Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Archive | Banks

Basel Committe fail to sign off on latest bank reform measures

Posted on 30 November 2016 by

Banking regulators have failed to sign off the latest package of global industry reforms, leaving a question mark hanging over bankers who complain they have faced endlessly evolving regulation since the financial crisis.

Policymakers had hoped to agree the contentious new measures at a crunch meeting held in Chile this week, but a senior official said a key element will have to be decided later -meaning the Basel Committee on Banking Supervision will likely miss a self-imposed target of completing the reform package by the end of the year.

At issue is how banks can use their internal models to determine the riskiness of their loans, an area on which US and European policymakers have publicly clashed on.

The reforms are an attempt to stop banks gaming rules put in place in the wake of the financial crisis, known as Basel III. Banks argue the reform package amounts to another capital-raising exercise by the backdoor, dubbing it “Basel IV”- something policy makers strongly push back against.

The US – at least under its current administration – is pushing for output floors, which would restrict banks’ use of models to assess their loan books. But European banks and politicians have warned that such a measure will disproportionately hit their balance sheets since European banks hold most of their mortgages themselves whereas US banks typically sell them on.

While the Chile talks forged an agreement around output floors, there is still no consensus on what level they should be set at, a senior Basel Committee official said on Wednesday.

“I expect an output floor will be part of our package of reforms. It will be based on the standardised approaches and the final calibration of the floor is subject to endorsement by the GHoS,” said Stefan Ingves, chairman of the Basel Committee who is also governor of the Swedish central bank.

GHoS is the Basel Committee’s supervisory board and is chaired by Mario Draghi, governor of the European Central Bank. The board is next expected to meet in January – although it could convene again before the end of the year – meaning no clarity on the final level of an output floor will happen until then. The committee had pledged for at least the last two years to finish the reforms by the end of 2016.

Mr Ingves’s speech, published after the meeting in Chile, revealed “the contours of an agreement” reached by the various countries that are members of the Basel Committee, which sets global minimum standards for banks.

Carney: UK is ‘investment banker for Europe’

Posted on 30 November 2016 by

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”.

Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient balance sheets, Mark Carney said the strength of the UK’s financial system was welcome in light of the possibility of a “UK-specific risk to financial stability” materialising in the coming years.

The governor said it was imperative that British businesses know “as much as possible, as early as possible” about the transition arrangements and the level of access to the EU’s internal market following the referendum.

“Having a degree of clarity, when appropriate, will help an orderly transition,” said Mr Carney.

He added that EU leaders should also push for a smooth Brexit, as the UK was “effectively the investment banker for Europe”.

The BoE’s financial stability report said the US election had amplified existing vulnerabilities in the global financial system, but on the economy, Mr Carney welcomed plans by US president-elect Donald Trump to inject fiscal stimulus into the world’s biggest economy.

Read more: BoE stress tests – all you need to know

BoE stress tests reactions: ‘No room for complacency’

Posted on 30 November 2016 by

The results of the Bank of England’s toughest ever stress tests are in, and it’s safe to say results have been mixed; RBS was forced to present a new plan to bolster its capital position, while Barclays and Standard Chartered also failed to meet some of their minimum hurdles.

Here’s a roundup of what analysts and investors are saying in response:

Lucy O’Carroll, chief economist at Aberdeen Asset Management, said that, despite some weaknesses, the tests show the banking sector overall is “broadly well capitalised” :

The individual vulnerabilities show that the job of ensuring our banks are capable of withstanding shocks remains challenging. The tests give banks no opportunity for complacency. Which is a good thing. This year has illustrated how the apparently unthinkable can happen and we all need banks that can absorb the inevitable unforeseen shocks.

Raul Sinha at JP Morgan stressed the relatively positive results for Barclays and Standard Chartered.

Both Barclays and StanChart were not required to submit a new capital plan which is the key outcome from a market perspective.

Overall, we conclude that capital return expectations from Lloyds and HSBC will remain underpinned following this test and believe investors should overweight Lloyds given the potential to positively surprise on capital return at at 4Q’16 or a highly accretive acquisition.

Meanwhile, UBS’s Jason Napier didn’t see much new in RBS’s plan to bolster its capital position by at least £2bn.

