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FTSE 100 5,816.94 -58.25 DOW 11,357.04 +10.29 NASDAQ 2,578.78 +15.80 /$ 1.61 +0.01 / 1.17 +0.01 /$ 1.38 unc Certified Distribution30/08/10 03/10/10 is 110,015

The National Union of Students condemned the chaos Picture: PA

IRELANDS borrowing costs soared toan 11-year high yesterday on worriesthe country is on the brink of askingfor a Greek-style bailout from the EUor the International Monetary Fund(IMF).The Irish central bank governor alsoadmitted yesterday that the enor-mous bank rescue had failed to reas-sure investors and that strugglingIrish institutions might be better offin foreign hands.

Growing alarm at Irelands poten-tial bankruptcy sent benchmark 10-

year yields up by more than half apercentage point to 8.64 per cent, thehighest level since 1999, while thecountrys spread over benchmarkGerman bonds soared to 6.22 per-centage points, which represents anall-time high.

European clearing houseLCH.Clearnet made it more expensiveto trade Irish debt due to the threat of

sovereign default, hiking the marginrequired by 15 per cent of net expo-sure.

The EUs top monetary official Olli

Rehn has said that while Ireland hadnot requested any financial aid, thepremium investors are demanding tohold Irish bonds rather than German

benchmarks has widened at the same breakneck speed as Greeces spreaddid shortly before it sought its bailoutin May.

Irish central bank governor PatrickHonohan conceded in a speech yester-day investors are not yet fully con-

vinced that setting up the NationalAsset Management Agency to buy out

troubled assets from banks includingAllied Irish and Bank of Ireland hadhelped build confidence in the coun-trys finances.

From a national point of view, theentry of foreign purchasers for someor all of the banks would help trans-fer both credit and liquidity risk tothose in a better position to bearthem, he told the InternationalFinancial Services Summit in Dublin.

He said the central bank wouldhelp search for potential buyers, as itis clear that all will benefit fromgreater market confidence in thefinancial situation of the banks as inthe sovereign.

The Irish government hopes to passan emergency budget to save 6bn(5.13bn) in December, which hasalready led to public protests.

However, Honohan said yesterdaythe country will not alter its austerityplans even if the country requires a

bailout. My take would be the sort ofpolicy package the IMF would want tosee Ireland doing is very much the

sort of policy package that the gov-ernment is putting together on thefiscal side, Honohan told the confer-ence yesterday.

IRISH BONDSSHUNNED AS

WOES MOUNTBY MARION DAKERS

WORLD ECONOMY

www.cityam.comIssue 1,261 Thursday 11 November 2010 FREE

FSA ISSUESPAY RULESBANKS WILL BE

FORCED TO REVEAL

SALARIES P3

ROLLS-ROYCE UNDER FRESHFIRE OVER PLANE ENGINES

MORE JETS GROUNDED P2

BUSINESS WITH PERSONALITY

Violence at student fees

demo leads to 35 arrests

HUNDREDS of protestors stormed theConservative party headquarters yes-terday after a protest over universitytuition fees spiralled out of control,leading to a total of 35 arrests.

The Metropolitan Police said lastnight that 14 people had been takento hospital, including seven policeofficers, for injuries picked up duringthe protests in which 52,000 mostlypeaceful activists took to the streetsagainst a hike in fees and cuts to gov-ernment spending on higher educa-tion.

Around 200 people barricaded

themselves on the roof of Tory HQ onMillbank after what the NationalUnion of Students described as agroup of rogue protestors smashed

the glass front of the building, whilehundreds more built a bonfire madefrom placards outside.

Mayor of London Boris Johnsonsaid police needed to examine how asmall minority had shamefullyabused their right to protest.

This is intolerable and all thoseinvolved will be pursued and they willface the full force of the law, he said.The Metropolitan Police commission-er has assured me that there will be a

vigorous post-incident investigation.We did not expect this level of vio-

lence, Metropolitan Police commis-sioner Sir Paul Stephenson said in a

TV interview later. This was thug-gish and loutish behaviour by crimi-

nals. Its not acceptable, it is anembarrassment for London and forus.

ALLISTER HEATH: P2

2

3

4

5

6

10 Mar May Jul Sep Nov

ANALYSIS l Difference betweenIrish and German 10-year bond yields

6.17510 Nov

BY MARION DAKERSPOLITICS

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News2 CITYA.M. 11 NOVEMBER 2010

Rolls-Royce hitin safety blowEUROPEAN air regulators yesterdaysaid Airbus super-jumbos with Rolls-Royce engines similar to the one thatfailed last week were unsafeenough to order compulsory checkson the planes, dealing another blowto the embattled jet engine maker.

The European Aviation SafetyAgency (EASA) ordered operators of A380s with Trent 900 engines tomake inspections after a Trent 900 ona Qantas jet flying to Australia partlydisintegrated in mid-air on Thursday.

An EASA spokesman said: Theincident that occurred is consideredto be related to a potentially unsafecondition in the engine.

Rolls-Royce said it has been work-ing with Airbus, airlines and safetyauthorities to try to determine the

cause of the engine failure.But one major airline, Dubais

Emirates, has called for a clear line ofcommunications from the UK manu-facturer over the problem.

Emirates President Tim Clarke saidRolls-Royce should be more openabout whats actually going on.

So far the engine-maker has issuedjust two brief statements. But a Rolls-Royce spokesman said the companywould provide another update today.

EASA said early findings showedthat an oil fire in part of the enginemight be to blame.

BY PHILIPWALLER

AVIATION

Why protesters need a reality check

IT is a tragic day when the headquar-ters of a political party in a democracyare stormed by a lawless mob. That iswhat happened yesterday to the ToryHQ in Millbank; it almost happened atthe Liberal Democratic base in CowleyStreet. A minority of thugs in thecrowd possibly professional agitatorsof the sort that caused havoc at theG20 meetings in 2009 turned vio-lent; regrettably, the police failed tocontain the violence properly, for rea-sons which remain unclear but whichmust urgently be investigated. Theauthorities need to be better prepared

to deal with this sort of thing in thefuture and ensure that people andproperty are adequately protected.

Student fees were first introducedby the Labour government. The 3,290

the universities are allowed to chargeUK students ensures that virtuallyevery institution loses money on everyBritish student they accept. Thismakes no sense: graduates earnaround 100,000 more over a lifetimethan non-graduates (and often muchmore). The reforms to the original sys-tem proposed by the present govern-ment are hardly radical and includenumerous safeguards to help the poorand those whose parents are from less well-off backgrounds (crucially,Labours fees didnt discourage thepoor, with demand for places fromthe less-well off continuing to rise).Unfortunately, even fees of 9,000 ayear the maximum allowed underthe reforms wont be enough toallow the top UK universities to com-pete globally with the likes ofHarvard, MIT and even now the best

Chinese universities. In this area, as inothers, the UK is in relative decline.

It would be nice if tens of billions ofpounds of free money could be con-jured up out of thin air. As rational,

grown-up strategies for plugging thebudget deficit go, however, magic isntexactly what most economists wouldrecommend. There is no such thing asa free lunch, which is why hard choic-es are now having to be made aboutpublic spending. Reasonable peoplecan disagree about what the prioritiesshould be; but nobody can deny thatthe government is spending close to20 per cent more than it is collectingin tax. Countries that go on like thatfor too long eventually go bust.

Mindsets must change in Britain:higher education needs to be seen asan investment, not as an opportunityto have a good time at taxpayersexpense. That will mean that studentswill have to face more of the costs and not merely enjoy the benefits oftheir education. It also means thatthey will have to consider more care-

fully which degrees they wish to study.In return, they will be able to behavemore like consumers, forcing the sys-tem to evolve. There will be more two- year degrees and more distance

learning; for-profit companies need toenter the market, which is currentlycontrolled by charities. More innova-tion and experimentation is needed.Students should embrace, not fear,the current, tentative moves towardsthe commercialisation of higher edu-cation. It is a shame yesterdays pro-testers couldnt see this.

ECONOMIC HORROR STORYIf you like the sorts of arguments pre-sented in this column, you will enjoy abrilliant polemic on Channel Four at9pm tonight. It is called Britains Trillion Pound Horror Story andmakes the case that to put Britain back on track we need to radicallyrethink the role of the state, stoppoliticians spending money in ourname and introduce a flat tax. Itsgreat stuff. [email protected]

LLOYDS Banking Groups chief riskofficer Carol Sergeant is set to leavethe bank after almost seven years.

Sergeant, who joined the bankfrom the Financial Services Authorityin 2003, said in a statement the movecomes at the right time for me toseek new challenges.

She might seek a role at the top ofone of the new bodies created fromthe break-up of the FSA, it was report-

ed last night.She has established an outstand-

ing risk leadership team and hasimplemented industry-leading risk-management standards and prac-tices, Chief executive officer EricDaniels said in a statement.

Her departure comes a week afterthe bank announced that SantanderUK boss Antonio Horta-Osorio wasmoving to Lloyds to become its chiefexecutive.

The bank said in a statement it willnow look for Sergeants replacement.

