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Hurd sued

by HP overOracle job

MARK HURD, the former chief execu-tive of Hewlett-Packard (HP), is beingsued by the computer company overhis move to join rival Oracle.

Hurd was appointed as co-presidentand director of Oracle, the worldsthird-largest software maker, yester-day and just one month after heresigned from HP.

HP has alleged that Hurds move toOracle puts its own trade secrets inperil as his move will give Oracle astrategic advantage as to where toallocate or not allocate resources andexploit the knowledge of HPsstrengths and weaknesses.

A statement filed with theSupreme Court in Santa Clara said:In his new position, Hurd will be in asituation in which he cannot performhis duties for Oracle without neces-sarily using and disclosing HPs tradesecrets and confidential informationto others.

But Hurds separation agreement with HP did not have a non-competeclause contained within it. It did,however, have a two-year confidential-ity pact. Non-compete clauses are gen-erally unenforceable in California.

Hurd resigned from HP on 6 August after the company said hefiled inaccurate expense reports relat-ed to a marketing contractor, JodieFisher, who worked for his office.

Fisher accused Hurd of sexual harass-ment, but HP has found no evidenceto back her allegations.

HP and Oracle are direct rivals.

BY EMMA SADOWSKITECHNOLOGY

(L-R) Bob Diamond, Stephen Green and Marcus Agius are all changing jobs Pictures: Micha Theiner/City A.M., REUTERS

A SHAKE-UP at the helm of two of theUKs largest banks is fuelling fearsthat the country could lose its top

banking institutions overseas due toan over-zealous approach to regula-tion of the industry.

Barclays yesterday shocked themarkets by appointing BarclaysCapital boss Bob Diamond to run the

business. Current chief executive John Varley will retire next year. Theturmoil was compounded by the deci-sion of HSBC chairman StephenGreen to step down before the end of the year end to take up the position of trade minister.

Analysts are warning the new chief-tains make the prospect of a high-pro-file relocation for either bank look ever more plausible if the govern-ment decides to go ahead with legisla-tion to split up retail and investment

banking operations.Diamond, a US-born investment

banker, has fewer ties to the UK thanhis predecessor Varley and has beenan impassioned defender of the inte-grated banking model. HSBC is yet toappoint a successor to Green, but adecision to install a chairman withsubstantial Eastern ties could provecrucial to future relocation plans.

Current chief executive MikeGeoghegan, one of the top contendersfor the role, relocated to Hong Kongearlier this year; while the man seen

EXODUS FEARS ASBANKS RESHUFFLEBY VICTORIA BATES

BANKING

www.cityam.comIssue 1,215 Wednesday 8 September 2010 FREE

VODAFONE IN4.4BN SALETELECOMS GIANTSHEDS STAKE IN

CHINA MOBILE P3

ROONEY SCORES AWAYFROM HOME IN KEY WINSTRIKER FIRES ENGLANDP26

BUSINESS WITH PERSONALITY

as the favourite to step up to the plate Barclays non-executive director andex-Goldman Sachs banker John

Thornton has extensive ties to Asia. The government refused to com-

ment on Diamonds appointment yes-terday, saying it was a matter forshareholders. But one governmentminister described the choice to theBBC as a bank taken over by casino

while there was a feeling among anti-City forces in Westminister that the

move was a provocation. Friends of Vince Cable a critic of the City andof Diamond said that he would beoutraged by the move, while Lib Dem

Treasury spokesman Lord Oakeshottsaid: We have pledged to tackle unac-ceptable bonuses and to reduce risk:Bonus Bob Diamond personifies

both of those things.City figures warned the backlash

will make an exodus even more likely.Nothing preordains that these insti-tutions are based in the UK if they go on making it uncomfortable for

banks to operate here, then politi-cians are going to get a rude awaken-

ing at some point, one investment banker told City A.M. yesterday. Tim Linacre, boss of stockbroker

Panmure Gordon, added: If banks

are headed by those who have no par-ticular emotional or business interestto keep their operations headquar-tered in the UK, that is bound tospeed up discussions over potentialmoves overseas.

I wouldnt be raising the panicflags now, but if Bob Diamond wereto look someone in the eyes and say he wants to move, it would take a

brave man to call his bluff.In yet another move, Barclays chair-

man Marcus Agius is stepping up tochair the British Bankers Association. ALLISTER HEATH: P2,BANKING MERRY-GO-ROUND: P4-5

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News2 CITYA.M.8 SEPTEMBER 20

Tube strikecauses chaos

THE TUBE is expected to run a nor-mal service today, according to

Transport for London (TfL), after thestrike by London Underground (LU)

workers triggered intense disruptionin London yesterday. However, morepeople than expected braved thestrikes and came to work.

By 5pm last night TfL said it wasalready operating one-third of itstrains throughout the network, butdelays continued past 9pm, whenstrikers returned to work, as LUmoved to get the trains on the righttracks. Commuters walked andcycled as a number of station clo-sures, slower trains and increased

buses gridlocked traffic on the capi-tals roads.

I stayed over in London last night

at a huge cost to myself in order tomiss the chaos. Then my taxi driverrefused to take me to Canary Wharf due to the traffic, so I had to walk tomy meeting in any case, said MichaelDerbyshire of Savills.

On Monday evening, LU workers,members of the RMT and TransportSalaried Staffs Association (TSSA)trade unions, launched the strike in aprotest to plans by TfL to axe up to800 staff.

More strikes could occur on 3October, 2 November and 28November if tensions continue.

BYE MMA S ADOWSKITRANSPORT

EUROZONE FEARS SEND INVESTORS TOHAVENSInvestor worries over the Eurozonehave deepened, hitting the marketsof the single currencys weakereconomies and sparking a flight tothe safety of US Treasuries, German

bunds, the yen and the Swiss franc.Global equities lost ground and theeuro weakened on Tuesday, whileEuropean bank stocks came underpressure as doubts over the conti-nents financial system resurfaced.

DANA PITCH FOR HIGHER KNOC OFFERFALTERSDana Petroleum has made a last-ditchattempt to convince a group of itslargest shareholders to demand KoreaNational Oil Corp raise its $1.87bnhostile offer. Dana, which is due toissue its official defence document on

Wednesday, has approached a collec-tion of institutional investors and

hedge funds to marshal support for ahigher offer.

EQUITIES SEEN AS NEW FOCUS FORBANKSEquity derivatives and increasedleverage will be key to revenuegrowth for the global investment

banks in the next couple of years, with the big US and Swiss groups bestpositioned to prosper, according to a

JP Morgan report on the sector.

ELAN HITS BACK AT CONFLICT OFINTEREST CLAIMSElan, the Irish drug company, steppedup an unusual defence against a cata-logue of alleged conflicts of interestand corporate governance failings. Ina letter to shareholders, Kelly Martin,the chief executive, confirmed con-nections that he and other directorshad with external companies, includ-ing some that did business with Elan,

while arguing that they did not act

against shareholders interests. Heaccused Ib Sonderby.

OUT GO JEANS AS DUNCAN DROPSINTO THE LUXURY CAR BUSINESS

Andy Duncan, the former head of Channel 4 and possibly one of thescruffiest chief executives to have leda large British commercial organisa-tion, has landed a job where a hand-crafted suit and Hermes tie are derigueur: running the HR Owen luxu-ry car group. In an extraordinary andabrupt change of career direction, MrDuncan has swapped Big Brother andHollyoaks for selling Rolls-Royces andFerraris.

GOVERNOR BRACED TO FACE TUCSHORT OF BROTHERLY LOVEMervyn King will walk into a political

bear pit next week when he becomesonly the second Governor of the Bank of England to address the annual

Trades Union Congress. Delegates are

gearing up for the most highly politi-cised annual conference.

GEORGE SOROS GIVES $100 MILLIONTO HUMAN RIGHTS WATCHGeorge Soros, the billionaire finan-cier, is giving $100m (65m) to ahuman rights organisation in one of the largest acts of philanthropy so farthis year. Famous for betting againstthe pound when Britain was forced to

withdraw from the Exchange RateMechanism in 1992.

BANK CAPITAL RULES UNCERTAINTYSETS UP MARKET FOR AN ANXIOUSWEEK OF WAITING

A group of central bankers and regula-tors from around the world agreed onthe new capital requirements for

banks, however the industry will haveto wait until after a further meetingat the weekend to hear the final pro-posals. On Sunday, the Group of Governors and Heads of Supervision,

the oversight body for the BaselCommittee, will meet.

ANHEUSER WINS PARTIAL VICTOUS COURT

A federal judge here handed a partial victory to the US arm of Anheuser-Busch InBev, ruling that an Illinois

beer-distribution law discriminatesagainst out-of-state brewers. At issueis Anheusers bid to acquire a control-ling stake in its largest Chicago beerdistributor, City Beverage, whichcould help the brewing giant com-pete more effectively the market.

BP TO TAKE SOME, NOT ALL, BLGULF-SPILL REPORTBPs report on its investigation intothe Deepwater Horizon disaster willassign some of the blame to itself butalso hold other companies responsi-

ble for the various decisions that ledto the explosion, said a person famil-iar with the matter. It is unclear how

much of the blame will be shoul-dered by BP in the report.

