cityam 05/01/2010

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FTSE 100 5,500.34 +87.46 DOW 10,583.96 +155.91 NASDAQ 2,308.42+39.27 /$ 1.61 -0.01 / 1.12 -0.01 /$ 1.44+0.01 Certified Distribution02/11/09 29/11/09 is 102,194

www.cityam.comIssue 1,044 Tuesday 5 January 2010 FREE

NEW FOREXCOLUMNOUR STRATEGISTS

OFFER THEIRTOP TIPS P13

BRA TYCOON NAMED ASTOP BUSINESS WOMAN

THE CAPITALIST P8

BUSINESS WITH PERSONALITY

Pimco cuts

exposure toUK bonds

PACIFIC Investment Management Co(Pimco), the worlds biggest bondfund, said yesterday it will cut itsexposure to government bonds in theUK and US, amid fears that the end ofquantitative easing and rising publicdebt could scupper the economicrecovery.

Pimco leads a number of largefunds which are concerned that UKand US governments will struggle tomanage their record debts as theystep up borrowing this year.

Pimco managing director PaulMcCulley said in a statement on thefirms website: We are currently cut-ting back in the US and UK becausesupply and demand dynamics arelikely to be negatively affected as bor-rowing rises and central bank buyingdeclines.

Other big funds, such asBlackRock, Barings AssetManagement and Standard LifeInvestments, also share Pimcos fears

These funds worry that a big rise ingovernment bond yields, or interestrates, triggered by market concernsabout public finances, could meanrising mortgages and higher business

borrowing costs. Worries over the US and UK gov-

ernment bond markets have seenthem sharply underperform otherEuropean bond markets such asGerman bunds in the past month.

Britain is expected to sell 220bnof gilts in the current financial year four times the average annualamount sold in the f ive years beforethe collapse of Lehman Brothers.

BY ROGER BAIRD

ECONOMICS

Lloyd Blankfein will receive his bonus in shares this year Picture: REUTERS

GOLDMAN Sachs is likely to pay outUK bonuses in full, a decision which

would force it to hand around $1bn(620m) in taxes to the Treasury.

The bank looks set to increase thesize of its bonus pool to compensatefor Alistair Darlings 50 per cent

bonus levy rather than punish itsworkers by cutting their annual pay-outs.

Goldman is expected to pay outbonuses in the UK worth some $2bn(1.24bn), meaning it would end uppouring around $1bn into the

Treasurys coffers. That amount alone would eclipse

the 550m that Darling said heexpected to raise from the measure,

which was announced in the pre-Budget report last month.

It is also understood that hundredsof back office staff at the investment

bank will avoid the supertax, afterthe Treasury clarified what kinds ofemployees would be affected.

A Goldman Sachs spokeswoman would not say whether a final deci-sion on whether to pay UK bonuses infull had been made.

She added: We will not be com-menting on this until we announceour fourth quarter financial results.

Goldmans decision to honour bonus payouts could embarrass thegovernment, which is desperate topander to public opinion on bankerspay.

GOLDMAN TO PAY$1BN IN BONUS TAXBY STEVE DINNEENBANKING

SLOANE ROBINSON PARTNERS SHARE 61M IN PROFITS

SLOANE Robinson, the City partner-ship famed for its high levels of com-pensation, saw profits tumble last

year but its managers still sharedsome 61m in profits between them.

The amount shared between 14senior managers fell more than 80

per cent from a record peak of 341min 2007/8 to 61m in 2008/9, accountsfiled with Companies House reveal.

The highest-paid member, thought to be chief investment officer RichardChenevix-Trench, took home 14mcompared with 87m before theonset of the financial crisis.

In the past Sloane Robinson has been known for paying its top staff

more than even the highest earnersat Goldman Sachs or Barclays Capital.But the slump reflects the toughtimes faced by hedge fund managers,

who rely on strong returns to gener-ate performance fees. Fees typicallymake up over half a funds income.

Many of Sloane Robinsons portfo-lios strayed into negative territory last

year, including co-founder Hugh

Sloanes SR Global International fundand Chenevix-Trenchs Asia andemerging markets funds.

Mark Leader, partner at the firm,told City A.M. the drop in profits wasentirely down to poor performanceas a result of volatile stockmarkets.He declined to comment on whetherclients had withdrawn cash, but said:Companies like ourselves make

money from our clients, and the 2008year was when we were just lookingto hold onto performance, so its likea treading water operation. Id ratherthe figures were like the year before,

but we were happy with it... We stillrun a decent amount [of money].

The year before the boom period of2007/8, Sloane Robinsons partnersshared around 200m between them.

BY OLIVER SHAH

EXCLUSIVE

The chancellor had hoped thatmost banks would rethink compensa-tion policies when he announced thesupertax.

But many US firms like Goldmanfeel they cannot allow massive paydifferences to arise between staff

working in London and New York. Although it is planning to pay

bonuses in full, Sky News reportedthat Goldman Sachs could still opt tomake a political gesture by reducingthe proportion of revenues it pays outin compensation in the final quarter.

At the end of the third quarter, theglobal compensation pool stood at$17bn, which was expected to rise to$23bn by the end of the fourth quar-ter.

But the full year figure could bemuch less if Goldman does decide tocut the compensation to revenueratio.

The bank has made other payreforms in recent weeks, andannounced plans to pay global man-agement committee bonuses inshares only this year, a decision that

will affect chief executive LloydBlankfein.

City A.M. last month exclusivelyrevealed that most banks werepreparing to take the bonus tax onthe chin instead of punishing employ-ees.

Lloyds Banking Group is planningto pay bonuses in full, a decisionwhich will see it hand around 100min taxes to the Treasury.

ALLISTER HEATH: P2

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News2 CITYA.M. 5 JANUARY 2010

Labour: wellkeep 50p rateLABOUR will continue to tax highearners at a rate of 50p for at least fiveyears despite a previous pledge thatthe measure would be temporary.

When chancellor Alistair Darlingintroduced the 50p rate for thoseearning 150,000 or more, he said itwould only be kept in place until theeconomy started to recover.

But yesterday he conceded that thetax would remain in force until atleast 2015 if Labour wins the nextgeneral election, which is said to beplanned for 6 May.

The admission was contained in adossier published by Labour on Torytax and spending plans, claimingthere was a 34bn funding gap in theConservatives pledges.

Darling said that the Tories had

made spending commitments worthsome 45bn, but had only identified11bn of funding to pay for them.

Within hours of its publication,the Tory party dismissed the dossieras lies and junk. But the partywould not be drawn on when theyplan to reverse the 50p tax rate.

And in more bad news for the City,Conservative leader David Cameronreiterated a pledge to fund cuts ininheritance tax with a levy on non-doms, wealthy foreign nationals liv-ing in Britain but domiciledelsewhere.

BYDAVID CROW

POLITICS

Why the UKs factories are back to 1973

EVERYBODY knows that financial serv-ices have been the hardest hit sectorduring the recession, right? Wrong.Manufacturing has been by far agreater drag on UK plc than services,including finance; factories have suf-fered more than offices, includingtrading floors. Virtually all our beliefsabout the slump turn out, on closerscrutiny, to be incorrect.

The stats are tragic. Manufacturingoutput peaked in February 2008; sincethen, production in our factories isdown an astonishing 14.3 per cent,despite the collapse in sterling. The

last time the UK produced so little wasin 1992, just after we were kicked outof the European Exchange RateMechanism, an event which wasmeant to kick-start a renaissance in

UK manufacturing. Yet the meagregrowth of the past 18 years has beentotally wiped out. In fact, current out-put levels are exactly what they were back in 1973 (they subsequently fellback, taking 15 years to return to thatlevel again in 1988). Bottom line: overthe past 37 years, the UK has failed tosustainably grow its output of manu-factured goods. Some of the lostground of the past 18 months will berecovered, of course, but globalisation,poor education and skills and highcosts (including tax and red tape)guarantee a bleak outlook. By con-trast, business services and financehave slumped only 6.2 per cent andare back to 2006 levels. The sector(which includes law, consulting and soon) remains up by 81.7 per cent since1995, when the figures start.Manufacturings sharp collapse over

the past two years was partly causedby a crash in word trade and a crunchin trade credit, both now reversed. Butultimately, the lesson is clear: we needa sensible, reformed City to return to

growth. Like it or not, business andfinancial services are what we do best.

WELFARE STATE NEEDS GOLDMANGoldman Sachs is the bank everybodyloves to hate. It is undoubtedly an arro-gant beast but Im afraid that this isno good reason to want to chase itaway from London, which is whatmany of its growing army of enemieswould like to see. Given the parlousstate of our public finances, the starktruth is that we need more firms likeGoldman in London, not fewer. Pleasehear me out.

Goldman will contribute around2bn in tax to the Treasury in 2009 incorporation tax, national insuranceand pay-as-you earn income tax andthat is before the special 50 per centbonus tax on banker bonuses above25,000. Quite a lot more will have

been paid by its 5,500 staff in stampduty and value added tax. Many oth-ers are indirectly employed by thefirm lawyers, IT workers, supportstaff, retailers and so on. Unlike the

likes of RBS, the firm didnt take apenny in handouts from the Britishgovernment.

Many of those who hate Goldmanwould also like to see public spendingmaintained or increased. But youcant have it both ways: shutting downor chasing away our biggest taxpayerswould be a recipe for f inancial suicideand make swingeing reductions inspending inevitable. In fact, given thatour budget deficit is about 180bn,another 90 Goldmans would do thetrick and balance our books withoutrequiring any cuts. Joking aside, eventhose who hate and loathe everythingabout Goldman need to understandthat London needs to attract big finan-cial firms and encourage them toemploy more people here not drivethem away to more welcoming shores.