BYMARION DAKERS

BANKING

Lloyds risk chief resignsCarol Sergeant (inset) is one of the Citys most prominent women Picture: REUTERS

NEWS | IN BRIEF

Cisco forecasts disappoint CEOUS technology firm Cisco Systems fore-cast revenue far short of Wall Streetsexpectations yesterday, as it warned ofuncertain demand from Europe andother markets, sending its shares tum-bling 14 per cent. Chief executive JohnChambers said he was disappointed at

the revenue growth of nine to 12 percent forecast for the 2011 financial year,well below the 13.1 per cent expected byanalysts. Chambers said growth in thecurrent quarter would be three to fiveper cent.

Fed reveals more QE detailsThe Federal Reserve will buy about$105bn (65bn) of Treasuries andTreasury inflation-protected securities in18 operations from 12 November to 9December as part of its next batch ofquantitative easing, the New York Fedsaid last night. Around $75bn of thissum is part of the new $600bn easingprogramme announced last week, withthe remaining $30bn printed under apreviously announced scheme. The Fedhad already in August undertaken a pro-gramme of Treasury and TIPS buying,using funds from agency bonds.

EDITORS LETTER

ALLISTER HEATH

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Rolls-Royce CEO SirJohn Rose is underpressure to tell airlineswhat went wrong withits Trent 900 engine

GREENSPAN WARNS OVER WEAKERDOLLARThe US is pursuing a policy of weak-ening its currency which is drivingup exchange rates in the rest of theworld, according to Alan Greenspan,the former chairman of the FederalReserve. Writing in todays FinancialTimes ahead of the G20 meeting inSeoul, Greenspan argues that withChina also holding down the renmin-bi, the upward pressure on currencieselsewhere risks a return to wide-spread trade protectionism.

WALL STREET TO SIDESTEP VOLCKERRULEWall Street groups will continue toinvest billions of dollars in propertyand companies in spite of new rulesaimed at curbing the bets banksmake with their capital, executives

say. US financial groups such asGoldman Sachs, JPMorgan Chase and

Morgan Stanley intend to take advan-tage of a little-discussed aspect of the

Volcker rule to continue makingdirect investments.

FIRST EASTERN FUND TARGETS UKFirst Eastern Investment Group, aHong Kong-based private equity firm,has launched a $500m fund to investin small and medium sized enterpris-es in the uK and help them break intothe Chinese market. The fund waslaunched yesterday in Beijing duringPrime Minister David Camerons offi-cial visit.

BA SUFFERS SETBACK IN CABIN CREWCLASHBritish Airways attempt to reach asettlement in its acrimonious dispute with cabin crew has hit anotherstumbling block after two branchesof the trade union involved said theywould not recommend the airlineslatest offer to members. BA and the

Unite union last month reached atentative agreement.

MACYS SINGS PRAISES OF MADONNA A clothing line for teenagerslaunched in August by Madonna andher 13-year-old daughter Lourdes ishelping to breathe new life intoMacys. The Material Girl line, whichrecalls Madonnas leather-and-lacedays of the 1980s, represents theAmerican department stores attemptto compete with outlets such as H&M.

BAE HAS SIGHTS ON CYBER WARFAREAS MERGERS ARE RULED OUTBAE Systems is to look for acquisi-tions in high-growth areas such ascyber warfare, but mega-mergers will be off the agenda as defence cutsloom. Ian King, chief executive ofEuropes largest defence company,said that the Pentagon had madeclear it did not want more consolida-tion between the worlds largest

defence contractors because it wouldreduce competition.

PRIVATE DETECTIVES CHASE HP BOSSThe new chief executive of Hewlett-Packard is being hunted by privatedetectives, it has been claimed.Investigators are said to have beenhired by software group Oracle to findLeo Apotheker, who took charge atHewlett-Packard this month. Oracle isattempting to serve Mr Apothekerwith a subpoena to testify in a courtcase, in which it is fighting SAP, a rivalcompany that Apotheker formerly led.

ANGLIAN'S JONSON COX IS NEW UKCOAL CHAIRMANUK Coal, Britains largest coal miner,has appointed Jonson Cox, the formerhead of Anglian Water, as its newexecutive chairman. The companyannounced in July that David Jonesand Jon Lloyd will step down as chair-man and chief executive, ahead of the

company being split into its coalassets and property operations.

EU MINISTERS, PARLIAMENT TONEGOTIATE BUDGET INCREASEEuropean budget ministers will meetrepresentatives from the EuropeanParliament in Brussels on Thursdayto try and reach an agreement onnext years EU budget. The council, which comprises budget ministersfrom the blocs 27 member states,wants the budget to increase by nomore than 2.91 per cent from this years level of122.9bn, whileParliament wants a 6.2 per cent rise.

SWITZERLAND TIGHTENS BANKCAPITAL RULES The Swiss government is askingbanks to set aside more capital as acushion against losses on their trad-ing books, a move that will affect UBS AG and Credit Suisse more thansmaller institutions. The tighter

rules, which come into force on 1January, stem from the Basel III rules.

WHAT THE OTHER PAPERS SAY THIS MORNING

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FSA to toughen bank pay law

FOREIGN banks operating in the UKcould be forced to disclose the pay

packets of their senior bankers,according to a consultation paperreleased by the Financial Services

Authority (FSA) yesterday.The FSA said it is seeking feedback

on whether to close the loophole thatexempts banks based outside theEuropean Economic Area from disclo-sure rules on remuneration.

All UK banks will be asked to reveal

details of pay policies on at least anannual basis, the FSA said, with thecountrys top 26 institutions held upto the strictest scrutiny in reformlinked to the Basel III global rules.

Bonuses, deferred pay and goldenhandshake deals will be among thelist of awards that must be disclosed

by banks operating in the UK, insteadof the current system where banksonly release the total amount spenton pay each year.

The UK has already introduced aone-off tax on bonuses and willimpose a four-year levy on banks from

the start of 2011.Consultancy PwC said the plans

were less onerous than the mandato-ry breakdown of the number of staffin each pay band, which had been

mooted by the Treasury.The proposals do not includesome of the more prescriptive ele-ments of previous proposals, such asdisclosure by pay bands. This shouldhelp prevent the unintended conse-quences that can sometimes followpay disclosure, for instance pay ratch-eting, said Tom Gosling, a partner atPwC.

BYMARIONDAKERS

REGULATION

NOKIA and other established handsetmakers are quickly losing global mar-ket share to a push by Chinese no-

brand vendors into emergingmarkets, research firm Gartner said.

Surging growth of no-brand manu-facturers coupled with growingsmartphone sales boosted third-quar-ter mobile phone sales 35 per cent,Gartner said yesterday. But Nokia saw

its marketshare slip from 44.6 percent to 36.6 per cent in the period.

No-brand manufacturers, mostlysmall Chinese firms, have this yearquickly expanded their reach outsideChina into Africa, India, Latin

America and Russia. These manufacturers, who sell in

total roughly as many phones asNokia, will soon focus on smart-phones, using Mediateks new

Android chipset, Gartner said.

Nokia and Apple lose salesto cheap Chinese phonesTECHNOLOGY

News 3CITYA.M. 11 NOVEMBER 2010

GILT yields shot up after the Bank ofEnglands inflation report yesterday,

with the market moving to price inlower expectations of further quanti-tative easing (QE).

Yields on ten-year gilts jumped 14basis points to 3.18 per cent from 3.04per cent before the report wasreleased and sterling rallied to over$1.60 against the greenback and toover 1.17 against the euro.

In its first inflation report since thegovernments comprehensive spend-ing review, the Bank kept its GDPgrowth projections at the same levelas in its August report, saying that ithad already factored in the fiscalcrunch.

It forecast that growth would reachabout 2.2 per cent next year and thenrise to three per cent by 2012.

But it pushed back the date by which it said consumer price infla-tion was likely fall below its two percent target to 2013, cautioning that

the risk around its most likely pathare judged to be skewed to theupside.

Its probability-weighted fan chart(see right) shows that it expects CPI topeak at about 3.4 per cent halfwaythrough 2010 and then to fall to twoper cent a year later.

The combination of bullish growthprojections and above-target inflationforecasts convinced City economiststhat a second round of QE is off the

books for now.Ernst & Youngs Nida Ali said:

Further asset purchases are only like-ly to occur if there are clear signs thatthe recovery is relapsing.

But many also think that the reportleft the door open for QE if growthfigures slow, with Capital Economics

Vicky Redwood claiming it could stillcome as early as February.

Most economists now expect inter-est rates to remain at their current0.5 per cent level until late 2011, after

which IHS Global Insights Howard Archer said they would rise onlygradually.

QE less likely

after Banksnew outlook THE Bank of Englands quarterly infla-tion report yesterday revealed a widen-ing divergence of views as governorMervyn King admitted that theMonetary Policy Committee (MPC) wascaught up in a vigorous debateabout policy.

The report stated that there is a wider than usual range of viewsamong committee members as theBank pushed back projections on thetimeframe by which the consumerprice index (CPI) would fall below itstwo per cent target.

In a sign of the uncertainty grippingthe MPC, its report stated that thechances of inflation being above-target

by the end of 2013 were fifty-fifty. Itnow seems certain that any decisionon monetary policy will be heavilyreliant on data releases.