WHAT THE OTHER PAPERS SAY THIS MORNING

Diamond is the right man for the job

GOOD on Barclays for promoting BobDiamond, head of the banks invest-ment banking unit, to be the firmsoverall chief executive. He is the bestman for the job, proving himself again

with the successful integration of Lehmans US operations. Yet givenDiamonds demonisation in the

broadcast media and popular press,not least by the likes of Vince Cableand even the prime minister, it was a

brave move; it was also a strong state-ment by one of the few banks that did-nt require a taxpayer bailout that it

will do what is best for its global share-

holders, rather than pander to vote-hungry, City-hating UK politicians.

This is something that ought to reas-sure markets: shareholders are stillnursing big losses from the financial

crisis, even from the better managed,non-bailed out firms such as Barclays. As a result of the dominant narrative

of the recession, the politics of envy hasmade a spectacular return. One of themain objections to Diamonds appoint-ment yesterday was that Barclays CEO-designate was too wealthy; apparently,only poor bankers or those willing to

work for much lower salaries should beallowed to run banks. But given thattaxpayers did not bail his bank out,that part of his fortune comes from hisstake in a very successful wealth man-agement arm he helped to build up forBarclays, and that he will be paying

vast amounts of tax when he moves back to the UK, it is hard to see whatthe problem is with Diamonds

wealth. If Barclays customers object,they are free to move their business.Barclays, like other banks, has

reformed its compensation practicesto put emphasis on long-term incen-tives; there is nothing in Diamondsnew employment contract which willfuel short-term risk.

Investment banks are not casinos;and even if they were, critics shouldremember that the central rule of gambling is that the house always

wins. Casinos always make money;they dont go bust so in that sensecasino banking should be a goodthing for taxpayers, shareholders andthe stability of the banking system. I

jest, of course, but the terminology of this debate is truly idiotic.

What makes banking dangerousare traditional loans: it is those that godud and bring down economies, nottrading. Another weakness is the mis-match between the duration of assets(loans) and liabilities (bank deposits ormoney market borrowing) but againthis is nothing new. Despite the new-fangled derivatives, this recession was

very much like all the others. Sub-prime lending was at the heart of the

financial crisis; at its most basic, a tra-ditional form of retail banking gone

wrong. Investment bankers repack-aged the bad loans; but they only gotthat opportunity because of stupid,

traditional lending decisions.Instead of bashing those who pro- vide huge tax revenues and employ tens of thousands of Londoners, thegovernment ought to focus its atten-tion on 2010s real financial disgrace:the abysmal failure of HMRC and itscomputerised pay as you go incometax system to get its sums rights.

Around 1.4m people are about to besent letters demanding 2bn in under-paid tax, courtesy of off icial incompe-tence. There ought to be a purge atHMRC, with all top executives losingtheir jobs. Of course, it wont happen,

just as the officials and central bankers who did so much to fuel the bubble have walked away unscathed.It is high time politicians put theirown houses in order, rather than try and chase away successful UK [email protected]

NEWS | IN BRIEF

Ryanair boss mulls buying spreRyanair boss Michael OLeary hasrevealed he is considering buying up to300 planes. The European budget airlineboss says he is also wr iting to aviationauthorities, asking for permission tohave only one pilot per flight. The airlineis preparing to pay its first dividend of

500m (414m) next month but aspending spree could ruin hopes of future payouts.

Capital increase for Greek bankGreeces largest lender National Bankannounced a 2.8bn (2.3bn) capitalincrease yesterday to better deal withthe economic crisis and position for fur-ther expansion in Turkey and EasternEurope, the bank said.

FTI hires Lord Malloch-BrownLord Malloch-Brown, 56, has joined anAmerican corporate investigations andconsulting group to spearhead its pushinto emerging markets. The formerForeign Office minister and UnitedNations deputy secretary-general hasbeen appointed chairman of globalaffairs at FTI Consulting, the businessadvisory group said yesterday.

EDITORS LETTER

ALLISTER HEATH

7thFloor, Centurion House,24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: [email protected] www.cityam.comEditorialEditor Allister HeathDeputy Editor David HellierNews Editor Ben GriffithsNight Editor Katie HopeAssociate Editor David CrowBusiness Features EditorMarc SidwellLifestyle Editor Zoe StrimpelArt Director Darren SoulsbyPictures Alex RidleyCommercialSales Director Jeremy SlatteryCommercial Director Harry OwenHead of Distribution Nick Owen

Editorial StatementThis newspaper adheres to the system of

self-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the EditorsCode of Practice, a copy of which can be found at www.pcc.org.uk

Printed by Newsfax International,Beam Reach 5 Business Park,Marsh Way, Rainham, Essex, RM13 8RS

Distribution helplineIf you have any comments about the distributionof City A.M. Please ring 0207 015 1230, or [email protected]

London Undergroundboss Howard Collins isbeing called on by theunions to stop plans tocut 800 jobs.

CITY VIEWS: HOW WAS YOUR COMMUTBY THE STRIKE? Interviews by Marion D

I was supposed to be working out in Hangar Lane today, butits on the central line so obviously thats not happening. Ivecome into another office in Bank, using the northernline, which was packed.

ZUBY UDEZUE |ACCENTURE

I live in Paddington, but today the trip took two hours, four

buses and more than 7 in various fares. Ive also seenTrafalgar Square today, which is definitely not part of myusual commute.

ISAAC GASKIN |JEEVES

There were loads of people trying to commute on thestreets, getting a bit angsty. I saw a few taken by surpriseby the typical London cyclists on the morning com-mute, going through red lights and so on.

PHIL HEALY |WILLIS

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VODAFONE, the worlds largesttelecommunications operator by rev-enue, has sold its 3.2 per cent stake inChina Mobile for $6.6bn (4.3bn).

The sale was part of Vodafonesnew strategy to exit non-strategicminority investments, which analystsand investors believe have weighedon the companys overall value inrecent years.

Vodafone said UBS, Goldman Sachsand Morgan Stanley were handlingthe placing, managed by corporateadviser Rothschild, and around 70per cent of the net proceeds would bereturned to shareholders via a buy-

back, while the remainder would beused to pay down debt.

Vodafone chief executive VittorioColao has said the groups minority holdings are not considered essentialand it would focus on its core mar-kets in Europe, Africa and Indiainstead.Todays transaction achievesa near doubling of Vodafones origi-

nal investment in China Mobile andcombines our stated portfolio strate-gy with ongoing cooperation withChinas leading telecommunicationscompany, said Colao.

The two groups said they wouldcontinue to work together on issuessuch as roaming and research.

After buying into China Mobile in2000, Vodafone increased its stake in2002, paying a total of $3.25bn.

At Vodafones AGM in July, someshareholders criticised its chairman,Sir John Bond, for the companys dis-astrous acquisition record.

Vodafone sells4bn stake inChina Mobile CITIGROUP investment bankers boast-ed of getting paid on both sides of adeal after the private equity group

Terra Firma made a 4.2bn bid for themusic group EMI, according to courtdocuments listed in New York yester-day.

According to a filing from Guy Hands Terra Firma, which allegesthat it was advised by Citi to pay morethan it needed to win ownership of EMI, one of Citis bankers said: Pleasemake sure that....David Wormsley andme get revenue credit for Terra Firma

buyside financing as well as EMI sell-side M&A.

Banker Matthew Smith, went on to write in response to congratulatory messages from colleagues: We gotpaid on both sides of the deal!

Terra Firma is suing Citigroup forallegedly giving it bad advice duringits bid for EMI which has since turnedout disastrously.

A Citigroup statement said lastnight: The evidence in this case isoverwhelming that Citi has donenothing wrong, and we f irmly believethat Citi will prevail in this case.

In its filing to the courts, Citigroupsaid EMI authorised the bank to pro-

vide financing to potential biddersincluding Terra Firma. Citigroup istrying to have the action struck out.

Citigroup paidon both sidesof EMI deal

BY H ARRY B ANKSTELECOMMUNICATIONS

PRIVATE EQUITY

News 3CITYA.M. 8 SEPTEMBER 2010

SINOCHEM, Chinas state-owned trad-ing company, has approached

Temasek to join a consortium of firms looking to rival BHP Billitons

bid for Canadas PotashCorp. The move by Sinochem comes after

Chinese authorities demanded statecompanies meet with investment

bankers to look at ways to block BHPs$39bn (25.4bn) move for PotashCorp.

Bill Doyle, PotashCorp chief execu-tive, said yesterday that a number of third parties were interested in buy-ing the fertilising giant.

There is a wide universe of poten-tially interested parties and we

believe BHP will not be the only bid-der, said Doyle.

BHP has recently come underimmense pressure to sweeten its$130-a-share bid for PotashCorp,

which has been called grossly inade-quate.

Sinochem seeks Temasekhelp for rival Potash bid

Potash boss Bill Doyle said BHP will be joined by other bidders

BY E MMA S ADOWSKIMININGANALYSIS l Vodafone

135

145

155

24 Aug4 Aug15 Jul25 Jun7 Jun

p159.90

7 Sep

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BARCLAYS chairman Marcus Agius yesterday announced he would stepup to chair the British Bankers

Association after HSBC chairmanStephen Green resigned to take up anew appointment as UK minister fortrade and investment.

Agius, a former Lazard investment banker, has chaired Barclays since the beginning of 2007.

He has maintained a lower profileduring the financial crisis than someof his peers, including Green himself,

who has proved himself unafraid to

call on bankers to show restraint onthorny issues such as remuneration

while at the same time defending therole of the City.

