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www.cityam.comIssue 1,526 Tuesday 6 December 2011 FREE

BUSINESS WITH PERSONALITY

Certified Distribution

28/02/11 - 03/04/11 is 105,180

RATING AGENCY DROPSEUROZONE BOMBSHELL

the impact on Paris finances if itslenders require bailouts.

The only two Eurozone countriesto escape the new downgrade threatwere Cyprus, which is already on neg-ative watch, and Greece, on thegrounds that its debt is already junk.

Those that were affected now face

a 50-50 chance of being downgradedin the next 90 days, although S&Psaid it would try to come to a conclu-

sion sooner. The triple-A ratednations could see a one-notch down-grade and the others a two-notch fall.

The timing could hardly have beenworse, coming after a show of unityfrom German Chancellor AngelaMerkel and French President NicolasSarkozy sent investor sentiment soar-

ing yesterday afternoon.European stocks had risen, withthe French CAC40 up 1.15 per cent,

the FTSE 100 up 0.28 per cent and theGerman DAX up 0.42 per cent.

A range of austerity measuresunveiled by Italian Prime MinisterMario Monti had also buoyed confi-dence in Rome, with its ten-year yields dropping 73 basis points tobelow six per cent.

But in markets that were still open,the trend reversed sharply after newsof S&Ps move leaked out: the Dow

RATINGS agency Standard & Poors(S&P) wrecked a mood of growingoptimism about the Eurozone debtcrisis last night by warning that 15 ofthe regions 17 countries face creditdowngrades if politicians do not get agrip.

Less than a month after the EUthreatened a crackdown on ratingsagencies, S&P blasted Brusselsdefensive and piecemeal manage-ment of the crisis, blaming the openand prolonged dispute amongEuropean policymakers for destroy-ing investor confidence.

Those placed on negative creditwatch include all of the currencyunions remaining triple-A rated sov-ereigns: Germany, France, Austria,Finland, the Netherlands andLuxembourg.

S&P cited rising systemic stressdue to an approaching recession, adysfunctional political process and abank credit crunch, with the agencyestimating that Eurozone banks willsee 205bn (131bn) of their debtmature in the first quarter of nextyear.

French banks are a particularworry, S&P said, highlighting that the

value of their external debt is greaterthan Frances GDP. The agency saidthat the figures raise questions about

BY JULIET SAMUELEUROZONE

fell over 100 points in response andthe euro dropped versus the dollar.

The agency preemptively defendedthe timing of its move, implying thatit would serve to pile pressure onEurozone leaders to make substan-tive progress at their next summit onThursday and Friday.

But its actions assume that thereactive and insufficient policyresponses to date will continue, itsaid, setting the scene for another,possibly steep, drop downwards ininvestor confidence.

Some analysts had begun to raisequestions after Merkozys joint pressconference, in which they outlinedplans to increase Brussels controlover profligate states.

In particular, economists aredoubtful that Germany and Francewill be able to persuade all the otherEurozone members to sign up totreaty changes.

S&P said that fiscal oversight willneed to come alongside a greaterpooling of fiscal resources in orderto avoid a downgrade threat.

But that is likely to prove unpopu-lar in Finland and Slovakia, both of which resisted passing the mostrecent package of changes to boostthe euro bailout fund.

France and Italy will respectively

see

126bn and

91.2bn of their debtmature in the next three months.ALLISTER HEATH: P2, MORE: P2

CHARITY APPEAL REACHES 200,000 P8AND WHY THE GOVERNMENT IS BACKING IT P23

Angela Merkel and NicolasSarkozy saw optimism evaporate

Picture: REUTERS

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News2 CITYA.M. 6 DECEMBER 2011

Merkozy dealon spendingPROFLIGATE governments will be pun-ished by other euro states under toughnew rules unveiled by GermanChancellor Angela Merkel and FrenchPresident Nicolas Sarkozy yesterday.

But the Eurozones bailout fund willnot have the power to negotiate hair-cuts with private-sector bondholdersand overspending states will not behauled in front of the EU courts, previ-ous German demands that Berlinagreed to drop yesterday.

Instead, there will be sanctions onthose spending too much, to be decid-ed by a qualified majority vote byother states.

The political agreement paves theway for European Central Bank (ECB)boss Mario Draghi to allow the Banks balance sheet to be used to support

failing banks and governments.Stock markets jumped on the news

and investors rushed back into Italianand Spanish bonds on hopes that theplan marks a turning point in the sov-ereign debt crisis. However, the trendreversed after news of S&P ratingsactions leaked out.