BGC Partners David Buik said thatthe report signalled a monetary policyof suck it and see, with IHS GlobalInsights Howard Archer agreeing thatthe Bank remains perched on themonetary policy fence.

The Institute of Directors GraemeLeach said: Uncertainty is written allover this report and rightly so. Thereare so many competing forces towardssustained recovery or recession, theeconomic models are overwhelmed.

This is a time for judgement.

Inflation reportsignals growingsplit on MPC

Mervyn King said there was a growing divide on the MPC Picture: GETTY

BY JULIET SAMUEL

ECONOMICS

ECONOMICS

5

4

6

1

0

2

3

-1-2

131211100908072005

ANALYSIS l CPI inflation projection based on market interest rate expectationsand 200 billion asset purchases

%Increase inprices on ayear earlier

Inflation target met

5

76

10

234

-1-2-3-4-5-6

131211100908072006

ANALYSIS l GDP projection based on market interest rate expectations and nofurther QE%

Banksestimates ofpast growth

ONS Data

Projection

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US CARMAKER General Motors (GM)posted a $2bn (1.24bn) third-quarterprofit yesterday, driven by an acceler-ating turnaround in North Americaas it rushes to complete an initialpublic stock offering (IPO) set fornext week.

The quarterly profit was thelargest for GM since it emerged frombankruptcy in July 2009 and providesthe last piece of financial data forinvestors evaluating the Detroit-

based carmakers $13bn initial publicoffering due next week.

GM posted revenue of $34.1bn inthe third quarter, and earnings pershare of $1.20.

GM said it expected to post solidlyprofitable results for 2010, its firstfull-year of profit since 2004.

It obviously will bode well for theIPO, said Van Conway, chief execu-tive at turnaround specialistsConway MacKenzie. Its more proofthat they have executed the turn-

around I dont say completely because I wouldnt say that just acouple of quarters make [a turn-around].

GM reported increased cash earn-ings in North America for a thirdconsecutive quarter, with its interna-tional results flat to up slightly and abigger loss in Europe.

We know we have much more work to do, chief executive Dan Akerson said in a conference call.We still need to fix Europe. We con-tinue to be vigilant in reducing costin the enterprise, and we have just

started doing a better job in market-ing our brands to consumers.

The carmakers IPO will includecommon and preferred shares andwill allow the US Treasury to reduceits stake in GM from about 61 percent to near 43 per cent.

GM executives have started aninvestor road show to support theIPO plans. Akerson and chief finan-cial officer Chris Liddell did not takequestions after a presentation on theresults yesterday.

GM delivers$2bn in profitahead of IPO US PRESIDENT Barack Obamaresponded to widespread criticismthat the United States is deliberately weakening the dollar as he tried to

swing the G20 spotlight back ontoglobal imbalances at a gathering ofworld leaders in Seoul.

The US easy-money policy has beenunder fire since the Federal Reserveannounced last week it would pumpan additional $600bn (372.4bn) intothe economy. In an attempt to easetensions, Treasury secretary TimothyGeithner said he was optimistic theG20 could reach a deal to limit tradeimbalances during a two-day summitdue to conclude today.

Obama, in an attempt to take hisown countrys policies out of theglare, said a strong US economy wasvital to the global recovery and urged

his G20 counterparts to put aside dif-ferences and help promote economicgrowth.

When all nations do their part -emerging no less than advanced, sur-plus no less than deficit - we all bene-fit from higher growth, Obama saidin a letter sent to G20 leaders.

The bridge-building came after aday of heated arguments as negotia-tors struggled to hammer out a state-ment that all G20 leaders could sign.

MORE ON G20: P9

Obama defendsUS dollar policyahead of G20

Obama is trying to calm tensions ahead of todays G20 summit Picture: REUTERS

BYHARRY BANKS

AUTOMOTIVE

ECONOMICS

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DAVID Cameron yesterday warnedChina against protectionist policiesand raised the issue of its currency,ahead of todays G20 meeting of

world leaders.In a carefully worded speech, the

Prime Minister promised to campaignfor greater links between Europe andChina, but said the economic super-power needed to rebalance its econo-my towards domestic consumption.

He added: The truth is that some

countries with current account sur-pluses have been saving too much

while others like mine with deficitshave been saving too little.

The result has been a dangeroustidal wave of money going from oneside of the globe to the other.

Cameron insisted that he did notwant to punish China for being a suc-cessful exporter, but highlighted waysthe country could shrink the deficit,

such as boosting domestic consump-tion.

In a carefully worded speech, thePrime Minister also called on China totake steps over time toward interna-tionalising its currency, setting thescene for a fraught G20 meeting.

Countries like the US think thatthe yuan, which has not been allowedto appreciate, is too low, fanning glob-al imbalances in the economy.

The Prime Ministers speech, deliv-ered to an audience at PekingUniversity, capped a high-profile two-day trade delegation to China that

failed to live up to expectations.Despite promising trade deals

worth billions of pounds before thetrade mission, officials admitted they

were disappointed by the number ofagreements that were signed.

Save for a 750m deal to supplyRolls-Royce airplane engines, there

were few agreements worth trumpet-ing. Britain has lagged behind Franceand Germany in trade with China.

Cameron tellsChina to avoidprotectionismBYDAVID CROWPOLITICS

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IFS calls foroverhaul oftax system

THE UK tax system is in desperateneed of a radical overhaul in order tosupport the countrys economicrecovery, according to a study com-missioned by independent think-tankthe Institute for Fiscal Studies (IFS).

The study, conducted by NobelLaureate Sir James Mirrlees, foundthe system was overly complex,inequitable and costly to administer.Mirrlees called for the tax treatmentof different types of income to bealigned so that corporation tax wasproperly integrated with personaltaxes, and the tax treatment ofincome from employment, self-employment and corporate sources

was the same.

The report also argued that the taxbias in favor of debt as a source of cor-porate funding over equity should beremoved, with the resulting loss ofcorporate tax revenue offset by rais-ing taxes on wages.

Mirrlees said it was undeniablethat the proposed changes would bepolitically difficult, but said: Wecannot forever succumb to the tyran-ny of the status quo.

BYKATIE HOPE

TAXATION

w

ww.c

ityam.c

om

The focus of the visit is the economyand its not really for the UK to interferewith internal issues on human rights. Itstheir issue. We can disagree but we cantchange it and if we put a lot of pressureon them, it might affect our relationship.

WAS CAMERON RIGHT TO BRING UP CHINAS HUMANRIGHTS RECORD ONLY IN PRIVATE? Interviews by Juliet Samuel

AMMAR DAKER | FDM GROUP

Its a difficult question. He could havebeen more straightforward andexpressed his views. Theres limiteddownside for British interests if he hadbeen straightforward and he couldhave found the right words to raise iteffectively.

FRANK MAASSEN | SUN EUROPEAN PARTNERS

From a human rights perspective,its the wrong approach because hesnot mentioning Chinas record. Butfrom an economic point of view, hesdodging a bullet and they securedquite a few good contracts.

MITESH PATEL | QBE INSURANCE

A lesson in

Confucius

for the PM

CONFUCIUS once said study the past,if you would divine the future.Someone should have told DavidCameron this before he donned apoppy in Beijing. To show your respectfor the fallen is a noble pursuit onethat City A.M.wholeheartedly supports(see p1 and p20) but in China wear-

ing what we see as a remembrancepoppy is interpreted very differently.Cameron should have known that

there is only one thing the Chinesethink of when it comes to poppies andthe British: the Opium Wars. He hascommitted a serious cultural faux pas.

But he has got one cultural quirk very right on his trip to representBritish business -- his presence.Historically in China, businessmenrank below peasants in the peckingorder. To know a government officialimproves your social status and, unsur-prisingly in a pseudo-Communistcountry, makes business easier to do.

His presence will speed along Sino-British deals. But speed is a relativeterm in a culture of collective decision-making. In the West we say Rome

wasnt built in a day because it tookaround 500 years. The Chinese consid-er themselves to still be working on

the Han civilisation --- a project startedin 207AD.

COMMENT

DONATA HUGGINS

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REWRITINGTHE RULE

BOOK FORCITY LIFERULES, rules, rules its probably fair tosay the financial services industry is get-ting a little sick of them by now, after

being hit by a hammer blow of regulatorychanges in the wake of the crisis.

But that hasnt deterred Canon DavidParrott, guild vicar of the St Lawrence

Jewry church on the Guildhall yard, whostaken it upon himself to re-write the Cityrule book quite literally in order to pro-

vide guidance on how to live a better life. The original, written by former Lord

Mayor Sir John Barnard in 1740, is stillgiven to new Freemen of the City ofLondon today, and features 36 shortrules for life, along with references

from the Bible to back them up.Parrott whose name may be familiar

to some, since he shot to prominence ear-lier this year for blessing BlackBerries,phones and laptops at a Plow Mondayservice has merely updated the rule

book using modern English to make itmore relevant for today.

The challenges presented to the City bythe financial state it has been in for thepast couple of years have caused somepeople to question the values by whichthey live their lives some of the same val-

growth, the more likely it is that otherswill realise that youre taking part, ratherthan just forgetting to have a proper shavein the mornings. Next stop: theEdwardian twizzle-sided moustache.