In his new role, Agius will supportBBA chief executive Angela Knight,the banking industrys staunchestdefender in the face of the criticismheaped upon it in the wake of thecrunch.

[Agius] has helped the global universal bank grow and successfully weather the last three years financialturbulence, Knight said.

He brings a sound understandingof the City, the key issues facing theindustry and an international per-spective which reflects well the BBAs

broad global membership.

The Barclays chairman takes up hisnew role with immediate effect.

Barclays Agius take helm at BBABY V ICTORIA B ATES

BANKING

Focus on Banking reshuffle4 CITYA.M. 8 SEPTEMBER 20

CITY insiders voiced concern over thefuture of Barclays retail bankingoperation yesterday after the groupconfirmed Bob Diamond wouldreplace John Varley as chief executive.

Diamond, who has won renownaggressively building the BarclaysCapital investment bank, will take

over from Varley next March. Varley will stay on for six months as anadviser to Barclays on regulatory issues as Sir John Vickers delivers his

verdict on whether large institutionsshould be split up to the chancellor.

The outgoing boss has also beentipped for a position in government.

Diamond will enjoy a 11.5m annu-al pay and bonus deal, significantly more modest than the total haul of

63m he took home last year.Chairman Marcus Agius defendedthe package as having been bench-marked against Diamonds peers.

But analysts were more worriedabout the implications of theappointment for Barclays plan to cutits reliance on BarCaps revenues. Last

year the investment banking armdelivered nearly half the groupsincome, a ratio Varley said would be

reduced to a third over time.Evolution Securities wrote: All in

all we feel the management changesat Barclays are likely to make evenmore pronounced what we considerto be its main weakness: too muchinvestment banking, too little retail.

Merrill Lynch said there will bequestion marks over Bob Diamondsretail commitment but was pleased

to see continuity within Barclays sen-ior management line-up.

Diamond was at pains to empha-sise his commitment to Barclaysmodel of combined high street andcapital markets banking. He pledgeda seamless transition from Varley.Observers said they doubted his pres-ence would increase the likelihood of Barclays quitting the UK.

Diamond crowned asBarclays new chief BY O LIVER S HAH

BANKING

ANALYST VIEWS: HOW WILL BOB DFIT IN AS CHIEF EXECUTIVE?Interviews by Oliver S

NEIL SHAH |EDISON INVESTMENT RESEARCH

Its a great example of succession planning as far as Im concerned.Hell be in a different position as chief executive, though, and he will probably bemore measured in his approach. Where he was before and where hes going tonow are different and hell probably be operating in a different way.

DAVID BUIK |BGC PARTNERS

Though Bob Diamond comes from an investment banking background,above all else he is a brilliant delegator, and lets face it, the art of good manage-ment is delegation. He is also a bold man. If the heads of retail banking are notdoing their job to the standard required, trust me, they will be replaced.

ANGELA KNIGHT |BRITISH BANKERS ASSOCIATION

With Bob Diamond taking over the helm from John Varley there will bewelcome continuity from a formidable team which steered one of the UKs leadingfinancial institutions safely and successfully through the recent global financialproblems. It is also testament to Barclays faith in universal banking.

Bob Diamonds rootslie in investment banking

Picture: REUTERS

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Focus on Banking Reshuffle 5CITYA.M. 8 SEPTEMBER 2010

FORMER Goldman Sachs investment banker John Thornton was yesterday touted as the most likely candidate tostep into Stephen Greens shoes, afterthe HSBC chairman accepted the roleof trade and investment minister in

the coalition government.Green is due to step down before

the year is out to fill the last remain-ing vacancy in the cabinet.

Thornton, a non-executive directorat HSBC, joined the board two yearsago. A hardened industry veteran

with very strong links to China HSBCs core market he previously

spent 23 years at Goldman, where he was right hand man to then-chief executive Hank Paulson.

However, HSBC insiders said amove over to the chairmanship forcurrent chief executive MichaelGeoghegan should not be ruledout. Geoghegan took over responsi-

bility for the banks strategy from

Green earlier this year when he relo-cated to Hong Kong, leaving the chair-man free to play more of anambassadorial role.

Greens appointment to Westminster marks the culminationof an arduous search process forCameron, who has struggled to fillthe trade minister position since fail-

ing to persuade ex-StandardChartered boss Lord Davies to contin-ue in the role after the election.

Green, also an ordained Anglicanpriest, leaves HSBC after 28 years. He

will also step down from his positionsas chairman of the British Bankers

Association and deputy president of the CBI.

Ex-Goldman banker tipped for HSBCBY V ICTORIA B ATES

BANKING

ANALYSIS l How Barclays group earnings break down geographically

US12,300 employees6.6bn income400m profit before tax

UK55,700 employees13.3bn income2,500m profit before tax

Rest of Europe13,500 employees4.5bn income900m profit before tax

Africa and Middle East50,700 employees3.9bn income900m profit before tax

Rest of World12,000 employees

2.7bn income600m profit before tax

Bob Diamonds domain

Barclays Capital

Barclays Capital is a globalinvestment bank, offering itsclients the normal range of services from strategicadvisory and M&A, equity andfixed income capital raising andcorporate lending to riskmanagement across foreignexchange, interest rates,equities and commodities.

TOTAL INCOME 11.6bnCLIENTS GENERATING MORETHAN 10M INCOME 232 AVERAGE TOTAL INCOMEGENERATED PER MEMBEROF STAFF 515,000

Barclays Wealth

Barclays Wealth providesinternational and privatebanking, fiduciary services,investment management andbrokerage.

TOTAL INCOME 13bnCLIENT ASSETS 151.3bnCOUNTRY LOCATIONS 25

BOB DIAMOND is known as a thrust-ing dealmaker but his appointment is a

reward for remarkable patience.Having started his career as a busi-ness lecturer at the University of Connecticut, Diamond spent 13 years

at Morgan Stanley and four years atCredit Suisse before joining Barclaysin 1996. He has waited 14 years totake the top spot at the UK bank.

Although the 59-year-old consis-tently denied an aspiration to succeedJohn Varley, declaring last year thathis existing role of president soundslike a great title to me, Diamond hasoccasionally hinted at the depth of hisambition. In a 2009 interview he said:

I recall my dad saying about me oncethat the only time hed ever heard mesay never was when I was asked if Id had enough.

BOB DIAMOND

BECOMES CHIEFEXECUTIVE,BARCLAYS

RICH RICCI and Jerry del Missier, BobDiamonds trusted lieutenants, willbecome co-chief executives of Barclays Capital next month.

Ricci started at Barclays in 1994following stints at the Bank of Boston

and the Bank of New England. Afinance graduate of CreightonUniversity, Ricci is known as a detailsman who has been integral toBarCaps rapid growth in recent years.

He left the limelight to his boss butRicci was at Diamonds side throughthe purchase of Lehman Brothers USbrokerage in 2008. He became tem-porary chief executive to oversee theintegration of the American bank.

Riccis pay has not come under thesame scrutiny as Diamonds, but hehas earned decent sums in recentyears even by Wall Street standards.

RICH RICCI

BECOMES CO-CHIEF EXECUTIVE,BARCAP

CANADIAN-BORN Jerry del Missierhas been Bob Diamonds chosen heirfor at least two years.

Naming del Missier as president of Barclays Capital in 2008, Diamondtold analysts the investment bankingunit was the machine that Jerry

built. Del Missier was handed controlof BarCaps important credit productsin September 2007 before being givenfull deputy status the January after.

Educated at Queens University inOntario, del Missier started his careerat the Bank of Nova Scotia beforemoving to Bankers Trust in Toronto.He joined Barclays in 1997 fromBankers Trust in London.

Alongside Rich Ricci, del Missierwon his spurs working on the LehmanBrothers transaction at the height of the financial crisis. The two menworked through the night on the deal.

JERRY DELMISSIER

BECOMES CO-CHIEF EXECUTIVE,BARCAP

ANALYSIS l Barclays

260

280

300

320

340

360


p 314.557 Sep

ANALYSIS l HSBC

600

620

640

660

680

700


p662.40

7 Sep

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TROUBLED social housing repair firmConnaught put most of its businessinto administration yesterday, afterits lenders refused to further fundthe company.

The FTSE 250 component said lastnight that its public sector business

will be put into the hands of adminis-trators KPMG, though its environ-ment and compliance arms willremain in operation.

The company suspended trading of its shares yesterday morning, andlater said in an announcement to thestock market: Following extensivediscussions with the groups securedlenders, it is now clear that sufficientsupport would not be extended to thegroup as a whole to enable it to con-tinue trading as a going concern.

It added that an update on fundingfor its remaining business would be

made today, once negotiations withlenders are complete.

The value of Connaught sharesfroze at 16.65p yesterday, meaning adrop of over 90 per cent since a sur-prise profit warning in June.

The company blamed governmentspending cuts for its dire financialstate at the time, though rivals Mearsand Rok stressed their social housingand public property businessesremained strong.

Connaught drafted in Deloitte toexamine its accounting practices in

July, the results of which have not been made public.

The company has around 220m of debt, provided by six banks and fourother creditors.

The Connaught administration will be one of KPMGs largest jobs inseveral years. The auditor recently dealt with company voluntary arrangements for sports chain JJB andoutdoor retailer Blacks.

