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www.cityam.comIssue 1,473 Thursday 22 September 2011 FREEBUSINESS WITH PERSONALITY

Certified Distribution

01/08/11 till 28/08/11 is 92,745

THE FEDERAL Reserve announced twonew twists to its efforts to stimulatethe ailing US economy last night, yetstopped short of declaring anotherphase of quantitative easing.

There are significant downsiderisks to the economic outlook, includ-ing strains in global financial mar-kets, the Fed said in a bid to justify itslatest intervention. The Fed will buy$400bn (253.bn) long-term Treasury

securities by the end of June next year,funded by selling the same amount inshort-term paper.

It hopes the move will weigh down

interest rates, boosting borrowing anddemand in the economy.

The struggling US housing marketwill also be targeted by the Fed, whichannounced a second twist -- recy-cling money from its maturing mort-gage and housing agency bonds backinto the mortgage market. Prices inthe market for mortgage-backed secu-rities (MBS) spiked on the news.

The stock market in New York tooka hit following the Feds gloomy out-look, and its refusal to kick off a thirdround of quantitative easing (QE3).

The Dow Jones closed down 2.5 percent while the Nasdaq lost two percent mainly in afternoon trading.

The downbeat verdict also hit oil

prices; Brent crude for Novemberdelivery fell 18 cents a barrel to settleat $110.36, after topping $112 earlier.

Yet some analysts see the Fed gear-ing up to QE3. The doves still seem tohave a working majority for furtheraction. As long as that remains thecase then QE stands a chance of beingintroduced as early as the Novembermeeting, said INGs Rob Carnell.

The Feds three hawkish dissenterscontinued to oppose the new acco-modative measures; Richard Fisher,Narayana Kocherlakota and CharlesPlosser all voted against the twist.

Yet six of the Feds senior officialsrallied behind chairman BenBernanke in support of the policy.

Despite the scheme being widelyexpected, yields on governmentbonds sank on the news perhapsdue to expectations that the size ofthe twist would be smaller than theannounced $400bn.

Yields on 10-year notes dropped to1.856 per cent, the lowest in morethan 60 years -- a dip of 3.8 per centduring the day. Yields on 30-year notes

also fell off a cliff, falling from over 3.2per cent to below three per cent, inthe aftermath of the statement.

Nearly a third (29 per cent) of theFeds intended purchases will be inthe 20- to 30-year area, while theremaining Treasury securities willhave six to 10 years left to mature.

We doubt this latest action willaccomplish anything, said PaulAshworth of Capital Economics. Thecost of borrowing simply isnt theproblem. Businesses dont have theconfidence to invest and half of all

mortgage borrowers dont have thehome equity needed to refinance atlower rates.

NEW US DEBT CEILING CRISIS: P3

FED ADDS AN EXTRA

TWIST TO STIMULUSBY JULIAN HARRIS

US ECONOMY

Ben Bernanke and sixcolleagues voted forOperation Twist a

method made famous bythe Fed in 1961

LAST NIGHTS

CITY A.M.

AWARDS

ALL THE WINNERS, PICTURES ANDSTORIES

ANALYSTOF

THEYEAR:

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GERALD RONSON:PERSONALITY OFTHE YEAR

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News2 CITYA.M. 22 SEPTEMBER 2011

SEC CHARGES EX-GOLDMAN TRADERA former Goldman Sachs trader andhis father have been charged by secu-rities regulators with insider tradingfor allegedly profiting after learningconfidential information about the banks trading strategy around anexchange traded fund. The SEC, in acivil action, alleged the formerGoldman trader, Spencer Mindlin,tipped off his father, Alfred Mindlin,an accountant, about Goldmanshedging trades pegged to an ETF,which mirrors a basket of securities.

LACK OF AVIATION TIES TO EMERGINGWORLD EXPECTED TO COST 14BNThe UK is at serious risk of missingout on trade with emerging marketsworth 14bn during the next decadebecause of inadequate aviation links,according to a report by consultants

Frontier Economics. The inability ofLondons overstretched Heathrow air-

port to support more flights to devel-oping countries may already be cost-

ing the UK 1.2bn each year as tradegoes to better connected Europeancompetitors.

SSE POISED TO QUIT NUCLEAR PLANTBUILDScottish and Southern Energy is intalks to pull out of a consortium plan-ning to build a nuclear power plantin the UK, as the company seeks toconcentrate on renewable energy.

REGULATORS TAKE THEIR TIME OVERTMX BIDCanadian regulators are unlikely torule for at least another three monthson a C$3.8bn bid by a consortium of banks and pension funds for TMXGroup, operator of the Toronto andMontreal exchanges. TheCompetition Bureau will make itsviews known only after hearings bythe Ontario and Quebec securities

commissions, according to a personfamiliar with the process.

BRITISH GAMBLERS CAUGHT OUT BYCRACKDOWN DEMAND MONEY BACKBritish gamblers who were left out ofpocket by the demise of Full TiltPoker are considering taking legalaction to get their money back. The gamblers have been unable togain access to funds that they hadused on the poker website since FullTilt became caught up in an unprece-dented crackdown by US authoritiesagainst online gaming in April.

APACHE PICKS UP ANOTHER PIECE OFTHE NORTH SEAExxonMobil has become the latest oilmajor to sell off its ageing fields inthe North Sea after agreeing a $1.75 billion deal with Apache. The deal will boost the American buyersNorth Sea production by 19,000 bar-rels per day, or 54 per cent. The assets

sold belong to Exxon-Mobil sub-sidiary Mobil North Sea.

BRITAIN LOST 35BN IN UNCOLLECTEDTAXES LAST YEARBritain lost 35bn in uncollected taxeslast year the equivalent of 7.9 percent of the annual revenue, theTreasury has admitted. The so-calledtax gap, which is the differencebetween the amount of tax due andthe total collected, was reduced from8.1 per cent of revenues from the yearbefore but critics argue that the figureis still too high.

NEW TAR BALLS ON GULF OF MEXICOBEACHES COME FROM BP OIL SPILL Tar balls that turned up on the USGulf coast this month are linked toBP's oil spill last year, signalling thatthe area is still not fully cleaned up, astudy has found. Researchers fromAuburn University found the environ-mental impact of the spill is continu-

ing 17 months since oil leaked intothe ocean.

SCHMIDT DEFENDS GOOGLE INHEARINGGoogle executive chairman EricSchmidt defended the companyssearch practices at a congressionalhearing yesterday, as lawmakerscame close to saying that theInternet-search service is a monopolythat could use its dominance ofonline searches to steer users to itsown sites. His appearance, before a USSenate Judiciary subcommittee, pitsthe search company against reviewsites such as Yelp and Nextag.

VERIZON CEO CAUTIONS GOVERNMENTON BLOCKING AT&T DEALLowell McAdam, who as chief execu-tive of Verizon Communications Incoversees the countrys largest wirelesscarrier, has waded into the debate overwhether AT&T Inc should be allowed

to buy competitor T-Mobile USA for$39bn.

WHAT THE OTHER PAPERS SAY THIS MORNING

Why we are not (quite) a new Japan

SLOWLY but surely, the Bank ofEngland is preparing for another boutof quantitative easing (QE). It hinted asmuch in yesterdays minutes, whichfollowed the release of a researchpaper earlier in the week explaininghow it thought QE had boosted theeconomy last time round. No real sur-prise there; regardless of what theyand their forecasts may claim, theauthorities are clearly no longer pri-oritising the fight against inflation.But whenever central banks start toroll out QE, a question is always asked:are we another Japan?

I have always found that compari-son to be flawed. It is true that the UKand Japan both suffered massive bub-bles caused by loose monetary policy(in Japans case, this was due to the

disastrous Plazza Accords of 1985,which devalued the dollar against theyen by 51 per cent, triggering a bubble-creating response by the Japanesemonetary authorities).

So of course there are parallels, notleast declining property prices andexcessive debt. But then these are trueof all countries that undergo a creditbubble. There is more to the Japanesedisaster than merely years of weakgrowth and declining asset prices.

Standard Chartereds chief econo-mist Gerard Lyons has a useful way oflooking at Japans crisis. He calls it thefive Ds: debt, def lation, deindustriali-sation, the need for deregulation anddemographics. There are similaritieswith what we see in the UK and theWest, but also major differences.

In some ways, our crisis is worsethan Japans. It ran current account

surpluses and was able to fund itsmassive debt bubble by tapping intoits domestic resources. This is not thecase in the US, UK or Eurozone periph-ery, which rely on external funding.

Japans population always saved a lotand was able to dip into its cash pile when the bubble imploded.Unfortunately, people in the UK havehuge personal debts and low savings,which will make the crisis far tougherto endure and get out of.

One area of similarity is that the West faces deindustrialisation, as Japan did. Japan was very much acartelised, corporatist economy post-second world war; it took years torealise that it needed to reform andeven now that process isnt complete.The West is less bad but also needs rad-ical structural reforms.

In other ways, the Wests problemsare much less pronounced. Deflationwas Japans biggest problem. Its stockmarket is still at a fraction of the 1989peak. Land prices peaked in 1991 andtook until 2006 to stop falling, trigger-

ing horrendous collateral and badloan problems for banks (which them-selves were badly managed and whichtook years to fully acknowledge andcleanse themselves of their losses).

