BANKING
UK banks relying more on short-term funding, says report
Banks in the UK are relying more on short-term funding as rising interest rates push depositors to seek better deals elsewhere. According to a report from the Bank of International Settlements (BIS), UK banks saw a $50bn increase in funding from US non-banks in the first quarter of the year, while deposits from the real economy declined by $43bn. This increase in short-term funds came from US money-market funds (MMFs), which offer higher interest rates than bank deposits. However, concerns have been raised about the risks posed by MMFs to financial stability. Lee Doyle, partner at Ashurst, said “MMF liquidity is inherently short term and liable to withdrawal. This must be considered a growing systemic risk”. The Bank of England is developing new tools to inject liquidity into non-banks, but MMFs will not have access to this emergency funding. The Bank of England will release a consultation paper on money market funds later this year.
Revolut strikes share deal with SoftBank
Revolut and its largest investor, Softbank, have come to an agreement on simplifying the fintech’s share structure – a key plank in gaining approval for a banking licence. The Bank of England had instructed Revolut to collapse its six classes of shares into one as a condition for a full license which the company first applied for over two-and-half years ago. According to the FT, other investors such as Tiger Global Management, venture capital firm TCV, Balderton Capital and Ribbit Capital have all either agreed to transfer their shares into a single class, or are in final talks to do so.
Virgin Money offers temporary best-buy remortgage rate
Virgin Money is set to launch a best-buy remortgage rate of 4.9% on a five-year fix, but borrowers will have only seven days to secure it. The rate is the lowest on the market for remortgagers and is a reduction of 0.25 percentage points on the previous price. The next-cheapest deal is Yorkshire Building Society's 4.92% on a five-year fix. Virgin Money is also reducing its five-year fix for those with a 70% deposit or equity by 0.25% to 4.95%. Mortgage broker John Charcol said borrowers should expect more competitive offerings in the coming months.
Lloyds Bank teams up with BlackRock to offer ETF ‘quicklist’
Lloyds Bank has chosen BlackRock’s iShares arm for the launch of an exchange traded fund service designed to attract do-it-yourself investors.
PRIVATE EQUITY
European venture capital firm Atomico raises $1.1bn to defy tech slowdown
The London-based venture capital firm Atomico has defied a broader slowdown in the tech industry and raised $1.1bn worth of new funding to invest in start-ups.
INTERNATIONAL
PNC Financial acquires $16.6bn portfolio from Signature Bridge Bank
PNC Financial Services' banking unit has acquired a $16.6bn portfolio of capital commitments from Signature Bridge Bank. The portfolio includes fund subscription credit lines extended to private-equity firms and $9bn of funded loans. PNC Bank stated that the acquisition is highly complementary to its existing business. PNC Bank purchased the commitments and loans without any funding, guarantees, or loss-sharing agreements from the FDIC. Signature Bank was closed by the FDIC in March and its deposits and assets were transferred to Signature Bridge Bank.
Westpac fails to sell pacific banking business
Australian lender Westpac has cancelled the sale of its Fiji and Papua New Guinea businesses, ending a years-long process that was beset by regulatory problems. The divestment deal with Kina Securities was blocked by a Papua New Guinea regulator. Westpac had warned that failure to divest the businesses would expose it to higher operating costs and inherent risks. The bank plans to launch a new brand campaign in both countries to improve its standing in local markets.
Bank debt sales in Singapore set to break annual record
Bank debt sales in Singapore are on track to break the annual record for the second consecutive year. The market is being driven by attractive currency swaps and cash-rich investors, which are luring issuers to the traditionally domestic market. So far this year, $2.4bn worth of "Tier 2" notes have been sold in Singapore dollars, already surpassing last year's record of $2.6bn.
AVIATION
SAS wipes out shareholders as part of rescue deal
Scandinavian airline SAS has selected a group offer that includes private equity firm Castlelake, Lind Invest together with the Danish government and Air France-KLM to finance its turnaround. The airline said it would receive $475m in new equity and $700m in convertible debt as part of the deal, and if approved by US regulators, the arrangement would see it taken off the stock exchange with no payment to current shareholders and little to bondholders. The carrier filed for bankruptcy protection in mid-2022 after years of struggling with high costs coupled with low customer demand brought on by the pandemic.
FINANCIAL SERVICES
Insurance firms to face dynamic stress tests from 2025
Insurance firms will be subject to "dynamic" stress tests from 2025 as the regulator seeks to ensure the sector remains financially secure in the face of major regulatory changes. The Prudential Regulation Authority (PRA) confirmed that the tests will assess the industry's solvency and liquidity resilience while also helping to judge the effectiveness of insurers' risk management. The tests will simulate a sequential set of adverse events over a short period of time. The PRA will engage with the industry over the next six months to provide further details in the first half of 2024. This announcement comes as the industry undergoes a major regulatory shakeup. The Government's plans for a post-Brexit overhaul of the EU's Solvency II rules have sparked a debate between the PRA and the Government, with the PRA warning that the reforms increased the risk of insurers collapsing.
HEALTHCARE
Eli Lilly to buy cancer specialist Point for $1.4bn
Eli Lilly is buying Point Biopharma for $1.4bn, paying a premium of almost 90% to Monday’s closing price. The move would mark the “beginning of our investment in developing multiple meaningful radioligand medicines for hard-to-treat cancers” said Jacob Van Naarden, president of the company’s oncology division.
AstraZeneca settles heartburn drug lawsuits for $425m
AstraZeneca has reached a $425m settlement to resolve long-standing lawsuits involving an old blockbuster stomach acid drug in the United States. AstraZeneca said that the settlements involving Nexium and Prilosec meant it could “avoid continued costly litigation” in the US, its largest market.
MEDIA & ENTERTAINMENT
Meta plans to charge European users for ad-free Instagram and Facebook
Meta Platforms is reportedly planning to charge European users of Instagram and Facebook up to $17 (£14) per month for an ad-free subscription tier. Users wishing to maintain free access must agree to targeted ads based on their personal data. According to the Wall Street Journal, the proposal has been made to regulators after the Court of Justice of the EU ruled that under Europe’s General Data Protection Regulation (GDPR) Facebook cannot justify using personal details to target people with personalised ads unless it receives their consent first.
RETAIL
UK food prices drop for first time in almost two years
UK food prices dropped in September for the first month in almost two years, according to retail industry figures. The British Retail Consortium (BRC) reported a 0.1% decrease in the cost of an average food basket compared to the previous month. However, overall food prices are still 9.9% higher than a year ago.
ECONOMY
Global bond market sell off intensifies
UK government bond yields rose above the 5% mark on Tuesday with the 30-year gilt yield hitting 5.02% - the highest level since it briefly topped 5.1% in October last year. The 20-year UK gilt was also sold off hitting a peak of 4.961% while the benchmark ten-year gilt yield rose sharply. This came on the back of new figures showing the US labour market remains overheated, fuelling concerns that the Federal Reserve will have to keep interest rates higher for longer. This sent the yield on 30-year US Treasuries to a 16-year peak, while German and Italian borrowing costs also hit their highest levels for more than a decade. The higher rate of return on bonds left equities trailing with markets in the US, the UK and Europe falling.
OTHER
Banks drive jump in greenwashing incidents
The number of instances of greenwashing by banks and financial services companies worldwide has increased by 70% in the past year, according to a report. Environmental, social, and governance (ESG) data firm RepRisk recorded 148 cases in the banking and financial services industry globally in the 12 months to September 2023, with 106 cases involving European financial institutions. The banking and financial services industry is second only to oil and gas in terms of the number of greenwashing incidents.