TALL ORDERUseless trivia of the week, courtesy of the

National Business Awards on Tuesdayevening where Dragon Peter Jones

National Enterprise Academy wasthe charity partner.

The rather diminutive

Capitalist had neverrealised, watching Joneson-screen, that he wassuch a statuesque fel-low, standing animpressive 67 tall.

Thats right, helaughed. You know

what? When were film-ing in the Den, they even have

to put Theo Paphitis chair onstilts so that I dont look like sucha giant

ues which are central to the church, saysParrott, whos enlisted the business

worlds most famous man of the cloth HSBC chairman Stephen Green to deliv-er the first of a series of lectures to mark

the books launch later this month at StLawrence Jewry.

The sub-headers to the rewritten book Rules for living the high-life without

being a low-life, for example certainlysound like hes hit the nail on the head onthe advisory front.

TOP LIP TOPIARYIf youve felt baffled over the past week orso by the number of usually dapper gentle-men in the Square Mile whove been sport-

ing sparse growths of hair onthe upper lip, allow TheCapitalistto explain.

Were currently in themiddle of Movember, the

month when many men gothrough the public humilia-tion of growing a moustachefrom scratch, to raise fundsand awareness for the ProstateCancer Charity.

Bank of America Merrill LynchsStewart Jones is one charitable soul

braving the abuse for a good cause, andtells me that the style of choice this

year is shaping up to be the Mexicandrop-down moustache. The reason-ing? The more out-there the

Canon David Parrott has revamped the original rule book from 1740

The Capitalist10 CITYA.M. 11 NOVEMBER 2010

EDITED BY

VICTORIA BATESGOT A STORY? [email protected]

A City vicarhas taken itupon himself

to rewrite therule book,quite literally,to guide onhow to live abetter life

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BUSINESS advisory firm RSM Tenon yesterday said it expects to benefitfrom changes to pension legislationin the UK, adding that its f irst-quarterresults and trading to date supportmarket expectations for the full-year.

Last month, the government said it

would cut the tax relief on pensionsavings for around 100,000 higher

earners, in a move designed to raise4bn a year for Treasury coffers.

These changes will encourage fur-ther activity towards the second halfof the year within taxation and invest-ment planning, RSM Tenon said.

The company, which is planning tomigrate a greater proportion of itsrisk management services to corpo-rate clients, said the move would

limit the effects of governmentspending cuts on this service line.

RSM Tenon expects integration ofits recently acquired businesses to belargely complete around the turn ofthe year, and says it is on track todeliver the expected level of annualcost savings.

In September, the company posteda 37 per cent increase in full-yearadjusted pre-tax profit, boosted by theacquisition of RSM Bentley Jennison

and certain assets of troubled rivalVantis.

RSM Tenon boosted by pension changes

BHP Billiton | Rio Tinto | Xstrata

SELLAR Property, the developer of theShard skyscraper, yesterday appoint-

ed four leasing agents to find tenantsfor the tower and office block nearLondon Bridge.

Jones Lang LaSalle and KnightFrank will act as joint sole agents forthe 310m Shard tower, while CB

Richard Ellis and ColliersInternational will advise on nearbyLondon Bridge Place.

The Renzo Piano-designed tower isdue for completion in the first quar-

ter of 2013, but has already signed upand later bought out its first tenantto try and cash in on rising City rents.

Transport for London accepted amulti-million pound payment to sur-render its contract for 200,000 square

feet of office space in June, havingagreed to pay 38.50 per square foot.

The Shangri La hotel is currently thetowers only agreed tenant.

Neil Prime, head of markets at

Jones Lang LaSalle, said yesterday:Given the current shortage of highcalibre space being delivered weanticipate very strong demand fromprospective occupiers both from

within the UK and internationally.

Shard starts tenant hunt

BYMARION DAKERS

PROPERTY

CHARLES Stanley chairman Sir DavidHoward yesterday railed against theMonty Python-esque barrage of newregulation hitting the independentstockbroking sector, even as the firmreported a 33 per cent surge in pre-taxprofit for the half year.

Howard, an ex-Lord Mayor of theCity of London, said new measuresintroduced by the FSA are excessively

blunt, without the finesse necessaryto ensure new regulation is appropri-ate to every corner of the industry.

The political pressure on the FSAmeans they are stretching the newrules far beyond a sensible level, hesaid. Its a death wish on the part ofthe UK to make us less competitive.

Howard said extending the newremuneration code to independentfund managers and stockbrokers didnot take into account their businessmodels, which are entirely differentto those at large investment banks.

Stockbrokers and fund managersare also having to devote an increas-ing amount of time and energy to

jumping through hoops on new capi-tal and liquidity standards, he said.

Charles Stanley itself delivered asolid performance over the first half,growing pre-tax profits by a third to7.3m and revenue by seven per centto 59.7m, thanks to a jump inincome at its private client division.

CharlesStanboss attacksregulation

FRENCH bank Credit Agricole yester-day said it did not plan to raise capitalto meet incoming Basel III require-ments as it posted higher-than-fore-cast quarterly results, driven by retail

banking.The bank is seen as one of the most

vulnerable in Europe to the strictercapital rules because of its cross-share-holdings with its cooperative parentgroup.

Credit Agricole does not plan tocarry out any rights issue for the pur-pose of meeting regulatory require-ments, the bank said in a statement,though it said it could take non-dilu-tive measures to strengthen solvency.

The bank said cross-shareholdingswith regional banks could add around50bn (42.6bn) in risk-weightedassets under Basel rules coming intoforce in 2019.

Credit Agricole said third-quarternet profit more than doubled to742m, higher than the 669m aver-age market consensus.

Strong trends in domestic retail banking helped offset losses at thegroups Greek Emporiki unit, whilestrong corporate financing activitieshelped its investment banking unitprofit. Growth at corporate financingalso helped offset capital marketssluggishness, delivering overall invest-ment banking profits of358m.

Profits soarat CreditAgricole

MORE THAN 700 jobs have been cut atstricken housing repair company Rokafter it plunged into administration onMonday.

Administrator PwC said the cutsmostly fall in the firms maintenanceand construction operations, in aneffort to trim down the 3,800-strong

payroll ahead of a possible sale.Mike Jervis, partner and joint admin-

istrator for PwC said: Regrettably, theredundancies made today were neces-sary for economic reasons where therehas been little or no interest in the

business from prospective purchasersor where there was insufficient workfor staff to carry out.

The auditor said more than 100firms had expressed an interest in the

business, and that it will continue to

meet with suitors today to draw up ashortlist.

700 jobs are cut at RokPROPERTY

The Shard owner has retained four property agents Picture: Micha Theiner/City A.M.

BYHARRY BANKS

BANKING

BYVICTORIA BATES

PROFESSIONAL SERVICES

BYVICTORIA BATES

FINANCIAL SERVICES

260

250

230

210

15 Sep16 Aug 14 Oct 3 Nov

ANALYSIS l Charles Stanleyp 249.00

10 Nov12.5

12

11.5

10

10.5

11

3 Sep 23 Sep16 Aug 13 Oct 2 Nov

ANALYSIS l Credit Agricole 11.66

10 Nov

8/8/2019 Cityam 2010-11-11

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GERMAN insurer Allianz said it wason course to hit the upper end of itsfull-year profits target despite a fall innet earnings in the third quarter.

It said third quarter net income fell8.8 per cent to 1.3bn (1.1bn) as aresult of higher tax liabilities.

However, Allianz said revenue inthe third quarter grew by 11.4 percent to 24.5bn compared to22bn a year earlier, while operating profitgrew by 2.3 per cent to 2.1bn from

2bn. Operating profit for the ninemonths to 30 September stood at6.1bn, up 19.8 per cent on the yearbefore.

Michael Diekmann, chief executiveof Allianz, said: I expect our full-yearoperating profit to trend towards theupper end of our target range ofaround 7.2bn plus or minus 500m.Also, for the first time since 2005 weare likely to end the year with totalrevenues above 100bn.

Gross premiums written in

Allianzs property and causality busi-ness in the third quarter increased by3.6 per cent to 10.6bn, compared to10.2bn a year before.

Adjusted for currency effects, pre-miums decreased by 1.1 per cent.

But operating profit grew by 8.8per cent to 1.1bn in the third quar-ter compared to 1bn the previousyear as a result of improved underwriting and higher investmentincome.

The insurers life and health busi-ness saw revenue grow by 16.4 percent to 12.6bn in the third quarter,

compared to 10.8bn the previousyear as a result of continued demandfor unit-linked as well as traditionallife insurance products.

Operating profit in Allianzs assetmanagement business for the thirdquarter stood at 521m a 41.6 percent increase on the previous years368m. Total assets under manage-ment (AUM) grew by 25.5 per cent to1.4trn to 30 September, compared to1.15 trillion a year ago, Allianzadded.

Allianz bullishdespite dropin net income AGEAS UK reported a 50 per cent fallin pre-tax profit for the first ninemonths of the year followingincreased claims from the severe win-

try weather at the start of the yearand poor private car sales.

The insurer, formerly known asFortis, reported profits of 16.6m forthe first nine months of the year, 50per cent lower than the previousyears profits of 33.2m.