[email protected]

PORT operator DP World will goahead with the foundation stage ofits postponed London Gateway proj-ect despite the market downturn, itsaid yesterday.

The unit of debt-laden state-ownedholding company Dubai World said ithad decided to proceed with the con-struction of essential infrastructurefor the planned port and logisticspark.

The company, which is not part ofits parents restructuring plans, yes-terday bought further developmentland as well as Royal Dutch Shellsremaining interest in the project for136m, it added.

London Gateway is a planned1.5bn deep-sea container port locat-ed on the north bank of the riverThames.

DP World will continue to reviewthe development of the port and parkoperations in line with marketdemand, it said in a statement.

BYHARRY BANKS

SHIPPING

London Gateway lives onThe container port is located around 25 miles from central London

NEWS | IN BRIEF

News Corp sells reviews websiteNews Corp sold Rotten Tomatoes, themovie reviews compilation site itreceived as part of its acquisition of IGNEntertainment in 2005, to rival reviewssite Flixster yesterday for an undisclosedsum. The deal is a sign that News Corpwants to offload non-essential digital

assets and concentrate on its twobiggest online properties, IGN andMySpace.

AIG makes senior appointmentsAmerican International Group (AIG),the US insurer, made several seniorappointments, naming a new head ofhuman resources and a new chiefadministrative officer, it emerged yes-terday. Jeff Hurd, a senior employee atthe giant insurer and its current chiefadministrative officer, will become headof human resources, according to aleaked memo from AIG chief executiveRobert Benmosche. While MichaelCowan, a longtime employee at MerrillLynch, is joining AIG as chief administra-tive officer. Cowan had been at Merrillsince 1986 and was most recently sen-ior vice president of global corporateservices at the Wall Street firm.

Labour will not reversethe 50p rate until2015, although AlistairDarling previously saidit was temporary

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EDITORS LETTER

ALLISTER HEATH

US PUBLIC PENSIONS FACE $2,000BNSHORTFALLThe US public pension system faces ahigher-than-expected shortfall ofmore than $2,000bn that willincrease pressure on many statesstrained finances and crimp econom-ic growth, according to the chairmanof New Jerseys pension fund. The esti-mate by Orin Kramer will fuelinvestors concerns over the deterio-rating financial health of US statesafter the recession.

HIGH STREET HOPES RISE AS JOHNLEWIS RINGS UP RECORD

The employee-owned departmentstore chain has recorded record salesover the Christmas and new year peri-od, providing evidence of a pick-up inconditions on the high street. The

store group said that sales werestrongly ahead of last year.

EX-TIME WARNER CHIEF APOLOGISES

FOR DISASTER OF $164BN AOL DEALJerry Levin, who sold Time Warner for AOL shares inflated by the dotcomboom has marked the 10th anniver-sary of the $164bn deal with a call fortodays corporate titans to acceptresponsibility for the recent financialcrisis. The former Time Warner chiefexecutive, having avoided apologisingfor the billions of dollars destroyed bythe deal, made a belatedmea culpa. Hesaid he was sorry for the pain andsuffering caused.

FLORIDAS WINTER CHILL PUTS THEHEAT INTO ORANGE JUICE FACTORIESA cold snap in Floridas citrus grovessaw orange juice futures surge yester-day to hit an exchange -set daily trad-ing limit, further extending a rally ina market in which prices rose 81 percent last year. Freezing temperaturesin the states growing regions could

pinch a crop already expected todecline.

SHELL IS FINED OVER ACCIDENT AT OILREFINERYShell and two of its contractors werefined a combined 283,000 by theHealth and Safety Executive (HSE) yes-terday over an accident at an oil refin-ery that left a worker paralysed fromthe waist down. The HSE said the acci-dent at the Stanlow ManufacturingComplex at Ellesmere Port was total-ly avoidable.

TULLOW OILS MOVE TO RETAINUGANDAN OILFIELDSTullow Oil is preparing to scupper adeal that would see half its prized oil-fields in Uganda sold to Eni, theItalian energy giant. The FTSE 100 oilexplorer recently discovered that thefields hold huge reserves but to bringthem into production will require bil-lions of dollars in investment.

Ownership of the fields is an issue ofnational concern in Uganda.

CONFIDENCE AMONG UK FINANCEDIRECTORS IS RISINGFinance directors at some of thebiggest companies in Britain are feel-ing more confident than at any timesince the start of 2008, according to anew survey. almost 80 per cent ofthose finance directors questionedreckon that the banking system canhelp sustain a recovery for the widerUK economy. A measure of riskappetite among the executives alsocame in at the highest level for twoyears.

MOULTON AND HANDS PROFIT ONWINDFARMGuy Hands and Jon Moulton, the pri-vate equity veterans, have finally seena Cumbria-based wind farm theyacquired in 2006 blow into profit.Wharrels Hill LLP crept into the black,

posting a 62,161 pre-tax profit in theyear to April 2009.

ENERGY ROW AS BELARUS ANDRUSSIA FAIL TO CLINCH OIL DEAL An energy price dispute betweenRussia and Belarus escalated Monday,raising concerns about midwinterdisruptions in the flow through apipeline system that supplies 10% ofthe European Union's oil. The disputefocuses on the Soviet-era Druzba sys-tem that is the main pathway ofSiberian petroleum to Europe.

AD INFLUX BRIGHTENS HOPES FORNEWSPAPERS AND MAGAZINES A year-end flurry of ad spendinghelped moderate steep declines atsome newspapers and magazines,and has fueled an uptick at others,raising hopes for a recovery in 2010.But publishers remain wary of declar-ing an ad rebound as marketers selec-tively reopen their wallets after a

brutal 2009, when scores of publica-tions closed or made drastic cutbacks.

WHAT THE OTHER PAPERS SAY THIS MORNING

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ABERDEEN Asset Management is upagainst several large players in thebidding for Royal Bank of Scotlandsfunds division, City A.M. understands.

Rival fund manager Schroders andhedge fund giant Man Group arethought to be among those runningthe rule over RBS Asset Management(RBSAM).

RBSAM, which was earmarked forsale as long ago as last February, has$45bn (28bn) assets in long-only

equity and alternative products. RBSis hoping to offload it before the endof the first quarter with a price tag of80-100m. It is understood negotia-tions are at an advanced stage butdue diligence has yet to be conductedby any party.

Last night a senior source atAberdeen confirmed the firm was intalks to buy the unit, in what would be its biggest acquisition since the300m purchase of Credit Suissesfunds arm in December 2008. We

would be interested at the rightprice, the source said. But we arenot the only people involved... Itwould be nice to get it but we are upagainst pretty stiff competition.

City insiders were divided on thelikelihood of bids from Schroders andMan Group, however. One source saidSchroders could be expected to con-centrate on organic growth afterMichael Dobson, the firms chief exec-utive, dismissed the idea of bolt-onacquisitions in a third quarter confer-ence call. Another source said themix of assets managed by RBSAM

would be an unlikely fit with ManGroups absolute return focus.

RBSAM is one of several assets RBSmust sell off under EC rules.

Aberdeen inrunning forRBS fund arm WORLD stocks closed the first day oftrading this year at a 15-month high,leading to increased hopes of a sus-tainable economic recovery.

The FTSE 100 index reached a 16-month peak, up 1.6 per cent, to reach5,500.34. The closing figure was thehighest point since September 2008when Lehman Brothers collapsed.

The Dow Jones industrial averagerose 1.5 per cent to 10,584.96, the S&P500 gained 1.6 per cent to 1,132.99,and the Nasdaq composite indexjumped 1.7 per cent to 2,308.42.

The German DAX gained 1.5 percent to 6048.30 and the French CAC40 rose two per cent to 4013.97.

In Tokyo the Nikkei 225 reached a15-month high when it climbed oneper cent to 10,654.79.

Strength in commodity stocks and

banks outweighed falls from realestate firms and life insurers.

Royal Bank of Scotland sharesclimbed 2.9p to 32.1p.

The rise in commodity pricesmeant mining companies wereamong the biggest winners.

Oil companies also benefited as oilprices reached $81 a barrel beforefalling back slightly.

BP and Royal Dutch Shell rose by2.3 per cent and 2.6 per cent respec-tively. MARKETS: P14

Hopes of globalrecovery asmarkets soar

Traders saw world stocks surge to 15-month highs yesterday Picture: REUTERS

MARKETSs

RBSAM runs institutional money. It has afund of hedge funds unit with 4.3bn of assets As a condition of state aid, the EuropeanCommission says RBS must sell non-core arms,such as Sempra and RBSAM, within four years

FAST FACTS | RBS ASSET MANAGEMENT

NewsCITYA.M. 5 JANUARY 2010

BYOLIVERSHAH

FUND MANAGEMENTs

3

FTSE

5500.34s 1.62%

NIKKEI

10654.79s 1.03%

DOW

10,583.96s 1.5%

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NOVARTIS yesterday said it wanted tobuy the rest of leading eye care firmAlcon for $39.3bn (24.3bn) to reducereliance on prescription drugs, but isoffering minority shareholders aworse deal than major owner Nestl.

The Swiss drugmaker, whichbought 25 per cent of Alcon in 2008,said it was exercising an option to buy a further 52 per cent from the worlds largest food group for$28.1bn, boosting its stake to 77 percent.

Novartis, which was widely tippedto snap up the Nestl stake as soon asits option allowed, also aims to buyout the 23 per cent held by minorityshareholders for $11.2bn, endinguncertainty over whether or not itwould seek full control.

Novartis and rival drugmakerssuch as GlaxoSmithKline and Sanofi- Aventis are pushing into areas likeconsumer healthcare and generics asthey face the biggest loss of patentprotection in history.

Novartis is offering minorities 2.80Novartis shares for each remainingAlcon share, which amounts to $153per share, based on 30 December

prices, versus the $180 agreed withNestle.

