BANKING
Banks gain £3bn from savers and borrowers
Britain’s five biggest banks have pulled in an extra £3bn from customers by increasing mortgage rates while holding savings deals steady. Banks have seen net interest margins - the gap between what they charge borrowers and pay savers – hit £16bn in the last three months. This is £3bn up on the near £13bn recorded over the July to September period in 2021. The Mail says takings are set to climb further, with the Bank of England expected to increase the base rate by 0.75 percentage points, taking it to 3%. While lenders have been quick to hike mortgage deals on the back of rising interest rates, Bank of England data shows the average rate on easy-access savings accounts is still just 0.4%, up from 0.1% in January. Britain’s big five banks — Barclays, HSBC, Lloyds, NatWest and Santander — have all increased the gap between what they charge borrowers and pay savers. By contrast, smaller banks and building societies have pushed up their rates, with market-leading online account rates at Al Rayan Bank, Aldermore, Hampshire Bank, RCI Bank and Secure Trust. Laura Suter at broker AJ Bell says: “Until savers vote with their feet and move their money to accounts with better rates, the big brand names don’t need to offer savers more attractive deals.”
Regulator monitoring mortgage market
The Financial Conduct Authority (FCA) is sending weekly surveys to mortgage lenders to collect information on rates and availability in order to provide the regulator with an oversight of the issues affecting firms and consumers. The survey asks about whether the lender has made any changes to interest rates or withdrawn any products. With interest rates continuing to rise, the FCA has been working with lenders to ensure consumers are treated fairly amid cost-of-living pressures.
AUTOMOTIVE
Bentley’s profits more than double
Bentley has reported its results for the nine months ended September 30 – with profits more than doubling year-on-year to €575m, while return on sales increased to a record 23.1%. Revenue was up 28% to €2.5bn.
AVIATION
Carlyle sues insurers after jet seizures
The aviation division of Carlyle Group is suing insurance firms, claiming a total of about $700m after aircraft were seized in Russia in the wake of its invasion of Ukraine. Carlyle Aviation Partners, which leases aircraft, says that more than 30 insurers and reinsurers have failed to pay up on policies covering aircraft stranded in Russia. AerCap, the world's biggest aircraft leasing business, earlier this year filed a claim thought to be worth about $3.5bn, aiming to recoup the value of about 100 jets seized in Russia, while Dubai Aerospace Enterprise last week filed a lawsuit against insurers two months after it wrote off almost $600m for 19 aircraft stuck in the country.
FINANCIAL SERVICES
Treasury committee chair questions call-in powers
Dame Angela Eagle, interim chair of the Treasury Select Committee, has voiced concern over plans to give the Treasury the power to overrule decisions made by City regulators. She warned that the proposed call-in power is “controversial and potentially risky.” In a letter to Economic Secretary Andrew Griffith, Dame Angela called on the Government to allow the powers to be scrutinised by MPs. She also asked whether regulators will be consulting on the move and asked for “adequate time” for the committee to take evidence, scrutinise and table amendments to this element of the Financial Services and Markets Bill. The Treasury yesterday said amendments to the bill, which add in the “safety valve” of call-in powers, will be delayed. In a letter to the Treasury Select Committee, Mr Griffith said: "In light of the appointment of the new PM last week and the need for government to consider the detail carefully, we will now be unable to take the amendment in time for the deadline for committee stage."
FCA: ‘Tick box approach’ to consumer duty not good enough
Therese Chambers, the Financial Conduct Authority’s (FCA) director of consumer investments, has warned advisers against viewing the consumer duty as a tick box exercise. Speaking at the Personal Finance Society’s Festival of Financial Planning, she said the consumer duty gives the industry an opportunity to focus on driving up standards, adding that there is a need to "move from a one size fits all model, to models which are generally designed to meet the needs of customers and which recognise that not all customers have the same needs.” Telling advisers that “this is a different lens to what you have been used to,” Ms Chambers warned that a tick box approach to detailed regulatory requirements “will not be good enough.” “Firms who view the new consumer duty as simply a change to governance and processes will not meet the new standards,” she added.
