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Daily News Roundup: Wednesday, 2nd August 2023

Posted: 2nd August 2023


Banks to explore open banking in the savings market

The Financial Conduct Authority (FCA) has announced that banks and building societies have committed to exploring how investment in open banking can be used to support savings customers. Currently, most savings products are outside the frameworks for data sharing. The FCA said that opening up savings data has "the potential to bring consumers up to date and personally relevant information to enable them to make active switching decisions." Regulators are currently considering the next steps in open banking, determining what form a new regulator will take and which products should fall under the open finance remit. Since launching in 2017, open banking, which looks to improve competition by forcing high street lenders to open customers’ data to trusted third-party firms, has seen over 7m customers, with 750,000 of these SMEs. The UK’s six largest banks implement the requirements of the open banking roadmap in January and April saw regulators announce that a new long-term regulatory framework would be established to “unlock” its potential.

HSBC profits more than double

HSBC has launched a $2bn share buyback programme after first-half profits more than doubled. Pre-tax profit hit $8.8bn in Q2, with the bank's strong performance driven by rising interest rates globally, leading to increased net interest income. HSBC UK accounted for about 22% of the group's total pre-tax profits in the first half of the year. HSBC has raised its full-year net interest income guidance to over $35bn and upgraded its forecast for return on tangible equity. HSBC increased provisions for credit losses to $900m, with $300m set aside for the commercial real estate sector in China and $300m in the UK. The bank is focusing on Asia and plans to boost revenue in its Asian wealth business by up to 9% over the next few years. HSBC's chief executive, Noel Quinn, said: “We have moved on from the task of purely transforming the bank between 2019 and 2022, to a greater focus on growth and new creation for our shareholders. Our portfolio is more focused and we have a tight grip on costs. So if you take one thing from today's results, it's our strategy is working.”

Metro Bank reports £16.1m profit in first half

Metro Bank reported a pre-tax profit of £16.1m in the first half of the year, a significant improvement from the £48m loss recorded in the same period last year. The bank's deposits decreased from £16.01bn to £15.53bn in H1. Its net interest margin, which represents the difference between what it charges on loans and pays on deposits, climbed to 2.14% in the first half from 1.73% a year earlier. Metro said it is pushing ahead with plans to expand its store network in the North of England, having previously said it wants to open 11 more branches by the end of 2025. Daniel Frumkin, the bank's chief executive, said: “Whilst competitors continue to shrink their branch numbers and reduce hours, we are continuing to see the benefits of being rooted in the communities we serve and we believe this will continue to differentiate our proposition in the years ahead.”

More banks cut mortgage rates

NatWest, Halifax, and Virgin Money have announced rate cuts on their mortgage deals. This follows similar cuts made by Nationwide, Barclays, TSB, and HSBC. Virgin Money will reduce rates by up to 0.41%, while Halifax will lower rates on its remortgage deals by 0.18% and 0.27%. NatWest will cut rates on new purchases and remortgages by up to 0.3%. Smaller lenders, including Vida Homeloans, Foundation Home Loans, and Accord, have also reduced rates. The most recent cuts were announced just a day after the Financial Conduct Authority said banks and lenders will be named and shamed over high rates, with the regulator having found that fewer than 30% of interest rate rises had been passed on to savers, despite some banks making huge profits from higher mortgage rates.


Chinese regulators tell banks to reduce dollar purchases

China's currency regulators have instructed some commercial banks to reduce or delay their dollar purchases in order to slow the pace of yuan depreciation. The People's Bank of China and the State Administration of Foreign Exchange have emphasised that banks should hold off on dollar purchases under their proprietary trading accounts. The Chinese yuan has lost 3.6% against the US dollar this year, making it one of Asia's worst performing currencies.

UniCredit proposes giving board audit powers

UniCredit has proposed amending its by-laws to give its board audit powers, aligning its governance with rival banks. The changes, subject to shareholder approval, would bring the control body within the board, enhancing the effectiveness of controls.