Under Swiss law, Novartis can forcethrough the deal once it takes major-ity control from Nestl as mergersrequire approval of two-thirds ofshareholders and a simple boardmajority.

We consider that the price weoffer to minority shareholders is veryfair. If this could be concluded fasterthat has a benefit. If not we have towait until we have control of the com-pany, said Novartis chief financialofficer Raymond Breu.

It appears that Novartis has theupper hand due to unique circum-stances related to Swiss merger law,said Sanford Bernstein analyst TimAnderson.

OIL rose more than two per cent totouch two-month highs over $81 abarrel yesterday as cold weather bat-tered the US and other big consumerregions, driving up demand for heat-ing fuel.

Frigid temperatures are expected todrive up US heating demand to 21 percent above normal, with consump-

tion in the US Northeast, the largestheating oil market, seen up 11 per

cent above average levels.Unusually cold weather in Britain

is expected to continue into the sec-ond half of January after the coldestDecember since 1995, said the UKsMet Office. Colder temperatures inEurope were seen gradually spread-ing from the northeast to southwestduring the next few days, boostingenergy consumption.

Heavy snows and biting cold alsohit parts of Asia, with unusually

harsh winter weather snarling uptransport across north China, South

Korea and India.Heating oil futures led the US oil

complex higher, with US crude forFebruary delivery trading up $1.92 to$81.28 a barrel lunchtime in the US,after earlier touching $81.68, thehighest level since 23 October. Brentcrude climbed $1.93 to $79.86 a bar-rel.

Cold temperatures in the US, partof a global cold front, and a weak dol-lar are driving oil prices higher, said

Phil Flynn of PFGBest Research inChicago.

Oil surges to two-month highs as coldweather boosts demand for heating

MITCHELLS & Butlers (M&B), the puband restaurant group, said yesterdayit will appoint Ronald Robson, a rep-resentative of rebel shareholder JoeLewis, to its board from 22 January.

The appointment will need to beratified by shareholders at the compa-nys annual general meeting on 28January, it added.

Lewiss investment vehicle,

Piedmont, which is M&Bs biggestshareholder with a 23 per cent stake,

is entitled to have two representa-tives on the M&B board. However, inDecember, the operator of All BarOne and Harvester ousted four direc-tors, including Lewis two representa-tives, and called on the TakeoverPanel to rule whether rebel share-holders were trying to gain control ofthe group.

A source close to the situation saidM&B did not object to Robson, who iscurrently chief financial officer of

Lewis property company, TamarCapital.

M&B appoints Joe Lewisman to board of directorsBEVERAGES

MORGAN STANLEY named invest-ment bankers Eric Bischof andJonathan Pruzan as global co-heads ofits financial institutions group (FIG),replacing Ruth Porat who was namedas the groups chief financial officerlast month.

The bank also named John Espositoas the head of FIG Americas, accord-ing to a memo send out on 29December, that emerged yesterday.

It also named Yoichiro Ito and

Takashi Kurose as co-heads of FIG Japan, taking over from Kohei Yuki

who will remain a senior bankerfocusing on important FIG clients inJapan.

The appointments were effectivefrom 1 January, 2010.

Bischof, 45, has been with MorganStanley for 13 years and was earlierglobal chief operating officer of thefinancial institutions group.

Pruzan, 41, a 15-year MorganStanley veteran, was co-head of NorthAmerica FIG M&A.

Morgan Stanley namesfinancial unit executivesBANKING

NESTL was again mooted as a poten-tial rival to consumer goods giantKraft in its 10.1bn bid to acquire con-fectioner Cadbury yesterday, afterboosting its balance sheet by sellingits stake in eye care group Alcon.

Speculation exploded in the Cityabout the ramifications of the sale, with analyst Warren Ackerman atEvolution Securities noting that thefirm will have plenty of firepower todo sizeable acquisitions despite [its]comments that this is not on theagenda.

Ackerman added that the mostlikely scenario would be for Nestl toteam up with Hershey on a counter-bid, buying Cadburys chewing gumbusiness itself and leaving the choco-late operations for its US counterpart.

Though Cadbury chairman RogerCarr has dismissed Krafts currentoffer as derisory, he has indicatedhe would be more open to a deal withHershey, labelling the company a bet-ter cultural fit.

Kraft is widely expected to table animproved bid for the chocolatier before a 19 January Takeover Paneldeadline. Cadbury shares gainedalmost a per cent yesterday on theLondon Stock Exchange in anticipa-tion of a higher offer, reaching 805pby close of play.

Cadbury is due to release a hotly-anticipated trading update at the endof next week.

Nestl fuelsCadbury bid

speculationCONSUMER

APPLE is set to unveil a new tabletdevice later this month, as anticipa-

tion builds about what could be thecompanys biggest product launchsince the phenomenally successfuliPhone.

Apple is understood to be planningto ship a multimedia tablet with a 10-to 11-inch touchscreen in March.

The much-anticipated device has been dubbed the iSlate by analysts,and will be a cross between a fully-fea-tured laptop and a smartphone.

Although analysts have been specu-

lating for months that Apple plannedto unveil a tablet in the first half of2010, Apple has never confirmed itwas working on such a device.

But most commentators expect

Apple to use a trade fair in SanFrancisco on 27 January to launch theproduct.

Excitement about the tablet inrecent weeks has helped propelApples shares to record levels, ana-lysts say. The companys stock rose 1.6per cent and finished at $214.01 yes-terday, a new closing high.

Analysts expect the tablet to bepriced at between $500 and $1,000.

Meanwhile, analysts said they

expected Apple had sold between 8mand 11m iPhones in the three monthsto 26 December, smashing all previ-ous records.

Apple to unveil new deviceBYHARRY BANKS

TECHNOLOGY

Novartis eyes

deal to buy uprest of AlconBYHARRY BANKS

PHARMACEUTICALS

BYHARRY BANKS

ENERGY


ANALYSIS lNovartis

50

51

52

53

54

55

56

57

28 Dec7 Dec16 Nov16 Oct5 Oct

CHF55.05

4 Jan

CITY VIEWS: WHAT WILL HAPPEN NEXT INTHE CADBURY BID BATTLE? Interviews by Ben Griffiths

JEREMY BATSTONE-CARR | CHARLES STANLEY

Our Reduce recommendation is predi-cated on the view Cadbury will do enough toensure sufficient shareholder support to see offits rivals. We think it unlikely that [the next trad-ing] update will have disappointed, judging bythe strong anecdotal evidence to suggestrobust Christmas-related sales activity.

HENK POTTS | BARCLAYS WEALTH

There has been a lot of excitement aroundKraft coming back with a sweetened bid. Thedeal we saw today with Nestl gives them a cashpile which some people say could bring them into

the frame. The market believes there is more toplay for and, as the bid deadline approaches,speculation will reach fever pitch.

DAVID BUIK | BGC PARTNERS

Cadbury breached 800p this morning. Themarket believes Irene Rosenfeld will increaseKrafts bid to at least 800p. Cadbury is due outwith a trading statement on 15 January, andmany will be surprised if it does not make encour-aging reading, with growth of between 5-7per cent and margins up 16-18 per cent.

ANALYSIS lApple

180

190

200

210


$

214.154 Jan

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FRANCES Total signed a $2.25bn(1.49bn) tie-up with ChesapeakeEnergy, becoming the latest oil firmto gain a foothold in US shale-gasfields

Total said it would take a 25 percent stake in Chesapeakes Barnett

Shale gas fields in north Texas, paying$800m in cash and providing $1.45bn

toward the fields development for upto six years.

Analysts said the deal made strate-gic sense for Frances largest company by market value and that the pricewas in line with recent transactions.

The deal highlights a disciplinedapproach to capital allocation andthat M&A focus at Total remainsmore toward smaller bolt-on asset

acquisitions, as opposed to larger cor-porate deals, Morgan Stanley said in

a research note. The deal follows similar invest-

ments by US and European rivals inNorth American shale gas, which isharder and more expensive to extractthan gas from traditional reservoirs.

The drilling techniques needed toproduce natural gas from shale werepioneered in the Barnett Shale in theearly 1980s. The Barnett Shale is the

largest producing field in NorthAmerica.

Total signs $2.25bn deal with Chesapeake

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CAMBRIDGE University is consider-

ing selling bonds for the first time inits history.The university is following the lead

of several Ivy League institutions thathave benefited from the scheme. Ithopes to raise 300m to invest in new

buildings.The universitys director of finance

Andrew Reid told City A.M.: This issomething we have been looking into

for years but it is only recently wehave looked at amounts.We will be moving forward with

the plans in 2010 and may either sellbonds or borrow from a bank.

We have received advice from sev-

eral banks but not from independentfinancial advisors.

The recommendations were madeby the Cambridge Board of Scrutiny,

an office set up to ensure the univer-sitys finances run smoothly.Their report urged the institution

to proceed with a long-datedissuance in the f ixed-interest marketswhile conditions remain favourable.

Cambridge to sell bondsBY STEVE DINNEEN

FINANCIAL SERVICES

INVESTMENT bank Citi has agreed adeal to sell its electronic foreignexchange platform, LavaFX, to elec-tronic forex platform FXall, it said yes-terday.

FXall, which has some 800 institu-tional clients including large hedgefunds and asset management firms,did not disclose the terms of the deal.

The firm said the acquisition, foran undisclosed fee, would boost itsclient base to 1,000, adding it willtake on LavaFX chief executive TomSan Pietro as head of active trading.

FXall chief executive Phil Weisbergsaid: We have long admired LavaFXsinnovative client focus on active trad-ing which compliments FXalls offer-ing for this important clientsegment.

