April / May 2011: News roundup

Commercial property loans reduced sharply
Property lending by UK banks fell by over £17bn last year, it has been revealed. Royal Bank of Scotland and Lloyds were responsible for the lion’s share of this, with loans from the two taxpayer-backed banks dropping by £14.5bn.

Although the figures have led some analysts to warn of a commercial property price slump, many have welcomed what they see as a sensible and careful approach by the lenders.

“These numbers show that banks have been far more active than people think in reducing their loan exposure to real estate,” said Phil Clark, co-author of the report by the Property Industry Alliance.

The UK’s four biggest banks, RBS, Lloyds, HSBC and Barclays, lent a total of £199bn in commercial property loans last year and the document said that figure could drop to £100bn within the next five years.

Savings outlook is strong
UK savers are optimistic about 2011 with many expecting to put more money aside this year.

These facts were revealed as HSBC unveiled its ‘Savings Map of Britain’.

More than one in three people said they will save more this year, with those aged 18 to 24 most likely to do so. The South West registered the highest positive response.

More than half of the money put aside by the public is in deposit savings accounts with a bank or building society.

Wales has the lowest savings of any region, with people in Scotland having the most diverse portfolio of investments and the second highest level of savings, according to the survey.

Over 55s embrace online finance
Online banking is a hit with those aged over 55. Some 70 per cent of this age range are using the internet to manage bank accounts, with almost as many logging on to source pension schemes, independent financial advice and stocks and shares.

The findings are a huge boost to online banking with many experts claiming that better interest rates, product ranges and general convenience are driving factors.

Many of those questioned also cited better privacy, personal safety and often unpleasant experiences of banking in person.

Surprisingly, a higher proportion of over 55s described themselves as ‘good at online banking’ compared with those aged 18 to 24.

Barclays shells out for Egg
Barclays has agreed a deal to acquire the UK credit card accounts of Egg. Around 1.15 million accounts, comprising over £2bn, will be merged with Barclaycard.

Completion of the deal is expected in the next couple of months, subject to a competition ruling. The price which Barclays is paying has not been revealed.

Barclaycard chief executive Valerie Soranno-Keating said she was “very pleased” with the transaction.

Swiss role attracting finance workers
The number of UK bankers moving to Switzerland to avoid paying more tax has risen by 28 per cent, claims Channel 4.

Figures from the Swiss Federal Migration Office show that 383 British citizens working in banking and financial services moved there last year.

Many leading figures in the industry have long argued that punitive tax rates ran the risk of driving the UK’s banking industry overseas.

BBA calls for regulator co-operation...
The British Bankers’ Association has said that cooperation between institutions is vital for achieving the government’s plans to improve the financial regulatory environment.

Chief executive Angela Knight told a conference of BBA members that Downing Street’s vision could have significant benefits for the sector if they have genuine democratic accountability and agree to work together to change the financial system for the better.

“The Financial Conduct Authority (FCA) must also develop a closer working relationship with the Financial Ombudsman Service, clarifying, interpreting and agreeing the standards required to meet important principles such as fairness to customers. The Ombudsman is a dispute resolution authority; the FCA will be the regulator,” she said.

Ms Knight said the FCA would ultimately be judged on its ability to protect the interests of all consumers rather than by following a knee-jerk agenda.

...which banks are already planning
Improving co-operation between branch, internet and contact centre channels is the top strategic priority for nearly half of Europe’s retail banks in 2011, according to a report by the European Financial Marketing Association.

The sixth annual Efma-Finalta report on Multichannel Banking in Europe said the next critical improvements are increasing online banking sales functionality, transaction migration and improving mobile internet banking services.

2010 insolvency rise sparks 2011 fears
Personal insolvencies hit a record high last year and there are fears that 2011 could see even more. The Insolvency Office has revealed that there were 135,089 declared insolvencies in 2010, a rise of 0.7 per cent.

The Consumer Credit Counselling Service said the results were “bleak” and pointed towards rising inflation, rising unemployment and the VAT increase as likely reasons why a similar result may occur in 2011.

However, the number of businesses hitting the rocks fell by 16 per cent. Low interest rates and the HMRC’s Time to Pay scheme have been credited with averting a large rise in company bankruptcies.

Big year-on-year drop for house prices
UK house prices fell by 2.8 per cent in the 12 months to February. The figures, revealed in the Halifax House Price index, make up the largest annual fall since October 2009.