Connaught inadministrationBY M ARION DAKERS

PROPERTY

FORMER Standard Chartered headLord Davies has taken his second non-executive job since leaving govern-ment by agreeing to chair New

York-based asset manager PineBridge.Davies joined the firm last month.

Although he will continue to work from the UK, the banking veteran will

deploy his considerable contacts inthe Far East to advise PineBridge on

regulatory issues. The Americangroup runs more than $78bn(50.1bn) of assets, 65 per cent of

which are located outside the US. The 57-year-old Welshman also sits

on the board of buyout firm CorsairCapital. The Corsair job marked hisreturn to the world of finance after 16months as former Prime MinisterGordon Browns trade minister. He

was previously chief executive, thenchairman of Standard Chartered.

Ex-Standard Chartered boss LordDavies joins $78bn PineBridge

FUND MANAGEMENT

MARGARET COLE staked her claim toa top job when City regulation ispassed to the Bank of England by join-ing the board of the FinancialServices Authority yesterday.

The enforcement chief, who isdescribed as tough as old boots by former private sector colleagues,

becomes managing director of finan-

cial crime. She joins chairman Adair Turner and chief executive HectorSants on the FSAs 16-strong board.

Cole has been closely associated with the watchdogs tougher stanceon insider trading, claiming the high-est-profile scalp in its history with the

jailing of former Cazenove partnerMalcolm Calvert in March. Shortly after, she said: People should beafraid of the FSA. We mean what wesay and we mean business.

Bosses at the regulator decided toreward Coles efforts amid a spate of impending defections from senior fig-ures such as Jon Pain and Sally Dewar.Chancellor George Osbornes plan toroll supervisory duties into the Bank of England have spooked some staff.

Simon Morris at CMS CameronMcKenna said: This is Margaret Colenailing her colours to the FSA mastand laying claim to a prominent roleon one of the new regulatory bodies.

Insider trading bounty hunpromoted to the board of FBY OLIVER S HAH

REGULATION


Connaught chief Ian Carlisle had tried to convince creditors the firm could stay solvent

Support services companies compared:

l Aids the BBC, government and localcouncils with outsourcing.l First half pre-tax profit up 15 per centto 163m.l Unite union currently balloting work-ers over strike action.

CAPITA

l Runs the DLR and detention centres.l First half pr-tax profit up 21 per centto 101.4m.l Signed a 415m contract to run anew prison in July.

SERCO

l Offers social housing repair work tolocal councils.l First half pre-tax profit fell by 50 percent to 3m.l Company blamed financial misman-agement for the drop.

ROK

l Offers social housing repair work.l Annual results will show "material loss".l Shares lost more than 90 per cent of their value after profit warning.

CONNAUGHT

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FOOD price inflation surged to itshighest level in more than a year asrising commodity prices fed throughinto the supermarkets, the BritishRetail Consortium (BRC) will say today.

The BRCs monthly shop priceindex shows that annual food infla-tion increased to 3.8 per cent in

August from 2.5 per cent in July, thehighest level since July 2009. In con-trast, non-food inflation slowed to 0.5per cent on a year earlier.

Stephen Robertson, director gener-al of the BRC, said: Past rises in thecost of global commodities, such as

wheat and sugar, are filteringthrough to food prices. In response,retailers are offering more deals with

milk and bread particularly competi-tive battlegrounds.However, he added that food price

inflation is nowhere near the returnof the double-digit food inflation of two years ago.

Although non-food inflation easedin August, the BRC anticipates a pick up in prices in the coming months.Over the coming months, we expectnon-food inflation to experience

weak downward pressures, butremain relatively stable, as competi-tion among retailers intensifies inthe run-up to Christmas, the BRCsaid. It added: With the new 20 percent VAT rate coming into effect in

January, non-food inflation is likely torise sharply in the first quarter of 2011.

Nonetheless, with a third of gro-ceries already on promotion and con-sumer demand likely to remainlacklustre, the BRC expects retailersto continue to use discounts and pro-

motions to drive sales in the comingmonths, keeping shop price inflationlow.

Commoditiesdrive surge infood inflation

BY J ESSICA M EADUK ECONOMY

GERMAN factory orders unexpectedly plummeted in July, raising fears of aslowdown in Europes largest econo-my, which rebounded sharply in thesecond quarter.

Official data published yesterday showed that orders fell 2.2 per centon June, the sharpest monthly drop

since February 2009. But they are stillup 18 per cent on a year earlier.

Economists brushed off yesterdayssurprise data. INGs Carsten Brzeskisaid: The drop is no reason to worry.

Todays numbers just illustrate theinevitable return to a normal growthpath, after the exceptional secondquarter. Deriving any double-dipideas from todays numbers would beexaggerated and very premature.

However, the f igures emphasise the

importance of global growth to theGermany economy.

Fears of an economic slowdowafter German factory orders d

EUROPEAN ECONOMY

BRITAINS struggling job market con-tinued to suffer in August with thenumber of permanent appointmentsrising at the slowest rate sinceOctober 2009, against a gloomy back-drop of public sector layoffs anddownbeat business confidence.

The monthly survey conducted by professional services firm KPMG andthe Recruitment and Employment

Confederation (REC) showed that thenumber of people placed in new jobs by recruitment consultancies contin-ued to increase in August, but growthslowed further from Marchs peak.

Kevin Green, the RECs chief execu-tive, said: We are concerned aboutthe UK jobs market. Growth is rapidly slowing as public sector job freezesstart to bite and private sector employ-ers confidence remains fragile.

There was also evidence of weaken-ing pay pressures in August with per-

manent staff salaries rising at theslowest rate for seven months, whiletemporary staff pay growth hit a five-month low.

Bernard Brown, partner and headof business services at KPMG, said: Inthe months ahead we will see a sub-stantial reduction in public sectorheadcount. The big question is

whether the private sector can createnew jobs in sufficient numbers andquickly enough to offset the down-turn in the public sector.

Growth in UK jobs weakensas doubts over recovery hitBY J ESSICA M EAD

UK ECONOMY

Economic News8 CITYA.M. 8 SEPTEMBER 20

Food price inflation is the highest in over a year Picture: Micha Theiner/City A.M.

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ADRIAN MEE, head of Europeanmergers and acquisitions at Nomuraand one of the banks key rainmak-ers, has quit the Japanese investment

bank to join Bank of America MerrillLynch (BoA).

The move will come as a blow toNomura which has suffered a seriesof high-profile defections just two

years after acquiring the Europeanand Asian investment banking of Lehman Brothers.

Mee, global head of M&A atNomura, will become head of inter-

national M&A at BoA. He joins his for-mer colleague Christian Meissner,

who ran the investment banking business at Nomura before resigningearlier this year to join BoA.

The pair, along with William Vereker, co-head of global investment banking at Nomura, were the threemain negotiaters in the acquisition of Lehmans businesses.

The duo recently advisedInternational Power on its deal withFrances GDF Suez to create the

worlds largest utility with annualrevenue of 84bn (69.3bn).

Nomura still ranks 18th in theleague tables for European M&A,compared with BoA which has held a

top five position under the leadershipof Carlo Calabria.

CURRENCY printer De La Rue faces ahit of at least 35m to first-half profitand a possible fraud investigation fol-lowing the falsification of banknotequality certificates by staff.

Updating on its investigation intoproduction errors at its banknoteplant in southern England the firmsaid yesterday the behaviour of someof its staff was totally unacceptable.

De La Rue has reported its findingsto the relevant law enforcement agen-cies and taken appropriate discipli-nary action.

A company spokesman declined tosay if any employees had been dis-missed but said the managing direc-tor of the currency division had left.

A spokesman for the Serious FraudOffice said the agency had been con-tacted by the company.

The company has reported someconcerns to us. Weve noted thoseconcerns, we are alert to them and we

will have further discussions with thecompany, he said.

Banknote paper specifications havea large number of detailed parame-

ters and the companys investigationfound in certain cases that a smallnumber of them failed to meet therequired standard.

The spokesman for De La Rue, which is involved in the productionof over 150 national currencies,declined to name the customersinvolved, say how many staff wereimplicated or comment on theirmotives.

The 35m hit relates to stock write-offs, professional fees, rectificationand production trial costs, and someslippage of currency volumes into thesecond half. De La Rue said it was tooearly to assess the financial impactfor the full year and future years.

De La Rue totake 35m hitfrom note slip

GOOGLE will launch its service to bring the web to TV screens in theUnited States this autumn and world-

wide next year, its chief executive EricSchmidt, said, as it extends its reachfrom the desktop to the living room.

Schmidt said the service, which will allow full Internet browsing viathe television, would be free, and

Google would work with a variety of programme makers and electronicsmanufacturers to bring it to con-sumers.

We will work with contentproviders, but it is very unlikely that

we will get into actual content pro-duction, said Schmidt.

The news comes less than a week after rival Apple unveiled its latest

Apple TV product and will intensify a battle for consumers attention.

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Google set to offeTV service in the

BofA bolsters M&A team afterpoaching Nomura rainmaker

BY H ARRY B ANKS

MANUFACTURING

BANKING

Google boss Eric Schmidt said the

group will workwith programmerswhen it launchesits TV service.

Picture: REUTERS

BY H ARRY B ANKSTECHNOLOGY


ANALYSIS l Google

440

460

480

500


$ 464.457 Sep

ANALYSIS l De La Rue

700

800

900

1000


p

680.507 Sep

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accept they are now locked in a Vulcandeath grip and are about to fall uncon-scious

Will the Star Trek indicator of market volatility soon catch on?