Citi, which is a shareholder in FXallin addition to 15 other banks, said ina statement that it believes a multi- bank platform is best owned by amulti-bank provider, making the saleof LavaFX to FXall the right strategyfor its continued growth.

The bank hopes the sale will pro-vide FXall with the capacity to chal-lenge Reuters and EBS, the providerscurrently dominating the electroniccurrency trading market.

FXall was originally launched in2000 by seven founding banking par-ticipants.

FXall snapsup Citi forexplatform

DUBAIS Emaar Properties yesterdayopened the Burj Khalifa, the worldstallest skyscraper, marking the com-pletion of the last of its big local land-mark projects and the start of a newstrategy which is expected to focus onoverseas projects.

We will be focusing on our sub-sidiaries -- hospitals and hospitality --which will create a lot of revenues forEmaar and also work on wherever wehave started projects [overseas],Issam Galadari, chief executive ofEmaar Dubai said.

Emaar, 31.2 per cent owned by theDubai government, is the Arabworlds largest listed developer, but isless indebted than other Dubai prop-erty firms, with about 8.1bn dirhams($1.37bn) of loans and borrowingsoutstanding as of September 2009, ofwhich about half is due this year.

Last year it posted a 53 per cent risein third-quarter net operating profitto 655m dirhams, beating most ana-lysts forecasts thanks to higher salesof its high-end properties.

The performance contrasted withthat of troubled compatriot Nakheelwhich has seen earnings collapse andits liabilities rise to $20bn (12.4bn).

Following Mondays opening the$1.5bn towers first residents are dueto move in next month and Emaarschairman, Mohammed Alabbar, said90 per cent of the properties in thetower have been sold. The firm is setto get a 10 per cent yield on its invest-ment and the completion will boostearnings in 2010.

The owners of the tower say thebuilding is 828 metres high.

Emaars story has been about

Dubai and the high end (of the prop-erty market). It has been a survivorcompared to the two main developersNakheel and Dubai Properties, saidSaud Masud of UBS.

Dubai openstallest towerin the world

SHARES in Staffline, the blue-collarrecruitment and training specialist,closed 5.8 per cent up yesterday afterthe company said its full-year earn-ings would be in line with upwardlyrevised market expectations.

The board said the performance ofthe Aim-listed firm had been driven

by new contract wins since June and acost-cutting programme.

Chief executive Andy Hogarth saidthat the integration of bolt-on acqui-sitions had also offered the chance tocarve out efficiencies.

He also hinted of more consolida-tion to come in the sector, saying:Our strong trading performance pro-vides us with the confidence to con-tinue to review acquisitionopportunities as we look to invest fur-

ther in our expansion.Its shares closed up 4.5p at 82p.

Staffline earnings to riseCONSULTANCY

Cambridge may sell bonds to fund capital projects Picture: REX

BYHARRY BANKS

PROPERTY

BYHARRY BANKS

ENERGY

BYVICTORIA BATES

FINANCIAL SERVICES

News 5CITYA.M. 5 JANUARY 2010

ANALYSIS lCiti

3.20

3.40

3.80

3.60

4.40

4.20

4.00

4.60

4.80

5 Oct 26 Oct 16 Nov 7 Dec 28 Dec

$

3.374 Jan

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6/20

UK MORTGAGE approvals rose inNovember to their highest level sinceMarch 2008 as confidence tricklesback into the property market, Bankof England figures showed yesterday.

Loan approvals numbered 60,518over the month, rising from anupwardly-revised 57,718 in Octoberand more than double the record lowof 27,162 set in November 2008. Thefigure comfortably beat analyst fore-casts of 58,000.

Net mortgage lending in Novemberrose by 1.5bn, significantly above both Octobers 1.1bn rise and theprevious six-month average of 700m.

George Buckley, chief UK econo-mist at Deutsche Bank, said the fig-ures were low compared to pre-crisislevels but that the tide looks to beturning.

However, he was quick to caution

that the economic recovery is farfrom set in stone, adding: The dura-bility of the recovery will remain anissue going forward given that muchof the improvement in growth could be down to the credit impulse andthe turn in the inventory cycle bothof which could prove short-lived.

Oliver Gilmartin, senior economistat the Royal Institution of CharteredSurveyors, said: Todays figures sup-port our view that increasingmomentum in the housing marketwill see further rises in house pricesduring early 2010 Despite an expect-ed increase in property listings andthe onset of several headwinds dur-ing 2010, the current imbalancebetween demand and supply is set tounderpin further price gains in thenear term.

The mortgage data came as anoth-er survey predicted that activity inthe prime property sector is set topick up this year following a deluge oftop-end homes coming onto the mar-ket.

Property portal Primelocation.comsaid yesterday 21.8 per cent of poten-tial sellers in the South East regionalone had yet to appoint an agent tomarket their home, indicating aboost to supply in the near future.

THE BANK of Englands benchmarkgauge of the money supply rose inNovember at its fastest monthly pacesince April, in another sign that cred-it conditions in the UK economy arebeginning to ease.

M4, money supply excluding inter-mediate other financial corporations,rose by 0.9 per cent month-on-month,though it fell 2.2 per cent over thethree months to November.

The data raises hopes that Bank

efforts to boost the money supply notably its 200bn quantitative eas-

ing (QE) programme are having anincreasing impact on the economy.With data and survey evidence

generally firmer, the economy almostcertainly having returned to growthin Q4 2009, and inflation now moving back up and set to spike markedlyover the next few months, we suspectNovembers 25bn increase to 200bnmarked the final extension to the QEprogramme, said Howard Archer,economist at IHS Global Insight.

Banks QE programmeboosts UK money supplyECONOMICS

MANUFACTURING activity in theworlds largest economies jumped inDecember, underpinning the tenta-tive signs of recovery from the finan-cial crisis, data showed yesterday.

The US manufacturing index grewfor a fifth consecutive month to 55.9,beating forecasts of 54.3 and hittingits highest level since April 2006.

Meanwhile, factory activity in theUK expanded at its fastest pace inmore than two years, buoyed by asharp jump in new orders, theCIPS/Markit purchasing managersindex (PMI) showed. The index rose to54.1 last month after a surprise fall to51.8 in November.

December PMI data signal a posi-tive end to a tumultuous year formanufacturers, said Rob Dobson,

senior economist at Markit.Manufacturing data for the 16-

country eurozone also improved lastmonth as the regions PMI ticked upto 51.6 from 51.2 in November.

And Chinas factories followed suit,cranking up production in Decemberon the back of bulging order books,with the HSBC PMI for the countryrising to 56.1, the highest since thesurvey began in April 2004.

Factories hard at work as strong orderbooks buoy global manufacturing dataECONOMICS

NET consumer credit fell by 400m inNovember as cash-strapped con-

sumers continued in their attemptsto improve their financial stability inthe ongoing uncertain economicenvironment.

Novembers fall in consumer creditmarks the fifth net repayment in asmany months, including the record600m of debt that was paid down inOctober.

Credit card lending in Novemberincreased by a muted 200m, thoughother loans and advances also showed

a decline of 600m, a sixth successivemonthly net repayment.

The figures come after the Bank ofEnglands Monetary PolicyCommittee warned in the minutes of

its December meeting that the extentof the increase in the household sav-ings ratio would be one of the key fac-tors projecting uncertainty over theoutlook for inflation and activitygrowth.

Consumers continue to adjusttheir household balance sheets in theshadow of worries over the state ofthe economy, the job market andrestrictions on bank borrowing. Thehousehold savings ratio reached an

11-year high in the third quarter of2009, rising to 8.6 per cent.

The Bank also cautioned that thenascent stabilisation in consumerspending in the third quarter of 2009

was a uncertain indicator of econom-ic recovery due to the effects of thecar scrappage scheme and house-holds bringing forward spending toavoid the reversal of the cut in theVAT rate at the beginning of this year.

Those effects were hard to quanti-fy, making the extent of the underly-ing recovery in consumer spending,and therefore future prospects, diffi-cult to judge, the minutes of theDecember MPC meeting stated.

Debt repayments rise againBYVICTORIA BATESECONOMICS

UK mortgage

loans at a 20month peakBYVICTORIA BATES

ECONOMICS

Economic News6 CITYA.M. 5 JANUARY 2010

A jump in the levelof manufacturingactivity across theworlds biggesteconomies inDecember hasboosted hopes ofstronger globalgrowth in the final

quarter of the year

Picture: REUTERS

I hope they dont raiseinterest rates too quicklythis year because mymortgage would costmore. I think levels ofunemployment are goingto stay about thesame, but I thinkwere through theworst of the

recession.

ANDY APPELBAUM |DIAGONAL CONSULTING

Im quite optimistic. Ithink the market hasimproved and sharesended last year on ahigh, which is verypositive for invest-ments. Jobprospects are bet-ter too, so thingsare definitely

picking up.

BEVERLEY GALLEY |SMBCE

Im not very optimistic, Ithink the worst is still tocome. There are going to besevere cutbacks and taxesare going to go up. The pub-lic has become used tothe good times, sopersuading themto take the medi-cine needed will

not be easy.

CHRIS BACHOFEN |STEMCOR

The first half of the yearlooks fairly optimistic, butwe may have to tighten ourbelts later. We need toaddress the national debt,but we need to do itcautiously. I dontthink any politicalparty is saying any-thing different

from the others.

SELLERS KARIA |DEUTSCHE BANK

CITY VIEWS: DO YOU THINK ECONOMIC PROSPECTS FOR 2010 ARE BETTER THAN THEY WERE IN 2009? Interviews by Philip Waller

Deutsche Bank chiefUK economist GeorgeBuckley claims the tideof woe in the propertymarket is turning

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CAMERON CLYNENational Australia Bank chief executive

JAYNE ANNE GADHIAVirgin Money MD

RICHARD PYMNorthern Rock (AM) chairman

IRISH finance minister Brian Lenihanwill continue to implement his fiscalreform programme but will not per-form non-essential tasks for monthsas he undergoes therapy for cancer,he said yesterday.