However Martin Ellis, housing economist for the Halifax, downplayed the statistic, saying there had been little change in house prices over the first two months of 2011.

“Overall, we expect a modest 2 per cent decrease in house prices in 2011. Uncertainty over the economic outlook is likely to affect housing demand this year,” he said.

The lack of first time buyers, traditionally a group that supports house price levels, has been cited as a major factor.

Howard Archer, chief UK economist for IHS Global Insight, painted a particularly gloomy picture saying that the housing market was “still stuck in the doldrums”. He predicted that house prices would fall by around 5 per cent in 2011 and ultimately decline by around 10 per cent from their peak 2010 levels.

Business startups shy away from banks
Small businesses are reluctant to approach banks for money and many think the availability of funding is poor.

Only around one in three SMEs have gone to their bank for money over the last 12 months, regardless of the size of the enterprise.

Perceptions of funding do differ, however, with 28 per cent of start-ups feeling that the availability of money is poor but only 16 per cent of larger businesses agreeing.

Mark Dennis, Director at Charterhouse Research, which carried out the Business Banking study, said the results point to negative expectations rather than an actual lack of funding.

“Perhaps start-ups and smaller businesses need more support and help to find out exactly what their funding options could be,” he suggested.

The Business Banking Survey is a syndicated study of 17,000 British businesses, ranging from start-ups to companies with a turnover of £1bn.

New Northern Rock mortgage range to attract new buyers
Newcastle-based Northern Rock is to launch a series of mortgage products which will require a deposit of just 10 per cent.

The move is aimed at attracting first time buyers who have nearly dropped out of the mortgage market completely. Many banks will not offer new buyers a mortgage without a 25 per cent deposit which makes it extremely difficult for the majority to get a foot on the property ladder.

While some lenders are now offering more favourable products, few are prepared to go as far as Northern Rock who hope that their 90 per cent loan-to-value range will turn around their fortunes. Northern Rock was the first casualty of the banking crisis and was nationalised in 2008. Now it is anticipated that the north-east lender could return to private ownership sometime this year.

Public still lacks trust in banks
A University of Nottingham report claims that consumer confidence in financial institutions is still struggling to recover.

The research says that a significant number of customers have faith in their financial providers only because they feel they have no choice. Some organisations are also effectively surviving on their reputations amid a lack of trust in those who run them.

Banks fared worst of all with brokers/advisers seen as the most trusted.

Professor Nigel Waite said the report highlighted the scale of the challenge faced by the industry in winning back public trust. “The overall conclusion has to be that consumers are moderately trusting of their own financial institution but tend not to trust financial institutions in general,” he said.

Lloyds announces business review...
Lloyds Banking Group has announced it will close its Equity Markets division and speed up the planned sale of 600 UK branches.

New chief executive António Horta-Osório also launched a strategic review of the Bank which will examine all aspects of the state-backed business.

The closure of the Equity Markets arm came hot on the heels of an announcement that 200 jobs would go at the Bank’s insurance division.

Lloyds was ordered to sell 600 branches within four years under a 2009 European ruling. The Bank said it was accelerating this process with advisers on the sale to be appointed shortly.

...but tops dissatisfaction list
There were 22,000 complaints made against Lloyds Banking Group in the second half of 2010, according to the Financial Ombudsman Service.

The list, which includes only instances where mediation was required, placed the Bank, which is now the UK’s biggest, on top.

In all, there was a 15 per cent rise on the first half of the year, which has been attributed to the sale of payment protection insurance policies.

Chief ombudsman Natalie Ceeney said: “The latest set of complaints data continues to show that while some financial businesses are improving the way they handle their customers’ complaints, some regrettably are not.”

Credit cold calling causes CAB complaint
The Citizens Advice Bureau (CAB) has lodged a major complaint with the Office of Fair Trading about credit cold calling.

CAB claims that tens of thousands of people are tricked out of their money by rogue debt management and loan firms. The Bureau wants a complete ban on cold calls which offer debt management or credit services, as well as the outlawing of up-front fees.

Chief executive for England and Wales, Gillian Guy, said: “For many, mainstream credit is out of reach, and a cold call or text offering help to find a loan is naturally tempting. Our evidence suggests that rogue operators are cashing in on the desperation of people hit hard by the recession who are least able to afford it, and this problem is set to grow much worse.”

Recent figures revealed that around six million people in the UK are either in arrears with bills or credit commitments or constantly struggle to keep ahead of them.

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