While residential property prices havefurther to fall in the UK, the troughwill hopefully be reached in the nextcouple of years, after which the situa-tion could stabilise. The big differencein Japan is that consumer prices alsofell year after year, increasing the realvalue of debt. The problem in the UKat the moment is the very opposite:consumer price inflation thatremains cripplingly high, depressingdemand. This is the biggest differenceand why it is incorrect to say that theUK is another Japan. Demography wasalso a more urgent problem in Japanthan it is in the UK and US, which areseeing large inflows of migrants. But both countries will face large age-related liabilities unless they reformtheir public sectors. Tough times.

[email protected] me on Twitter: @allisterheath

NEWS | IN BRIEF

Gruebel says UBS backs himThe embattled chief executive of UBSyesterday scotched suggestions hewould quit, as directors met for the firsttime since the rogue trading scandalemerged. As Oswald Gruebel arrived inSingapore yesterday he was asked if hehad the boards backing and responded:

Yes. Always. UBS last night refused tocomment on reports in a Swiss maga-zine that Gruebel was asked to leave.

Qatar may buy BNP Paribas stakeQatar is in talks with BNP Paribas ontaking a possible stake in Francesbiggest listed bank, a source close to thedeal based in Qatar said yesterday.Qatar has also been talking to otherFrench banks over a possible investment,the source said, while investors in AbuDhabi are also said to be involved.

Massive gas find in NW EnglandPrivate equity-backed energy explorerCuardrilla has discovered a shale gasdeposit near Blackpool that it thinkscould hold 200 trillion cubic feet of fuel a much larger deposit than first esti-mates had shown. The firm said the findcould create more than 5,000 jobs.

EDITORS LETTER

ALLISTER HEATH

Editorial StatementThis newspaper adheres to the system of

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EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Jo SimpsonPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

Clegg attacksLabour legacy

DEPUTY Prime Minister Nick Clegglaunched a scathing attack on theLabour Party yesterday, accusing theprevious government of leavingBritain teetering on the edge of aneconomic precipice .

Closing the Liberal Democrats con-ference, party leader Clegg defiantlydefended the coalitions plans to elim-inate the annual deficit by 2015.

Saddling our children with thenations debt: thats not fair, he said.Handing control of the economy tothe bond traders is not progressive.

Labours shadow chancellor Ed Ballsaccuses the government of reducingthe deficit too far and too fast, lead-ing Clegg to jibe: Labour would have

offered too little, too late.Labours economy was based on

bad debt and false hope, they got usinto this mess, he added. Never, evertrust Labour with our economy again.

Nonetheless, the Deputy PrimeMinister admitted that the outlook forglobal growth has got worse.

Thats why were already investingin infrastructure, reducing red tape,promoting skills, getting the bankslending. But we need to do more, wecan do more, and we will do more forgrowth and for jobs.

The speech was welcomed by TimMontgomerie, editor of ConservativeHome and former adviser to IainDuncan Smith. Clegg made attackafter attack on Labour. He feels like areal coalition partner in a way that Vince Cable, Chris Huhne and TimFarron do not, Montgomerie said.ECONOMICS: P6

Clegg said Labour should never be trusted with the economy again Pic: REUTERS

BY JULIAN HARRIS

LIB DEMCONFERENCE

After their government stipend, 95 per centof Labour's money comes from unions, Cleggsaid, arguing that the Lib Dems are in nobodyspocket neither unions nor media moguls. When we come to sell those [bailed-out]bank shares, I want to see a payback to everycitizen, the Deputy Prime Minister said. Clegg promised a new economy safe fromcasino speculation, adding that Vince Cable

was putting a firewall into the banking sys-tem an endorsement of ring-fencing. Bankers were not the only people to beaccused of greed by Clegg, who blasted theriots as outbursts of nihilism and greed. Clegg threatened to make firms work hard-er to get women on their boards. The Human Rights Act is here to stay, theLiberal Democrat leader pledged to activists.

DEPUTY PM NICK CLEGGS SPEECH: THE HIGHLIGHTS

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SOVEREIGN debt crises are strainingbanks to the tune of hundreds of bil-lions of euros, and greater measuresurgently need to be taken to counterthe problems that creates, theInternational Monetary Funds (IMF)global stability report said yesterday.

The Eurozone debt crisis has had adirect impact of 200bn on EU

banks in terms of sovereign creditrisk, it said.

Links between financial institu-

tions compound these risks andhave led to some entire countries los-ing access to private capital markets,according to the report.

Two solutions are needed, says theIMF. Credible fiscal consolidation,to deal with the sovereign debt prob-lems, and enhancing the robust-ness of banks, to limit the systemicrisks to the financial industry and

wider economy.That means banks need to shore

up their balance sheets and beef up

their capital buffers, which the IMFsaid should help to break the link

between banks and risky govern-ment debt.

Fiscal consolidation will clearlyimpact on the banks: If a countrysfiscal measures are successful inrestoring the long-term sustainabili-ty of its public f inances, its sovereignrisk premium will come down, andthis will reduce pressures on banks.However, banks must help them-selves with prudent behaviour andnot just hope sovereigns positionsimprove.

In particular, the report singlesout banks that rely heavily on the

wholesale markets for funding.Heightened uncertainties and

the need to convince markets oftheir stability means there banksneed larger capital buffers if they areto retain or regain access to the fund-ing they rely on.

The IMF is concerned thatEuropes politicians lack the abilityto deal with the crisis, which it saysis very much in a political phase.

EU banks face200bn extra

risk on crisesRATINGS agency Moodys yesterdaycut the debt ratings of three of

Americas biggest banks on worriesthe US government would be less like-ly to support a large lender if it gotinto trouble.

Bank of Americas long-term seniordebt rating has been cut from A2 toBaa1, Wells Fargo long-term debt hasdropped from A1 to A2, and Citigrouphas seen its short-term debt cut fromPrime-1 to Prime-2.

The government is more likelynow than during the financial crisisto allow a large bank to fail should it

become financially troubled, as therisks of contagion become less acute,the ratings agency said.

The action concludes a threemonth review that began in June

when the ratings agency said the

banks faced a potential downgrade.Moodys said the long-term outlook

on the banks senior ratings remainsnegative.

Bank of America shares slumped7.5 per cent after the announcement.Citigroup fell more than 5.2 per cent,

while Wells Fargo dropped 3.9 percent.

Meanwhile Standard & Poors cutits ratings on seven Italian banks fol-lowing its downgrade of the troubledEurozone country on Tuesday.

Moodys cutsratings for Citi,BofA and Wells

BY TIMWALLACE

EUROZONE ECONOMY

BANKING

News 3CITYA.M. 22 SEPTEMBER 2011

AMERICA could be plunged into yetanother debt ceiling crisis, afterRepublican rebels and Democratsunexpectedly voted down a bill tokeep the government funded.

The bill would fund the US gov-ernment past 30 September.

Democrats objected to cuts to asubsidisation programme for elec-tric vehicles. The partys oppositionto the cut was partly expected, yet

some Republicans shocked onlook-

ers by voting against the total fiscalcost of the bill.

Republicans said that further cuts were necessary to fund disasteremergency relief linked toHurricane Irene.

The measure failed by a vote of195 to 230.

The crisis over Americas self-imposed debt ceiling went right tothe wire at the beginning of lastmonth, with politicians agreeing alast minute deal to avoid a default.

President Barack Obama faces another debt-induced headache Picture: REUTERS

BY JULIAN HARRIS

US ECONOMY

Fresh fears over US debtceiling as bill is rejected

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GREECES biggest public sector unions voted for two days of strikes nextmonth as its cabinet unveiled a newround of austerity measures.

The government is expected to layoff thousands of civil servants andwill put another 30,000 into a reservearmy on permanent holiday with60 per cent pay.

It will also cut the state pension by20 per cent for those earning over1,200 (1,054) a month and reduce

the income tax-free threshold from8,000 to5,000.

Greek finance minister Evangelos Venizelos told parliament that thecountry will do anything to get holdof its next 8bn instalment of bailoutmoney.

He said: The country will not crossinto existential danger for [missing itstarget by] 0.5 or 1.0 per cent of out-put We will do anything, we will notplace at risk the fate of the countryand its place in the Eurozone.

However, he was unable to say howAthens will deliver on its promise tocut its deficit to 7.6 per cent of GDPthis year. It is forecast to be around 8.5per cent of GDP.

Venizelos needs to have a convinc-ing plan to present to the troika Greeces international lenders, theECB, European Commission and IMF when he flies to New York next weekif they are to release the 8bn in aidthat will stave off bankruptcy for thesovereign next week.

Portuguese prime minister PassosCoelho warned yesterday that a Greek

default would hit Lisbon hard.This could have disastrous conse-

quences for Portugal, above all interms of financing for banks and theeconomy, he said.

But Yiannis Panagopoulos, head ofGreek public sector union GSEE is notin a mood for compromise.

If the troika threatens Greek socie-ty with an [austerity] marathon, itshould know that our answer will be amarathon of struggle, Panagopoulossaid. THE FORUM: PAGE 25

Greece cutsprompt unionstrike threat ITALIAN lender Mediobanca waspushed into the red for its fourthquarter due to write-downs, itrevealed in its full-year results yester-

day.Over the year to June, the bank took

a 109m (94.5m) hit on its Greekbond holdings, accounting for nearlyhalf of its total impairments of238mfor the year. Despite a fourth-quarterloss, however, the bank made a pre-taxprofit of792m for the year. Most ofthe earnings came from its corporateand investment banking division.