Lenihan, who has won praise frominvestors for halting Irelands steep

budget deficit rise by presentingthree budgets in just over a year, isunderstood to have pancreatic cancer.

He said a blockage including can-cerous material had been identifiedat the entrance to his pancreas but

that the organ was functioning nor-mally and he was feeling fit and well.

THE race to snap up the good assets ofNorthern Rock heated up yesterday,

with Virgin Money and NationalAustralia Bank (NAB) emerging as thefrontrunners.

Clydesdale and Yorkshire Bankowner NAB is understood to have heldmeetings with potential advisersincluding Lazard, Citigroup, CreditSuisse and Morgan Stanley ahead of apotential bid for the lenders savingsand mortgage business.

Meanwhile, Virgin Money, whichtried to buy Northern Rock before it

was taken into the government's armsin early 2008, is looking into a 50mdeal to buy a small British bank in thecoming months.

Sir Richard Bransons financial armhas applied to the Financial Services

Authority (FSA) for the bankinglicence it needs to pursue its retail

banking ambitions. This is expected tobe approved in the next three months.

Northern Rock has now been for-mally split into a good bank and abad bank following its restructuringlast year. The new savings and mort-

gage bank, named Northern Rock,received FSA authorisation on 1

January. This holds savings balancesof around 19bn and has around10bn of low-risk residential mort-gages.

The bad bank, named NorthernRock (Asset Management) and chaired

by Bradford & Bingleys Richard Pym,has a residential mortgage book ofabout 50bn and 4.5bn of unsecuredpersonal loans. This will remain ingovernment hands and will no longeroffer new mortgages. Northern Rock

yesterday said 90 per cent of its mort-gage book was not in arrears.

Gary Hoffman, Northern Rockschief executive, said: I am pleased toannounce that we have successfullycompleted the legal and capitalrestructure of the business. This helpsto build a stronger future and delivers

value to taxpayers.The government has been keen to

introduce new players into the bank-ing sector to boost competition. NABis one of the biggest financial institu-tions in Australia with 8.3m con-sumer and business clients across 10countries. It could also increase its UKpresence by bidding for branches

being sold by RBS and Lloyds.

Bank buyers

circle as Rocksplits off unit

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A THIRD of UK workers would quittheir current jobs for a new employer,according to research for businessadvisers PricewaterhouseCoopers.

The survey found 33 per cent ofworkers feel they were not valued bytheir employers during the recession.Of those respondents who said theydid feel appreciated in the downturn,41 per cent said they had no plans toleave, while just 23 per cent said they

would consider leaving regardless.PwC said employers must resolve to

meet workers needs or risk losing

them to rivals once the job marketpicks up.

Workers poisedto change jobsIrish ministerbattles cancer

BY RHIANNICHOLSONOF INTERACTIVE INVESTOR

BANKING

POLITICS

INDUSTRY


GARY HOFFMANNorthern Rock chief executive

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PADDED BRAMAGNATE IS

TOP WOMANIN BUSINESSPLENTY of lists of the most powerful

women in business are published eachyear now that we ladies have (almost) suc-ceeded in cracking that glass ceiling, so TheCapitalistwas somewhat surprised by thenovel value of the latest addition to thepack.

A sneak peek at ladies magazineGlamours upcoming list of the five mostpowerful businesswomen and femalelawyers, you see, makes rather interestingreading. Not for this rag the serious Helen

Alexanders and Katherine Garrett-Coxesof the finance world; rather, in true glossystyle, theyve picked a bevy of business

beauties with a difference.

In at number five is graceful Lottery boss Dianne Thompson; number four isprolific dealmaker, former model and ex-Royal squeeze Amanda Staveley; PaulMcCartneys solicitor Fiona Shackletoncomes in at number three; and BaronessHale, the most senior female judge inBritish history, takes the silver medal.

All of which makes the magazineschoice of most powerful businesswoman Ultimo lingerie founder Michelle Mone seem even more bizarre. For one, TheCapitalistcant see Staveley, the toast of the

having just joined India InvestmentPartners as a fund manager, but its noth-ing compared to the challenge he under-took this time last year.

Cornell is the great-grandson onJameson Boyd Adams one of the coura-geous men who accompanied explorer SirErnest Shackleton on his failed expeditionto the South Pole in 1909 (above). So, onehundred years later, he decided to lead hisown expedition to complete the 97-miletrek across the Antarctic in Adams place,calling it unfinished family business.

BIG CHILLFinally, while were on the subject of

wintry escapades, an email arrives froma City chum who was astounded to get

into his car yesterday morning and readthe temperature 9C on the dial.Ironically, waiting for him at work was

an advertisingemail for an upmar-

ket ski resort inFrance, where temperatures are current-ly a balmy 8C

Middle Eastern investment communitywhos worth an estimated 100m, beingtoo happy about playing fourth fiddle to apadded bra entrepreneur, however suc-cessful and talented. Though come to

think of it, perhaps it would be folly tounderestimate the power of a gel bra to

bring joy to the masses.

FESTIVE FATTIESSpeaking of, ahem, more superficialcharms, word on the street is thatBeautifulPeople.com, the dating websitestrictly for candidate who are easier on theeye, has thrown out over 5,000 of its mem-

bers over Christmas for pigging out.Yes, you did read that right the firm,

which appears supremely unconcernedabout such trivial things as customer loy-alty, is adamant that it doesnt want fes-tive fatties roaming its forums (its theirphrase, not mine, before ultra-PC readers

decide to shoot the messenger)Needless to say, the country with

most members banned from the hal-lowed cyber halls was the US, whichlost 1,520 roly-poly users.

POLE POSITIONHeres a City chap who makes the extra-curricular activities enjoyed

by the rest of us look likepure childs play. DavidCornell, 41, is a busy bee at the moment,

Staveley, left, and Shackleton, right, were beaten to the top by Michelle Mone Pictures: REX/GETTY

The Capitalist8 CITYA.M. 5 JANUARY 2010

EDITED BY

VICTORIA BATESGOT A STORY? [email protected]

MichelleMone, thefounder of

the Ultimolingeriebrand, doesntunderestimatethe power ofa gel bra

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INVESTMENT bank Morgan Stanleybeat rival Goldman Sachs to the topspot in the mergers and acquisitionsdeal value stakes during a tough year,a survey showed.

Morgan Stanley advised on dealsworth $585.9bn (363.4bn), comparedwith Goldmans $548.6bn, accordingto the data group MergermarketsGlobal M&A Round-Up for 2009.

Goldman topped the table in termsof deal volume, completing 244 dealsin contrast to Morgan Stanleys 231.

The pair advised firms on deals insectors ranging from Australian com-modities to US healthcare and tech-nology, Mergermarket said.

The dynamic duo of the M&Aworld have benefited from advising

clients across the globe on the major-ity of the largest transactions,Mergermarket said.

Morgan Stanley and Goldman werethe star performers in a year in whichthe number and value of deals wasdown 27 per cent compared with2008, although activity improved inthe final quarter, Mergermarket said.

Companies completed 2,523 dealsworth $626.8bn in the quarter, mak-ing it the best for value since thethird quarter of 2008.

Despite market uncertainty, themomentum is tipped to continue in2010, thanks to firms record levels ofcash and a thawing credit market.

2009 was not a good year for M&A.The end of the year, however, showedsigns that the recession is coming toan end and M&A is starting to pick upagain, Mergermarket said.

CREDIT Suisse has been sued by prop-erty owners who said the Swiss bankschemed to defraud investors in fourluxury resort communities, includingthe bankrupted Yellowstone Club.

The lawsuit filed in federal court inBoise, Idaho, seeks $24bn (15bn) ofdamages against Credit Suisse andcommercial real estate firm Cushman

& Wakefield, and class-action statusfor investors and property owners. The

alleged losses relate to resorts inNevada, Idaho and the Bahamas.

According to the complaint, CreditSuisse violated federal racketeeringlaws by concocting a loan to ownscheme that inflated the value ofresorts and burdened the resorts andpurchasers of homes there with toomuch debt.

Using appraisal methodology pro- vided by Cushman & Wakefield, thisscheme allowed Credit Suisse to win

enormous fees, and ultimately fore-close on or take control of resorts at

well below market value, the com-plaint said.

The scheme has been a financialheist for Credit Suisse with no risk,the complaint said.

Credit Suisse knew at the time thelending advice and authorisationswere given that its scheme and tactics would cause the developers and theresorts financial ruin, resulting in theultimate takeover by Credit Suisse , itadded.

The complaint seeks $8bn of actualdamages.

Resort owners sue Credit Suisse for$24bn over luxury property schemes

CAR sales in France, Italy and Spainrose strongly in December, datashowed yesterday, as drivers tookadvantage of incentives but expertswarned of tough conditions ahead asthe scrappage schemes start to end.

Some major markets saw sales risein 2009 after governments intro-duced cash incentives for drivers totrade in old cars, but prospects for2010 are less certain as subsidies end.

Full-year car sales figures due later

this week are also expected to showChina has overtaken the US as the

worlds biggest car market.The figures would cap a turbulentyear for an industry that saw somemanufacturers collapse and newalliances pursued in an effort to sur-vive. In Italy, where a car scrappingscheme was introduced in Februaryand ran out at the end of 2009,December new car sales rose 16.73per cent, while full-year sales weredown 0.17 per cent at 2.158 millionvehicles, the transport ministry said.

Car sales rise again dueto scrappage schemes

AUTOMOTIVE

DUTCH luxury car maker Spyker Carsis working on its final offer forGeneral Motors(GMs) Saab assetsand will file its bid by a 7 Januarydeadline, Spykers chief executivesaid yesterday.