Wizz Air faces pushback on plan to give chief extra time to hit £100mn bonus

Proxy advisers ISS and Pirc have recommended investors vote against Wizz Air's plan to give chief executive József Váradi an extra two years to meet the criteria to land a £100m bonus.


FCA appoints chairs to three panels

The Financial Conduct Authority has appointed chairs to lead three of its panels. The City watchdog has appointed Clare Woodman, head of EMEA and CEO of Morgan Stanley, as chair of the Markets Practitioner Panel; while Matt Hammerstein, CEO for Barclays Bank UK, will serve as chair of the Practitioner Panel; and Mandy Gradden, CFO at information, data and analytics company Ascential, has been named chairperson of the Listing Authority Advisory Panel. FCA chair Ashley Alder said the chairs “bring with them a deep wealth of experience and knowledge at a changing and challenging time for the economy and for consumers.” “They will play a vital role in providing insight and challenge on behalf of the firms, markets and consumers we serve by ensuring that all voices are heard,” he added.


Manufacturing sector records worst month of the year

The UK manufacturing sector endured its worst month of the year in July as demand for goods weakened further both at home and abroad. The S&P Global/CIPS manufacturing PMI fell to 45.3, down from 46.5 in June. British manufacturers have been struggling under the weight of high energy prices and a weaker domestic and global economy. The number of people working in the industry fell for the tenth consecutive month and at the fastest rate this year. Despite falls in the costs of raw materials and energy, manufacturers did not reduce prices for buyers last month. The report notes that input cost inflation fell for a third consecutive month as pressures on transport and energy prices eased. Rob Dobson, director of S&P Global Market Intelligence, said: "Domestic and export demand are weakening and backlogs of work are declining sharply, all of which likely presages further cutbacks to production, employment and purchasing in the months ahead." 


House prices see steepest fall in 14 years

House prices fell at the fastest annual rate for 14 years in July, according to data from Nationwide. The 3.8% year-on-year decline was the steepest since July 2009. The fall took the average UK house price to £260,828, with this around £13,000 – or 4.5% - below a peak recorded in August 2022. Month-on-month, prices were down 0.2% in July. Noting that housing affordability “remains stretched” for those hoping to buy a home with a mortgage, Robert Gardner, Nationwide’s chief economist, said a “challenging affordability picture helps to explain why housing market activity has been subdued in recent months.”


Recession warning over rate hikes

With the Bank of England expected to deliver its fourteenth consecutive base rate hike, economists have warned that repeated interest rate increases could tip the country into a recession. The Bank’s Monetary Policy Committee (MPC) is expected to back a rise of 0.25 percentage points that would take the base rate to 5.25%. Martin Weale, a former MPC member, said there is “no doubt” that an increase would increase the risk of recession. However, he noted that rate-setters have to “balance that risk against the need to bring inflation down.” He added: “I do think it is a risk that is better taken than ducked.” Stephen Millard, of the National Institute of Economic and Social Research, said a fresh hike would “increase the risk” of a recession, although he does not think this week’s forecasted rise will lead to one. Richard Murphy, professor of accounting practice at Sheffield University, has warned that rate increases “have gone too far,” pointing to “signs of real stress in the economy,” and a “potential private debt crisis on the horizon.” “We need to stimulate the economy rather than try and slow it. This is the moment to say enough is enough,” he argues.


Breeden to succeed Cunliffe as Bank deputy

Chancellor Jeremy Hunt has announced that Sarah Breeden will replace Sir Jon Cunliffe as the Bank of England’s deputy governor for financial stability as of November 1. Bank governor Andrew Bailey said Ms Breeden “will bring a wealth of financial and economic policy knowledge to the role, both domestically and internationally.” Ms Breeden, who will join the Bank’s Monetary Policy Committee, will remain a member of the financial policy committee alongside Mr Bailey and Financial Conduct Authority chief executive Nikhil Rathi. Mr Hunt said that in his decade in the role, Sir Jon “has led the Bank’s work on delivering financial stability and has played a key role in ensuring Britain’s financial services are well placed to thrive in the future.”

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