Ageas also blamed lower invest-ment yields compared to last year forthe lower set of results. Meanwhilestart up deals with Tesco Bank, whichcost it 7.7m, and Kwik Fit Insuranceservices, which cost Aegeas 4.3m,also impacted on profits.

Ageas owns 50.1 per cent of TescoUnderwriting, the new insurance business with Tesco Bank, which

began writing business in October.The companys life business, Fortis

Life, which only launched two yearsago made a pre-tax loss of 3.3m forthe year to date compared to a loss of6.1m for the same period last year.Fortis Life is due to be rebranded in2011 to Ageas.

Barry Smith, chief executive ofAgeas UK, said: Notwithstanding atough 2010, our performance hasimproved quarter by quarter which isreally encouraging.

Ageas UK seesprofits fall onhigher claims

Chief executive Michael Diekmann saw net income fall 8.8 per cent Picture: REUTERS

BYMATTHEWWEST

INSURANCE

INSURANCE


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ANALYST VIEWS: WHAT DO YOU MAKE OFPRUDENTIALS LATEST RESULTS? Interviews by Matthew West

EAMON FLANAGAN| SHORE CAPITAL

Another terrific set of new business figures fromPrudential which is undervalued, especially when the ratingof the newly-floated AIA in Asia is factored in.

INSURANCE giant Prudential yesterdaysaid its sales grew on the back of grow-ing momentum in its Asian business.

The insurer, which was forced toback out of a $35.5bn bid for AIGsAsian insurance unit AIA earlier thisyear, said yesterday total group salesrose 24 per cent to 2.4bn in the firstnine months of the year. The compa-ny reported new business profit of1.3bn for the first nine months of

2010, up from 1.1bn last year and inline with expectations.

Group sales for the third quarteralone were 809m compared to689m last year an increase of 17 percent. The Prus Asian unit con-tributed a significant amount to totalnet business profit, adding 46 percent of the total with Asian net busi-ness profit up 34 per cent to 621mfor the year to date compared to465m a year earlier.

Sales for the year so far were up 32

per cent to 1.06bn while sales for thethird quarter were 533m, up 25 percent on the previous year the high-est sales figure for the Asian businessin the third quarter to date.

In the UK, now the smallest slice ofthe insurers business, it said it wasfocused on a strategy of writing newbusiness with sustainable cash gener-ation and capital preservation. Totalsales were up three per cent to 548mfor the first nine months compared to282m a year earlier. Net businessprofit grew 14 per cent year to date to

192m from 169m a year earlier.Tidjane Thiam, group chief execu-

tive, said Prudential remained wellpositioned to deliver strong growthand generate strong returns for share-holders.

South East Asia, with its high ratesof GDP growth, saving habits and lowpenetration of insurance products,remains the most attractive long-term opportunity in our industry andthe primary focus for our growth andinvestment, Thiam added.

Pru gets liftfrom highersales in Asia SCANDINAVIAN airlines (SAS) effortsto cut costs were overshadowed by afine that dragged it to a third-quarterpre-tax loss of 1bn krona (92.5m) yes-

terday.The airline booked 1.4bn krona in

one-off charges, the biggest of which was a70.2m (60m) fine from theEuropean Commission related to aninvestigation of European airlinesaccused of operating a cartel in cargocharges imposed on Tuesday.

Since 2009 SAS has made efforts tocut costs by around 6.3bn krona whilehelping to boost its underlying busi-ness. But the airline has been badlyhit by the global downturn and hasstruggled to compete with no-frillsairline.

Acting chief executive of SAS, JohnDueholm, said revenues were stabilis-

ing and costs would continue to fall,though SAS expects continued pricepressure through 2011.

When you have unit costs declinemore than unit revenue, then ofcourse you will have a positive impacton the underlying business,"Dueholm said.

In the second quarter the companylost 600m krona mainly due to thevolcanic eruption in Iceland that keptmost of Europes air traffic on theground for a week.

SAS posts bigloss on back ofEU cargo fine

Pru boss Tidjane Thiam oversaw strong third-quarter results Picture: GETTY

BYMATTHEWWEST

INSURANCE

TRANSPORT

NewsCITYA.M. 11 NOVEMBER 2010 13

JONATHAN JACKSON | KILLIK & CO

The latest results show the success of Prudentialsstrategy of focusing on value over volume, and capitalisingon the most profitable growth opportunities.

BARRIE CORNES | PANMURE

This is a straightforward set of figures and helpsreinforce the strength of the group, despite the AIA loss, thecompany is still delivering in spades.

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SUPERGROUP yesterday said it hadopened a record number of storesabroad in the last quarter as salessurged by 68.4 per cent.

The company, which is behind theSuperdry label, saw sales jump to57.5m in the three months to 31October. Supergroup opened a record14 franchise stores overseas in thequarter, including its first in theUnited Arab Emirates, bringing thetotal to 49.

The company also launched eight

stores in the UK and a further 13 con-cessions in House of Fraser depart-ment stores.

The Superdry label has been boost-ed by celebrities, including DavidBeckham, who wear the clothes.

Chief executive Julian Dunkertonsaid: These figures really demon-strate the solid progress we are mak-ing as a brand and as a retailcompany. The autumn range hasbeen well received by the public andour roll-out is on track both in the UKand internationally. The businessfloated in March and the share price

has soared since.

Supergroupsales in liftfrom abroad US fashion chain American Apparelslike-for-like sales plunged by 16 percent over the third quarter to 30September.

Total sales dropped ten per cent to$134.2m (84m).

Increases in production costs hitthe figures, the company said.

American Apparel is working withits primary lender, Lion Capital, in abid to breathe new life into the busi-ness. Last month, it amended theterms of the chains loan agreementto prevent it from breaking its bank-ing covenants.

Tom Casey, acting president ofAmerican Apparel, said: We expectto improve financial results by sup-porting the brand with a customer-focused supply chain, leveraging ourspeed to market capability with lower

distribution costs.We are optimising our retail store

base through investment in technolo-gy and improved allocation while low-ering our lease costs.

Earlier this month the companyreported later than expected a sec-ond-quarter net loss of $14.7m(9.1m) after sales fell 2.4 per cent to$132.7m (86m).

The company added that it wouldbe concentrating on its basic rangesin a bid to turn the firm around.

AmericanApparel suffersanother loss

Supergroup founder Julian Dunkerton says the firm is making solid progress

BY JOHN DUNNE

RETAIL

RETAIL

Consumer News14 CITYA.M. 11 NOVEMBER 2010

Living up to the brand name WHEN investors look back over2010, theyll see a graveyard offailed IPOs. Merlin, New Look andTravelport couldnt even get away;those that did, such as Ocado andPromethean, havent lived up to

expectations. One of the flotationsthat stands out from the crowd isSupergroup, which appears to beliving up to its boastful brandname. Shares have more than doubled since the firm went public,while sales have done better still.

In its most recent update, cover-ing the period to 1 August, salesgrew by 60 per cent. Since then, thetrend has accelerated, with sales inthe three months to the end of

October up by 68 per cent. Valuing such a fast-growing

retailer is tricky, and investorsshould urge caution where hype isinvolved. Supergroup currentlytrades on 23 times calendar earn-

ings in 2011, far more than thewider retail sector (12.6 times). Bullspoint out that ASOS trades on over40 times 2011 earnings, althoughthe online-only retailer has a com-pletely different business model. Noone can deny Supergroups mete-oric rise, but it is already priced in.

BOTTOMLINEAnalysis by David Crow

1,300

1,100

900

700

500

JulMayMar Sep Nov

ANALYSIS l Supergroup

p

1,200.0010 Nov

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Have you ever eaten a Honda?

Well, you might have. At Honda we grow our own soybeans,

to fill our containers that would otherwise be shipped home empty.

Its a clever use of space, something we are very good at. Why?

Because everything we do goes into everything we do. Just look at

the Jazz, with its Magic Seats and clever flexible interior. Youll be

amazed at the room inside the cabin. And with a large innovative

boot space, its perfect for your next trip to the supermarket.

Just dont forget the soybeans.

The Honda Jazz range from 9,995 OTR.

Thats a saving of 995 on the 1.2 S Manual.

Or great offers available on other Jazz models*:

3 years complimentary servicing

3 years 0 road tax

2 years 0% APR typical

Useful innovation has never been so affordable.

honda.co.uk/affordablehonda

Terms and Conditions: Offers valid on cars registered from 1 October to 31 December 2010. Offers applicable at participating Dealers and areat the promoters absolute discretion. Subject to model and colour stock availability.Price Point: 9,995 price point applies to Jazz 1.2 S Manualand excludes metallic paint (430 extra). *Servicing, Road Tax and Finance rates apply to Jazz range excluding Jazz 1.2 S Manual.Honda Hire Purchase (HP): Indemnities may be required in certain circumstances. Finance is only available to persons aged 18 or over subjectto status. All figures are correct at time of publication but may be subject to change. Credit provided by Honda Finance Europe Plc. 470 LondonRoad, Slough, Berkshire SL3 8QY. Servicing: 3 years complimentary servicing or 37,500 miles, whichever comes first, and includes a maximumof 3 services. Complimentary servicing covers the manufacturers scheduled servicing only. Road Tax: A monetary amount equivalent to the costof road tax for the first 3 years of the vehicles life will be paid at time of purchase at the prevailing rate.