Spyker cars is preparing to revise itsbid for GMs loss-making Swedish car-maker Saab for a third time to

address GMs criticism of its currentoffer.

We have gotten time for a finaloffer. Nothing has been rejected,said Spykers chief executive VictorMuller.

Muller said he would file an offerby a deadline that would expire on 7 January but he declined to givedetails.

Saab said last week General Motors

had extended a deadline that expiredon 31 December to accept bids for theSwedish car brand.

Saab said there were several poten-tial bidders for the marque but itdeclined to give names, except forSpyker.

Paul Akerlund, union representa-tive at Saab, said GM had given untilThursday for bids and would then goahead with its wind-down process.

Spyker will make final bid for ailingSaab this week, says chief executive

AUTOMOTIVE

GAMING group Sportech is targetinginternational expansion of its foot-

ball pools business after tying up anew 91m funding deal.Sportechs chief executive Ian

Penrose said it is hoping to take thepools into Asia or elsewhere overseas,either on its own or with partners.

The company has just renegotiatedlending facilities with Lloyds BankingGroup, giving it more flexibility andfinancial headroom to grow the busi-ness and to do deals.

Sportech is continuing talks with

an unidentified party about a signif-icant acquisition which it saidwould generate significant long-termbenefits, although Penrose declinedto elaborate.

Interest in British football hasnever been higher, particularly inAsia, and we want to ensure we followthat, Penrose told City AM.

Sportech, which owns LittlewoodsGaming, Vernons and Zetters, had been re-negotiating its deal withLloyds since November, when itsought more flexibility for impor-tant strategic opportunities.

The firm, which had banking facil-ities of 99.75m and net debt of

81.5m in November, said its reviseddeal with Lloyds involved bankingfacilities of 90.75m, with a latermaturity date of June 30, 2013, for87.75m of the total. Its lawyers are

Freshfields and its broker is Investec.Penrose said: We now have inplace robust facilities, which allowthe group to pursue both organic anddevelopment opportunities.

He added: In the economy, it isstill going to be challenging, but over-all the industry is fairly resilient.

Sportech has previously expressedinterest in buying the Tote, the state-owned bookmaker that the govern-ment has said it may sell.

Sportech bags 91m fundingBY PHILIPWALLER

LEISURE

M Stanley in

top M&A spotBY PHILIPWALLER

MERGERS & ACQUISITIONS

BYHARRY BANKS

BANKING

Swedish car marque Saab has fallen on hard times Picture: Micha Theiner/CITY A.M.

NEWS | IN BRIEF

Gas demand surges as cold gripsNational Grid yesterday issued a gas bal-ancing alert (GBA) to warn big users ofthe fuel they may have to cut consump-tion as cold weather grips the country.The GBA means that demand has risento such a level that, given Britains supplyand storage position, there is a risk thatanother supply shock could force ademand-side response, such as shuttingdown a gas fired power plant. Gas pricessurged as unusually cold weather droveup demand to about 30 per cent aboveseasonal norms.

Hotel rates in London on the riseHotels in London saw revenue per avail-able room a key industry measure

rise out of the red during the final quar-ter of 2009, up 5.5 per cent to 110,

according to professional services firmDeloitte. Occupancy was the key driver ofgrowth in the capital, up 5.8 per cent to82.9 per cent. Marvin Rust, hospitalitymanaging partner at Deloitte, said: Withsterling still weak against a basket ofcurrencies, London seems set to continueon a fast track to recovery.

Small companies back ToriesAround 78 per cent of small companiesthink a Conservative government wouldbe more supportive of entrepreneurialbusinesses, according to a surveyreleased by private equity firm BowmarkCapital. The businesses sampled alsoadded that keeping interest rates low,simplifying employment law and cutting

back on red tape should be priorities forwhoever forms the next government.

Y/E 2008 Y/E 2009 HOUSE VALUE (US$M) DEAL COUNT

LEAGUE TABLE OF FINANCIAL ADVISERS TO GLOBAL M&A: VALUE

7 1 Morgan Stanley 585,893 2312 2 Goldman Sachs 548,603 2441 3 JPMorgan 415,824 2254 4 Citigroup 387,390 1703 5 Bank of America Merrill Lynch 298,536 1658 6 Credit Suisse 287,767 1995 7 UBS Investment Bank 263,577 19437 8 Barclays Capital 247,787 706 9 Deutsche Bank 229,021 14310 10 Lazard 214,087 159

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GLOBAL reinsurance markets startedthe year softer after a lack of majorcatastrophes in 2009.

The cost of reinsuring against natu-ral catastrophe losses on 1 Januaryfell by six per cent in the US and by asmuch as 10 per cent in the UK,according to broker Guy Carpenter.Rival intermediary Aon Benfield esti-mated the cost fell by up to 15 percent worldwide, bringing prices backto January 2008 levels.

The decline came as a result of therally in global financial markets, lowcatastrophe losses last year and thelingering recessionary effect ondemand, Guy Carpenters global headof business intelligence Chris Kleinsaid. Another factor was strong com-petition between reinsurers, whoremain strongly capitalised thanks tothe rebound in financial markets.

In the UK, property reinsurancerates fell by between 5 and 10 percent. The cost of retrocession whereone reinsurance company reinsuresanother fell by between 5 and 7.5per cent. Aon Benfield said the cost ofreinsuring against credit and politicalrisk was up to 10 per cent higher inEurope, one of the only risers, along

with motor liability.Collins Stewart said Swiss Re and

Hannover Re remained its preferredEuropean stocks in the sector, withHiscox its preferred Lloyds insurer.Collins Stewart rated Amlin a sell.

The stockbroker forecast return onequity in the mid teens for Europeanreinsurers and slightly higherreturns from larger Lloyds insurers.

Analyst Ben Cohen said: The mainpositive is that where there have beenlosses it would seem prices have risen,so the markets been responding to

whats happened and the industrysstill broadly speaking holding itsown.

Oriel Securities said the price dropwas broadly in line with expectations.Analysts wrote: The absence of catas-trophe losses combined with a strongrecovery in industry capital was wide-ly expected to drive softer catastropherates in particular.

THE private pensions system is in cri-sis with virtually all final salaryschemes now closed to new entrants,according to the Association ofConsulting Actuaries (ACA).

A survey of 309 employers pub-lished by the ACA showed that nineout of 10 defined benefit schemeshave shut the door on new employees.

The data also showed that 91 percent of such schemes were in deficit.

Meanwhile 59 per cent of employ-ers said they are set to review theirpension provision before 2012 whenthe National Pensions SavingsScheme (NPSS) is due to begin. TheDepartment for Work and Pensionsclaims its pension reforms will mean11m workers being given the chanceto save with a new minimum employ-er contribution.

But only two per cent of employerssaid they feel the governments stated

policy of supporting quality work-place pensions is working down

from 38 per cent two years ago. ACAchairman Keith Barton said these

were worrying times and called fora radical change of approach.

He added: Our survey found thatthree-quarters of employers feel theiremployees are uncomfortable in tak-ing on the entire investment, infla-tion and longevity risks that come

with defined contribution schemes.However, this is exactly what is

happening as defined benefit

schemes are being replaced withdefined contribution.

Private pensions system is facing crisisas final salary schemes are scrapped

JAPAN Airlines shares jumped 31 percent yesterday as the governmentlooked to secure funds to prevent thecarrier from running out of cash as itawaits a possible bailout.

The stock lost a quarter of its valuelast Wednesday, the last trading dayof 2009, after sources said a govern-ment-backed turnaround fund wasleaning towards a bankruptcy pro-

ceeding for JAL as part of its restruc-turing plan.

But the shares rebounded on newsthe government had asked the state-owned Development Bank of Japan todouble its credit line to JAL to 200bn

yen (1.34bn). A spokesman for theDBJ said it was considering the gov-ernments request.

The extra funding is aimed at keep-ing the carrier going until the state-

backed fund -- the EnterprisTurnaround Initiative Corp of Japan(ETIC) -- decides later this month

whether or not to support JAL withtaxpayer money.

Japan Airlines soars onhopes of rescue fundingAVIATION

HMV is poised for a successful 46mtakeover of music venues and festivalsfirm Mama Group after a rival offerhit the buffers.

Mamas largest shareholder,Luxembourg-based investment firmSMS Finance, made a 38.3m bid forthe business last month.

SMS the investment vehicle ofItalian telecoms billionaire SilvioScaglia owns 29.8 per cent of the

business but failed to up its offer andHMV is now in pole position to seal adeal.

HMVs takeover bid comes less thana year after the two companiesformed a joint venture which owns 11music venues and an interest inevents such as Londons Lovebox festi-

val. Mama also has an artist manage-ment business which represents top

bands including the Kaiser Chiefs,Franz Ferdinand and White Lies.

The company was set up in 2002and bought venues from the MeanFiddler group including the rightsto the brand in 2007.

HMVs move into the live musicbusiness is part of a comeback led bychief executive Simon Fox after thecompanys sales were badly hit bymusic downloads. Recent resultsfrom Mama showed further stronggrowth in gig demand, with tradingat the Hammersmith Apollo the

joint ventures flagship 5,100 capacityvenue at record levels.

HMV poisedfor Mama

takeoverRETAIL

BUDGET airline easyJet yesterdayannounced plans to boost expansionof its European network in 2010 andsaid there were more routes to come.

The Luton-based carrier said it wasadding 21 routes to its expansion pro-gramme in the coming year, takingthe total number of routes it plans tolaunch in 2010 to 70.

The latest plans include new flightsfrom Liverpool, Bristol and LondonStansted to destinations in Turkey,

Greece and Croatia and daily flightsfrom Amsterdam and Paris to Prague.