The write-down of its Greek gov-ernment holdings was calculatedusing the market price on the report-ing date, but could worsen if the sov-ereigns bond prices fall further.

Mediobancas deposits were large-ly steady, with the bank reporting a

loan-to-deposit ratio of 70 per cent well below the highly leveragedratios of some of its rivals. It report-ed a core tier one capital ratio of 11.2per cent, up just 10 basis points onthe previous year.

Despite the write-downs, the bankcut down on its loan loss provisions by18 per cent, boosted by improvingasset quality in both its wholesale andretail businesses. Revenues grew sevenper cent overall, though they wereroughly flat in its wholesale divisions.

THE EUROPEAN Central Bank (ECB) hasannounced that it is prepared to accepta wider range of collateral in return fordishing out emergency funds to theEurozones floundering banks.

It said that it will now accept assetsthat are not listed on regulated publicmarkets as collateral, potentially open-ing the way for billions in asset-backedsecurities that are sitting on bank bal-

ance sheets to be used as security forfunding.

At the same time, the Bank said thatit is cutting down on its limit foraccepting unsecured collateral from10 per cent of the total collateral valueto five per cent.

Meanwhile, European Commissionpresident Jos Manuel Barroso hasagain raised the spectre of euro-bondsas a solution to the debt crisis, tellingBloomberg yesterday: We should notexclude that option.

Mediobanca hitby Greek bondwrite-downs

ECB loosens its collateralrequirements for lending

ECB president Jean-Claude Trichet is trying to contain the crisis Picture: Reuters

BY JULIET SAMUEL

EUROZONE


BY JULIET SAMUELEUROZONE

BY JULIET SAMUEL

BANKING

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ESPRESSO IS AT THE HEART OF ALL OUR FULL BEAN COFFEES.

MCDONALDS FULL BEANTM

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2011 McDonalds.

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MORE QUANTITATIVE easing (QE) islikely to be implemented at somepoint because of falling economicgrowth expectations, minutes of last

weeks monetary policy committee(MPC) meeting, out yesterday, show.

However, the US policy of sellingshort-maturity assets and replacingthem with longer ones, cutting long-term interest rates, was ruled out.

Only one of the nine members, Adam Posen, voted for 50bn moreQE in an effort to boost the economy.

High inflation currently 4.5 percent on the consumer price index,

well above the two per cent target stopped others voting for QE as it isinflationary. Bank studies suggest QEincreased inflation by between 0.75and 1.5 per cent in 2009.

However, the MPC expects inflationto fall back sharply next year asdemand declines and the VAT risedrops out of the figures.

The hawkish Spencer Dale thinksthat might not happen. Private sectoremployment has increased, suggest-ing relatively little spare capacityexists, he said in a speech yesterday.

Other members are waiting to seedevelopments in the coming weeks,including the action of overseasauthorities, the minutes explain.

That includes action by the Fed, whose policy decision wannounced yesterday, a week afterthe MPCs.

Changes in the economy also mat-ter: For some, a continuation of theconditions seen over the past month

would probably be sufficient to justi-fy an expansion of the asset purchaseprogramme, the minutes concluded.

MPC movescloser to newround of QEBY TIMWALLACE

UK ECONOMY

THE GOVERNMENT borrowed morelast month than in any other in thisfinancial year, the Office for NationalStatistics (ONS) revealed yesterday.

Almost 16bn was added to thenational debt in August, excludingfinancial interventions, reversing

Julys surprise surplus. Augusts deficit of 15.9bn is up

from 14bn in August last year, with

spending up by 3.5bn compared withthe same month last year. The largestcomponent of that is a 1bn increasein benefit payments.

Revenues did increase with a 4bnfall in the tax gap the difference

between expected and received rev-enues, as a result of evasion and inac-curate form filling. The gap still standsat around 35bn a year, however.

The national debt now stands at944.5bn, or 61.4 per cent of GDP. Thatmeans the government has borrowed

an extra 134bn in the last 12 months.When the bank bailouts are includ-ed, the national debt stands at2,258.8bn, or 146.9 per cent of GDP.

The Treasurys compilation of inde-pendent economic forecasts, out yes-terday, suggested growth is slowing.

That will hit tax revenues as fewer jobsare created.

Average predictions for 2011s totalGDP growth have slowed from 1.3 percent in August to 1.1 per cent over thelast month.

UK government borroweda record 16bn last monthBY TIMWALLACE

UK ECONOMY


SHOULD THE BANK OF ENGLAND DO MORE QE?Interviews by Phoebe Torrance

Yes, it should, because Europe is in acritical condition at the moment. Ifthe economy gets any worsethere will be big repercussions.

TOBY BRYMER | ALLIANZ

At some stage I think it is inevitable,because of the state of the economy.Whether now is the right time forQE is very hard to gauge.

KEITH JULIAN | JRP UNDERWRITING

Mervyn Kings MPC is unsure about more QE as inflation remains high

* These views are those of the individuals above and not necessarily those of their company.

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THE Lloyds of London group of insur-ers was hit by unprecedented losses inthe first half of 2011, after a string ofdisasters meant customer claims wereup by 24 per cent.

Lloyds reported a pre-tax loss of697m in the six months to June, com-pared to a profit of 628m in thesame period last year.

Outgoing chairman LordLevene (pictured) said that2011 had so far been one ofthe most challenging years onrecord, after the marketsuffered heavy lossesrelated to the earth-quakes in Japan andNew Zealand, andflooding in Australia.

Between Januaryand June customersof Lloyds 80-oddinsurance syndicatesmade claims worth a totalof 6.7bn, including 1.2bnsolely on the earthquakeand subsequent tsunami

that hit Japans north coast in March.Levene told City A.M. that despite the

dramatic increase in claims, it was business as usual among the Lloydsmarket.

We dont hike prices and were notlooking for more capital weve got57bn in assets. Its the normal courseof business for us, he said.

Lloyds also joined Siemens yester-day in being the latest company toreduce its exposure to the Eurozone,pulling deposits from some peripheralEuropean banks.

Twenty-eight per cent of its invest-ment portfolio is in government

debt, with the majority inthe perceived safe havensof UK and US governmentsecurities.

The knock-on effect[of global financial tur-moil] is delayed andsomewhat muted, saidLevene. But clearly theway in which the worldeconomy develops, if business levels fall,eventually it will runthrough to us.

Record claims

plague Lloydsof LondonBYELIZABETH FOURNIERAND JULIET SAMUEL

INSURANCE


NEWS | IN BRIEF

Lehman drops Barclays litigationLehman Brothers Holdings said it will dropits appeal of a bankruptcy courts rulingupholding Barclays purchase of its NorthAmerican business in 2008. In a state-ment, Lehman said yesterday it will drop itschallenge of Judge James Pecks Februaryruling denying its attempt to overturn the

sale, which was completed in the hecticdays following Lehman's $639bn bankrupt-cy filing. The company said pursuing theappeal would put an unnecessary strain onits estate. Lehman had accused Barclays ofsecuring a windfall by withholding informa-tion from the court. Lehman also said it willnot pursue an appeal of Pecks follow-updecision earlier in September that Barclayshad not improperly withheld $500m it wassupposed to pay to employees it inheritedin the takeover.

Fingers will be crossed for a calmerwinter as catastrophe losses mountDESPITE the record hit to revenue,the Lloyds performance was still better than some analysts hadexpected. Audit firm Mazars pre-dicted losses of 1.5bn last week,but yesterday the results comparedfavourably to the rest of the sector.

Last year the average combinedloss ratios of UK-listed insurers wereslightly better than Lloyds, saidinsurance partner AndrewGoldsworthy. This year they weresignificantly worse.

But look behind the figures andLloyds is having to do more andmore to shore up its own numbers.The top line combined loss ratio of113.3 per cent was only below someof its syndicate because it used

reserves to bolster earnings by

474m otherwise it would havebeen closer to 119 per cent.

At the same time, low interestrates and volatile markets mean itsgetting harder to up premiums,and Lloyds investments arent reap-ing the same rewards that theyused to paying out just 1.1 percent in the first half of the yearcompared to an average of 3.9 percent over the past five years.

Its diverse business book willhelp, but with claims this yearalready higher than for the wholeof 2010, losses can only be absorbedfor so long.

BOTTOMLINEAnalysis by Elizabeth Fournier

HEWLETT PACKARD MULLS NEW CHIEF EXECUTIVE

Shares in US tech firmHewlett Packardjumped 7.5 per centlast night, as WallStreet gave itsapproval to news thatits board had met toconsider ousting chief

executive LeoApotheker (pictured).After less than a yearin the role, Apothekercould be replaced byformer eBay boss MegWhitman, a sourcefamiliar with the mat-ter said. HP lastmonth bought Britishtech firm Autonomyfor more than $10bn.

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The Capitalist10 CITYA.M. 22 SEPTEMBER 2011

A great night celebrating success in the City

LAST night was an occasion toremember: City A.M.s annual awardscelebrating the best and brightest ofLondons business, financial and

investment communities. Over 500guests from dozens of the Citys lead-ing firms attended the celebration,held at the Grange Hotel in St Pauls.