NEWS HOUNDRivalry bubbles over on Twitter betweenthe two doyens of financial television jour-nalism, the Beebs Robert Peston and SkysMark Kleinman.

BBC appears to have learned how toread output of other news organisations.Stephen Green appointment as trade min-ister now imminent, tweeted Kleinman,hours after Pesto had picked up on thestory first broken by his rival.

Should it be briefcases at dawn, gentle-men?

SHARK ATTACKBrokering million-dollar deals or fishinghuman remains from the stomachs of the

worlds deadliest sharks? Its all in a days work for Bahamian investment bankerHumphrey Simmons, who wins the prizefor daredevil of the week after his eye-pop-ping tale of terror on the high seas.

Simmons tells the local Tribune paperthat he was out deep sea fishing when hereeled in a tiger shark but as he wasabout to cut the creature free, it spat out ahuman foot.

Later investigations on land revealedthe headless remains of a man, thoughofficials believe he had drowned beforecoming to his grisly rest. Quitethe most unusual extra-cur-ricular achievement TheCapitalist has ever heardfrom the banking sector.

LOVE BOAT Valentines Day may behalf a year away, but if any City gentlemen want inspi-ration for a romantic treatfor their better halves, look no further.

St Katherines Dock reck-ons its housing a true sliceof history in the form of classic yacht the FlamontRose, which it believes

was once the love boatof French songstress EdithPiaf and French boxing champi-

on Marcel Cerdan. At 1,500 a pop for a weekly rental, the

old gal sure wants to get her moneys worth, though.

MONKEY BUSINESS As City runners prepare for the ever-popu-lar Bloomberg Square Mile Relay tomor-row, word reaches The Capitalist of aslightly more off-the-wall fun run offeringcoming to the Square Mile.

On 26 September, Im told, 750 people will take to the streets to run 7km andevery single one of them dressed up as agorilla, in order to raise money for theendangered creatures in West Africa.

It is ideal for those who want to dosomething that little bit different andpush themselves physically, say the organ-isers.

7k may not be far, but 7k in agorilla suit is a lot harder Illsay.

SEX SELLSPing! In pops an email frommerchandise groupIcons.com, which clearly has-nt been reading the papers

of late.The 2010 World Cup

may not have lived up toexpectations, but Fridays

4-0 defeat of Bulgaria at Wembley showed the futuremay be brighter for the passion-ate England following, thefirm shouts, excitedly, proceed-ing to offer unique signed foot- ball memorabilia at a discount.

With 60 off a hand-signed Wayne Rooney England shirt,now could be the time tomake that special purchase,it adds, seemingly withoutirony.

SPEARMINTRHINO BOSS

RETURNS TOCLUB SCENE

AMID all the talk of a strict clampdown onCity jaunts to strip clubs, it comes as some-thing of a surprise for The Capitalist tolearn that another such den of iniquity popped up this week claiming to be theclassiest table dancing joint in town.

Thats right, folks, its back courtesy of founder Simon Warr, the former manag-ing director of Spearmint Rhino, whosplit from the chains founder John Gray recently, taking control of its out-of-London clubs and rebranding them asPlatinum Lace.

The new club, on the former site of theCC Club, next to the Trocadero centre atPiccadilly Circus, aims to be the very bestand most exclusive that London has tooffer, and its not shy about tapping amarket of which predecessors steered wellclear: the ladies.

On board to help raise awareness of the venue among female punters is EmmaSayle, she of orgy-organiser Killing Kittensfame, as a consultant. Weve themed it asa crossover club, with themed nights,entertainment and burlesque as well asthe usual dancers, she tells me. Wedlove the ladies to come along too theidea that strip clubs are a primarily maledomain is outdated.

BEAR NECESSITYSocGens lovable ber-bear strategist

Albert Edwards was back on top form yes-terday predicting his usual decline intothe icy depths of recession.

No optimism over market prospects inthis camp: Edwards believes were firmly

back in the same situation as we wereprior to the financial crisis in 2007.

Investors then were content to stick their heads into very deep sand andignore the fact that The Great Unwindhad clearly begun. But in August andSeptember 2007, even though the wheels

were clearly falling off the global econo-my, the S&P still managed to rally 15 percent! Edwards notes, incredulously.

The recent reaction to data suggeststhe market is in a similar deluded state of mind. Yet again, equity investors refuse to

Above: Former Spearmint Rhinomanaging director wants to throw out the concept that stripclubs are just for theboys

Pictures: GETTY, REX

The Capitalist10 CITYA.M. 8 SEPTEMBER 2010EDITED BY

VICTORIA BATESGOT A STORY? [email protected]

Piafs love vibes can be yours, but itll cost you

Simon Warrstarts afreshwith new

club PlatinumLace, whichaims toentice thegirls as wellas the boys

Are the markets in a Vulcan death grip?

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Herbert Smith, Exchange House, Primrose Street, London, EC2A 2HS

cost?

Listen to experts from industry | Network | Learn | Debate | Enjoy

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sponsored by and

Consumer News 13CITYA.M. 8 SEPTEMBER 2010

ONLINE retailer Ocado yesterday said its sales had surged by almost30 per cent but investorsremained unconvinced and theannouncement was greeted with adip in its share price.

The company, which recently completed a controversial flota-tion, hasnt made an annual oper-ating profit since it launched ten

years ago, but hopes to go into the black next year.

Ocado said gross sales in the 12 weeks to 8 August rose 29.5 percent to 126.5m from 97.7m inthe same period last year, support-ed by higher take-up of its pre-ordered fish and meat servicecounter offer.

Ocado, which mainly sells Waitrose products, began listing

its shares in July, but a lack of inter-est among investors forced thecompany to cut the asking price forthe float to 180p from an initial fig-ure of 200p-275p. It has been trad-ing below that since the float.

Its shares yesterday closed sevenper cent lower at 146p valuing thecompany at around 825m.

Chief executive Tim Steiner saidhe was disappointed for share-holders that the price was nothigher but that the company waslooking to the medium to longterm to reap the rewards of hard

work done now. We are delighted with the (sales) performance. Wehope that 2011 will be the year

when people can stop calling usthe loss-making online retailer.

Average order size during thequarter was 113.59, marginally down on the 114.73 recorded a

year earlier.

Ocado said gross profit margins were stable while earnings were ris-ing in line with trend in the first half.

The group has to engage inmaterial capital investment to sus-tain its sales growth and has yet todemonstrate profitability on analready considerable sales base, wecontinue to harbour reservationsabout the valuation of Ocado, saidShore Capital analyst Clive Black.

Ocado sales surgebut investors waryBY J OHN DUNNE

RETAIL

NEWS | IN BRIEF

Greene King toasts sales riseGreene King has seen an upturn in salesthanks to its pub grub. The brewer andpub operator saw sales lift by 4.4 percent in the last 18 weeks. Like-for-likefood sales rose 8.6 per cent. Howeversales of Greene King's own beer, whichincludes IPA, dropped five per cent.

Chief executive Rooney Anand said: Theeconomic and consumer environmentremains uncertain. However, we are con-fident of delivering another successfulyear for our shareholders."He added that the business would con-tinue to expand its managed pub opera-tion, from its current near-900 pubs toaround 1,100 sites.

Debenhams slashes pricesDepartment store group Debenhams iscutting prices by up to 25 per cent, in asign retailers are increasingly nervousabout the outlook for consumer spend-ing. Debenhams said yesterday it waslowering prices on "tens of thousands"of goods now in a bid to attract waryshoppers, rather than waiting to use dis-counting as a way of clearing stock atthe end of the season. "Many remaincautious due to the continuing, challeng-ing economic climate following spendingcuts and the 'will we, won't we?' double-dip recession debate," it said.Retail sales values rose one per centyear-on-year in August, an industry sur-vey found.

SPORTS DIRECT NETS A WORLD CUP BOOST

SPORTS Direct, the biggest seller of England team shirts, saw profits rise during theWorld Cup despite the sides dismal performance. In the 13 weeks to 25 July, sales

jumped 8.8 per cent to 408m, while profit rose 17.8 per cent to 185m. Chief executive Dave Forsey said: These results clearly show that Sports Direct had a good World Cup.

WHITBREAD yesterday reported a 14per cent sales surge across the group fuelled by a return of business trav-ellers to its Premier Inns and thegrowth of Costa Coffee.

Premier Inn like-for-like sales were10.7 per cent higher in the 24 weeksto 19 August, while Costas like-for-like sales in the quarter jumpedanother 8.1 per cent.

Its hotel chain saw business trav-ellers using its budget hotels jump by a fifth. Overall occupancy of rooms

was up almost ten per cent compared with the same period last year. Attheir lowest rates the rooms are 29-a-night. The company has opened ninenew hotels this year with a total of 795 rooms.

Chief executive Alan Parker said:

We are very pleased at how wellPremier Inns has been performing.

The rise in business travellers showsthat people want to make the trips

but in this age of austerity they wanta cheap room. All of our businesseshave been performing well.

Whitbread created another 1,000 jobs over the period and now employs34,000 workers in total. It also ownsthe Beefeater chain and its restaurantsales were up 4.3 per cent.

The company has 98 Costa Coffeefranchises, with total sales up 28 percent.