Model shown is Jazz 1.2 S Manual (9,995 OTR). Fuel consumption figures for the Jazz range

in mpg (l/100km): Urban 42.5 43.5 (6.6 6.5), Extra Urban 58.9 62.8 (4.8 4.5),

Combined 51.4 53.3 (5.5 5.3). CO2 emissions: 130 125 g/km.

SAINSBURYS chief executive JustinKing yesterday said record numbersof shoppers were flocking to thesupermarket chain which is massive-ly expanding its floorspace helpingit to deliver an eight per cent rise inunderlying profit.

The 332m profit for the sixmonths to 2 October was also attrib-

uted to a rise in sales in its luxuryTaste the Difference ranges as cash-strapped Brits shunned eating out infavour of a night in front of the TVwatching the likes of the X Factor.

King revealed that the company which opened its biggest store everearlier this year was planning tocreate 1.5m square feet of new spacenext year, up from the previous targetof 1.25m square feet. He said: Werein a good position to continue to per-

form well, notwithstanding thetough environment. Customer num-bers are now at an all-time high ofover 20m transactions every week,which is a million more than last yearand an indication of our growing uni-versal appeal. Like-for-like sales roseby two per cent to a total of 11.2bn.

King added: People are watchingthe X Factor and other TV shows ...but theyre eating well while theyredoing it.

Sainsburys in profit riseas expansion pays off

Sainsburys chief executive Justin King said the chains expansion plans are going well.

BY JOHN DUNNERETAIL

Consumer News 15CITYA.M. 11 NOVEMBER 2010

RALPH Lauren reported a higher-than-expected quarterly profit yester-

day and again raised its full-year salesoutlook.

The fashion company, whose brandsinclude Polo, saw net revenue rise 11per cent to $1.53bn (0.9bn). It has ben-

efited from a recovering demand forluxury items, as well as strong salesoverseas. The most recent quarter isusually Polos strongest in wholesale

as shipments are made ahead ofChristmas. Company president RalphFarah said: We are encouraged by ourcurrent business momentum headinginto the holiday season.

Ralph Lauren ups sales forecastsRETAIL

8/8/2019 Cityam 2010-11-11

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Focus on Inflation Report16 CITYA.M. 11 NOVEMBER 2010

DUTCHbankassurance group ING saidyesterday it planned two initial publicofferings, rather than one, for itsinsurance activities as part of a manda-tory split-up imposed because of itsstate bailout.

Chief executive Jan Hommen saidtwo IPOs could allow ING to achieve ahigher valuation and raise moremoney for insurance assets with acombined book value of 21bn(17.9bn). The group still needs to

repay half of its10bn Dutch state cap-ital injection. While the option of oneIPO remains open, we are going to pre-pare ourselves for a base case of twoIPOs for our insurance business, hesaid.

A Europe-focused IPO would have asolid cashflow combined with stronggrowth positions in developing mar-kets, he said, while a separate US-focused IPO would have a strongposition in retirement services.

ING shares opened weaker before

closing 2.4 per cent higher at 8.16, below a year high of8.18 set inOctober and after a 15.5 per cent risethis year for a market value of some30bn. The two IPOs would give INGmore flexibilty as investors used differ-ent valuation models for operations inthe US and Europe while EuropeanSolvency II regulatory changes wouldmake the US business less competitive,Hommen added.

Hommen said while the fourthquarter of 2011 was still possible as a

window for the market operations,2012 was more likely for the floats in

Amsterdam and New York.He added that the group is still in

talks with many interested partiesabout the insurance operations.

The smaller WestlandUtrecht Bankunit will run as a standalone unitfrom 18 November. The ING brand willstay with banking activities. The splitof ING into banking and insurance

businesses will reverse its creationthrough the merger nearly 20 yearsago of bank NMB and insurerNationale Nederlanden.

ING preparesfor two IPOspost bailout ASSET managers compensation lev-els are set to creep up on their invest-ment banking peers this year, as weaktrading results and lower client activ-

ity hit the bank bonus round.Incentive compensation at asset

managers and hedge funds is expect-ed to rise by 5 to 15 per cent in 2010,according to a report by US consultan-cy Johnson Associates, as assets undermanagement grow and hedge fundsexceed their high water mark.

By contrast, investment bankersare likely to see a net fall in their end-of-year compensation, with equitiesand fixed income traders coming off

worse than those involved in under-writing and advisory activities.

Equities may see a drop of 20 to 25per cent due to lower client activity,

while fixed income staff could see

their pay fall by up to 30 per cent onthe back of unfavourable compar-isons with an extremely strong 2009.

Underwriting compensation is like-ly to be flat due to mixed results,though M&A advisers may see a pick-up of five per cent as the deal pipeline

begins to improve, the report shows.But investment banks still pay

more as a percentage of net revenue,doling out 42 per cent on average sofar this year, compared to around 37per cent for asset managers.

Asset managersclose pay gapwith the banks

ING chief executive Jan Hommen is planning two IPOs Picture: REUTERS

BYHARRY BANKS

FINANCIAL SERVICES

REMUNERATION

8.00

7.60

7.20

6.80


ANALYSIS l ING

8.1610 Nov

8/8/2019 Cityam 2010-11-11

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HMV Group saw its shares rise yester-day after Russian billionaire

Alexander Mamut upped his stake toabove three per cent.

The companys stock had slumped49 per cent this year as the DVD andCD seller, which also owns

Waterstones, hit tough times.HMV has been moving into live

music events and venues as it tries todiversify its operation, as downloadshave taken their toll on CD sales.

Nick Bubb, an analyst at ArdenPartners, said in a note yesterday: Aninvestment of five million pounds ischicken-feed to Mamut at this stage,

but his ultimate intentions areunclear. Mamut bought 12.5mshares to raise his stake in the retailer.

Meanwhile HMV has registered thetrademark 363, based on the

address of the companys first shop,at 363 Oxford Street and couldlaunch its own fashion label.

HMV, led by Simon Fox, has alreadybrought out Studio, the clothing and

accessories range, in September,which saw the company partner withselected fashion brands, includingBoxfresh, Lee Jeans, FLY53 andEastpak.

A spokesman at HMV said: Werecently successfully launched ournew fashionwear offer at selectedHMV stores around the country.

Though we have no immediateplans, we may also look to develop anown-label option for HMV most like-ly for the t-shirts, tops and the like,and weve registered the brand name363 trademark.

HMV lifted byRussian buyerBY THOMAS HAMED

RETAIL


Alex fails to scrub up as apprentices get soapy

THIS week Christopher finally

burst into life. Who? Well, itshard to say. You might havespotted him in the background

but so far his input has been negligi-

ble. Last night was his moment toshine. So what was it that coaxedhim into action? Was he biding histime all the while, observing andstrategising? No, he was waiting forthe pretty girls.

This was the TV advert challengeand the teams had to promote a newcleaning product. As team leaderChristopher quickly cast himself inthe ad and started casting for a wife.Its really important for me and theactress to have chemistry, hepurred. Such artistic integrity!

The ad was a sort of Carry OnScrubbing, combining regressiveattitudes about gender roles with a

bit of innuendo (and a woman

dressed as an octopus). Nickdespaired (acting as partGermaine Greer, part MediaStudies teacher) while theadvertising executives satagog.

Ordinarily this sort ofbehaviour would have beenenough to get the teamhauled back into the board-room but they were in luck the other team was led by

Alex.Alex describes himself

as a brand sto-ryteller andhad a littletale to tell

about himself: If I was in an applepie, Id be an orange.

Sadly, when it came to thecleaning product he

seemed to be sufferingfrom writers block. With

no other options, theywent for The Germinator,a piece of punning thatinvestment banker Chris

was inordinately proud of. While they avoided calls

from Schwarzeneggerslawyers, it was time to

design the prod-uct; ratherthan thesummer

breezes usually evoked by cleaningproducts they emulated the aestheticcharms of a bottle of Swarfega.

The TV advert starred a child actor with a wavering American accentplaying the Germinator. But even

superheroes should read the label:not to be handled by children.Back in the boardroom, there was

nothing left to do but sit back andwait for Alex to talk himself out of a job as he ranted and blamed allaround him. A victim of Lord Sugar(and the Germinator) Alex insisted,Im going to be successful. Im goingto found my own business, I dontneed him.

In other words: Ill be back.

APPRENTICE REVIEW

GRAEME ALLISTER

70

65

55

45


ANALYSIS l HMV

p 47.2510 Nov

ALEXANDER Mamut is a colourful fig-ure in Russias business elite. Born intoa family of Moscow lawyers, Mamutwas a friend and political adviser toRussian President Boris Yeltsin in the1990s.

With a fortune of 900m, he is the

655th richest man alive, according to

Forbes.The oligarch co-founded Imperial

Bank in Russia, and also ran MDM-Bank. Mamut also made significantinvestments in Troika-Dialog, aRussian investment bank.

Mamuts stake in HMV is only hislatest foray into the communicationsindustry. Mamut bought LiveJournalin 2007, a popular blogging site inRussia.

In 2008, he also purchased a 100per cent stake in Euroset, Russiaslargest retailer of mobile head sets.