There was great food, music and com-pany, as well as a superb speech byLord Digby Jones. I wish to extend mythanks to Saxo Bank, our headlinesponsor, and also to British Airways,

who sponsored the reception.Our winners, profiled in these

pages, were chosen in unique fashion.Each was initially selected after feed-

back and responses from profession-als working across the City. We thenheld a meeting of our expert panel of

judges, which as you can see fromtheir profiles include many of themost influential people in Britains

business community. The winners were announced last night to apacked room, chaired superbly asever by the BBCs Katie Derham.

Like last year, we examined a broadrange of sectors spanning the finan-cial world in all of its forms, includ-ing banking, law, accounting, fundmanagement and trading, amongothers, with the aim of singling outthe highest achieving businesses,teams and individuals as well as themost promising new kids on the

block. Selecting the best was far fromeasy but our winners are all out-standing. They are at the forefront ofdeveloping new and better businessmodels that will help Britain returnto prosperity.

We are going down a dangerousroad in todays Britain. Success in

business is increasingly reviled, evenwhen it is arrived at fairly and with-out bailouts. This is completely

wrong. We need a thriving capitalistsector to help create jobs and financeBritains massive public sector. Weneed successful firms and people.

It was a wonderful evening and

proof that despite the Eurozone cri-sis, there is more to economic lifethan just doom and gloom.

[email protected]

EDITORS LETTER

ALLISTER HEATH

PERSONALITY | OF THE YEAR

There was a strong case for each of thebusiness titans on the shortlist for CityA.M.s prestigious personality of theyear award.

Ivan Glasenberg, chief executive ofGlencore, pulled off the largest-everfloat in London earlier this year, whileBurberry chief Angela Ahrendts hasdone an outstanding job since takingthe helm of the luxury brand in 2006,overseeing record sales and expandinginto China, Brazil and India.

The judges commended PeterClarkes achievement in turning aroundMan Group, returning the worldslargest hedge fund to positive inflowsand launching a savings product inJapan that raised 2bn. And financierNat Rothschild won praise for raising

more than 2bn in a year when no-oneelse has raised anything close on theLondon Stock Exchange. To have aRothschild name but to be valued in hisown right is quite an achievement, saidCentricas chairman Sir Roger Carr.

But while Rothschild has 50 years ofhard work ahead of him, the awardwent to the business leader with 50years hard graft behind him: GeraldRonson, CEO of Heron International, in ayear that saw the completion of thelandmark Heron Tower. Ronson hasspent a lifetime building his credibility,said one admirer on the property devel-oper whose fortunes dipped in the1980s Guinness scandal. But, likeKiplings If, he has built it all again andnever breathed a word about his loss.

WINNERGERALD RONSON,

HERON INTERNATIONAL

SHORTLISTED:

ANGELAAHRENDTS,CHIEF EXECUTIVEOF BURBERRY

SHORTLISTED:

IVAN GLASENBERG,CHIEF EXECUTIVEOF GLENCORE

SHORTLISTED:

NAT ROTHSCHILD,FOUNDER OFVALLAR ANDVALLARES

SHORTLISTED:

PETER CLARKE,CHIEF EXECUTIVEOF MAN GROUP

Sponsored by

COMPANY | OF THE YEAR

IT WAS fantastic to see four Britishcompanies on the shortlist for busi-ness of the year, said the judges.

The Cambridge-based microchipcompany Arm Holdings, hedge fundMan Group, which started life in theeighteenth century as the rum suppli-

er to the Royal Navy; engineering busi-ness Weir Group; and the media giantBSkyB are all doing terrific thingsaround the world from their bases inBritain, noted the panel.

Throw in the Dutch-founded globalgenerator rental company Aggreko,which enjoyed strong growth over thelast financial year, and this categorywas tough to call.

After much deliberation, however,the very well-run Arm Holdings

emerged as this years winner deemed to be a good example of aBritish company becoming an interna-tional player.

Arm, which began life in a convert-ed turkey shed 20 years ago and hasexpanded to employing 1,700 people

around the world, is still under theradar, said the judges but that is allset to change following the Las Vegastechnology show in January, whenMicrosoft announced it is designing itsnew operating system with Armmicrochips in mind.

Microchips developed by Armalready feature in 95 per cent of theworlds mobile phones, including thebrains of the iPhone, the originaliPad and the iPad 2.

COMMENDED:

AGGREKO

CHIEFEXECUTIVERUPERT SOAMES

SHORTLISTED:

MAN GROUP

CHIEFEXECUTIVEPETER CLARKE

SHORTLISTED:

BSKYB

CHIEFEXECUTIVEJEREMY DARROCH

SHORTLISTED:

WEIR GROUP

CHIEFEXECUTIVEKEITH COCHRANE

WINNERARM HOLDINGS

WARREN EAST

Sponsored by

Sponsored by

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FUND MANAGER |OF THE YEAR

Aberdeen edged ahead thanks to ajump of 54 per cent in pre-tax profitsin the six months to March. The firmhas had to limit the rapid growth ofemerging markets funds to preventthem becoming unmanageable.

MARTINGILBERT

ABERDEENASSET

MANAGEMENT

SHORTLISTlM&G Investments

l Aviva Investors

l Schroders

l Jupiter Fund Management

INSURANCE COMPANY |OF THE YEAR

Car insurer Admiral motored aheadto achieve a seventh straight year ofprofit growth in 2010, with a 50 percent revenue increase in 2011.Analysts expect the firm will have a13 per cent market share by 2013.

SHORTLISTl Beazley

l Catlin

l Resolution

l Hiscox

Sponsored by

RETAIL BANK |OF THE YEAR

The programme of change undernew leader Antonio Horta-Osoriowon the day for Lloyds, as it acceler-ates the sale of 632 bank branches.It also won praise for its bold stanceon Payment Protection Insurance.

SHORTLISTl Santander UK

l Virgin Money

l Tesco Bank

l Co-op Bank

PROFESSIONAL SERVICES |OF THE YEAR

L.E.K. is a wonderful British successstory, said the judges it now com-petes with McKinsey, Bain and BCGfrom a standing start in 1983, over-delivering for its growing roster ofprivate equity clients.

SHORTLISTl KPMG

l Ernst & Young

l Deloitte

l PwC

Sponsored by

ALTERNATIVE MANAGER |OF THE YEAR

Man Group has returned to positivefund flows after buying GLG Capitalfor $1.6bn last November. Fundsunder management have bouncedback from the crunch to rise three percent since the start of 2011 to $71bn.

SHORTLISTl Bluecrest Capital

l Laxey Partners

l Brevan Howard

l Sherborne Investors

Sponsored by

HENRYENGELHARDT

ADMIRAL

LLOYDSBANKING

GROUP

IAIN EVANSL.E.K.

CONSULTING

PETER CLARKEMAN GROUP

11EDITED BYHARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist

CITYA.M. 22 SEPTEMBER 2011

DEALMAKER |OF THE YEAR

Simon Robey, the CEO and M&A co-chair with a canny strategic mind,helped the bank win slots as leadadviser on LSEs C$3.bn takeover bidfor Canadian rival TMX and BPsefforts to tie up with Rosneft.

SIMON ROBEY

MORGAN

STANLEY

SHORTLISTl Jim Renwick, Barclays Capital

l Josh Critchley, RBC

l Rupert Hume-Kendall, BoA Merrill Lynch

l David Wormsley, Citi

Sponsored by

LAWYER |OF THE YEAR

Linklaters David Cheyne, one of thelast of the Citys true corporate leg-ends, is this years top legal brain.Cheyne stepped down as senior part-ner on 11 September, marking theend of an era at the magic circle firm.

SHORTLISTl Stephen Griffin, Linklaters

lMaria Da Cunha, British Airways

l Sir Nigel Knowles, DLA Piper

l Edward Bibko, Baker & McKenzie

LAW FIRM |OF THE YEAR

Freshfields has broken Linklaters andSlaughter & Mays stranglehold onthe FTSE 100 over the last year, tak-ing second spot in the adviser rank-ings with 23 of the UKs top listedfirms, compared to Linklaters 22.

SHORTLISTl Baker & McKenzie

l DLA Piper

l Linklaters

l Slaughter & May

Sponsored by

PROPERTY FIRM |OF THE YEAR

As Land Securities chairman AlisonCarnwath left the room, the judgesvoted her company property firm ofthe year, swayed by its 1.23bnannual profits a rise of 15 per centat a time of nationwide uncertainty.

SHORTLISTl British Land

l Capital Shopping Centres

l Hines

l Heron International

ENTREPRENEUR |OF THE YEAR

The stand-out in an impressive fieldwas Daniel Ek, the co-founder ofonline music business Spotify, whichis redefining a business model. Thecompany has been valued at $1bnand launched in the US in July.

SHORTLISTl Simon Calver, LoveFilm

l Nick Robertson, Asos

l Iain Dodsworth, Tweetdeck

lMichael Acton Smith, Mind Candy

Sponsored by

DAVID CHEYNE

LINKLATERS

FRESHFIELDS

BRUCKHAUS

DERINGER

FRANCIS

SALWAY

LANDSECURITIES

DANIEL EK

SPOTIFY

RISING STAR |OF THE YEAR

Numis star Alex Ham, 28, is quickon the phone and suppies a lot ofbackground information. He ran thebrokers involvement in the Horizonand Betfair IPOs and advisedInvestcorp on its bid for Opsec.