Whitbread given alift by Premier Innbusiness travellersBY J OHN DUNNE

LEISURE

A long, hard struggle for credibilityOCADO chiefs were yesterday upbeat about the companysprospects and had seemingly jus-tifiable reasons for optimism withan almost 30 per cent sales hike.

But the figures cannot belooked at in isolation and comeon the back of a torrid flotation

which saw chief executive TimSteiner and crew pitched againstsome analysts who claimed thestock was still overpriced.

Indeed the way the share pricehas gone since the issue at amuch reduced 180p would sug-gest that the sceptics were correct

to rein in the company as it

sought to bankroll expansion. The neigh sayers were again out

in force yesterday helping theshare price to close around 146p.

Jonathan Pritchard at Oriel dis-missed the stock saying: Nochanges to forecasts and the fun-damentals will reassert them-selves. The fundamentals, fromthis valuation, look poor.

Meanwhile the company said it was very focused on where it(the stock) will be trading in twoor three years time, not where it

will be trading at lunchtime.However, what the stock is

doing at lunchtime and indeed

next week is being watchedclosely and the company cannotafford to appear aloof and dismis-sive if it is to build its reputation.

Ocado is also facing a challengefrom Morrisons which is expectedto announce a foray into onlineretail.

With the picture so mixed ahold as advised by KeithBowman at Hargreaves Lansdown

would appear to be the bestoption.

BOTTOMLINEAnalysis by John Dunne

Whitbread chief execAlan Parker says theage of austerity ishelping to fuel a salesrise at Premier Inn

ANALYSIS l Ocado

135

145

155

160

31 Aug 7 Sep23 Aug16 Aug9 Aug

p146.00

07 Sep

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BOUTIQUE hedge funds are sufferingas investors cash flows into largerinvestment houses in a trend dubbedthe flight to size, a survey pub-lished last night revealed.

The top five European hedge funds by size grew their assets under man-agement by 18 per cent to $112bn(73bn) in the year to mid-2010,according to research compiled by NewEdge Prime Brokerage Group for

The Hedge Fund Journal. In contrast,the 10 smallest funds saw their capi-tal shrink by seven per cent to $14bn.

The numbers suggest investors arerushing for the perceived brand safe-ty and improved liquidity of largerhedge funds. Giant asset managerBrevan Howard and Guernsey-basedBlueCrest Capital Management wereamong the beneficiaries, withBlueCrest increasing its assets by agenerous 58 per cent to $20.5bn.

Revealing its Europe50 leaguetable, The Hedge Fund Journal wrote:

Much anecdotal evidence suggeststhe flight to size is having an evenmore pronounced impact on the hun-dreds of smaller firms that fall below the threshold for inclusion. Whatsmore, the tough environment for cap-ital raising and the cost of regulatory changes is likely to crimp the emer-gence of new funds for some years.

Despite difficult conditions, a number of fledglings appeared in the top50 list. Veteran London trader Tony Chedraouis event-driven TyrusCapital vehicle charted at 43rd place

with $1.6bn of assets. FinisterreCapital, an emerging markets vehiclefounded by ex-Citigroup trader YanSwiderski, was 49th with $1.2bn.

INVESTMENT FEATURE: P19

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Flight to sizehurts smallerhedge funds DUBAI Holdings main unit will delay repayment on a $555m (361.4m)loan until 30 November, the company said yesterday, the second time it has

failed to meet a repayment deadline.DHCOG, a unit of the conglomerate

owned by the Gulf Arab emiratesruler, took a big hit on its exposure toDubais property crash.

The company said in June it may resort to asset sales to deal with itsdebt after posting a $6.2bn loss for2009. Its assets include Jumeirahhotel group and business parks.

DHCOG was due to repay the$555m loan yesterday, having already extended it for two months in July.Market participants had expected themove.

The restructuring and reschedul-ing of debt is still in progress,Haissam Arabi, chief executive andfund manager at Gulfmena

Alternative Investments said.Concerns about the overall debt

burden of Dubais state-linked compa-nies mounted after Dubai announceda standstill on repaying $26bn in debtas it restructured conglomerateDubai World. It unveiled a $9.5bn res-cue plan for the firm in March.

The $555m revolving credit is thedrawn part of a $1bn loan that wasagreed in 2007.

Dubai Holdingdelays $555mloan repaymen

Larry Fink of BlackRock (top) and Peter Clarke of Man Group Pictures: GETTY, REUTERS

BY OLIVER S HAH

HEDGE FUNDS

WORLD ECONOMY

1. Brevan Howard2. Man Investments3. BlackRock4. BlueCrest Capital Management

TOP FOUR HEDGE FUNDS BY SIZE

News14 CITYA.M. 8 SEPTEMBER 20

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News 15CITYA.M.8 SEPTEMBER 2010

CENTRAL bank and regulatory offi-cials agreed tougher new global bank capital rules yesterday but will keepinvestors on tenterhooks untilSunday when formal endorsement isexpected.

The Basel Committee ended itsmeeting with recommendations onhow much extra capital banks willhave to hold in future to avoid govern-ments having to bail out the sector inthe next crisis, a source familiar withthe process said.

It also agreed arrangements forphasing in higher standards on thequality of capital banks must hold infuture. The Basel Committee hassaid they are on track with their dis-cussions but there will be noannouncement today, a committeespokeswoman said without elaborat-ing further.

The recommendations will be putto the group of governors and headsof supervision, chaired by EuropeanCentral Bank president Jean-Claude

Trichet, which meets in the Swisstown of Basel on Sunday.

The so-called Basel III reform is thecornerstone of the worlds response

to the financial crisis and endorse-ment by Basels oversight body willpave the way for the G20 summit of leaders in November to give their sealof approval.

Germanys Die Zeit newspaperreported on Monday evening that adraft of the finalised package showed

banks will have to hold Tier 1 capitalof 9 per cent, including a three percent so-called conservation buffer.

At least five per cent of Tier 1 would have to be in the form of pureequity or retained earnings for maxi-mum market shock absorbency. Thecurrent Tier 1 ratio minimum is fourper cent, with a core pure equity min-imum of two per cent.

Germany continued to press formore time to implement the changesso its banks do not have to raise hugeamounts of capital quickly.

Analysts and regulators have beenexpecting the new levels under BaselIII to come in at around six per centfor core Tier 1, with a conservation

buffer of at least two per cent Andrew Lim, an analyst at Matrix

Group said the minimum ratios out-lined in the newspaper leak were atthe more onerous end of what themarket had been expecting once theadditional buffers are added.

ARAB Investments, the developer of the Pinnacle skyscraper, has broughtin an extra letting agent to sell leasesin the tower on Billingsgate.

Property company CB Richard Ellishas joined Savills as joint leasingagent on the tower, which is set to bethe tallest building in London whencompleted in 2013.

Its something weve always want-ed to be a part of, Mark Slim, execu-

tive director of the City agency atCBRE, told City A.M . Savills has been

working on it for some time, and very well I might add, and ArabInvestments has decided to bring insome reinforcements.

Savills secured Rex Restaurants asthe towers first pre-let in February,

but is yet to announce takers for therest of the 1m square feet of commer-cial space and 27,000 square feet of retail space.

There is a great deal of interest sofar and we will put together a market-

ing campaign and get the tenants,said Slim. We will put the full globalresources of CBRE into motion on

behalf of The Pinnacle Limited and itsshareholders.

The Pinnacle Limited, a subsidiary set up by Arab Investments, is in dis-cussions with several potential back-ers to fund the 800m project.

Khalid Affaras company hasalready obtained 130m from a 60-strong consortium of investors and

200m worth of debt from HSHNordbank.

Pinnacle team brings in second agentto attract pre-let tenants to the tower

PACKAGING supplier DS Smith saidtrading over the summer was encour-aging, helped by an uptick in fastmoving consumer goods (FMCG).

The FTSE 250 firm said it was confi-dent for the rest of the year, and saidit was ahead of the market for growthin the FMCG sector.

Our aim is to produce a morefocussed business with less cyclicali-

ty, said chief executive Miles Robertsin a call with analysts yesterday. We

are looking at five to six per cent like-for-like growth in our main markets,and more in developing markets suchas Poland.

The company acquired Frenchpackaging firm Otor for about 247m(205m) in July and said it expectedOtor to add to both earnings and mar-gins in the first full financial year of ownership in 2011.

The firm announced a 227 per centrise in annual profits to 55m in

June, on sales of 2.1bn.Shares closed flat at 147.7p.

DS Smith says tradingtrack after it boosts sal

MANUFACTURING

IRELAND extended its guarantee forshort-term bank liabilities, includingcorporate and interbank deposits, asexpected yesterday as the governmentsought to reassure investors about itsfinancial position.

The move came as Irish bondspreads hit fresh peaks amidrenewed jitters about the health of the European banking sector pilingmore pressure on Ireland as it seeksto hammer out a deal with theEuropean Commission over thefuture of nationalised lender AngloIrish Bank.

Dublin saved Anglo from collapsetwo years ago when it agreed to guar-antee the liabilities of the entire

banking sector and finance ministerBrian Lenihan said yesterday thatguarantee would be extended untilthe end of the year for short-term lia-

bilities. With Ireland once again at the cen-

tre of European debt fears amid con-cerns over the escalating cost of

bailing out Anglo Irish, there werereal fears corporate depositors wouldpull funds out of Irish banks if theguarantee had been left to expire atthe end of this month.