An easyJet spokesman said thecompany planned to announce morenew routes in the next few weeks.

There are more to come, he said.EasyJet runs 182 aircraft on 503

routes and plans to expand its fleet to197 jets by September next year.

Last month, the airline said chiefexecutive Andy Harrison planned toleave the company in June after a row

between its board and millionairefounder Sir Stelios Haji-Ioannou.

EasyJet announces raftof new European routesAVIATION

A US judge yesterday rejected arequest to consider reducing the

prison sentence of a whistleblower inthe tax fraud case against Swiss bankUBS.

Bradley Birkenfelds lawyers hadappealed for a postponement of his

jail sentence, saying that he has moreinformation on tax cheating to offer.

They also appealed for a reductionof his 40-month sentence to reflecthis contribution to the case.

But Judge William Zloch of theFederal District Court in Fort

Lauderdale ordered the whistleblow-er to start his sentence on Friday asplanned.

Former UBS banker Birkenfeld, 44,handed information to the US

authorities to help with a tax probeinto the bank.The Swiss bank was targeted after

allegations that it was helping US taxcheats to hide assets in UBS accounts.

Birkenfeld was sentenced by Zlochin August, just two days after US andSwiss authorities signed a pact in

which Switzerland agreed to revealthe names of about 4,450 wealthy

American clients of UBS to tax investi-gators. The whistleblower was widely

seen as a key figure in the case.Justice Department officials said thejail time was justified because he wasdid not help the enquiry at first.

Setback for UBS whistleblowerBY JOHN DUNNE

BANKING

Reinsurance

prices fall ona safer 2009BYOLIVER SHAH

INSURANCE

BY JOHN DUNNE

PENSIONS

Hurricane Katrina pushed rates up in 2005 Picture: REUTERS

ANALYSIS lReinsurance Rates

6%decline in UScatastrophe

reinsurance rates

5%decline in Europe

catastrophereinsurance rates

5-10%decline in UKproperty rates

5-7.5%decline in

retrocessionBen Cohen, analyst atCollins Stewart, saidthat losses in 2009had been offset byhigher prices

ANALYSIS lUBS

15

15.5

16.5

16.0

18.0

17.5

17.0

18.50

19.0

5 Oct 23 Oct 12 Nov 2 Dec 22 Dec

CHF16.414 Jan

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11/20


BUDGET airline Ryanair has been branded puerile and childish forusing a legal loophole to hit onlinecustomers with an extra credit cardcharge.

Office of Fair Trading (OFT) chiefexecutive John Fingleton yesterdayattacked the company for hittingcustomers with a 5 booking fee forusing all but one credit card.

The fee has been added to pay-ments with an Electron Visa debitcard from 1 January, leaving a pre-paid MasterCard as the only way to

book flights without being hit withthe charge.

Existing law says there must be atleast one method on offer in whichcustomers are not clobbered.

Fingleton said: Its almost liketaunting consumers and pointingout: Oh well, we know this is com-pletely outside the spirit of the law,

but we think its within the narrowletter of the law.

He added: On some level its quitepuerile its almost childish.

The OFT chief also questioned theautomatic addition of insurance toflights by airlines such as Ryanairunless customers opt out.

But Ryanair hit back at the claims,insisting the airline was offering

value for money.A spokesman said: Ryanair is not

for the overpaid John Fingletons ofthis world, but for the everyday JoeBloggs who opt for guaranteed low-est fares because we give them theopportunity to fly across 26European countries for free, 5 and10.

What the OFT must realise is thatpassengers prefer Ryanairs model asit allows them to avoid costs such as

baggage charges which are stillincluded in the high fares of highcost, fuel surcharging, strike-threat-ened airlines such as BA.

OFT attacksRyanair overfee loopholesBY JOHN DUNNE

TRANSPORT

New Year resolutions for entrepreneur country

NEW YEAR, New Chance, thechance to do things differently.If you continue to do what

youve always done, youll getmore of what youve already got.

The reason I have spent my lifemoving around from San Francisco,

to Chicago, to Cambridge, to Paris, toBoston, to Fontainebleau to London is to keep reinventing myself in orderto stay fresh.

Here are a handful of New Years

Resolutions from the world of fast-growing, relatively new businesses,which are bursting into fresh, uncon-tested market spaces, enabled by tech-nology, fuelled by finance, and led by

visionaries.1. Dont take risks in 2010. This is a

year when you should be cautious.Focus on relentless execution instead.

2. Focus on what you can influ-ence, which always begins as some-thing small but gets bigger as timegoes on. Dont focus on what interests

you.

3. Align, align, align: value is creat-ed when people are aligned in a com-mon pursuit. The old I win, youlose no longer works in a network-oriented, highly-connected world.

The people and companies that arewinning are organising the econom-ics of the ecosystems in which theyoperate.

4. Play to your strengths you canonly create an unfair advantage bydoing something youre good at that

you love. If the timing is right, youcan build significant value. If yourea big company, you should use

your strengths to provide scale tosmaller innovative companies.Provide reach and distribution capa-

bility to the young firms that are

innovating dont try to innovateyourself.

5. Unleash the momentum of theindividual. Iqbal Quadir, founder ofGrameenPhone and Massachusetts

Institute of Technologys LegatumCentre, says: Aid to governments hasempowered authorities and not nec-essarily citizens. Mobile phones, theinternet and similar technologiesthat empower the individual turnthat on its head, and shift the powerto the individual making individ-ual capitalism the force for prosperi-ty and democracy in the 21stCentury.

6. Stay hungry, stay foolish andremember youre going to die. AsSteve Jobs wrote in a Commencement

Address to Stanford University in June2005: Remembering that Ill be deadsoon is the most important tool Iveever encountered to help me makethe big choices in life. Because almost

everything all external expecta-tions, all pride, all fear of embarrass-ment or failure these things just fallaway in the face of death, leavingonly what is truly important.

Remembering that you are goingto die is the best way I know to avoidthe trap of thinking you have some-thing to lose. You are already naked.

There is no reason not to follow yourheart.... Stay Hungry, Stay Foolish.

Julie Meyer is chief executive of AriadneCapital and a Dragon on the BBCs Online

Dragons Den.

DRAGONS VIEW

JULIE MEYER

ArtemisSam Mettrick has joined the sales teamat the fund management group as headof strategic alliances, based in London.

Mettrick, who joins from HendersonNew Star, has some 20 years of experi-

ence in investment management. Hisnew role will involve developing busi-ness with Artemis third party partners,including key national and networkintermediaries, life companies andsupermarkets.

Booz & CompanyThe management consulting firm hasappointed Michael Knott as a partner inthe telecoms, media and technologyteam in its London office.

Knott has over 15 years of experi-ence in the TMT markets, having previ-ously held positions as a manager atBritish Telecom and head of communi-cations, media and technology strategyin Europe for a major rival consultancy.

Hermes Fund ManagersThe fund management group has hiredFred Cleary to join its fixed incometeam as director of government bonds.

Cleary joins the firm from UBS,where he built a successful trading andresearch operation for US inflation-

linked markets, both in London andNew York. Prior to that, he held seniorpositions at Barclays Capital andDonaldson, Lufkin and Jenrette.

Hermes invests 7.3bn in sterlingand global government and inflation-linked bonds on behalf of its clients andwe believe this appointment willstrengthen our offering in this area,said the firms head of investmentSaker Nusseibeh.

MercerThe consulting and outsourcing firmhas hired Gary Simmons as a clientmanager and principal, responsible fordeveloping its human capital and gov-ernment sector business.

Simmons formerly worked as a part-

ner at accountancy companyPricewaterhouseCoopers, where heworked on strategic human resourceissues for clients in the public and pri-vate sectors in the UK, Europe, NorthAmerica and the Middle East.

He has also held positions at Hewittand Watson Wyatt.

Vertu MotorsThe car retailer has appointed MichaelSherwin as finance director, effectivefrom 25 February.

Sherwin, 50, previously spent adecade as finance director of consumergoods firm Games Workshop Group,where he led a successful restructuringprogramme and developed the financefunction.

CITY MOVES | WHOS SWITCHING JOBS Edited by Victoria Bates

To appear in CITYMOVESplease email your career updates and pictures to [email protected]

Coutts & CoThe private bank has appointed Maggie Bradleyas a client partner for its Oxford office, focus-ing on the local entrepreneur, professional andexecutive markets.

Bradley joins from Coutts head office inLondon, where she has worked for the past fiveyears, latterly as a business partner for interna-tional clients.

Prior to that, she was a private banking areamanager at Lloyds TSB.

BEST OF THE BROKERS

ANALYSIS lCarnival

1,900

2,000

2,100

2,200


p2,150.00

4 Jan

CARNIVALCruise operator Carnival's full year resultswere ahead of market expectations andCharles Stanley expects yields to continueto recover with the US economy in 2010. Itbelieves cruising remains a structuralgrowth industry with good prospects forgrowth in Europe and Asia. Booking andoccupancy levels remain strong, it said.

ANALYSIS lJ Sainsbury

310

320

330

340

350


p

324.204 Jan

J SAINSBURYShore Capital expects Sainsbury's festivetrading to have lived up to expectations,and doesnt expect forecasts for 2010 tochange when the grocers third quartertrading update is released on Thursday.Sainsburys will have benefited from aFriday Christmas, allowing late shopping,and materially low food inflation.

ANALYSIS lBovis Homes Group

340

360

380

400

420

440

460

14 Oct 3 Nov 23 Nov 11 Dec

p

414.404 Jan

BOVIS HOMESKillik & Co has retained its buy recom-mendation on Bovis Homes. Before thehousing crash the group continuously deliv-ered the best operating margins and sincethe downturn it has incurred the secondlowest level of writedowns. Bovis is finan-cially secure and able to take advantage ofattractive land acquisition opportunities.