ALEX HAM

NUMIS

SHORTLISTl Sam Smith, Finncap

l Billy Clegg, Financial Dynamics

l Oliver Holbourne, Bank of America Merrill Lynch

l Leanne Hoare, Linklaters

Sponsored by

INVESTMENT BANK |OF THE YEAR

JP Morgan Cazenove has performedthe most consistently of the short-listed banks, said the judges, pointingto its strong year for M&A, pullingoff deals such as AT&Ts $39bnacquisition of T-Mobile USA.

SHORTLISTl Evercore

l Bank of America Merrill Lynch

l Barclays Capital

l Goldman Sachs

Sponsored by

TRADER |OF THE YEAR

CQS founder Michael Hintzeemerged as the star trader this year.Not only did his hedge fund makestrong returns, but in January Hintzedonated 2m of his personal wealthto the National Gallery.

COMMENDEDl Stephen Roth, Man Group

SHORTLISTlAlex Beard, Glencore

l Richard Evans, Morgan Stanley

l David Hitchens, Unicredit

Sponsored by

MARKETING CAMPAIGN |OF THE YEAR

NatWest had the most visible cam-paign: a marketing drive thatrepaired its own and the bankingsectors image with its HelpfulBanking ads by M&C Saatchi prom-ising to serve its customers better.

SHORTLISTlAmerican Express

l Barclays Stockbrokers

l LOCOG

lMicrosoft

ANALYST |OF THE YEAR

Goldmans global head of commodi-ties research was a near-unanimouschoice from the judges, because hiscalls on oil have the power to movemarkets. He has also advised govern-ments in the US, Europe and Russia.

SHORTLISTl Peter Davey, Standard Bank

l Simon Ward, Henderson Global Investors

l Kevin Cammack, Cenkos Securities

l Jenny Barker, Nomura

Sponsored by

JP MORGAN

CAZENOVE

MICHAEL

HINTZECQS

NATWEST JEFF CURRIE

GOLDMANSACHS

Sponsored by

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Investment Writing Investor Relations Equity Research Editing & Translation

Thought Leadership KIIDs for UCITS IV Annual Reports Website Copy

Performance Commentaries Litigation Support

CLS Communication would like to congratulate all the winnersat the City AM awards on their achievement.

writing, editing and translation services. We have a long

track record working in partnership with banks, asset

managers, corporate communications and IR departments

markets. Our in-house linguists create accurate

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Call 020 3117 2800 | Email [email protected] | Visit www.cls-communication.com

The Capitalist | Awards CITYA.M. 22 SEPTEMBER 201112

Left: Fund manag-er of the yearMartin Gilbert ofAberdeen AssetManagement withLawson Muncaster,City A.M. manag-ing director, andhost Katie Derham

Below left: Michelle

Mone, founder ofUltimo

Below: Saxo BanksTorben Kaaberwith a team mem-ber

Above: Guestsenjoy themselvesduring dinner

Right: KatieDerham presentsMartin Gilbert,dressed in tartantrousers, with hisaward

Right: AllisterHeath, City A.M.editor, gives hisspeech

8/4/2019 Cityam 2011-09-22

13/36

The Capitalist | Awards 13CITYA.M. 22 SEPTEMBER 2011

*All fares are one way, inclusive of all taxes and fuel surcharges, subject to availability and exchange rates. Longhaul flights are

operated by AirAsia X. Booking period from 5pm 20th September to 5pm 30th September 2011. Travel period from 4th May to27th October 2012. Processing fees apply for payments via credit, debit and charge cards. To book, log on to www.airasia.com

A NIGHT TO CELEBRATETHE BEST OF THE CITY

THE GRANGE Hotel in St Paulswas the venue for last nights sec-ond City A.M. awards ceremony,introduced by editor Allister Heathas an evening of celebrating allthat is good about the City.

Opening the event to the 500City guests, Heath said: It is vitallyimportant that in a gloomy world

where the headlines are all aboutthe great economic problems fac-ing our generation, we can all takesome time out to actually cele-

brate the good news and thosecompanies and individuals whoare succeeding in such a toughenvironment.

Back by popular demand to pres-ent the awards was the BBCs KatieDerham. Actually I demanded to

be back, Derham clarified,explaining that at last years partyshe enjoyed the best dancing withdrunken Scotsmen ever in theclub in the hotels basement.

And so to the awards, whereGerald Ronsons daughter Lisa andhis brother Laurence came alongto watch the Heron Internationalchief executive win the headlinePersonality of the Year award, inrecognition of a 50-year career

where he has developed 156 build-ings in nine countries around the

world and 15,000 residential unitsin the UK.

And I invented self-servicepetrol stations, Ronson told The

Capitalist on his trajectory thathas weathered three recessionsand major ups and downs. So

what are the property tycoonssecrets for anyone hoping to emu-late his success in business?Focus, commitment, dedicationand having passion for the indus-try you are in. To me, my businessis my hobby.

Also at last nights awards wereex-England footballer TrevorSteven; Michelle Mone, the

founder of Ultimo; Better Capitalfounder Jon Moulton; andMoultons former business associ-ate Sir Digby Jones, the formerdirector general of the CBI, whodelivered a spirited defence of

wealth creation. Without you wewouldnt be able to get out of thisparlous state, he told the audi-ence. If it wasnt for the wealth

business creates, there wouldnt bea penny of taxation and that is

why tonight is important.Thanks also go to Saxo Bank, the

headline sponsor of this yearsawards a true celebration of theentrepreneurial spirit and profes-sionalism that exists throughoutthe City of London, said chiefexecutive Torben Kaaber. The win-ners are a credit to the City, andSaxo Bank is proud to sponsor this

years awards and celebrate the

drive and focus that it has taken towin each category.

Left: SimonBorrows, 3is newchief investmentofficer

Right: Jon Moultonof Better Capital

Right: Centricaschair Sir Roger

Carr presentsDavid Cheyne of

Linklaters with theLawyer of the Year

Award

Left: Guests fromDLA Piper; FD; andBlackstone

Above: Digby, LordJones ofBirmingham giveshis speech

Left: High on Heelsdrummer providesthe entertainment

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MEET THE JUDGES

ALLISTER HEATH | CITY A.M.Allister joined City A.M. as editor in early 2008. He chaired our panel of judges.

The Capitalist | Awards CITYA.M. 22 SEPTEMBER 201114

DAVID HELLIERCITY A.M.

David joined City A.M.in 2006 and has beena financial journalistfor over three decades,reporting on sports,M&A and media.

NIGEL BOARDMANSLAUGHTER & MAY

Nigel is one of the Citysmost respected lawyersand has been a partnerat Slaughterssince1982, advising on thesale of Liverpool FC.

JOHNGRIFFITH-JONESKPMG

John joined KPMG in1975 and became thechairman and seniorpartner of the UKpractice five years ago.

TRUETT TATELLOYDS BANKING GROUP

Truett joined Lloyds in2003 as a managingdirector, and was thismonth appointed asvice chairman of clientcoverage.

SIMON BORROWS3I

Simon is moving to 3ito become its chiefinvestment officer. Heused to co-chief execu-tive of Greenhill invest-ment bank.

ALISONCARNWATHLAND SECURITIES

Alison currently chairsLand Securities and isa non-executive direc-tor at Barclays andMan Group.

ROLAND RUDDFINSBURY

Ex-financial journalistRoland foundedFinsbury in 1994 andin August becamechairman of the newlymerged RLM Finsbury.

SIR MARTINSORRELLWPP

Sir Martin is the co-founder and chiefexecutive of WPP, theworlds largest com-munications company.

SIMONMACKENZIE-SMITHBANK OF AMERICA

MERRILL LYNCH

Simon is chairman ofUK & Ireland corpo-rate and investmentbanking at Merrills.

PHIL RAPERGOLDMAN SACHS

Dealmaker Phil is headof corporate broking atGoldman Sachs, advis-ing on major M&Atransactions such asAstraZeneca.

SIR ROGER CARRCENTRICA

Sir Roger was appoint-ed chairman of BritishGas owner Centrica in2004 and becamepresident of the CBIthis June.

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IMPERIAL Tobacco said yesterday itexpects sales to rise two per cent in thecurrent year, with a damaging pricewar in Spain set to ease.

Imperial is market leader in Spain with a near 30 per cent share from brands like Fortuna, Ducados andNobel, but suffered from a marketdepressed by economic woes and a2011 ban on smoking in public places,which sparked a price war this year.

Analysts say the outlook for 2012has improved in the Iberian region,Imperials third most profitable mar-ket after Britain and Germany, as allmajor tobacco players there haverecently increased cigarette prices.

Imperials annual sales rise was inline with expectations and was unlike-ly to lead to any major changes toearnings forecasts, analysts said. The

group said its performance in the yearto 30 September remained in line withits expectations.

In July Imperial, which also makesGauloises Blondes and JPS cigarettes,said the continued challenging eco-nomic environment in Spain is likelyto hit full-year operating profit fromthe country by up to 70m, revisedfrom previous forecasts of 110m.

