Latest figures show sharp drop in credit demand

Corporate and mortgage lending down while consumer credit cards still in demand

The latest results released from the Bank of England Credit Conditions Survey show that credit demand has retreated sharply post-Brexit, despite measures including a cut in the base rate and the introduction of the term funding scheme. The most notable drop has been in demand for credit from corporates, which has shown a sharp drop,  particularly among medium and large enterprises. This echoes the findings of the recent Deloitte CFO survey, which revealed that 57% of CFOs surveyed in FTSE 100 and FTSE 250 companies were planning for cutbacks to  capital investment in the next 12 months.

Mortgage lending also saw a lessening of demand, with the largest decline in the buy-to-let sector, since the survey began after the regulatory changes in Q2. Overall, new lending is set to slow down over the coming months in the mortgage market.

Strong demand was still evident in the unsecured lending demand sector in Q3, particularly for credit card lending, which suggests the UK consumer will continue to support GDP growth in the near term. Analysts expect, however, that Tuesday’s CPI data will reveal a sharp uptick in inflation in September, pointing to the possibility of real wage growth turning negative in the near future, with a knock-on effect of slowed household spending.


The evolution of London’s gold market

After a century of tradition, changes in how gold is traded are on the way

When the precious metals industry meets in Singapore next week for an annual gathering, one of the key topics will be the coming changes to how gold is traded in London.

A new trade-reporting service and the introduction of exchange-traded futures will be the latest developments in a market that until recently remained largely unchanged for about a century. Here’s a timeline of main events over the past 350 years, according to the London Bullion Market Association.


After moving to London from Amsterdam, Moses Mocatta partners with the East India Co. to ship gold to India. The firm he built, the oldest member of London’s bullion market, has today evolved into ScotiaMocatta, part of the Bank of Nova Scotia.


As master of the Royal Mint, Isaac Newton set gold at 4.75 pounds an ounce, a price which lasted two centuries. Gold costs about 1,033 pounds ($1,260) today.


With gold volume rising in London, the Bank of England opened the city’s first bullion vault. By then, almost two-thirds of the world’s gold production was passing through London.


The Royal Mint produced the first gold sovereigns, replacing the guinea, a coin equal to about a quarter-ounce of gold.


The BOE began accepting 400-ounce bars (up from 200 ounces previously) — the traditional size accepted globally today — to meet demand from central banks in Europe for their reserves.


The first silver fixing took place at the London office of Sharps & Wilkins, with dealers Mocatta & Goldsmid, Pixley & Abell, and Samuel Montagu & Co. The daily process used by brokers, mining companies and jewelers to trade and set prices would remain largely unchanged for more than a century.


The first gold fixing took place. Meetings were held in a wood-paneled room at N.M. Rothschild & Sons Ltd.’s offices until the process switched to a telephone conference call in 2004. Dealers who met in the room each had small Union Jack flags to signal the need to change orders.


The U.S. fixed gold at $35 an ounce, with the American assay office buying large amounts of the metal at that price. London’s good delivery list, which set quality standards for gold bars, expanded to include refineries and mints in eight countries.


The London Metal Exchange closed its gold futures market after just three years because of a lack of domestic investor and speculator interest.


The BOE establishes the LBMA, the international trade association representing and overseeing London’s gold and silver market.

2014 and 2015

Silver became the first precious-metal fixing to move to an electronic auction after Deutsche Bank AG withdrew from the old phone system amid a pull-back from commodities. Regulatory scrutiny of how benchmarks are set intensified after traders manipulated Libor rates. Platinum, palladium and gold fixings were also replaced by new electronic auctions.


The LME, World Gold Council and a group of banks said they’ll introduce centrally-cleared gold and silver futures in the first half of next year. Separately, the LBMA picked technology firm Boat Services Ltd. to develop a trade reporting service to boost transparency in the over-the-counter market.

By Nicholas Larkin

© Bloomberg


Acquisition and revenue upgrade drive foodie forecast changes

Revenue upgrade in convenience food sector drives forecast change

Wealth management group Davy today released a statement announcing a FY 2017 forecast change, of which the dominant driver is a 7.3% (c.£86m) revenue upgrade for the UK Convenience Foods segment. The upgrade is a function of the Sandwich Factory acquisition (c.£40m in revenue), by Greencore Group plc, which was announced in July, and on-going business development with the group’s Food Retail customers in the Food-to-Go category.

The Sandwich Factory operates from a single facility in Atherstone, Warwickshire, where it produces a range of food to go products for distribution in the convenience store and food service channels. Net revenue from manufactured products in the financial year ended 31 March 2016 was £42m.

The new forecasts imply 8.5% year-on-year (yoy) growth for the UK Convenience Foods segment and 14.8% yoy growth for the Food-to-Go business. Their forecast models for a 30bps decline in segment operating margins to 8.1% (previously 8.2%) to allow for start-up costs at Northampton (new sushi facility), the dilutive impact of M&A and on-going labour rate pressures (National Living Wage) in the UK. The operating profit contribution for UK Convenience Foods increases by £6.1m to £103.4m, implying yoy growth of 4.8%.


Senior bank official supports code of conduct for currency markets

Bank of England’s Chris Salmon believes banks and financial institutions will adhere to new code of conduct

LONDON, Sept 23 (Reuters) – Adherence to a new code of conduct for currency markets will be voluntary but signing public attestations that they are keeping to it will focus the minds of senior managers at banks and other institutions, a senior Bank of England official said on Friday. Attempts by banks to rig currency markets prompted regulators to revamp and strengthen codes of conduct for forex dealers. In a speech made to the ACI association of currency dealers in London on Wednesday, the bank’s executive director for markets, Chris Salmon, also pointed to the “supportive” nature of UK banking regulators’ new senior managers regime for implementation of the new global guidelines. But he stopped short of saying that managers would be held legally accountable for their firms keeping to the code, drawn up by a working group of the Bank for International Settlements over the past year. “A sceptic might question the prospects for the success of this initiative,” Salmon said in his speech that was released to the media on Friday. “In a market where information asymmetries have been exploited for selfish motives – what good can a voluntary code of conduct really achieve?” He laid out several reasons why he believed banks and financial institutions would keep to the code in years to come, including the UK Senior Managers and Certification Regime, soon to be extended beyond banks to all of Britain’s regulated firms. He said firms should be able to demonstrate publicly that their behaviour and practices in the FX market are in line with the Code’s principles. That might include the development of an industry kite-mark which firms would have to earn. “The widespread use of a common public attestation could be a powerful tool in this respect,” he said. “It would provide a strong signal of a firm’s commitment to following good practices and help focus the mind of the firm’s senior management who would be asked to sign the attestation.”

(Writing by Patrick Graham)

Copyright(c) Thomson Reuters 2016.