We believe this plan, which includes cost cuts, asset disposals and further capital management, mostly is the formal inclusion of measures planned and known by the market. We expect a bigger cost and restructuring plan in February – with associated capital costs – and colour around non-core, low return assets within the Commercial Bank, including £8.5bn in risk-weighted assets.

With uncertainty around timing and cost of Williams & Glyn and Department of Justice residential mortgage-backed securities, we think RBS remains under pressure to deliver on core profits, principally by achieving further significant cost cuts.

Central Bank of Ireland fines Springboard for mortgage mispricing

Posted on 29 November 2016 by

The Irish central bank has imposed one of its highest ever penalties on an Irish financial institution after completing an investigation into mortgage mispricing that in some cases led to customers paying tens of thousands of euros more than they owed in mortgage repayments.

The Central Bank of Ireland said on Tuesday it had imposed a fine of €4.5m on Springboard Mortgages, which at the time the mispricing happened was a wholly owned subsidiary of Permanent TSB, a high street bank that was badly hit by Ireland’s financial crisis.

The fine is the latest in a series of stiff penalties imposed on Irish lenders failures in how they deal with customers or other operational issues.

The central bank is taking an increasingly tough line on operational or business conduct failures as it seeks to restore the bank’s reputation for customer protection after the crisis.

The fine for Springboard is understood to be the largest penalty imposed on a financial institution for business conduct failures. It followed an investigation by the central bank into tracker mortgages, where the interest rate tracks that of the European Central Bank. The regulator said Springboard failed to apply the correct interest rates to 222 customer mortgage accounts over a seven year period between August 2008 and July 2015.

Derville Rowland, the central bank’s director of enforcement, said:

The consequences for impacted customers were serious and totally unacceptable. All 222 customers paid more than required, some fell into mortgage arrears, and some were subjected to legal proceedings.

She said the fine “demonstrates the central bank’s determination to take all necessary action in order to protect customers’ best interests, and serves as a clear and timely warning to all regulated firms of their obligations to customers.”

Springboard Mortgages was a new lender in the Irish mortgage market at the height of the country’s construction and house-price boom in the late stages of the “Celtic Tiger” era. It was established in 2007 as a joint venture between Permanent TSB and Merrill Lynch.

It was effectively a sub-prime lender, and its emergence coincided with the collapse of Irish house prices and the global financial crisis. The Irish bank took full control of Springboard in 2008. The loans in the Springboard Mortgages portfolio were acquired by Mars Capital, a venture capital fund, in 2014. At the time it had a mortgage portfolio with a nominal value of €468m.

Springboard is no longer operating. Permanent TSB declined to comment. The central bank said its investigation into Springboard had now closed.

A strong banking system alone cannot secure Turkey’s financial stability

Posted on 29 November 2016 by

Investors have good reason to be concerned about aspects of the Turkish economy these days.

The list of domestic challenges is long: political tensions are running high at home and internationally, while the current account deficit is widening again — despite a sharp slowdown in economic activity that may, in the third quarter of 2016, lead to the first negative GDP growth figures in seven years.

With a large external financing requirement and dollar-dominated external debt structure, Turkey is particularly vulnerable to the higher US yields and stronger dollar expected under a Trump presidency.

These global and domestic challenges have all taken their toll on the Turkish markets, with the currency bearing the brunt of the pressure. The lira has depreciated by around 15 per cent against the dollar since the beginning of the year making it the third worst-performing emerging market currency after the Mexican and Argentine pesos.

But the fact that Turkey is not performing even worse than it is right now is thanks to two factors.

First, the government’s fiscal stance has been conservative. As a result of continuing fiscal discipline, the public debt-to-GDP ratio has fallen almost continuously since Turkey’s 2001 economic crisis. It now stands at just 33 per cent, nearly half the 60 per cent upper limit mandated by the Maastricht treaty for EU member states. Even with the predicted loosening of fiscal policy in 2017, the budget deficit is expected to widen to only around 2 per cent of GDP, according to the government’s medium-term program projections.

