Alt Lending week ended 29th October 2021

Fixed Rate Mortgage maturities lengthen out.

Life Company Rothesay has announced a tie up with a British Bank in order to offer fixed rate mortgages of up to 30 years. This is part of a trend which the UK government is actually encouraging in a bid to end borrowers switching lenders after a number of years to essentially arbitrage rates. Rothesay like most life companies have an interest in acquiring long term assets in order to assist with the long term liabilities of the pension funds which they manage.  This once again is a result of the UK’s (and the rest of the worlds governments pursuing a policy of ultra low interest rates) which  of course have consequences. For borrowers this is probably a benign occurrence but there are risks which will one of these days, and probably sooner than you think which all of us will have to shoulder. The most apparent is how to react to inflation. The Bank of England has more or less admitted that it cannot afford to raise interest rates without severely damaging  the economy, yet this is about the only monetary tool available to control inflation.  As an old banker friend of mine once said. Oh sh*t oh dear!

Draghi’s conundrum over worlds oldest bank

It is always sad when a very old institution that has apparently been around for ever looks like it is going to collapse and that looks like the likely outcome for Monte de Paschi de Siena. This is the worlds oldest bank having been in Tuscany for the last 500 years. To put that into perspective it was founded only 20 years after the death of Tuscan artist Leonardo da Vinci?  Initially this was a philanthropic organisation established to provide banking (pawnbroking) facilities to the poor of Siena. Talks between the Italian government  and Italian banking giant Unicredit have collapsed over disagreements relating to which parts of Monte do Paschi it was going to acquire. The current owner of the bank is the Italian state and the European Union has given it to the end of the year to dispose of its holding. I wonder if Draghi, once the golden boy of the ECB is going to do “all that it takes” to save the situation?

A golden opportunity wasted?

Lucy Burton is the Banking Editor at London’s Daily Telegraph, (I didn’t know they had one) and she comments on the fact that some very large retailers with established and loyal client bases (Tesco, Sainbury s, M&S) failed to capitalise on the fall out from the 2008 banking crisis to establish themselves as competitors  to the big banks. She is right. But are they missing a trick? The digital players have astronomic valuations placed on them but are nothing but cloud based applications that don’t  make any money. At least Tesco Bank is achieving that basic hurdle even if the ROE might be somewhat disappointing   Sainsbury’s have given up trying to sell their banking operations. If I were advising their boards I would suggest investigating  buying a pre money digital banking app.  I am sure that there are a whole shed load of them around the Shoreditch and Old Street. I think that might tick a whole lot of boxes and make the business of succeeding an easier prospect.

Howard Tolman is a well-known banker, technologist and entrepreneur in London,We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.

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