 to 2.5 if lenders start charging 6% on mortgages. Andrew Wishart, senior property economist at consultancy Capital Economics, said: “If that happened overnight, it would imply a 21% fall in house prices.” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that if the Bank did hike rates to the market’s expectations of 6%, it “would lead to a sharp rise in mortgage defaults,” adding that a sudden wave of borrowers being unable to service their mortgage debts could “set in motion a banking crisis.”

RETAIL

Morrisons chief operating officer to depart

Trevor Strain, the chief operating officer of Morrisons, has confirmed plans to step down. Mr Strain, who joined Morrisons from Tesco in 2009 as commercial and operations finance director, had been considered by the City as a candidate to be the next chief executive.

Former Asos chief named Gymshark CFO

Former Asos interim chief Mat Dunn has been named as the new chief financial officer Gymshark, as the company gets set to open its first physical store. Mr Dunn, whose departure was announced from the fast fashion brand a month ago, will join Gymshark in early 2023.

SPORT

Premier League players to earn extra £240k a year after tax cuts

The average Premier League player’s net income will rise by about £240,000 a year after the Government’s tax and National Insurance cuts. Premier League players paid out £1.4bn in direct tax in 2019/20. The cut of the highest rate of tax from 45% to 40% - as well as NI changes - will mean that drops by £70m.

ECONOMY

BoE chief economist: Pound slump will require ‘significant response’

The Bank of England’s chief economist has warned that the pound’s slump to a record low against the dollar will require a “significant” response. Speaking at the International Monetary Policy Forum, Huw Pill said there will be "challenging times" to bring inflation back to the Bank's 2% target, with recent market conditions creating "additional challenges." Mr Pill said there have been “significant market consequences” following the Chancellor’s announcement of tax cuts last week, going on to say: “It is hard not to draw the conclusion that all this will require a significant monetary policy response.” He also described the Treasury’s decision to commit to a further, costed fiscal announcement with the oversight of the Office of Budget Responsibility in November as "helpful." 

OTHER

Only 11% ‘entirely trust’ Government for financial advice

New research, carried out by the David Hume Institute think-tank, has found that only 11% of people would “entirely trust” the UK Government as a source of financial advice or guidance. The research also showed that only a fifth (21%) of those questioned trusted “companies which provide financial products such as pensions” as a source of information. Instead more than half of people (52%) identified family and friends as a source of reliable information.

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