The second factor has been the strength of the Turkish banking system. This was not always the case: during the 2001 crisis, the banks were the weak link that propagated shocks across the economy. But Turkish bankers have taken the lessons from that crisis to heart. Gone are the days of large short-FX positions and the business model of relying on wholesale funding from abroad to lend to the government. In fact, Turkish banks’ net FX exposure as of September this year is practically zero.

Instead, Turkish banks now engage in the very traditional practice of collecting deposits and lending to companies and households, staying away from fancy but risky products. They have been doing a good job of managing asset quality: the non-performing loans ratio of the banking system stands at 3.3 per cent — Italy’s ratio is 17.5 per cent, according to IMF financial soundness indicators.

Turkish banks also have ample protection against a deterioration in asset quality; the capital adequacy ratio is 16 per cent — double the minimum set by the Basel Accord — implying that the banks retain substantial buffers to absorb shocks.

But the strength of the banking system is not only about financial capital; human capital is a very important part of the story.

According to the Turkish banks’ association, 85 per cent of people working in banks have university or postgraduate degrees. Not only that, but, in a country where only 26 per cent of non-farm workers are women, the banking sector has a female employee ratio of 51 per cent.

This well-capitalised system is now an important pillar underpinning the stability of the wider economy. But banks do not operate in a vacuum and their access to foreign capital is very much affected by the rest of the world’s perception of Turkey.

They now face specific pressures: a government push to accelerate credit growth via lower loan rates could erode net interest margins. This could hinder capital generation and future loan growth — precisely the opposite of what Ankara is trying to achieve.

Although banks may not be running short foreign currency positions themselves, their clients are, and the banks are therefore indirectly exposed to the FX risk. The short foreign currency position that the corporate sector runs has so far not led to significant asset quality problems for the banks. But this is no guarantee that quality will remain unaffected if the depreciation continues.

Even though the banks’ capital cushions are strong, the stabilisation of the currency would be a welcome relief from future asset quality concerns. But that would require Mr Erdogan’s government to change its stance on interest rate hikes.

The Turkish banking system may be strong, but its strength is not sufficient to safeguard overall macroeconomic stability. Banks will do what they can to support economic activity, but they will also need all the support that they can get from the government to ensure their margins are not unduly eroded and the financial health of their clients is not compromised by the continuous depreciation of the currency.

If the banking system cannot get that support, this bright spot will fade too.

The writer is senior emerging markets economist covering Turkey at Nomura

Jes Staley’s contrarian bet on investment banking at Barclays

Posted on 29 November 2016 by

“Better to be a lucky chief executive than a good one.” This is how one top 10 shareholder in Barclays sums up the performance of Jes Staley almost exactly a year since the 59-year-old American took over as the bank’s chief executive.

Mr Staley himself admits that he has taken a contrarian bet by “doubling down” on the future of Barclays’ investment bank at the expense of selling its large African operations and cutting the dividend in half — both unpopular decisions with some investors.

Yet, for now, this gamble seems to be paying off for the Massachusetts-born former JPMorgan Chase executive. Barclays shares have outperformed most European rivals in recent months, rising two-thirds from the seven-year low they hit immediately following the UK’s vote in June to leave the EU.

“If you can be contrarian with a strategy and get lucky or be right it gives you a lot of wind behind your sails,” Mr Staley told the FT Banking Summit earlier this month. “To a certain extent, the doubling down and committing Barclays to being a tier one investment bank was that contrarian move.”

Close allies of the Barclays boss say he has been helped by “exogenous events”, including a recent rebound in trading of bonds and loans, a key engine of its investment bank. Another share price boost came from the election of Donald Trump as US president, which many analysts expect to benefit banks by producing lower taxes and higher interest rates.

“Externalities have started moving in our favour,” says Sir Gerry Grimstone, the City grandee who became deputy chairman of Barclays shortly after Mr Staley took over. “The steepening of the yield curve, Brexit and the election of Trump — these are all positive for Barclays.”

“The City won’t benefit from Brexit, but New York is likely to be stronger, so our US operations give us a natural hedge against Brexit,” he adds. “We are moving into a position where we are the only significant investment bank left in Europe.”

The contrast with Mr Staley’s predecessor Antony Jenkins is striking. While Mr Jenkins declared in an FT interview two years ago that “the universal banking model is dead” — suggesting a split between retail and investment banking was on the cards — Mr Staley has been far more supportive.