The pair known as Merkozy said that they will renegotiate EUtreaties to implement the deal butthat if they cannot get agreementfrom all 27 EU countries, they willseek a separate Eurozone-only treatyfor the 17 members, although eventhat could be difficult to achieve.

BY TIMWALLACE

EUROZONE CRISIS

BOURSES VIE FOR TIE-UP WITHKAZAKH EXCHANGE The London Stock Exchange andRussias two main exchanges are vying to secure a strategic partner-ship with the Kazakhstan StockExchange as the bourse becomes thelatest play on the central Asian coun-trys huge natural resources. Themanoeuvring comes as the Kazakhexchange is preparing for the launchof a peoples IPO scheme designedto persuade Kazakh citizens to investin a wave of big privatisations andrevive dwindling activity on theexchange.

ICG STARTS DISPOSAL PROCESS FORCPAIntermediate Capital Group is look-ing to sell CPA Global, one the largestpatent management groups in the

world, barely two years after buyinginto it. The company is hoping to cash

in on the growing market for intellec-tual property management and dis-

putes.EURO DEBT CRISIS BITES INTO PRICEOF COCOA The sovereign debt crisis in Europehas claimed an unexpected casualty the price of cocoa. Europe is thelargest consumer of cocoa, the beanused to manufacture chocolate, and worries about a slowdown in theregions consumption combined witha bumper crop in west Africa, themain supplier, has pushed prices totheir lowest point in three years.

DUBAI EYES REFINANCING OF $10BNOF STATE DEBTDubai has for the f irst time raised theprospect of restructuring some bondsnext year as the emirate and its state-related companies face a wall of$10bn in debt repayments. The emi-rate is also pursuing other options,

including raising $2bn in funds fromliquid local banks.

REMEMBER THE ERA OF THE FRIENDLYLOCAL BANK MANAGER? The managers of more than 600Lloyds Banking Group branches willbe able to choose their opening hoursif NBNK, the specialist bank biddingvehicle, succeeds in buying them, itschief executive said yesterday. GaryHoffman said that branch managerswould not have opening hours dictat-ed to them centrally but would beable to choose hours to meet theneeds of local customers.

40M UPGRADE FOR OLYMPIC CEREThe budget for the opening and clos-ing ceremonies at the LondonOlympics has been doubled to 81min order to better exploit a greatnational moment, in a tacit admis-sion the shows risked underwhelm-ing the world. The move comes after

David Cameron was shown previewsof the Games productions.

OBR CREDIBILITY ON LINE AFTER FOURDOWNGRADES The credibility of the independentOffice for Budget Responsibility (OBR) would be threatened if theGovernments fiscal watchdog has torevise its forecast significantly againnext year, economists have warned. The credibility of the independentOffice for Budget Responsibility (OBR) would be threatened if theGovernments fiscal watchdog has torevise its forecast significantly againnext year, economists have warned.

VODAFONE BOSS SCOLDS OFCOM FORLUMPING TELCOS TOGETHER Vodafones UK chief executive, GuyLaurence, has warned Ofcom againstlumping together the big fourmobile operators after the regulatoraccused them of jeopardising eco-

nomic growth by taking disingenuouslegal positions.

BRONFMAN STEPS DOWN AS WARNERMUSIC CHAIRMANEdgar Bronfman Jr. will step down aschairman of Warner Music Group,effective 31 January, he said in amemo to employees, but will remainon the board of the worlds numberthree recorded-music company. Areplacement hasn't been named, butone is expected before the end ofJanuary, according to a person famil-iar with the matter.

CREDIT SUISSE TO SPLIT EMEAPRIVATE BANKING UNIT IN TWOCredit Suisses private banking chiefHans-Ulrich Meister, is pushing ahead with plans to strengthen the Swiss banks business of managing thewealth of its richest clients. In the sec-ond big strategic step in less than amonth, Meister said the bank will

split its Europe, Middle East andAfrica private banking unit into two.

WHAT THE OTHER PAPERS SAY THIS MORNING

S&P was right to warn the Eurozone

THERE was anger at Standard andPoors, the rating agency, last night,focusing on the timing of its decisionto put fifteen Eurozone countries onnegative watch. I disagree: for once,the agency demonstrated braveryuncharacteristic of the times we livein. Im no defender of the rating agen-cies, who performed appallingly dur-ing the bubble (and have a longhistory of being overly optimistic,including in the run up to the Asiancrisis of 1997 and the Russian defaultof 1998). Their opinions for that is allthey are are given far too much

weight by the authorities, who havebuilt their ratings into numerous reg-ulations (and until very recently artifi-cially restricted the number ofagencies with official recognition).

