BANKING
MPs say regulation is holding back challenger banks
MPs have warned that the Government's approach to regulation is hindering challenger banks and have called for watchdogs to “break the chains” holding back their growth. In a new report on the UK’s banking sector, The All-Party Parliamentary Group (APPG) on Challenger Banks and Building Societies said challenger banks were being restricted by over-burdensome rules. The MPs warned of “regulatory chains” and a “distinct lack of proportionality in the approach of regulators” when it comes to challenger banks and building societies. MP Karen Bradley, chair of the APPG, said: “The UK’s one-size-fits-all regulatory model for banks – challengers, building societies and institutions big and small isn’t working.” Commenting on the report, Metro Bank CEO Dan Frumkin said the potential of challenger banks “continues to be held back because rules and regulations aimed at de-risking the UK’s biggest banks actually prevent challengers from growing and shaking up banking for the better.”
Yorkshire Building Society appoints first female chief executive
Yorkshire Building Society has appointed the first female CEO in its 158-year history, having recruited Susan Allen from Barclays. She previously led Santander's UK retail and business banking businesses. She will take up the role early next year, replacing interim chief executive Alasdair Lenman. Ms Allen commented: "I'm really excited to have the opportunity to lead an organisation which has such a strong sense of purpose and which supports members at key points in their lives." Chairman John Heaps said Ms Allen's skills and expertise "will be of significant benefit to our members as we continue to invest in our digital servicing capability to help more members interact with the Society how, when and where they want to, and this will complement our branch and telephone channels.”
INTERNATIONAL
Lawyer to watch Morgan Stanley traders
Morgan Stanley has ordered a lawyer to watch over bankers in its block trading division amid a US federal investigation into big share transactions. It has installed the lawyer on its US equity syndicate desk to supervise staff and answer their legal questions. The move follows a crackdown by US authorities on block trading – the bulk selling of shares in quantities large enough to move markets.
AVIATION
Ryanair will grow faster in recession, says CEO
Ryanair chief executive Michael O'Leary says the business will grow even faster in the event of an economic downturn, suggesting that people would still fly during a recession but would choose low-fare airlines. He said that as with previous downturns, “you see people trading down from high-fare airlines like BA and Easyjet, to low-fare airlines like Ryanair,” likening it to the way “many people have switched from shopping in Sainsbury's to Lidl and Aldi.”
FINANCIAL SERVICES
Insurers continue to punish customer loyalty
Research by Which? suggests insurers are increasing renewal prices for many of their existing customers despite a ban on loyalty penalties. A poll of 14,000 people found that more than 50% of home cover customers and over 40% of car insurance customers were paying a higher premium this year than last, with more than half of those paying more having remained with their existing supplier. In January the Financial Conduct Authority implemented rules that banned car and home insurers from offering different prices to equivalent new and renewing customers. Which? analysed premiums paid by customers in the first six months of this year compared with premiums paid in H2 2021. The premiums of 51% of home insurance customers still rose by an average of £41 under the new rules, while the bill for 43% of car insurance customers increased by an average of £35.
Investor confidence low, warns investment platform boss
Chris Hill, chief executive of retail investment platform Hargreaves Lansdown, says investor confidence has hit at an all-time low amid soaring inflation and concerns over Russia’s invasion of Ukraine. He said: “Investor confidence is really, really low – probably the lowest we have seen.” He added that his firm is “aware of engaging with clients on the benefits of saving and investing over a long period of time,” saying: “If you build up your financial resilience you can cope with these short-term shocks. If you are investing for the long term you shouldn’t be so concerned about the short-term volatility.”
Wise subsidiary fined over anti-laundering failures
A subsidiary of London-listed payments app Wise has been fined $360,000 for breaching anti-money laundering rules by authorities in the United Arab Emirates. The Financial Services Regulatory Authority of Abu Dhabi Global Market found that Wise Nuqud, a fully owned subsidiary of the money transfer business, did not maintain adequate anti-money laundering controls "to ensure full compliance with its obligations" in the country.
