One in three of Starling’s bounceback loans is underperforming
The chief executive of Starling has admitted to the Commons Public Accounts Committee that 34.3% of the bounceback loans it provided were in “distressed” status. The figure revealed by Anne Boden in Tuesday’s hearing was considerably higher than the proportion reported by other bank representatives who appeared before MPs. HSBC’s head of lending Karl Reid said roughly 17% of the bank’s loans were either in default or in arrears while Andrew Harrison, managing director of business banking at NatWest, said that 88% of its loans were either fully repaid or being paid back on time. Paragon bank’s managing director Dave Newcombe said that just two of its 139 loans were in arrears. The latest data published by the British Business Bank show that across the entire scheme, around 3.2% of outstanding loans were in default, 7.6% in arrears.
Chancellor to call on banks to help mortgage borrowers
Jeremy Hunt will host talks with bank bosses today during which he will urge them to provide more support for borrowers struggling to pay their mortgage during the cost-of-living crisis. The Chancellor will meet with Debbie Crosbie of Nationwide, HSBC UK’s Ian Stuart and NatWest’s Alison Rose to discuss the impact of rising interest rates and living costs on customers. Bosses from Lloyds, Santander UK and Barclays will also attend as will Richard Lloyd, the interim chair of the Financial Conduct Authority and consumer champion Martin Lewis.
“Socially conscious” Kroo opens first account
The digital bank Kroo is launching its first current account after being granted its banking license earlier this year. Kroo describes itself as a “socially conscious digital bank” which “truly connects people financially and champions values our customers can identify with.” He new app-based bank account is offering in-credit interest of 2% on balances up to £85,000. It will also plant two trees for every current account opened.
Paragon posts 16% jump in profit
Paragon Banking on Tuesday reported a 16.4% rise in annual profit on Tuesday, helped by strong loan book growth and rise in net interest margins. Operating profit came in at £226m for the year ended Sept. 30, up from £194.2m last year.
Blackrock to be a little more prudent - CFO
Blackrock’s CFO Gary Shedlin told a conference on Tuesday that the firm would be cutting back on expenses and placing a freeze on new hires in order to improve its position next year. Separately, activist investor Bluebell Capital Partners said in a letter it has sought to replace BlackRock CEO Larry Fink after taking a position in the asset manager. Bluebell accused Blackrock of “contradictions and apparent hypocrisy” on sustainability and of politicising the ESG debate while failing to live up to Fink’s widely publicised sustainability commitments.
Morgan Stanley to cut 1,600 jobs, banks issue wary outlooks
Morgan Stanley is cutting about 1,600 jobs or roughly 2% of its global workforce. The move comes as major banks cut staff numbers and prepare to trim bonuses as the economy contracts. Chief executive James Gorman said the downsizing was an expected result of years of rapid growth. Elsewhere, Goldman Sachs boss David Solomon told an industry conference on Tuesday that clients were “extremely cautious” amid the slowing economy while Jamie Dimon, head of JP Morgan Chase, told CNBC that rapidly rising prices are eroding business and households savings and threatened to derail the economy.
Deutsche and Rabobank charged by EU antitrust regulators
Deutsche Bank and Rabobank were charged on Tuesday with taking part in a government bond cartel. The European Commission said the two banks coordinated pricing and trading strategies on euro-denominated sovereign, covered and government guaranteed bonds between 2005-2016. "For effective competition to function, it is fundamental that economic operators determine their prices independently. Citizens need to be able to trust that financial institutions do not implement practices that restrict competition in bonds trading markets," EU antitrust chief Margrethe Vestager said in a statement.
Goldman Sachs eyes bargain crypto firms
Goldman Sachs will look to make a series of investments into crypto firms after the collapse of FTX sent valuations plummeting. Mathew McDermott, Goldman's head of digital assets, said: "FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform."
UK construction growth slows as mortgage rates hit housing market
UK construction growth slowed by more than expected in November as rising interest rates hit residential building projects. The S&P Global/CIPS UK Construction Purchasing Managers’ Index fell to 50.4 last month, from 53.2 in October. It is the third consecutive month that the index has fallen, and well below a consensus forecast for 52.0.
UK financial regulators warned to improve transparency
City minister Andrew Griffith has written to the heads of the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority calling for an update on their plans to increase transparency and their efforts to be “world-leading in terms of operational effectiveness.” His letter comes ahead of the unveiling of the Government’s financial services reforms due this week. Meanwhile, chief secretary to the Treasury, John Glen, told a regulatory summit hosted by Bloomberg that the Government was committed to the independence of the regulators and would not engage in a “race to the bottom” on regulation. Glen added that the landmark financial services and markets bill, which ministers have claimed will unleash a ‘Big Bang 2.0’ in the City, will be designed to boost the UK’s international standing rather than scrap red tape for the sake of it.
FCA looks to curb harmful promotions
The Financial Conduct Authority (FCA) on Tuesday proposed new rules requiring regulated firms to report to the FCA on the financial promotions they have signed off on. The measures come amid a sharp rise in misleading marketing online and will part of the new Financial Services and Markets Bill. "The proposed reforms will ensure the FCA can act quickly to put a stop to harmful financial promotions communicated by unauthorised firms, including in areas such as high-risk investments and Buy Now Pay Later," the FCA said.
Credit Suisse to fund Curve’s first $1bn of BNPL loans
Curve has agreed a $1bn deal with Swiss lender Credit Suisse to fund a growth push for its buy-now pay-later product, Flex. The London-based payments firm says its Curve Flex product will allow shoppers to split transactions they have made through Curve on any payment card across six, nine and 12 monthly instalments.
LEISURE & HOSPITALITY
World Cup sales to boost Marston's
Marston's has reported a £163.4m pre-tax profit for the year to October 1, compared with a £171.1m loss in the previous year. The company said sales over the last eight weeks have increased 7% on a like-for-like basis, while full year sales hit 99% of 2019 levels. Andrew Andrea, chief executive of Marston's, said: “Current trading to the end of November has been positive with encouraging levels of Christmas bookings as we look forward to the first-restriction free festive period in three years. Additionally, the World Cup has benefited trading, delivering like for like drink sales of around 50% growth for the home team games.”
Grim outlook for London office values
Analysis of the London commercial property market by Citi suggests the value of office blocks in the capital will fall by 38% in the next two to three years as rising unemployment and working from home depress demand. Citi forecasts that vacancy rates in London offices will double to around 11% as firms shed staff. “Based on the historic inverse correlation between rents and vacancy rates, we estimate a fall in London office rents of around 43%,” real estate analyst Aaron Guy said. The Times points out that not all predictions are this stark: Matthew Pointon, a senior property economist at Capital Economics, said recently that he expected London offices will have fallen in value by about 15% by 2025.
Asda planning to open 300 UK convenience stores
Asda has confirmed plans to open 300 convenience stores in the next four years, creating up to 10,000 new jobs. The grocer, which currently has just two Asda Express stores, said the 300 sites will be in addition to the 132 convenience stores the group is acquiring from the Co-op.
British companies targeted by foreign buyers
Figures from the Office for National Statistics (ONS) show the value of takeovers of British companies by foreign ones more than doubled to £25bn in the third quarter amid low valuations in the UK and a falling pound against the dollar. This compares with £12.5bn in the third quarter of 2021 and £11.1bn in the second quarter of this year. Outward M&A grew to £7.6bn in the quarter from £4.8bn previously.