The agencies are being asked to pro-vide near-omniscient accuracy, of thesort the worlds best investors couldonly dream of, which is ridiculous.That said, much of the anti-S&P talklast night was merely a case of shoot-ing the messenger. The only thingthat is ridiculous is that so manyEurozone countries still retain theirAAA statuses. They should have beenstripped of them many months ago;given that the very concept of a risk-free asset is questionable, over-lever-aged, mismanaged economies saddledwith a currency they do not controlclearly have a non-zero and rising riskof default. S&Ps announcement mere-ly means that there is a 50 per centchance that these countries will bedowngraded. It is not even certain.

The highly spun deal announced byNicolas Sarkozy and Angela Merkel

yesterday, which briefly sent the mar-kets into a paroxysm of over-exuber-ance, is weaker than it looks and it ismerely a proposal which still needsthe approval of 17 nations to be

enshrined into law. Far from being aproper mechanism to ensure fiscalprobity across the Eurozone, it is onlyan admittedly stronger version of thedeeply flawed stability and growthpact adopted as part of economic andmonetary union. Im not convinced.

Take the agreement that there willbe automatic sanctions for Eurozonecountries running deficit above 3 percent of GDP: a qualified majority votewill still be able to block the sanctions in other words, in a crisis of the kindwe are in now, with most nations bor-rowing too much, the rules would beignored. The European Court of Justice will only have the power tojudge whether countries have suitablychanged their constitutions toenshrine fiscal rules but notwhether they are actually meeting orbreaching the rules. The permanent

bailout fund will be brought forwardto 2012, with decisions made by quali-fied majority. The problem, of course,is if the guarantors of the fund aredowngraded from AAA- as is likely it

will find it much harder and moreexpensive to borrow, making it almostuseless to contain a crisis.

Last but not least, the provision thatthere will no longer be private sectorinvolvement clauses placed into bailout agreements rightly doesntmean all Eurozone debt is guaranteedby everybody else. Sarkozy concededthat under no circumstances canEurobonds be considered a solution tothe crisis. It simply means that futuredefaults will look like Greeces: privatesector creditors will do ad hoc, volun-tary deals about haircuts. There will(regrettably) be no automatic write-offof debt whenever a country is bailedout. All in all, far less radical stuffthan the headlines would suggest. TheEurozone remains in deep crisis.

[email protected] me on Twitter: @allisterheath

ITALIAN Prime Minister and financeminister Mario Monti unveiled asave Italy plan in Romes parlia-

ment yesterday, warning that failureto adopt it would see the country godown the same path as Greece.

The lions share of the budget cutswill come from an unpopular 10bn(8.56bn) property tax. Tariffs on pri-vate jets, yachts and sports cars willalso increase, while VAT will go uptwo per cent if necessary.

The country will also switch over todefined contribution rather thanfinal salary pension schemes for pub-lic sector workers. And those withpensions at the top end of the spec-trum will their pay-outs link to infla-tion abolished.

There will also be a 1,000 cap oncash transactions to try and stampout tax evasion.

Yield on Italys ten-year debt fellsteeply from 6.6 per cent to under sixper cent following the news.

Monti unveilssave Italy plan

EUROZONE

EDITORS LETTER

ALLISTER HEATH

Editorial StatementThis newspaper adheres to the system of

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

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ECB boss Mario Draghimay be called on touse the Banks funds toprop up failing banksand governments

4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900 Fax: 020 7283 5334Email: [email protected] www.cityam.com

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 Hepple

CommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

AT A GLANCE: THE LATEST EURO RESCUE

Enforced balanced budgetsGovernments will be forced to keep budgetdeficits below three per cent of GDP eachyear. Real fiscal restraint may give ECBboss Mario Draghi the confidence to loosenpolicy and to start printing money, presum-ably the deals secret objective. Automatic punishmentsPreviously, budgetary offenders were onlypunished if a qualified majority of countriesvoted to apply sanctions. Under the newproposals, a qualified majority will have tovote against to stop a sanction. A golden balance ruleAs if that was not enough, Eurozone mem-bers will be required to implement a gold-en rule domestically, making sure they actto bring budgets back towards balance,

regardless of whether or not they havedeficits of under three per cent of GDP. No small countries can stop bailoutsMerkel is taking no more chances afterSlovakia nearly derailed the bailout propos-als in October. The European StabilityMechanism (ESM) is to be brought forwardfrom 2013 to 2012, and a qualified majori-ty probably of 85 per cent of countrieswill be required to vote on its use, stoppingone small country getting in the way again. Regular meetings of euro leadersAs long as the crisis continues, Sarkozyannounced, we want a monthly meeting

of heads of state and governments. Eachmeeting must have a precise agendafocused on the goal of boosting economicgrowth in the Eurozone. The thinkingbehind this is to make sure all governmentsare acting in unison, and to boost growth seen as the best way of reducing debt bur-dens in the long-run. No more private sector bond lossesGreece may have been helped by a hair-cut imposed voluntarily on private sectorbondholders, but Merkel and Sarkozy madeit clear that they do not want to see auto-matic haircuts in future whenever a coun-try asks for a bailout. It is unclear what thisreally means; it is unlikely to mean that nocountry will ever be able to default (forwhere will the cash come from?).