Watchdog extends pensions dashboard deadline
Regulated pension providers have been given an extra two months to comply with the Financial Conduct Authority's (FCA) pensions dashboard rules. The watchdog said providers will have until August 31 for implementation, matching the Government’s extension to a deadline on occupational pension schemes. The FCA has also extended the connection deadline for providers with fewer than 5,000 pots in accumulation and those that rely on a third-party integrated service provider to achieve compliance. They will have until October 31, 2024, as long as they notify the FCA by April 30, 2023. The FCA said this extension comes amid concerns over demand for integrated service solution providers outstripping supply.
FCA pay deters top talent, says former official
Sasi-Kanth Mallella, a former technical specialist in the criminal prosecution team at the Financial Conduct Authority, has suggested pay policies at the City watchdog mean it is struggling to recruit top calibre staff. Mr Mallella said that while reforms pushed through by chief executive Nikhil Rathi have lifted salaries at the lower level, more senior staff have been left underpaid. He argues that the overhaul has had a “mixed impact”, with the regulator’s ability to attract staff in the banking and legal sectors constrained by a lack of funds. “You are not going to recruit those sorts of people by and large with the amount of money that they’re currently offering to employees,” he said, adding that the FCA’s current wage scales mean it is unlikely to lure professionals from private practice law or accountancy.
MANUFACTURING
Manufacturing sector contracts again
The manufacturing sector shrank for the third month in a row in October, according to the latest S&P/CIPS purchasing managers’ index. It scored just 46.2 on an index where anything below 50 is considered a contraction. This compares with a reading of 48.4 in September. Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing production suffered a further decline at the start of the fourth quarter, with the sector buffeted by weak demand, high inflation, supply-chain constraints and heightened political and economic uncertainties.”
REAL ESTATE
House prices slip 0.9% in October
House prices fell for the first time in more than a year in October, according to figures from the Nationwide Building Society. The average price dropped 0.9% to £268,282 last month, while year-on-year growth slowed from 9.5% to 7.2%. Robert Gardner, Nationwide’s chief economist, said a “sharp rise” in mortgage rates has had an impact, commenting: “Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the fall in prices “provides the strongest signal yet that house prices will buckle in the face of the surge in mortgage rates and the squeeze on real disposable incomes.”
RETAIL
Made.com appoints administrators
Furniture retailer Made.com has opted to appoint administrators after failing to find a buyer. While administrators will now seek to sell the firm’s assets to potential buyers, the company has warned “there can be no certainty that any such sale will proceed.” Made.com issued its third profit warning in less than a year in July and was forced to cut a third of its workforce in September. The company then sought a solvent sale of the business and while it attracted interest from a number of parties, it was unable to secure a rescue deal.
Morrisons to close 132 McColl's stores
Morrisons has said it plans to close 132 of its loss-making McColl's convenience stores, putting 1,300 jobs at risk. It comes after the supermarket chain agreed to buy McColl's out of administration in May.
ECONOMY
BoE in £750m bond sale
The Bank of England has sold £750m of government debt, with the bond auction heavily oversubscribed. The Bank received £2.44bn worth of bids for the debt. Despite the sale, the Bank still owns over £837bn of government debt. While quantitative easing (QE) saw the Bank buy up government bonds to support spending and bring down interest rates, selling bonds - quantitative tightening (QT) - is expected to raise market interest rates and discourage bank lending. Tighter financial conditions should reduce demand in an economy and tackle inflation. Antoine Bouvet, senior rates strategist at ING, warned that the Bank has sold bonds that were already in high demand, meaning there may be an issue once longer-dated debt sales begin. “So far so good I would say but clearly gilts cannot afford an underwhelming budget or investors questioning the BoE’s tightening strategy,” he added.
OTHER
Funds struggle to sell sustainability
Research shows that fund managers are struggling to sell their green investment products to financial advisers as greenwashing erodes trust in the ESG industry. Analysis by the Association of Investment Companies shows that just 1% of financial advisers and wealth managers said they now “completely trust” claims made by green and ESG funds, with a lack of evidence cited as the key reason for a lack of faith in sustainability claims. City AM notes that watchdogs are “looking to clamp down on fanciful sustainability claims by fund managers,” with the Financial Conduct Authority having revealed plans to curb the unverified use of terms like ‘green’, ‘sustainable’ and ‘ESG.’ The City watchdog is also tightening disclosure requirements, with firms having to prove unsubstantiated claims.