The FTSE 100-listed companyshares closed slightly up, outperform-ing the rest of the market.

Imperial in liftas price paineases in Spain

Chief executive Alison Cooper hopes to see better conditions in Europe

CONSUMER

SABMiller yesterday finally had a A$9.9bn (6.5bn) bid for Fostersagreed by the Australian companysboard after months of wrangling.

Fosters had rejected SABs previousbid worth A$9.5bn, saying it under-valued the company.

That triggered a hostile bid fromSAB, which approached the compa-nys shareholders directly in an effortto close a deal.

However, the Fosters board said it

would be recommending the latestoffer to its shareholders, who willnow vote on the offer.

SAB said the deal would give itaccess to Australias strongeconomic growth prospects, as wellas the countrys stable and prof-itable beer industry.

We look forward to working withFosters employees and other stake-holders to ensure the success ofFosters in the future as the largestbrewer in Australia with an outstand-

ing portfolio of brands, said SABschief executive Graham Mackay.

The offer values Fosters shares atA$5.10, compared with the originaloffer of A$4.90 a share made in June.

There have been talks of a takeoverof Fosters since it announced plansto break itself in two last year.

The brewer span off its troubledwine business as the company fearedit was putting off would-be suitors.Any purchase of Fosters by SAB willnot include the Fosters lager brandin the UK and Europe, where it isowned by Heineken.

Fosters givesin to improvedSABMiller bidBY JOHN DUNNE

CONSUMER


ANALYSIS l SABMiller

p

15 Sep 16 Sep 19 Sep 20 Sep 21 Sep

2,240

2,200

2,160

2,185.0021 Sept

ANALYST VIEWS: ARE IMPERIAL TOBACCOSHARES GOOD VALUE? Interviews by John Dunne

TINA COOK | CHARLES STANLEY

The firm benefits from cost savings, supportive 500m share buybackand a commitment to progressively raise the dividend payout ratio from 50 percent in 2011. Volumes have stabilised and pricing momentum remains intact.We remain comfortable with our accumulate recommendation.

MARTIN DEBOO | INVESTEC

Imperial needed to post a reassuring quarter and they look to havedone so. Top line performance accelerated but more convincing around the organ-ic growth outlook needs to be done, but Imperial is that rare beast a defensivestock that is relatively cheap.

RICHARD CURR | PRIME MARKETS

The statement shows sales have been driven by emerging marketsgrowth, with recent price increases partly offsetting the fall in Spanish volumes.Given the solid fundamental outlook and exceptionally strong charting picture, theshares present an attractive opportunity.

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TESCO has unveiled plans to float aproperty fund of 15 malls in Thailand

with a value of over 300m.The float, which is likely to be the

biggest in Thailand this year, will seethe Tesco Lotus Property Fund estab-lished as a standalone public listedcompany, with Tesco Lotus thegroups supermarket business leasingits hypermarket space from the firm.

It is not known what share of thefund will be up for grabs, but Tescochief financial officer Laurie McIlweehas said that by releasing value fromour Thai property we will be able toinvest in further innovation andgrowth for our customers and share-holders.

The retail giant could decide to

invest the proceeds in growing its busi-ness in Thailand, where it missed outon buying rival Carrefours Thai assets

last year.But as City A.M. revealed recently, it

has also been scoping out expansionopportunities in new markets in theregion and has examined a full entrystrategy for Indonesia. It could also optto establish a buying office in Jakartato expand its supply chain.

In combination with the sale of itsassets in Japan, which Tesco is exitingthis year, it will have a considerable

war chest at its disposal.

BY JULIET SAMUEL

RETAIL

A FORMER executive at the US con-sumer goods group Sara LeeCorporation has been confirmed asthe next chairman of troubled travelgroup Thomas Cook.Belgian Frank Meysman, 59, will jointhe board on 1 October and takes overas chairman from Michael Beckett.

He has worked for major compa-

nies including Procter & Gamblebefore joining Sara Lee, where he wasexecutive vice president and a mem-

ber of the board.Meysman said: We will be well

positioned to build shareholder valueon the back of premium brands and afine heritage in the UK as well asinternationally. The company is alsolooking for a chief executive after

Manny Fontenla-Novoa resigned.

Thomas Cook appoints formerSara Lee executive as chairmanLESIURE

TESCO is tipped to launch a price warnext week, which one analyst sayscould put the squeeze on online deliv-er service Ocado under its pledge tomatch prices.

The retailer was said by industrysources to be trying to dent Asdassales, but Ocado could be hit in thecrossfire.

Panmure Gordons Philip Dorgan ispredicting that Ocados pledge tomatch prices on 7,400 Tesco products

will put further pressure on the serv-ice, which has a contract with

Waitrose.In Mondays trading statement,

Ocado said that it had seen sales risein the third quarter and that it wason track with its business plan, buturged caution.

Commenting on the impact of a

prospective price war triggered byTesco, Dorgan said: Ocado is playingwith the big boys now.

Unfortunately, scale is a big advan-tage in food retailing, so we expect

Tescos planned price initiative tohurt Ocado disproportionately. Wetherefore reiterate our sell recom-mendation and 50p price target.

Ocados shares closed down morethan 11 per cent yesterday on the

back of the news.

Supermarkets pricing warcould put squeeze on OcadoBY JOHN DUNNERETAIL


Tesco chief Phil Clarke is set to float a property fund in Thailand

Tesco to floatThailand real

estate fund

ANALYSIS l Tesco

p


375.00

370.00

365.00

364.0021 Sept

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THE co-founders of RAB Capital sig-nalled the latest stage in the longrestructuring of their flagshipSpecial Situations fund by commit-ting to invest $30m (19.21m) oftheir own money in less than twoweeks time.

Executive director Philip Richardsand executive chairman MichaelAlen-Buckley (pictured) will put themoney in on 3 October, RAB saidyesterday.

The fund, which became notori-ous for its investment in NorthernRock, did not respond to calls forcomment but said in a statement:The board believes that this agree-ment is a positive outcome for the

company as it seeks toreduce exposure topotential liquidityissues in respect of thefunds unlisted invest-ments for other share-holders.

The super-richMittal familyare amongthose tohave invest-ed in RAB but thefund hasseen a wave ofexits ofc l i e n t sand leftthe stock

exchange.Once the darling of the hedge

fund industry after returns of morethan 1,000 per cent in 2003, RAB hitproblems in the credit crisis whenSpecial Situations invested heavilyin illiquid securities and bought

into Northern Rock before the for-mer mutual collapsed.

Earlier this summerRAB, which managedaround $7bn at theend of 2007, said third-

party assets underm a n a g e -

ment wereset to beless than$ 2 0 0 mb yOctober.

RAB Capital bossespledge $30m to fundBY PETER EDWARDS

FUND MANAGEMENT

ASIA-focused hedge funds attract-ed a net inflow of about $500m(319.2m) in August, increasingtheir total inflows for 2011 to$7bn, as investors shrugged offvolatile markets and raised betson the regions fast growth, newdata shows.

Flows this year have exceededlast years when these funds gotnet inflows of $4bn, data released yesterday by Singapore-based

hedge fund tracker Eurekahedgeshowed.

European hedge funds saw netoutflows worth $2.8bn in August, while North American fundsattracted net inflows of $4.8bn,the data showed.

Total assets under manage-ment of the Asian hedge fundstracked by Eurekahedge rose to$136.1bn at the end of August,the highest since December 2008.

While cumulative hedge fundassets in Asia remain about$40bn below their peak hit inDecember 2007, the industry is

seeing a revival from the globalfinancial crisis, with some funds

attracting hundreds of millionsof dollars.

High-profile funds such as Azentus, launched by formerGoldman Sachs trader MorganSze, and the ones planned by CarlHuttenlocher, the former Asiahead of JPMorgan Chase & CosHighbridge Capital and OasisManagements Seth Fischer areexpected to boost industry assetsfurther this year.

Asian hedge funds, includingthose betting on Japan, received a

net inflow for the 16th consecu-tive month in August.

FUND MANAGEMENT

JJB Sports shareholders yesterday voted in favour of a 73.4m sharebonus scheme for top managers.

The share incentive scheme is forfour directors and a small group ofsenior managers and 94 per cent ofshareholders voted in favour.

Managers including chairmanMike McTighe and chief executiveKeith Jones could end up with asmuch as 15 per cent of the companysequity if they hit targets under thefive-year turnaround plan.

McTighe and Jones will eachreceive 25 per cent of any sharesawarded, with the remaining 50 percent handed to senior managersincluding Dave Williams, chief finan-

cial officer, and David Adams, seniorindependent non-executive director.

The group said the scheme wouldallow staff to share in the value ofJJBs recovery.

JJBs plan fortop managershare bonusesgets green light

RETAIL


INDITEX BOOSTED BY OVERSEAS GROWTH

SALES in emerging markets helped Zara owner Inditex achieve a 14 per cent rise in prof-its in the first half. The Spanish owned company, which started selling all its brandsonline in Europe in the period, reported net profits of717m (626m).

SPORTSWEAR retailer JD SportsFashion, whose shops were widely tar-geted by looters during last monthsriots in several cities, yesterday posteda 21 per cent rise in first-half profitand said it was well positioned forfuture growth.