But he has backed failures too, suchas Bookberry, a Russian bookstore

chain, which went bankrupt in 2009.

ALEXANDERMAMUT

HMV wont saywhether chiefexecutive SimonFox has met hisnew investor

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ALDERMAN Michael Bear, who will become Lord Mayor of the City ofLondon tomorrow, took part in a pre-dawn rehearsal yesterday for this years Lord Mayors Show (onSaturday 13 November) in front of StPauls Cathedral.

He will be the 683rd Lord Mayor, whose duties include representingUK-based financial services interna-tionally. This years show features atroupe of zulu warriors, sambadancers and Hong Kong acrobats.

Events start from Mansion House at11am and the three-mile long proces-sion winds its way through the Citystreets, via St Pauls Cathedral, to theRoyal Courts of Justice where the Lord

Mayor swears an oath of allegiance tothe Monarch.

The day culminates at 5pm in aspectacular firework display lit froma barge on the Thames.

Incoming LordMayor up earlyto rehearse forCitys big parade

CITY


Alderman Michael Bear was up early to rehearse Picture: Clive Totman

SHIPPING and oil group AP Moller-Maersk hiked its 2010 profit forecast toaround $5bn (3.1bn) as it posted fore-cast-beating profits for nine months,driven by cost cuts and higher freightrates and oil prices.

The upgrade from the previousguidance for a full-year net resultexceeding $4bn stemmed mainly fromhigher rates for container shippingand efficiency improvements, thegroup said.

Maersks report followed strongthird-quarter results from Asian rivalssuch as China COSCO and Neptune

Orient Lines (NOL) , pointing to a sus-tained recovery from a dismal 2009 forshipping as global trade regainsmomentum. Net profit at the group, which owns the worlds biggest con-

tainer shipping company Maersk Line,totalled 23.8bn Danish crowns ($4.4bn)in January-September against losses of$3.9bn in the same period last year.

The result beat an average expecta-tion of a profit of 21.4bn crowns in apoll of analysts whose estimatesranged from 19.9bn to 22.9bn crowns.

Cheuvreux analyst Joakim Ahlbergcalled the third-quarter results verysolid and said he would make minorincreases to earnings estimates on theback of the report.

Average freight rates, including bunker surcharges, were up 34 percent in the nine months to end-September from the same period lastyear, and volumes seven per cent high-

er, Maersk said. Chief executive NilsSmedegaard Andersen said theimproved competitiveness throughcost savings was a very big factordriving the results.

Maersk hikes profitguidance after solid

nine-month figuresBYHARRY BANKS

SHIPPING

@

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GERMANYS E.ON, the worlds largestutility, promised investors minimumdividends for two years, seeking torestore confidence in an industryunsettled by slumping prices anddemand.

The triple whammy of lower indus-trial production, declining power andgas prices as well as prospects of high-er taxes in markets such as Germanyhas made the utility sector the worst-performing in Europe for the secondyear in a row.

New chief executive JohannesTeyssen is seeking to mend ties withinvestors and said yesterday that thecompanys dividend for 2011 woulddrop no more than 13 per cent to1.30 a share, and its 2012 payoutwould remain at that level.

As prospects for E.ONs operatingbusiness are weak the dividend wasthe last hope for investors, saidEquinet analyst Michael Schaefer.

Investors seemed unconcerned

that the dividend pledge means E.ONmight pay out more of its earningsthan it had been planning, and E.ON

shares rose 2.2 per cent to close at22.27, outperforming the STOXXEurope 600 utilities index. A stabledividend is something fantastic thesedays, said Herbert Wertz, who helpsmanage 260bn for insurer Generali.

By announcing 15bn (12.8bn) indivestments through 2013 E.ON bol-stered confidence in its ability to doleout the payout as the picture for earn-ings in coming years remains bleak.

As power prices in Germany,Europes largest power market areclose to six-year lows, and industrialproduction, a key measure for energydemand, dropped to the levels ofearly 2004 in Europe, E.ON is seekinggrowth outside Europe.

E.ON will sellassets in bid

to trim debtBYHARRY BANKS

UTILITIES

THE US futures regulator releasedproposals to govern the back officefunctions of swap dealers and otherbig players yesterday, but said morecontroversial elements for swaps par-ticipants remained to be determined.

The rules, including new firewalls between analysts and traders, are

part of a series of 50 to 60 regulationsto implement the Commodity

Futures Trading Commissions (CFTC)share of the Dodd-Frank Wall Streetreform law.

These standards for back officefunctions will help reduce risksbecause they require senior manage-ment of swap dealers to have in placepolicies to oversee the risks of theirswaps desks, CFTC chairman GaryGensler said in a speech yesterday.

The rules aim to reduce risk in the$615 trillion over-the-counter market.

US shakes up swap dealing rulesas implements Frank-Dodd reform

FINANCIAL SERVICES

EXPLORER Tullow Oil said a disputewith the government of Uganda hadforced it to abandon drilling at twooil-rich blocks near Lake Albert andthat it was unsure when this wouldrecommence.

The London-based company addedthat the government was wary ofagreeing to a plan to decouple

Tullows dispute from another, poten-tially lengthier, dispute between thegovernment and Tullows formerpartner, Heritage Oil, which coulddelay a return to drilling.

We have no definitive timeline(for a resolution), chief operatingofficer Paul McDade said.

Tullow bought half-shares of twooil blocks from Heritage earlier thisyear, giving it 100 per cent ownershipof three blocks which cover the

Ugandan side of Lake Albert andwhich Tullow believes could contain billions of barrels of oil. Heritagerefused to pay capital gains tax on thesale, which the government andTullow said was due, and subsequent-ly the government refused to renewthe licences for Tullow which hadplanned to sell stakes to FrancesTotal and Chinas CNOOC. The licencedispute has forced Tullow to haltoperations at the blocks.

Tax dispute forces Tullow Oilto abandon drilling in UgandaBYHARRY BANKS

ENERGY


New E.ON chief executiveJohannes Teyssen is seekingto mend ties with investors

Picture: REUTERS

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GREAT Portland Estates booked a 7.3per cent half-year gain in its Londonproperty portfolio to 1.46bn, buoyed

by higher income as tenants seek itsmore affordable office space.

The landlord, known for offeringoffice and retail space at competitiverents in the popular West End busi-ness district, yesterday said its adjust-ed net asset value rose 11 per cent to314p a share in the six months to theend of September.

The valuation gain helped GreatPortland outperform the InvestmentProperty Databank Central Londonindex, with a total property returnof 10.1 per cent against an 8.3 percent benchmark, but chief executive

Toby Courtauld warned economicgloom had stripped momentumfrom the London real estate marketcomeback.

Whilst there continues to be asurfeit of buyers over sellers... we

believe these more sedate conditions

will persist into 2011 as the uncertainmacro environment will continue toaffect sentiment in the short term,Courtauld said.

Despite the cautious near-term out-look for London property prices,Courtauld said the company wasencouraged by demand for its realestate assets after achieving new leas-es, reviews and renewals equating to8.3m of new income.

Total group revenue, including ashare of joint venture rental income,

was 37.1m, up 10.4 per cent on thesame period last year.

Upbeat Great

Portland seesstrong gains

IS Pharma prepares to buy

PHARMACEUTICALproducts supplierIS Pharma yesterday announced it

will raise 12.5m to fund an acquisi-tion drive. The new fundraising comes after

the firm raised 3.6m last month byplacing new shares. Some of the cashraised will go towards covering con-tingent payments for past acquisi-tions. It will be added to its cash

balance of 5.1m.The firm also reported its revenue

rose 10 per cent to 6.5m year-on-yearfor its first half.

Its profit jumped an impressive 21per cent to 4.5m, with gross profitmargins of 68 per cent, compared to

62 per cent last year.Profit from operations was up 98per cent to 1.8m with profit after taxup 192 per cent.

Tim Wright, chief executive of ISPharma, said: We are pleased toreport another period of strong per-formance as we continue to deliveragainst our strategy of building a sig-nificant European speciality pharma-

ceutical company.The IS Pharma team has, once

again, achieved further, sustainable,revenue and profit growth while atthe same time continuing to grow

our product portfolio.The announcement of a dividendin the period represents a significantstep in the history of the company,recognising that we are now able toreward our shareholders investment

while continuing to pursue ourgrowth strategy. IS Pharma acquiresand commercialises late-stage phar-maceuticals and medical devices.

BYHARRY BANKS

PROPERTY

BY STEVE DINNEEN

PHARMACEUTICALS

Great Portland Estates has seen its net asset value rise 11 per cent to 314p a share in thesix months to the end of September. Picture: Micha Theiner/City A.M.

STEPHEN Norcross was lead corpo-rate broker on the placing.

Norcross joined FinnCap in 2006from St Helens Capital, where he hadbeen head of the Equity ProductsGroup. At St Helens Capital he dealtwith high net worth individuals andinstitutional investors interested ingrowing companies.

Before working in the City Norcrosshad a general sales background, hav-

ing run his own direct sales force in anumber of industries. He studiedPhysics at University.

He has been running a number ofsmall cap fundraisings since 2006totalling around 200m.