Analysts said while the guaranteekept Ireland on the hook for its strug-gling banks, it at least gave them

breathing space ahead of a crucialmonth in which they need to refinacearound 26bn (21.5bn) of funding.

Anglo relieas Irelandextends aid

BANKING

US regulators are probing certainpractices around quote stuffing, where large numbers of rapid-firestock orders are placed and cancelledalmost immediately, Securities andExchange Commission (SEC) chair-man Mary Schapiro said yesterday.

The SEC and other regulators arelooking carefully at certain practicesin this area to assess whether they

violate existing rules against fraudu-lent or other improper behaviour,

Schapiro said in remarks to be deliv-ered at the Economic Club of New

York.Regulators were also looking atquote stuffing in connection with themysterious 6 May flash crash, whenthe Dow Jones industrial averagedropped dramatically before quickly recovering.

However, it is not seen as the causeof the dramatic market drop, sourceshave said. A report that may explainthe flash crash is expected toward theend of the month, Schapiro said.

SEC mulls tightening uprocess for stock order

REGULATION AUSTRALIAN Prime Minister JuliaGillard secured a wafer thin parlia-

mentary majority yesterday, ending apolitical impasse but hardly cheeringinvestors worried about the fragility of her government and its plans totax mining profits.

Gillards Labor Party, which waspunished by voters in 21 Augustinconclusive elections despite arobust economy, secured enough sup-port from three independents andone Green lawmaker to form a one-seat majority in the lower house of

parliament.Her narrow victory means Labor

can implement its proposed 30 percent mining tax, a prospect that dent-ed resources stocks and the dollar, as

well as pursue a $38bn telecoms proj-ect, which supported shares in phonecompany Telstra.

Shares in mining heavyweightsBHP Billiton and Rio Tinto extendedlosses yesteray after the independents

backed Labor, dashing hopes that theconservatives - who were opposed tothe tax -- would take power.

BHP Billiton closed at 1895p afterfalling by 1.3 per cent, while rivalXstrata was down 1.56 per cent to

1072p.Similarly, Rio Tinto dropped1.78 per cent to 3447.50p and Vedanta

was down 1.1 per cent to close at1980p. A group of miners had earlierthreatened to exit Australia when for-

mer Prime Minister Kevin Rudd hadproposed a 40 per cent mining tax.MARKETS: P18

Mining tax headache returnsBY E MMA S ADOWSKI

MINING

Basel bankingrules focus oncapital bufferBY H ARRY B ANKS

REGULATION

BY M ARION DAKERS

PROPERTY

The new goverment has been formed after 17days of political deadlock. Welsh-born Gillard now controls 76 seats,and can finally call herself Australia's first elect-ed female Prime Minister.

FAST FACTS |AUSTRALIAN ELECTION

Irish minister for finance Brian Lenihan has guaranteed liabilities Picture: REUTERS

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News16 CITYA.M.8 SEPTEMBER 2010

WHETHER its advising firms,publishing reports or driv-

ing efficiency, professionalservices firms are never farfrom the front line in the City. With

their global reach and diversified port-folios, the best-known firms have

emerged looking healthy and ready toface the challenges of the new, post-downturn world.

Dont miss the City event of the year getonline now and book your table for the

City A.M. Awards on Thursday 28 October2010 at Grange St Pauls Hotel, LondonEC4.www.CityAMAwards.com.

In common with all the firms inthis section, the governmentsspending cuts are sure to hitDeloitte hard. For now, though, itsemployees can be forgiven forcelebrating. 2010 was its second-best year ever, with partners onaverage taking home 873,000.Its results for 2009/10 showedthat its revenue dropped 16m to1.95bn in the year to May, mean-ing it narrowly failed to overtakePWC as the worlds biggest finan-cial services firm.

DELOITTE

The smallest of the big four, E&Yis planning for serious futuregrowth. Two years ago it mergedits EMEA and India practices,something that has proved prof-itable. It recently admittedalmost 400 new partners, its UKand Ireland advisory practicecontinues to grow, and it is look-ing to recruit 1,000 more peoplein that area. The only shadow? Itcould still face investigation overLehman Brothers Repo 105accounting practice.

ERNST &YOUNG

Voted the best Big Four auditorfor the third year in a row lastmonth, KPMG continues to play acentral role in the life of the City,not to mention government too.

KPMG With a presence in 146 countries

and employing 140,000 people,the operation is massive. Globally,its revenue was $20.1bn(13.1bn) for the last year avail-able to September 2009. Inrecent years it has also prideditself on its green credentials, andrecently won an award for itsenvironmentally friendly offices,and for a ban on short-haulflights.

It must be tough being outsidethe Big Four, but McKinsey stillholds its own in this most chal-lenging of company. True, itssmaller than the others on this list,but employing 8,600 peopleworldwide, it is by any standard abig firm. Regularly voted the bestconsultancy to work for in surveysof employers, it is renowned foremploying MBAs rather thanmore experienced managers, andfor giving young, talented people achance to make an impact.

MCKINSEY

If popularity is a measure of suc-cess, then PwC is doing alright; itrecently received an incredible800 applications for just 60graduate jobs. Earlier this week it

PWC announced that net revenues rose4 per cent to 2bn in the year toJune, with pay for its 820 UKpartners of 759,000 downfrom its record of 777,000 theyear before, but still healthy. Italso hired 57 new partners and1,750 other new staff over thepast 12 months. It plans to add800 more in the next year, and in2011 it will move to an impressivenew HQ on the Southbank.

THE management of risk hasalways been at the heart of theCitys business, and in theseturbulent times it has never

been more important. The five firms

on our shortlist work across the whole sector, from shipping and theoil industry to motor insurance. All of them have innovated and continue toflourish.

Dont miss the City event of the year getonline now and book your table for theCity A.M. Awards on Thursday 28 October2010 at Grange St Pauls Hotel, LondonEC4.www.CityAMAwards.com.

Of all the areas that our shortlist-ed firms work in, motoring is per-haps the toughest. But Admiralhas made a fantastic success of it,with pre-tax profits for the firsthalf of 2010 jumping 21 per centto 126.9m. The groups customernumbers increased by 23 per centto almost 2.4m. Meanwhile, itsoperation in Spain, calledBalumba, made a profit too oth-ers in the US, Italy and Germanyhavent yet, but you wouldnt betagainst them.

ADMIRAL

Formerly known as Jardine LloydThompson, the firm formally re-branded itself JLT last year, andin the 12 months since it has gonefrom strength to strength, andincome for the first half of 2010rose 40 per cent. Half the profiton the retail side of the businesscame from Australasia, with animpressive 24 per cent growth inthat market. A truly global playerwith an eye on the future, it alsosaw good performance inCanada, Latin America and Asia.

JLT

Operating profits were up 10 percent to 182m in the first half,largely because of its overseasearnings. The City stalwartmakes our list, though, because

STANDARD

LIFE

it has stuck up for the UK as aplace to invest. When the Pruwas engaged in its ill-fated ven-ture into Asia, Standard LifeCEO David Nish who took overthe top job at the end of lastyear criticised it and otherfirms of looking to Asia ratherthan at opportunities closer tohome. The UK is a stunningplace to do business, he said.Bravo.

The firm has repositioned itself in recent times, moving awayfrom property and towards theflourishing energy sector. Unlikemany in that sector, however, itescaped from the DeepwaterHorizon disaster with relativelyfew losses. Results for the firsthalf of the year showed that itdelivered a return on equity of 7.5 per cent for the first half of the year, while its combinedratio for the second quarter was51.5 per cent.

LANCASHIREGROUP

The worlds third-largest insur-ance broker recently announcedrevenues of $2.8bn for the yearto June 2010. Its a far cry from1998, when the aerospace,

WILLIS marine, construction, and energyspecialist was bought out for $3a share by Kohlberg KravisRoberts. But since then it hasflourished and in 2008 it pushedthrough the acquisition of HilbRogal & Hobbs for $2.1bn. If confidence counts for anything,then Willis has a bright future:last year it re-named it ChicagoHQ, formerly known as the SearsBuilding, the Willis Building.

Sponsored byOF THE YEAR| The Shortlist

OF THE YEAR|INSURANCE COMPANY

Headline sponsor In association with

Category sponsors

Official venue partneAwards reception sponsor

PROFESSIONAL SERVICES FIRMTOMORROWPROPERTY FIRM&

RETAIL BROKER

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News 17CITYA.M.8 SEPTEMBER 2010

BEST OF THE BROKERS

ANALYSIS l British Airways

180

200

190

210

220

230

Aug 24Aug 4Jul 15Jun 25Jun 7

p 226.708 Sep

BRITISH AIRWAYSUBS expects that British Airways (BAs)strong yield recovery will continue until theend of the year after the airline showed astrong yield delivery in the first quarter, up13.5 per cent, and surpassing Europeanrivals. UBS said that BA is trading well postits year-end results and continues to ratethe shares a buy.

ANALYSIS l Legal and General

85

80

75

90

95

100


p 94.00

7 Sep

LEGAL & GENERALLegal & General (L&G) has been upgradedby JP Morgan Cazenove from under-weight to neutral as its investment man-agement business is currently performingwell and is seen by JP Morgan as a valu-able asset. Along with the internationaldividends, it should be more than fundingthe total group dividend, JP Morgan believes.