The firm, which trades as JD Sports,Size, Bank, Scotts and Chausport, saidstock totalling 700,000 was lootedfrom a total of 16 stores during theriots.

We are currently working with ourinsurers on the subsequent claim, cov-ering theft of stock, repair costs and

business interruption. We do notbelieve that the riots will have a mate-rial adverse impact on the outturn forthe current year, it said.

The group made a pre-tax profit of

20.1m in the 26 weeks to 30 July, upfrom 16.6m in the same period lastyear. Sales increased by 14.6 per cent to439.8m, driven by strong demand forexternal brands such as Adidas andNike and the firms own brands suchas Mckenzie and Carbrini.

JD said trading since the period endhas continued to improve with like-for-like sales for the core UK and Irelandretail fascias in the seven week periodto 17 September up by 3.3 per cent.

JD Sports, which ended the first-halfwith net cash of 19.1m, is paying aninterim dividend of 4.1p, up 7.9 percent.

Shares in the firm, 57 per cent of which are owned by the Pentland

sportswear group, have lost 10 per centof their value over the last six months.

The group said it had continued itsinternational expansion with deals inSpain and Ireland.

JD Sports earningsup despite 700k

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Introduction by City AM Editor, Allister Heath

ADVERTISING icon M&C Saatchi yes-terday hit a 17 month share pricehigh after announcing a surge infirst-half profits.

The firm saw its pre-tax profitjump almost a quarter to hit7.7m, with revenues ris-ing 23 per cent to71.9m.

A strong performancein its core UK business,

which accounts for 43per cent of its rev-enues, was partly off-set by a challengingenvironment in its Chineseand Australian operations.Its US business posted apre-tax loss for the sec-ond year running.

The agency, found-ed in 1995 by broth-ers Maurice(pictured) and

Charles Saatchi after they were oust-ed from Saatchi & Saatchi, was boost-ed by big contract wins frommultinational clients includingGoogle, Pernod Ricard and Chinesecomputer giant Lenovo.

Chief executive David Kershawsaid: The results for the period showsignificant progress. Trading hasbeen strong in a tough market.

We are confident about ourprogress but conscious of anymacro effects beyond our controlin 2012. We remain vigilant about

costs and maintaining our strongbalance sheet.

Numis analyst Lorna Tilbian upgraded her

full-year forecast,praising thestrong set ofresults, driven by the the suc-cessful pitchingfor and win-ning of interna-tional work.

M&C Saatchiprofits surgeby a quarter

FACEBOOKS full year revenues are setto double this year, reaching a stag-

gering $4.3bn (2.75bn), according toresearch by eMarketer.The firm, which last week decided

to delay its long-mooted IPO until late2012, will take the majority of its rev-enues $3.8bn from advertising,with more than half of this in the US.

The news comes ahead of the F8developers conference, in which thecompany is expected to launch a raftof new products. GEEK SPEAK: P30

NEWS Corp bought back more than$1bn (637m) of its shares in the lastmonth as it seeks to improve relationswith its shareholders.

The transactions are part of a wider$5bn buyback scheme announced inthe wake of News Corps failed bid forthe 61 per cent of BSkyB it does not own.

Meanwhile, the firms phone hack-ing headache got even worse yesterday

after investigators in the US requestedinformation from the firm overwhether it paid bribes to UK police forinformation.

It is already facing a probe in the USover whether newspapers owned bythe company attempted to access thevoicemails of 9/11 victims.

The investigations come on top ofpolice scrutiny in the UK over whetherbribes were paid to serving police offi-cers and the ongoing probe into phonehacking.

Facebook set todouble revenue

News Corp share buybackhits $1bn in first month

Rupert Murdoch has forged ahead with his share buyback schemeBY STEVE DINNEEN

ADVERTISING

NewsCITYA.M. 22 SEPTEMBER 2011

BY STEVE DINNEENMEDIA

19

BY STEVE DINNEEN

TECHNOLOGY

PLAY.COM has been bought byJapanese online retail giant Rakutenin a deal worth 25m plus debt.

The acquisition of the music andfilm specialist is part of a an interna-tional push to compete with USgiants Amazon and eBay.

Play.com, based in Jersey, had ameteoric rise, taking advantage ofEuropean VAT rules to pioneer a freepostage model that attracted 14m reg-istered users and annual sales ofaround 500m.

Play.com soldin 25m dealBY STEVE DINNEEN

TECHNOLOGY

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STATE Bank of India is entering theBritish buy-to-let mortgage marketas part of a push to increase thesize of its retail division.

The lender, which is majorityowned by the Indian government,has just begun offering sums of

between 50,000 and 1.5m to pro-fessional landlords and people

who own second homes.It plans a full-scale public launch

over the winter after giving its newproducts a dry run this autumn.

Deepak Ahuja, head of con-

sumer banking and wealth, toldCity A.M. that SBI would have a con-servative lending policy amid the

weak housing market.It has been stagnant and prop-

erty prices have fallen. We thinkover time there will be an uplift.

We see housing as a bellwether ofthe UK economy and it is going tocome back.

The bank is offering loans for aperiod of five to 25 years with aloan-to-value ratio of 60 per cent.

Mr Ahuja said he expects buy-to-let mortgage customers to beroughly evenly split between prop-erty investors and people who sim-

ply want to rent out a secondhome.

SBI, which is listed in Mumbai, is59 per cent owned by the Indiangovernment. The rest is owned byordinary shareholders.

SBI launches buy to

let mortgages in UK


NEWS | IN BRIEF

DP World owner refinancesPort & Free Zone World, the directowner of London-listed ports operatorDP World, has signed an $850m(544m) loan refinancing, the lattersaid in a statement yesterday. Theloans are secured in part against someshares in DP World, the firm said.

Sources said that the five-year loanhad been signed by 15 banks and wasalmost evenly split between conven-tional and sharia-compliant tranches.

Pinnacle to rise on new dealConstruction work on London's sus-pended Pinnacle skyscraper, which is

set to be the tallest in the City, will berenewed after agreement on a fundingpackage that may be announced incoming weeks, a source said. The dealto rejuvenate the Pinnacle projectincludes a 500m debt facility from agroup of lenders including HSBC andHSH Nordbank.

MORE NEWSONLINE AT

www.cityam.com

SIR John Rose, the former chiefexecutive of Rolls-Royce, has beenappointed as deputy chairman of banking group Rothschild as itseeks to grow in emerging mar-kets.

The veteran industrialist willwork two-and-a-half days a weekfor Rothschilds ContinuationHoldings, which pulls togetherthe groups various interests,from 1 October.

The group said he would workclosely with David de Rothschild, theexecutive chairman and great-great-

great grandson of legendary founderMayer Amschel Rothschild.Sir John ran Rolls-Royce for 15

years until March. He is expected touse the newly created role atRothschild to help it to grow inemerging markets.

He said: After spending most ofmy career in the quoted sector I amlooking forward to working in a pri-

vate company, which like Rolls-Royce takes a long-term view.

SIR JOHN ROSE

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Capital thinking #17

If a lesson was expensive,dont pay for it again.

Been burnt again by playing a gameof double up to catch up? Or haveyou thrown the towel in completely?

MICROSOFT founder Bill Gates hasretained his title as the richest man in America for an eighteenth year, thenew Forbes 400 list out yesterdayrevealed.

Warren Buffett trails in secondplace, with his $39bn (24.5bn) for-tune overshadowed by Gates enor-mous $59bn cash pile. The Sage ofOmaha was the only member of thetop 20 to lose money this year.

Hedge fund manager George Soros,on the other hand, has gained $7.8mto bring his fortune to $22bn and takehim into the top ten richestAmericans.

Larry Ellison, the chief executive oftech giant Oracle that reported quar-terly operating income of $2.7bn on Tuesday, stays in third place with a$33bn fortune.

But further down the list, newerfaces are climbing fast. The youngestmember of the rich list this year isDustin Moskovitz, aged 27, who wasone of the co-founders of Facebook.

Facebook founder Mark Zuckerbergwas the biggest dollar gainer, adding$10.6bn to his wealth in the last year.

The 18 new entrants include SeanParker, the founder of music serviceNapster and one of Facebooks mostprominent investors.

Also new to the rich list is John WHenry, the asset manager who ownsLiverpool Football Club and the BostonRed Sox, at number 375, and fashionchain Forever 21 founders Jin Sook andDo Won Chang at 88.

Forbes said 70 per cent of the list ismade up of entrepreneurs this year an all-time high. Cost of entry was$1.05bn, up from $1bn last year.

There are 42 women in the Forbes400 the same as last year. Wal-Martscion Christy Walton is the wealthiest,with her family fortune of $24bn mak-ing her the sixth-richest American. Sixother members of her family are onthe list in their own right.

Of the 400 members of the famouslist, 262, almost two-thirds, saw their wealth increase over the last twelvemonths, compared with 217 in theyear to August 2010.

Forbes listed Groupon founderAndrew Mason, Twitters Jack Dorseyand musician P Diddy as names towatch next year.

The full list is available atwww.forbes.com/forbes400.