To appear in Best of the Brokers email your research to [email protected]

THE 53m sale of Royal Bank ofScotlands Pakistan unit to MuslimCommercial Bank has fallen through,the beleaguered bank confirmed yes-terday.

The bank, which is 84 per centowned by the taxpayer, said the dealhad collapsed because it had notobtained the necessary regulatoryapprovals by the 31 December dead-

line. MCB announced on 1 Januarythat the sale was off. It later emergedthat Pakistans central bank inKarachi had refused to back the dealfollowing disagreements over MCBsdecision to use shares as security.

In August, RBS agreed to sell its99.4 per cent stake in the business toMCB, as part of efforts to focus oncore UK operations. It will continue tolook for a buyer for the subsidiary.

In February, RBS announced plans

to pull out of Asia, claiming that itsretail and commercial banking opera-tions had insufficient presence in theregion. It then sold assets in Taiwan,Singapore, Indonesia, Hong Kong, thePhilippines and Vietnam to

Australian lender ANZ in August.However, RBS made a strong start

to New Year trading yesterday follow-ing a rating upgrade to outperformfrom Exane BNP Paribas analysts.

CFDS: P12-13

RBS 53m Pakistan unit sale collapsesBANKING

OFT chief executiveJohn Fingleton has hitout at Ryanair forbeing puerile andchildish with its fees

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I

T is probably fair to say that 2009was a bad year for the airline indus-try. Afflicted by strikes, falling pas-senger numbers and fluctuating

fuel prices, the year was topped off witha security alert onboard a Detroit boundDelta Airlines flight on Christmas Day.In the aftermath of another terroristattempt, European and American gov-ernments have pledged to toughen upsecurity at airports.

Yesterday Ferrovial-owned BAA, whichoperates six airports in the UK, said itwould introduce full body scanners atHeathrow after prime minister GordonBrown committed to using the new tech-nology to protect airport passengers.BAA said it will implement the new secu-rity checks as soon as practicable.

The heightened security measures willmean more queues for passengers at air-port check points, but its good news forthe producers of this new scanning tech-nology. Initial estimates of the cost ofimplementing the new screening devicesare as high as 250m. Smiths Group, theBritish-based technology company, is theworlds largest producer of airport scan-ners and its share price rallied 4 per centyesterday as investors looked to cash inon the potential increase in demand forits products.

Other companies that make scanningequipment include Lockheed Martin,Raytheon Systems, OSI Systems andGeneral Electrics security division, GESecurity.

Although news about the strictermeasures has reignited the debate aboutpassenger protection versus passengerprivacy, analysts are predicting that the

X-ray screening andmore baggage checksare an opportunityfor investors, writesKathleen Brooks

Tighter airport security could be an investment opportunity in the long-term. Picture: GETTY

Investment | Contracts for Difference12 CITYA.M. 5 JANUARY 2010

Airline search schemes

boosting security firmsL

AST year was an extraordinary one in themarkets. Following a two-month stockmarket plunge as investors dumped riskyassets, global indices have surged since

March and proved surprisingly resilient. Everytime they lost momentum or struggled tobreak up through resistance, they got anotherboost. The S&P is up 63 per cent from itsMarch low and 25 per cent on the year. Therehas been just a single correction of 7 per cent,over the summer. Although down for thedecade, the S&P is now 28 per cent below itsall-time high.

Does this seem reasonable? US economicdata is improving, but from a very low base.

This has been well received by the markets butit is worth remembering that much of thepick-up has been in sentiment surveys, andthese tend to be bullish on the back of improv-ing stock markets and low interest rates. Theformer is a bit of a self-fulfilling prophesy,while the latter cant last forever.

Yields are pushing higher, which could bethe crucial factor for investors as we kick off2010. We can expect to see the reemergenceof bond market vigilantes, who step in tocheck the Fed if its actions threaten to triggerinflation. By selling bonds and driving up yields(which increases the cost of borrowing) theycan place restraints on governments whichover-spend and over-borrow.

Many argue that inflation cannot be a prob-lem while unemployment remains so high andcapacity utilisation so low. But the vigilantesare also mindful of rising budget deficits andthe unprecedented new issuance of USTreasuries. Higher yields could well be theprice that the US has to pay to bridge its fund-ing gap. Policy-makers, as well as investors,will be watching yields closely, and hoping thatany moves upward wont derail any recoveryin the fragile housing market. A double-diphere could have serious ramifications.

BEWARE OF

BOND MARKET

VIGILANTESDAVID MORRISONCFD MARKET STRATEGIST, GFT

+44 (0) 207 170 0770LOND ON M AIN

gftuk.comWE B, LIV E C HAT

0800 358 0864UK FRE E P HONE

stricter measures will be implementedafter the Transportation Security Administration in the US said passen-gers flying into the US will faceenhanced security measures.

Fingerprint, iris and face recognitionsystems may also be adopted as airportsintensify their security checks. Thiswould be good news for the likes of theFrench company Safran, a world leaderin biometric technology. Alongside thisairports and airliners may need morepersonnel to manually pad down passen-gers before they board an aircraft and tocheck more bags. This is bad news for air-lines desperately trying to cut costs afterthe economic slowdown. But it could

benefit security companies such as G4S, which provides passenger checks andbaggage screening at airports across theworld. On Monday the G4S share pricewas given a boost, rising 2 per cent.

Investing in companies that provideenhanced airport security is a good long-term strategy using CFDs. It will takesome months for the new securitydevices to be introduced at airportsaround the world and for profits to startflowing to the companies who make thenew devices. But airport security is likelyto remain a major theme for the foresee-able future and investment in passengersafety is likely to keep expanding for aslong as terrorist threats remain.

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Slimmed downRBS and Lloydsare attractingclever moneyThe part-nationalised banks had a good dayyesterday, but others in the sector are stilllooking very weak, writes Kathleen Brooks

BANKS have had a torrid time for thepast year and a half. But there weresigns of life yesterday, at least forsome. Royal Bank of Scotland (RBS)

and Lloyds Banking Group had a good startto the first trading day of 2010, rising morethan 9 per cent and 3 per cent respectively.Shares were boosted by an upgrade for RBSfrom French bank Exane BNP Paribas andrumours that Brazils Itau Unibanco islooking into acquiring stakes in bothbanks.

CFD traders will be wondering whetherthis is a trend that is likely to continue in2010. The first thing to note is that anyexcitement is unlikely to spread out fromRBS and Lloyds to the rest of the bankingsector. For the likes of HSBC, Barclays andStandard Chartered, its likely to be a ques-tion of steady-as-she-goes in 2010.

So are the good vibes around the twopart-nationalised banks justified? The rea-son for BNP Paribas positivity was

summed up in the title of its note: ThingsCan Only Get Better. After a torrid 18months, RBS and Lloyds can really only goone way. The report pointed out that:With the halving of the RBS share priceover the past four months and an expecta-tion that, over the next few quarters, someearly progress in terms of asset disposalswill be achieved. It went on to say thatthe bank expects fundamental, and notpurely speculative, investor interest toreturn in 2010.

The reason that investors will take afancy to the two banks is simple. Bothhave been ordered to sell off some of theirassets under EU rules governing nation-alised entities. Selling certain segments oftheir business at the right price this year,then slimming down to a more manage-able size should pay off in the future.Indeed, some analysts prefer their bankssmall and simple. Robin Savage, an equitystrategist at Collins Stewart, says that a

Things are lookingup at RBS.

Picture: PA

Investment | Contracts for Difference 13CITYA.M. 5 JANUARY 2010

fundamental problem with big banks isthat they have too many moving parts.He says that banks with steady, sensiblegrowth of their loan books are betterplaced in the long-term than more excit-ing ones which take more risks.

SIMPLE IS BESTFollowing this logic, smaller banks likethe new RBS and Lloyds which concen-trate on traditional banking activities likeloans and deposits, and avoid complexstructured products, are a better bet forCFD traders.

There are also sound reasons to believethat the economy could help RBS andLloyds. Asset sales, improving economicconditions and a fall in unemploymentcould boost the outlook for earnings forboth banks. An improving economic back-drop also reduces the chance of furtherbad loan write-downs, which could boostprofit in the medium term.

But hold your horses before you plungein. RBS still has some problems, andalthough the backdrop is not as dire as itonce was, its recovery will be slow. AsParibas says, RBS is a stock with fewobvious near-term catalysts. It doesntexpect earnings per share to move intopositive territory until 2012, which iswhen it also expects the next dividend tobe paid. Instead Paribas is basing its deci-sion to turn positive on RBS on the factthat it now trades at just 0.6 times esti-mates of 2011 net asset value.

For those interested in the banking sec-tor more generally, it is worth watchingout for new banking regulations on thehorizon. The Basel Committee onBanking Supervision has suggestedincreasing and improving the capitalrequirements for banks. If these meas-ures are implemented, then that couldlimit profits. For all the good news, short-ing a banking index still looks clever.

CFD ANALYST PICKS

CURRENCY STRATEGISTJOHN KICKLIGHTER

My Pick: Short Crude from $81.25

Expertise: Combining Fundamental and Technical Analysis with

Risk ManagementAverage Time Frame of Trades: 1 day to 1 week

A new year has begun, and risk appetite has charged ahead for all

assets that are offering yield. However, this is not yet a trend. Atthe beginning of the new year, investors who took their funds out ofthe market for accounting or risk purposes are likely to reinvestthem. This is a market adjustment. Crude is the exemplification ofthis theory, with an overbought setup and retest of the $82 level.

TECHNICAL CURRENCY STRATEGISTJOEL S KRUGER

My Pick: Sell Gold at $1,150

Expertise: Technical Analysis

Average Time Frame of Trades: 5-10 days

The gold price has come off since it

cityam 05/01/2010

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