ANALYSIS l Petroplus

14

13

12

15

1617

18

30 Aug9 Aug19 Jul28 Jun2010

Sfr 12.407 Sep

PETROPLUSDeutsche Bank has upgraded Petroplus ta buy rating after the bank said that itsees value in the utility giants stock. Thirating comes despite a 32 per cent plum-met in Petroplus stock, which has hit anall-time low since the groups second quter results. Deutsche Bank said that it seeno obvious reason for the earlier fall.

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

NYSE Euronext and environmentalmarkets infrastructure provider APX

will create a joint venture, NYSE Blue,to develop global environmental mar-kets, the companies said yesterday.

The intention is to create otherexchanges in other parts of the mar-ket. NYSE Blue will operate as one sin-gle company around the world andthe trading infrastructure will belinked, Brian Storms, who will

become NYSE Blues chief executive when the deal is cleared, said yester-day.

NYSE Blue will focus on environ-mental commodities related to car-

bon emissions and renewable energy trading but it also sees potential fornew types of trading around energy efficiency and water.

Storms, who is currently the chair-man and chief executive of APX,

would not comment on the value of the joint venture.

US-based financial markets opera-tor NYSE Euronext said earlier it

would contribute its 60 per cent

shareholding in French emissionsexchange BlueNext and be the major-ity owner of NYSE Blue.

Shareholders in APX, includingGoldman Sachs, MissionPoint CapitalPartners and ONSET Ventures willtake a minority stake in NYSE Blue inreturn for their shares in APX.

NYSE Blue will try to attractimportant and strategic investorsinto the new company, Storms said.

It will offer services such as pre-trade and post-trade platforms, envi-ronmental registry services, marketsreference data and the BlueNext spotemissions platform.

UTILITY Scottish & Southern (SSE) ispoised to reopen the European corpo-rate hybrid bond market this week,giving investors a rare chance to pick up yield and the company an alterna-tive source of capital.

Lead managers said the size andprice of SSEs planned issue would bedecided following the end of a week-long roadshow to meet withinvestors, but they expect the issue to

be launched by the end of the week.

A deal from SSE would be only the

second corporate hybrid issue this year, following Dutch utility TenneTs 1.5bn (1.2bn) transaction inFebruary.

French utility Suez Environnementis also due to kickstart a roadshow fora hybrid issue tomorrow. The issues

would be SSE and Suez debuts in thehybrid market.

The structure of the SSE deal will be very similar to TenneT, said GavinKirkpatrick, capital structuring andadvisory banker at Royal Bank of Scotland, who was a structuring

adviser on both the TenneT and SSE

hybrids. While TenneT had dual-call dates at7- and 12-years, the SSE issue will have5- and 10-year call dates, he said.

Companies can use hybrids, whichare a blend of debt and equity, to raisecapital more quickly than a rightsissue. They also have the key benefit of not diluting shareholders, like tradi-tional equity capital. The riskier natureof hybrids, mainly that the issuer willnot redeem the debt at the stated calldates, means investors demand a high-er return than senior bonds.

Scottish & Southern poised to reopenthe market for corporate hybrid bonds

BANKS accepted lowly returns ontheir cash from the EuropeanCentral Bank (ECB) yesterday, high-lighting the appeal of the ECBs safe-haven status in the ongoingenvironment of money market ten-sion.

The ECB comfortably attracted the 61bn (50.6bn) it needed from banksto offset the controversial Eurozonegovernment bond purchases it hasmade since May.

The ECB paid a weighted average

interest rate of 0.33 per cent on the

one-week deposits, the same as a week earlier.It is also well below the 0.5 per cent

available on open markets, highlight-ing banks preference to park cash atthe ECB rather than lend it moreprofitably to peers.

The ECB takes seven-day depositsfrom banks on a weekly basis tomatch the amount it has spent buy-ing government bonds a controver-sial tactic it turned to in May in a bidto calm the Eurozone governmentdebt crisis.

European Central Banoffers banks a safe hav

ECONOMY

APX and NYSEEuronext plangreen ventureBY HARRY BANKS

FINANCIAL MARKETS

BYHARRY BANKS

INVESTMENT

Dr Pepper and Unilever warned byTECHNOLOGY

SchrodersThe asset manager has appointed RoryBateman as head of European equities,effective immediately.

Bateman joined the group in early2008 as head of European institutionalportfolios. In his new role, he will con-tinue to have responsibility for the core

European equity portfolios and theteam of research analysts.

GE CapitalJames Fenner has been named as thenew president and chief executive of GECapitals leveraged finance business,effective immediately.

Fenner was previously head of capi-tal markets for the group in the EMEAregion. Prior to joining GE in 2009, hewas head of leveraged loan capital mar-kets at Merrill Lynch.

AXA Investment ManagersThe investment management firm haspromoted Laurent Gueunier to head of

AXA Structured Finance, effective frommid-October.

Gueunier joined the group in 2002 toset up the structured corporate creditdepartment. Prior to that, he had spentthree years in the financial institutionsderivatives marketing team at JPMorgan Chase, where he was in chargeof structuring and developing deriva-tives in France and Belgium.

HSBC Alternative InvestmentsThe alternative investment firm hashired Amy McNally from BarclaysWealth as its new global marketingmanager.

At Barclays, McNally was a product

specialist covering alternative invest-ments, a role involving the marketingand distribution of hedge funds, privateequity and real estate products in theUK and EMEA region.

Prior to that, she worked in JPMorgans treasury services arm.

FreshfieldsThe law firm has appointed John Daviesand Martin Klusmann to co-head itsantitrust, competition and trade prac-tice.

Davies was formerly managing part-ner of the firms Brussels office for adecade, while Klusmann managed theDsseldorf office for the past four years.

CITY MOVES |WHOS SWITCHING JOBS Edited by Victoria Bates

DeloitteThe accountancy firm has appointed UK part-ner Chris Harvey as the new head of its finan-cial services group.

Harvey has been a partner since 2002 andhas been global head of banking and securitiessince 2008. He will focus on growing the finan-cial services business in Asia, Latin America,the Middle East and Eastern Europe, havingreplaced Jack Ribeiro, who is now chair of thefirms global financial services industry group.

+44 (0)20 7557 7245morganmckinley.comTo appear in CITYMOVES please email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

ANALYSIS l NYSE Euronext Inc

20

22

21

23

24

25

4 Aug 24 Aug15 Jul25 Jun7 Jun

23.0407 Sep THE US Food and Drug

Administration (FDA) yesterday warned beverage makers Dr PepperSnapple and Unilever about makingimproper statements regarding greentea on product labels and web sites.

In a letter dated 30 August andreleased yesterday, the regulator saidDr Peppers Canada Dry SparklingGreen Tea Ginger Ale was misbrand-

ed because the product label improp-erly used the word enhanced relat-ing to antioxidants from green tea.

We received the FDAs letter today and are reviewing its contents, a DrPepper spokesman said. We look for-

ward to working with the FDA andaddressing the issues raised.

In a letter dated 23 August andreleased yesterday, the FDA saidUnilever improperly promoted aLipton green tea product with word-

ing that would make it a drug underfederal regulations. The promotioncited studies showing that tea lowerscholesterol.

The therapeutic claims on your web site establish that the product isa drug because it is intended for usein the cure, mitigation, treatment, orprevention of disease, the FDA said.

It also said that Lipton had madeunauthorised nutrient claims for thetea.

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LONDONS TOP 250 Trade these shares from 1.50 with Interactive Investo3i . . . . . . . . . . . . . . . . . . . . . . . . 2 66 .9 0 4. 50 31 2. 00 2 46 .9 03i Infrastructure. . . . . . . . . . . . .115.00 +0.40 115.00 94.75A.B. Foods. . . . . . . . . . . . . . . .1070.00 +2.00 1096.00 790.00Aberdeen Asset Man. . . . .. . . . .136.90 3.10 155.60 111.00Admiral. . . . . . . . . . . . . . . . . . .1571.00 1.00 1586.00 1003.00Aegis. . . . . . . . . . . . . . . . . . . . . 11 4. 50 2. 50 1 37 .3 0 1 03 .1 0Afren. . . . . . . . . . . . . . . . . . . . . 10 3. 90 1. 60 111 .0 0 6 8. 00African Barr Gold. .. . . . .. . . . .599.00* +4.50 685.00 520.50Aggreko. . . . . . . . . . . . . . . . . .1485.00 28.00 1639.00 659.50Alliance Trust. . . . . . . . . . . . . . .322.50 2.30 352.70 292.70AMEC. . . . . . . . . . . . . . . . . . . . . 91 8. 50 24 .5 0 9 58 .5 0 7 24 .5 0Amlin. . . . . . . . . . . . . . . . . . . . . 41 7. 30 +1 .3 0 43 7. 60 3 50 .8 0Anglo American. . .. . . . .. . . .2460.50* 32.00 3015.50 1846.50Antofagasta. . . . . . . . . . . . . . .1076.00 16.00 1105.00 699.50Aquarius Platinum.. . . . .. . . . .301.90* 0.70 490.00 211.50ARM Holdings. . . . . . . . . . . . . . .366.30* 4.30 381.00 127.60Ashmore. . . . . . . . . . . . . . . . . . .301.40 1.90 311.20 215.00Astrazeneca. . . . . . . . . . . . . . .3339.50* 0.50 3376.00 2668.00Atkins(Ws). . . . .

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