Gates is still

richest manin America

BYMARION DAKERS

MEDIA


NEWS | IN BRIEF

BHP Billiton pays chief $11mMining giant BHP Billiton paid chief exec-utive Marius Kloppers close to $11m(7.04m) during 2011, a year that sawthe firm post a record profit of $31bn. Hisbase salary, along with those of otherdirectors, was raised four per cent to$2.1m, with the rest of his eye-wateringpayout made up of benefits and shareawards. In its annual report yesterday,the firm listed its main risks as a drop incommodity price linked to the Eurozonefinancial crisis, a fall in Chinese demandand regulatory clampdowns. BHP said ithad two fatalities at its plants in the lastyear. The metals-to-energy giant said ithas 583.1m barrels of oil equivalent inreserves as of the end of June a figure

that is set to rise thanks to its $12bnacquisition of Petrohawk in August.

Saab wins bankruptcy reprieveStruggling car maker Saab gained freshbreathing room in its fight for survivalyesterday when it won a court appeal tobe granted protection from creditorswhile it awaits Chinese investment. The60-year-old company has been fightingto stay afloat for most of this year afterit ran out of cash.

BP investors raise Russian claimMinority shareholders in TNK-BP, theRussian oil firm half-owned by BP, havemore than doubled their claim for dam-ages over the firm's attempt to ally withRosneft to 154.3bn roubles (3.16bn).The litigation led to BPs Moscow officebeing searched by bailiffs last month. BP

said the amount of alleged damages isunproven and baseless.

Microsofts Bill Gates is the richest man in America Christy Waltons Wal-Mart fortune puts her in sixth Mark Zuckerberg has made more than $10bn this year George Soros has entered the top ten this year

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EMPLOYEES are currently faced

with a barrage of contradicto-ry news and opinions abouteconomic and business fore-

casts and the potential impact ofthese on their own career prospects.

While some companies within thefinancial services sector may bemaintaining a tight hold of theirpurse strings, others have seen some

buoyant remuneration activity inthe past twelve months, particularlyfor those with niche specialist prod-uct experience. While recent newshas some employers cautious, a tal-ent shortage in some areas persistsand highly skilled candidates willcontinue to be in demand.

In recent months, it has becomeclear that although many firmshave reduced bonuses, there has

been an increased focus on salaries,which have increased over the past

12 months. So what should you bedoing to ensure your salary is fairand competitive?

...FROM YOUR CURRENT EMPLOYEROver recent months you may havetaken on additional responsibilities,

been under pressure to work longerhours and not seen any increase to

your remuneration. If so, it may betime to negotiate a salary increase.

Even if your company says it still hasa salary freeze in place it may bepossible to negotiate a pay rise if youcan demonstrate your value to thecompany. To improve your chancesof success, consider these simplesteps:

STEP ONE: Do your homework.Review salary surveys, talk withrecruiters and check comparableroles on online job boards.

STEP TWO: Track your successes.Make a solid list of your contribu-tions and have it to hand duringthe salary negotiation. Consider

where youve provided return oninvestment and why you deservea raise.

STEP THREE: Be flexible. Before youask your manager about a raise,

know specifically what you wantand be open to other forms of remu-

neration. If you ask for a 10 per centpay increase and youre told theresno money in the budget, maybe youcan negotiate an extra week ofannual leave or more flexitime.Step four: Time it right. Hows yourcompanys business doing? If your

organisation has undergonerecent budget cuts orredundancies, its not thebest time to ask.

...FROM A DIFFER-ENT EMPLOYER

If you have notsecured the

pay rise youwere looking

for or if youbelieve your

career wouldflourish else-

where, it may beworth moving toanother organisa-

tion.Moving company

may help you secure apay rise, with newsalaries potentially 10-

15 per cent higher thanthose at the previous job.Below are some steps forsecuring a fair and compet-

itive salary with a newemployer:

STEP ONE: Demonstrate that you arethe best person for the job andmaintain a positive and committed

view towards the new company andthe role.

STEP TWO: From day one, be trans-parent about your long-term careerambitions and remuneration expec-tations. Establishing an open dia-logue with a specialist recruitment

consultant will help you land acareer, not just a job.

STEP THREE: Dont just look atsalary. The overall career opportuni-ty, including the work environmentand your rapport with your manag-er will highly influence your overall

job satisfaction.

STEP FOUR: Read the contract thor-oughly. A good recruitment consult-ant will be able to explain anyconfusing terminology, and sup-port, you or act on your behalfthroughout the negotiation process.

But remember, whether you areseeking a pay rise from your existingemployer or moving to anotherfirm, negotiating on remunerationhas to be a win-win scenario for

both parties. If you are excited andmotivated about the role, your

employer will receive genuine valuefrom their investment in you.

W

EVE been told that theboom years are over. Thefast-growth sectors of

City employment haveground to a halt. New job opportu-nities will be fewer and far

between. Well, that is unless youwork in risk and compliance: thefallout from the credit crunch hasgiven a new lease of life to thesesticklers for detail.

Ian Clark, Hayss resident riskand compliance expert, says there ishuge demand for these workers:The last 18 months has seen anacute shortage of talent in this sec-tor. But what do these jobs involve,

where are they going and how canyou get in? We asked Clark for theinside scoop.

Q.WHAT SKILLS DOYOU NEED?A. For compliance, you need alegal or technical background.

A strong, sound knowledge of risk

and controls, audit and businessreview practices. The good jobs, ofcourse, go to those with direct

compliance experience. For risk,you need a mathematical back-ground a degree in maths, eco-nomics, engineering or science astrong understanding of financialproducts and middle and backoffice practices within banks.

Q.WHAT ARETHE PERKS?A.Lots of people dont realise thehigh-level business exposure

you get in these jobs. Risk and com-pliance employees usually dealdirectly with the chief operatingofficers and the board. Theres a lotof international travel too.

Q.WHAT DOES ITTYPICALLY PAY?A.The remuneration packages inthese sectors are much likethey are in other banking jobs: you

get all the healthcare packages,pension deals and bonus structuresthat you get elsewhere in the bank.

Depending on the bank, gradu-ates earn between 25-35,000. Themiddle ranks are harder to define,

but usually earn somewherebetween 45-70,000. The higher ech-elons are rewarded with salariesover 80,000, with the head of com-pliance and chief risk officers some-times earning 200,000.

Q.HOW DO YOUGET IN?A. I think the big banks have grad-uate schemes. JP Morgan, Bankof America and Barclays certainlydo. Otherwise, those with comple-mentary backgrounds might get in.For compliance, this might be alegal background. For risk, thismight be strong experience inaccountancy or mid-office productcontrol.

Q.WHAT MAKES YOU STAND OUTAGAINST THE CROWD?A.Businesses are always lookingfor leaders for these roles: peo-ple who are able to bring togetherstakeholders, by influencing and

building rapport with everyonefrom the front right through tothe back office. I dont deal withgraduates, but those who play teamsports might stand out torecruiters.

This years hot

sectors: riskand compliance

Take note: this is agrowth sector

Picture: ALAMY

NEIL OWENHEADHUNTER, ROBERT HALF

Donata Huggins asks Ian Clark, Hayssexpert, for the career ladder low down

Business Features | Careers23

How to go about asking for that raise

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24 The ForumCITYA.M. 22 SEPTEMBER 2011

GLORY be, we are to be saved!

As the TUC, President NicolasSarkozy, Chancellor AngelaMerkel and the European

Parliament agree, impose aFinancial Transactions Tax (FTT)upon the banks and Europe, or atleast the euro, will be saved. The

banks shall pay for their errors andkittens will gambol in sunshineonce again.

The FTT is a Tobin Tax, the RobinHood Tax. Levy just a teensie 0.05per cent tax on every financialtransaction and raise hundreds of

billions to do lovely things. Supportthe euro perhaps, or pay off theGreek debts. Oxfam wants to allevi-ate poverty, the eurocrats think theyshould just spend it.

There are, however, a few prob-lems with the idea. We had a globaleconomic crisis due to mortgagesand securitised bonds, and today

were on the lip of another thanksto an excess of government bonds.None of these things are heavilytraded, so a transactions tax has lit-tle to no effect on them. In fact,none of the things likely to be taxedcaused problems: the foreignexchange markets, options, futures,money markets, interbank loans...Not taxing the problem and taxing

what was not a problem is about parfor the political course.

Another justification offered isthat speculation causes price volatil-ity. Volatility is bad, so why not taxspeculation in order to reduce it.Unfortunately, only outside the eco-nomic literature do we find theassertion that speculation increases

volatility: inside it, the insistence isthat speculation reduces such

volatility. As Adam Smith told us it

did 235 years ago in book four, chapter five of

The Wealth of Nations. So the FTT aims to taxaway the activity that reduces volatility:entirely counterproductive.

Whats worse than these childish misun-derstandings, though, is an entire gawpingignorance of tax incidence. Who hands overthe cheque for a tax is not necessarily the per-son who is carrying the economic burden ofthat tax. Weve known for over a century,since Edwin Seligmans On the Shifting andIncidence of Taxation, published in 1899,that companies do not pay taxes. A tax leadsto a lighter wallet for some live human being:companies are not live human beings so itcannot be them that are paying. So while thedesire to make the banks pay might be sin-cere, imposing a tax upon the banks isntgoing to achieve that. Banks, being compa-nies, cannot and do not pay taxes.

cityam 2011-09-22

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