“The single biggest thing I would say he has brought is leadership,” says Sir Gerry. “I was amazed when I came … we had some excellent people but the top table had become almost completely dysfunctional. There was a complete lack of direction as to where the investment bank was going. The empire was in bad shape.”

In strengthening the top management, Mr Staley has hired so many former colleagues from JPMorgan — including his new heads of risk, operations and investment banking — that his former boss Jamie Dimon called Barclays chairman, John McFarlane, to say the poaching had to stop.

Another area where observers give him credit is addressing Barclays’ weak capital position. The bank’s common equity tier one ratio — a key measure of balance sheet strength — has only inched up slightly since he took over to 11.6 per cent and it is still below its 12.5 per cent target.

Yet Mr Staley has promised that by selling most of its majority stake in its South Africa-listed subsidiary, cutting the dividend and accelerating the run down of its noncore unit of toxic and underperforming assets it will add another full percentage point to its capital ratio.

A second top 10 shareholder praises Mr Staley for pushing through the strategy despite the resistance of Mr McFarlane, who ran the bank himself for a period last year. “That was a big and I’m not sure an easy win,” says the shareholder.

Chirantan Barua, banks analyst at Bernstein, says: “I think he did a brilliant job of understanding that capital is the crucial issue at Barclays.”

He adds: “Yes, he has been lucky. But not shrinking the investment bank further was the right thing to do anyway. I have always thought you cannot shrink to glory in investment banking.”

With the Bank of England set to announce its annual stress test results on Wednesday, Mr Barua says he is “still nervous” about Barclays because it “has the lowest capital of the UK banks and the highest macro risk”.

The main risk he identifies is that Brexit could trigger a sharp UK economic slowdown that causes a jump in defaults at its Barclaycard credit card unit. He adds that many of the potential benefits of a Trump presidency are already priced into the bank’s shares, “so the risk is if there is any disappointment on that”.

Mr Staley is convinced that the strong position Barclays gained in the US market from buying Lehman Brothers after its 2008 collapse and the woes of many European rivals, such as Deutsche Bank and Credit Suisse, are already strengthening the UK bank’s position.

“The economics of the broker-dealer function of investment banking are getting better every day,” he said at this month’s FT conference. “Go to any main bond fund and sit down with their main debt trader … and they will all say bond spreads are far wider, bond prices are gapping more, the market is more illiquid, I need to pay more to my broker-dealer to get a trade done than I did two years ago — and that is revenue to us.”

Some investors still worry that Mr Staley’s bet on investment banking — where returns still lag behind its cost of capital — at the expense of Africa’s growth potential may be too short term and could backfire, especially if costs start to slip out of control. For instance, having cut back operations in Asia recently, the bank is now hiring again in the region and loosening a hiring freeze to do so.

“We’ve been told in the past that Africa is an important growth engine and long-term bet,” says the second top 10 shareholder. “It might be the right thing to do now but will it be the right thing in 10 years?”

The recent rally in Barclays shares has taken them within 10 per cent of the 233p per share average price at which Mr Staley invested £6.5m as he prepared to join the bank last year. But the weaker pound means that in US dollar terms — what matters more to Mr Staley — he is still about $2.7m out of pocket. Both he and his investors will be hoping his luck continues to hold.

Further reading

● Analysis: Europe’s investment banks: down, but not yet out
● Lex: Barclays’ margin for error
● City Insider: An uneasy truce

India’s largest bank demands compensation for cash deluge

Posted on 29 November 2016 by

India’s largest lender has demanded compensation for the burden of managing a flood of deposits since the government’s shock demonetisation of high-value banknotes.

Almost $100bn has been deposited in Indian banks since November 8, when the government announced that the existing Rs1,000 and Rs500 notes were no longer legal tender, in an attempt to flush out undeclared “black money”.

As Indians flocked to deposit their obsolete notes some analysts thought that banks would respond by lowering lending rates. But the central bank, alarmed by the surge in banking sector liquidity, on Saturday ordered banks to transfer nearly half this amount to its cash reserve facility, which yields no interest.