FinnCap, led by chief executive SamSmith and chaired by private equityveteran Jon Moulton, is an independ-ent institutional broker and corporateadviser to 73 clients. It specialises in

advising and raising capital, providingresearch and after-market care forboth growing and established smallercompanies. It last month hired formerfund manager Tom Hayward fromHerald Investment Management,where he was responsible for 50mventure capital funds, as its newfinance director.

STEPHEN

NORCROSS

FINNCAP

GOOGLE is handing all of its employ-ees a 10 per cent pay rise and a pre-Christmas bonus of $1,000 in a movethat will cost the search giant areported $1bn a year.

Employees received the news in aninternal memo emailed to staff fromGoogle chief executive officer EricSchmidt. Tax on the holiday cash

bonus will also be paid for by Google.While we dont typically comment

on internal matters, we do believethat competitive compensation plansare important to the future of thecompany, a Google spokesman saidin an email.

The news suggests Google is instrong health as a company itrecruited 1,500 staff in the threemonths to September.

But it also suggests that it is takingfears over staff attrition in Silicon

Valley seriously particularly againstmain rival Facebook.

The companys chief financial offi-cer Patrick Pichette talked about theInternet industrys war for talent

when presenting bullish third quar-ter financial results last month.

In 2009, Google repriced millionsof employee stock options whose

value had been wiped out.

Google givesall its staff a

10pc pay riseTECHNOLOGY

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ELECTRICITY firm Scottish &Southern Energy yesterday postedforecast-busting first-half profits andpledged to stick to plans to raise itsdividend, boosting its shares.

SSE blamed high wholesale gasprices and low renewable energy out-put for a 6.1 per cent fall in adjustedfirst-half pre-tax profit to 386m,

beating market forecasts of 361m.The groups shares rose 3.8 per cent

to 1,160p as it raised its half-year divi-dend 6.7 per cent to 22.4p and said it

was on track for a two per cent realrise in 2010/11 to at least 74.5p pershare.

SSE, which has 9.9m customers, will lift household gas prices by 9.4per cent from 1 December due tocontinuing losses at its gas supply

business, Southern Electric Gas, The group has put off plans to

build more gas storage due to regula-tory uncertainty and lower profits,

but hopes to open its first nuclearplant around 2023, it said.

Chairman Robert Smith said lowerrenewable energy production andhigher gas costs had made the last sixmonths tough, but the groups under-lying performance was good.

SSEs key financial objective is div-idend growth, and we are on courseto meet our target, he said.

Bank of America Merrill Lynch saidthe results were slightly above expec-tations and underpinned medium-term growth prospects.

SSE was expected to report profit of1.27bn for the year to March 2011,against 1.29bn in 2009/10.

SSE and consortium partners GDFSuez and Iberdrola, expect to decide

whether to build a nuclear plantaround 2015. It has put off a decisionon the Aldbrough II gas storage siteon the east coast, a joint venture withNorways Statoil, due to uncertaintyabout usage rules and increasing liq-uefied natural gas import capacity inBritain.

SSE posts dipin profits butlifts dividend FEARS of a double-dip recessionappear to have dissipated, as UKfinance leaders say their greatest con-cern now is how to manage their bal-

ance sheets, according to a surveypublished yesterday.

Specialist recruitment firm RobertHalf said the survey of over 200 chieffinance officers (CFO) found morethan 44 per cent were worried aboutmanaging their balance sheets whilethe same number cited cash flow as amajor concern.

Over half of CFOs (53 per cent) saidraising capital was one of their toppriorities compared to a third last

year. Meanwhile, 26 per cent said they were looking for new investmentopportunities compared to just 11 percent last year.

Only one per cent were concerned

about the threat of a double-dip reces-sion. Instead 34 per cent said they

were now more concerned aboutmanaging growth compared to a pal-try nine per cent last year, suggestinggreater confidence in the economy.

Phil Sheridan, managing directorof Robert Half said: Finance leadersare placing more emphasis on main-taining strong accounting practicesand cash flow to capitalise on emerg-ing opportunities, particularly in theSME and private sectors.

BRITAINS biggest coal miner UK Coalappointed Jonson Cox as its new execu-tive chairman yesterday, as part of the

board restructuring it announced ear-lier this year.

In July, UK Coal had said chief execu-tive Jon Lloyd and non-executive chair-man David Jones would leave thecompany, with the company splittingthe responsibility for its coal and prop-

erty operations. The firm also said itplanned to appoint an executive chair-man, who would be accountable forthe managing directors of the two

businesses, rather than being led by anon-executive chairman and CEO.

Cox was chief executive of AnglianWater Group, a provider of water andwastewater services in the UK, for sixyears and will take over his new rolefrom 15 November. He is currently alsoa non-executive director at Britishhaulier Wincanton.

Finance chiefsnot concernedby double dip

UK Coal unveils new headamid reshuffle of its board

New UK Coal executive chairman Jonson Cox will take up his post next weekBY PHILIPWALLER

ENERGY

UK ECONOMY

NewsCITYA.M. 11 NOVEMBER 2010

BYHARRY BANKSRESOURCES

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ITALYS UniCredit SpA will keepinvesting in high-return easternEurope and wont curb its investment

bank, new chief executive officerFederico Ghizzoni said after sluggish

volumes and high tax dragged profitbelow forecasts.

In his first earnings presentationsince taking over on 30 Septemberfrom Alessandro Profumo, Ghizzonisaid he did not plan to reduce the

banks presence in eastern Europe,nor was he looking to cut investmentin its investment bank or in its sec-ond-largest market Germany.

Third-quarter net profit atUniCredit, whose network extendsinto Kazakhstan, reached 334m(288.9m), above the previous quarter

but 15 per cent down from a year agoand below an average analyst forecastof379m.

The main reasons for the negativedeviations result from weaker-than-

expected top-line trends in net com-mission income and net interestincome, as well as the high tax ratioand an increase in minorities, said

WestLB analyst Christoph Bossmann.The results are not yet convincing.

As long as loan volumes remain sub-dued and the interest rate environ-ment remains low we forecast theearnings recovery to be delayed, headded.

UniCredit ruled out a capitalincrease as it said that cumulativeretained earnings (by 1 January 2013)

will be sufficient to offset the fullimpact of Basel ... even assuming nophase-in and conservative assump-tions on mitigation.

The bank was forced to tap share-holders and to scrap cash dividendsduring the credit crisis, angeringItalian investors who blamedProfumos risk-taking for the banks

woes. UniCredit said its core Tier 1ratio, a closely-watched sign of finan-cial strength, had inched up to 8.61per cent.

Unicredit hurt

as its tradingincome dropsBY HARRY BANKS

BANKING

AvevaThe engineering software group has

appointed James Kidd to its board asits new chief financial officer, effective

from the beginning of next year. Hereplaces Paul Taylor, who has beenfinance director for the past decade.

Kidd, 40, has been at Aveva since2004, including four years as head offinance. A chartered accountant, hepreviously worked for Arthur Andersen

and Deloitte clients on transactionaland audit engagements.

GE CapitalGE Capital has named Paul Scott as thenew chief investment officer and headof sponsor coverage for its leveragedfinance business in Europe and the

Middle East.Scott has been at the firm for almost

three years as head of sponsor cover-age in the UK. He has also worked inthe past at Merrill Lynch, Barclays andBank of Scotland.

Legal & General PropertyThe property fund management firmhas hired Tom Carlton as a researchanalyst and Henry MacInnes as a seniorasset manager of its linked pensionsfund.

Carlton joins from Property MarketAnalysis (PMA) and will focus on the

retail sector. MacInnes, who will sup-port linked pensions fund manager WillEdwards, joins from Endurance Land,where he concentrated on acquisitions,asset management and refurbishmentopportunities around central London.

Barclays WealthThe private bank has appointedAndrew Corlett as chairman of theboard of its Barclays Private ClientsInternational (BPCI) division, based inthe Isle of Man.

Corlett is managing director of legaland professional services group Cains.

CITY MOVES | WHOS SWITCHING JOBS Edited by Victoria Bates

DLA PiperThe law firm said yesterday that Lord (Tim)Clement-Jones is to become its office managingpartner in London, effective from 1 January.

Clement-Jones, currently head of interna-tional business relations, has been with DLA

Piper since 1999. Prior to that, he was companysecretary at Kingfisher. He is also the treasurerof the Liberal Democrats until December thisyear, and was made a life peer in 1998.

+44 (0)20 7557 7245morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

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Media and Telecomms News 23CITYA.M. 11 NOVEMBER 2010

THE Digital Economy Act washanging in the balance last nightafter a judge granted a full hearinginto claims the legislation wasrushed through and could contra-

vene EU rules.BT and TalkTalk have mounted a

legal battle against the act, whichthey claim was not properly dis-cussed before being passed duringwash-up the period betweenone parliament being dissolvedand another being formed.

They are particularly concernedabout a clause that could force ISPsto suspend the accounts of userssuspected of repeatedly infringingcopyright. A hearing will now take

place in February to debate whether the Act needs to beamended or scrapped altogether.

A BT spokesman said: It isimportant for everyone involved copyright owners, ISPs, broadbandsubscribers including consumersand businesses, and institutionslike libraries and universities tohave certainty on the law beforeproceeding.

T

cityam 2010-11-11

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