LEISURE & HOSPITALITY
Pub bosses call for Government help over energy costs
A group of UK pub chains have called for immediate Government intervention to help with energy bills. The chains warned that energy price rises are "putting jobs and businesses at risk". Chris Jowsey, boss of Admiral Taverns, said his tenanted pubs now pay more in energy bills than they do in rent. Emma McClarkin, chief executive of the British Beer and Pub Association, added that the rise in energy bills would cause more damage to the industry than the pandemic if it does not receive support in the next few weeks.
REAL ESTATE
Mortgage lending declines
Mortgage borrowing decreased slightly to £5.1bn in July, from £5.3bn in June, figures from the Bank of England show. The data shows that gross lending rose to £26.1bn from £24.6bn the month before, while gross repayments increased to £20.8bn from £19.4bn. Approvals for house purchases, which serves as an indicator of future borrowing, increased to 63,800 in July, from 63,200 in June. Despite the increase, July’s figure still fell short of the pre-pandemic 12-month average of 66,800 recorded in February 2020. Approvals for remortgaging came in at 48,400, up from 43,300 the month before. This remains below the 12-month pre-pandemic average of 49,500.
RETAIL
Revolution Beauty to suspend trading as it fails to complete audit
Revolution Beauty is to halt trading of its ordinary shares after it failed to complete its audit ahead of deadline. The beauty firm said it would “not be in a position to publish its audited final results and annual report” and would therefore be suspending trade from September 1.
Shares in JD Sports advance after bullish update
Shares in sportswear retailer JD Sports rose by 2.4% yesterday after analysts at Credit Suisse lifted their full-year profit forecasts by 2% to £958m ahead of next month’s half-year results.
ECONOMY
Inflation could hit 22%, Goldman warns
UK inflation could hit 22% next year if soaring gas prices fail to come down, Goldman Sachs has warned. Economists at the investment bank wrote in a research note: “In a scenario where gas prices remain elevated at current levels, we would expect the price cap to increase by over 80% in January (vs 19% assumed in our baseline).” They added that this would imply headline inflation peaking at 22.4%, well above their baseline forecast of 14.8%. Economists from Citi last week said consumer price inflation was set to peak at 18.6% in January, far exceeding the Bank of England’s 2% target. Inflation currently stands at 10.1%. Meanwhile, Sven Jari Stehn, chief European economist at Goldman, reflected on what officials may do in regard to interest rates, saying: “Despite the incoming recession, we continue to look for the Bank of England to hike by another 50 basis points in September and see upside risks to our expectation of 25 basis points hikes in November and December given continued upside inflation and wage growth surprises and the need to keep inflation expectations anchored.”
Consumer credit rose in July
Data from the Bank of England shows that credit card borrowing grew by £730m in the 12 months to July, with the 13% increase the fastest rise since October 2005. The annual growth rate for all consumer credit, which also includes overdrafts, personal loans and car finance, increased to 6.9% in July, hitting £1.42bn. This marks the highest rate since the 7.2% seen in March 2019. The annual growth rate for credit card borrowing was 13.0%, while for other forms of consumer credit it came in at 4.5%. Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The annual growth rate of credit card borrowing has soared to its highest levels in 17 years amid the worst cost of living crisis in generations. July was a particularly agonising month for our back pockets, with inflation hitting double digits for the first time in 40 years.” Paul Dales at Capital Economics commented: “As inflation surges further in the coming months, more households will probably need to borrow more to tide them over. But lots of other households will probably cut back on their spending and as a result, their borrowing. As such, we think the outlook for consumer credit is weak.”
OTHER
Business confidence slips in August
Confidence among British businesses is at its lowest since during the third national lockdown in early 2021, according to Lloyds Bank’s latest Business Barometer. A net 16% of management teams said they were confident about their prospects for the year ahead in August, with soaring inflation hitting corporate confidence. This compares with 25% in July and a long-term average of 28%. August’s poll marks the third month in a row that confidence has slipped. The poll of 1,200 companies saw 56% of bosses say they expect they will have to increase their prices over the next 12 months as input costs climb. Almost 40% flagged slowing economic growth both in the UK and globally as a concern. The report also reveals that less than half of businesses expect to see their trading prospects improve over the next 12 months, while more than a third expect to increase their headcount next year.