“We do think that the banks need to be compensated for this loss,” Arundhati Bhattacharya, chairman of State Bank of India, told the Indian television station CNBC-TV18. “We are hoping that this is a temporary measure and that subsequently we will be given something.”

The Reserve Bank of India’s intervention forces banks to transfer to it a sum equivalent to the increase in their deposit base between September 16 and November 11, which amounts to Rs3.2tn ($47bn), according to HSBC.

The move has damped expectations that the demonetisation would prove a boon for the banking sector, with a rush of deposits helping to fund cheaper borrowing costs for businesses and households.

“The implications for the banking system are likely to be significantly negative,” wrote analysts at India Ratings & Research, arguing that the RBI could have soaked up liquidity through other avenues such as open market and reverse repo operations. 

Instead, they wrote, the central bank had saddled lenders with the costs of its intervention, “which will be a drag on the banking system”.

The concern over the impact on the banks comes amid broader concern over the economic impact of demonetisation. A shortage of new banknotes has driven a slowdown in consumer spending that prompted economists to slash their annual growth forecasts.

The benchmark Sensex index fell 7 per cent in the two weeks following Mr Modi’s announcement, though it has since regained some of the lost ground.

Pranjul Bhandari, an economist at HSBC, said that expectations of a sharp fall in lending rates had always been overblown. “There was always doubt about how long this extra liquidity would stay for,” she said, arguing that the banks would have held back due to anticipation of RBI intervention, as well as large-scale customer withdrawals once the new banknotes became readily available.

But any hit to margins is unwelcome for a banking sector where earnings have been badly dented during the past year by a profusion of distressed loans. 

Udit Kariwala, an analyst at India Ratings and Research, estimated that the cost to banks of the RBI’s new measure would be Rs10.5bn per month, adding that the full impact would depend on how long it was kept in place.

The central bank has said it will review the measure by December 9, but it was likely to release the funds only gradually, said Mr Kariwala, arguing that doing so “in one go will create excess liquidity again”.

Despite the discomfort caused by the RBI intervention, he added, the banks would benefit from a lasting boost to their deposit bases triggered by demonetisation. “It is still a structural positive,” he said.

Paris-listed advisory Rothschild seeks to expand in the US

Posted on 29 November 2016 by

The Rothschild name may be better known in the US for fine wine rather than finance, but the Paris-listed bank’s co-head is determined to change that by breaking into the world’s biggest market for mergers and acquisitions.

Olivier Pécoux, co-head of the Franco-British advisory and wealth management specialist, said it was spending €20m this year on bulking up its American operations, including the hiring of several senior bankers and opening a Chicago office.

“Clearly we are under-represented in the US,” said Mr Pécoux, adding that the bank aimed to increase the share of its revenues coming from North America to 20 per cent of the group total. “It is a bit frustrating because it is taking a lot of time.”

He said the bank was “looking at several options” to expand its US presence, including the possibility of a new office in San Francisco, to add to those it also has in New York, Los Angeles and Washington DC. It has a total of 160 bankers in the US.

Rothschild said net profit rose 72 per cent to €67m in the six months to September, as revenues rose 18 per cent, driven mainly by a more than one-third jump in revenues from its M&A and financing advisory businesses.

The family-controlled bank warned that the M&A market was expected to be more “challenging” in the coming months. Mr Pécoux said the UK’s vote to exit the EU would have no impact on its operations, but if it caused a slowdown in the British economy that “could have a knock-on effect on M&A activity”.

Revenues from its private bank and wealth management arm fell 4 per cent due to lower transaction commissions, while revenue at its merchant banking unit rose 7 per cent after its first private equity fund started to earn a profit-share known as carried interest.

The bank said it was on track to complete the acquisition of Compagnie Financière Martin Maurel, the Marseille-based private bank, early next year to create a combined group with almost €10bn of assets under management.

Number of ‘problem’ banks at seven-year low

Posted on 29 November 2016 by

The number of banks on US regulators’ list of lenders that are at risk of collapse has reached a seven-year low, a reflection of how much the industry’s health has improved since the crisis even as its profitability remains depressed.

Problem banks identified by the Federal Deposit Insurance Corporation fell from 147 to 132 over the third quarter. That compares with a high of 888 hit in the first quarter of 2011.

Meanwhile, the proportion of banks that were unprofitable during the period was the lowest since 1997, at 4.6 per cent. Only two of the near-6,000 banks insured by the FDIC failed during the period.

Regulators examine US banks and give them a score of between 1 and 5, based on quantitative and qualitative factors from capital, liquidity and bad loan metrics to the quality of management.

Those with the weakest scores are placed on the FDIC’s “problem list”. They are considered in danger of failing unless they solve problems watchdogs have identified. The designation carries tougher regulatory oversight, including scrutiny of lending practices and more frequent in-person visits by officials.

The identity of banks on the list is confidential, partly to avert panic and bank runs, as is the precise methodology the regulators use to determine inclusion, to prevent executives from “gaming” the system.

Banks given strong marks from the regulators are not even allowed to vaunt them, although the size of the premium they are required to pay into the FDIC’s insurance scheme is based in part upon their score.

Despite the impact of low interest rates, which reduce banks’ profit margins from lending, quarterly net income across the industry touched another post-crisis high of $45.6bn.

Banks have been piling on loans — balances rose almost 7 per cent from a year ago — while the Federal Reserve’s accommodative monetary policies have kept a lid on borrower defaults. Although the average net charge-off rate rose from 0.40 per cent the year before to 0.44 per cent, this remains low by historic standards.

Even so, investor returns remain below pre-crisis levels — partly because of higher capital requirements and other regulations. Industry-wide return on equity came in at 9.29 per cent, down from 9.33 per cent a year ago and shy of the 10 per cent level that analysts regard as acceptable to compensate investors for the risks they are taking on.

FDIC officials acknowledge the numbers of banks on the problem list, and the numbers of institutes that fail, are a “lagging indicator”. The longest period in modern US history without any bank failing was the two-and-a-half years before February 2007 — shortly before the financial crisis.

Lending to UK manufacturers slows but consumer credit rises

Posted on 29 November 2016 by

Bank lending to manufacturers declined 5.2 per cent in October compared with one year ago, according to the latest statistics on money and credit in the UK economy published on Tuesday by the Bank of England.

Manufacturing, which accounts for roughly a tenth of the UK economy, is expected to be one of the most sensitive parts of the economy to the decline in the exchange rate because of the sector’s reliance on imports.

The total volume of lending in the past three months grew at the slowest rate since the summer of 2015, because of a monthly decline of 0.2 per cent in October — this was a £3.2bn decrease in the total amount of lending compared with September.

Total business lending decreased by £8.2bn in October compared with the previous month. The decline was mainly due to a £10.5bn fall in loans to the financial services industry.

Consumer lending, however, increased 10.5 per cent compared with October last year and mortgage lending reached the highest level since March. Mortgage approvals rocketed in the first three months of 2016 as buy-to-let landlords rushed to buy new properties before a tax change.

There were 67,500 new mortgages approved in October, beating the forecast consensus of 65,000.

Tuesday’s data add to a picture of divergence between different sectors of the British economy following the EU referendum vote. Consumers have been mostly unfazed by the result and continued shopping while businesses and financial markets have been more circumspect.

Business and consumer borrowing are being bolstered by the Bank of England’s easy monetary policy as well as new measures introduced in August following the referendum, said Howard Archer, chief UK and European economist at IHS Markit. “Low interest rates are supporting consumer and business borrowing.”

The latest estimate of economic growth, released this month, found that the better than expected growth in the three months following the referendum was because of both consumer spending and business investment remaining strong in the third quarter.

However, government statisticians warned that many of the investment decisions would have been taken before the referendum result.

Commenting on the BoE’s money and credit statistics, Elizabeth Martins, UK economist with HSBC, said: “Credit conditions remain very loose, and there is little sign so far of borrowers, either consumer or corporate, starting to worry about Brexit at this point.”

The European Commission’s monthly survey of economic confidence, also published on Tuesday, found that business sentiment rose back above the pre-Brexit level in October.

It also found that consumer confidence slipped back to levels seen in the immediate aftermath of the referendum, although these figures are quite volatile.

Consumer expectations of price increases climbed in October to reach their highest level since 2011, according to the survey.