It needs to be agreed this week...Merkel and Sarkozy want other leaders toagree to the plan at the summit onThursday and Friday. If they do agree, theplan can be negotiated and finalised beforethe French Presidential election in Marchand formally ratified shortly after. ... but might not be that easyIt is no mean feat to get 17 Eurozone coun-tries to agree on anything, let alone treatychanges. Economists expect the other 10EU members to disagree, leaving theEurozone 17 to plough on alone if theymanage to agree anything at all.

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THE UKs services sector registeredincreasing output growth inNovember, with its PMI rising from51.3 to 52.1.

However, employment is believed tohave fallen by several thousand as thepicture for new orders remained weak.

In the US, services growth declinedslightly by remained modest, fallingfrom 52.9 to 52.0 in November, defyingthe European slowdown.

Output across the whole Eurozonecame in at 47.0, its third consecutivemonth of decline, prompting econo-mists to warn growth forecasts already in contraction territory maybe cut further. Any PMI reading below

50 represents a fall in output.The composite PMI figures includ-

ing services, manufacturing and con-struction data fell into negative terri-tory for Germany for the first timesince July 2009, at 49.4.

And France, Italy and Spain all con-tinued to decline, with composite PMIsof 48.8, 44.8 and 38.2 respectively.

Manufacturing and constructionPMIs were released last week, joined byservices figures yesterday.

Services PMI of 47.5 for the currencyunion as a whole represents a declinein output though at a lower pacethan in October, which registered aPMI of 46.4.

Spanish output collapsed further,hitting a 32-month low of 36.8.

France and Italy both experienceddeclining services output, with PMIs of

49.6 and 45.8, while Germanys servicesector barely grew in the month.

A MAJOR shareholder group hasslammed banks for letting executivepay get out of sync with results, in asign of growing investor activismover the hot button issue of bankerbonuses.

The Association of British Insurers(ABI), whose members own some 15per cent of FTSE 100 stock, has sent aletter to the boards of the UKs fivebiggest banks calling for all banksto fundamentally restructure theirremuneration practices.

It can no longer be business asusual for this remuneration round,writes ABI chief Otto Thoresen. [Ourmembers] expect to see significantlylower bonus pools and individualawards given the current market cir-cumstances.

He adds that there is no longer ameaningful link between pay andbottom line performance.

In particular, Thoresen complainsthat banks prioritise bonuses overdividends when it comes to cuttingcosts, with too much value being

delivered to employees in contrast tothe dividends paid to shareholders.

Given lenders dismal share priceperformance and mass lay-offs ofinvestment bankers, he suggests thatnow is the time to redress aninequitable balance between payand shareholder rewards.

Given this lack of competition forstaff, our members believe that theretention risk is now reduced,Thoresen writes.

The letter is evidence of growingdisquiet among bank investors overthe eroding value of their stock.

It will bolster political efforts toshift the balance of power towardsshareholders in deciding on bankerspay. But depending on the outcomeof the ABIs discussions with banks,it could undermine arguments for astatutory pay crackdown above andbeyond shareholder intervention.

Thoresen also wades into the argu-ment over lenders accounting prac-tices. There have also beenquestions over the portrayal of finan-cial positions and performance, he writes, implying that banks shouldreconsider their methods.

ABI: dividend

should comebefore bonus

BARCLAYS has made a 2.5bn offer tobuy back its debt in order to bolster itscapital levels.

If taken up by holders of the banksbonds, the move could book Barclays aprofit and reduce the amount of itsdebt that is non-compliant with newBasel III capital rules.

The bank is offering a price for the

bonds that is above their current mar-ket price but less than the cash itraised by selling them, hence thepotential for it to make a profit fromthe deal.

The move will make concrete someof the own credit earnings thatmany banks booked in recent resultsstatements, despite most of them hav-ing not actually realised the gain bybuying back their debt.

Investors could decide to participate

if they see it as an opportunity to cuttheir losses and avoid suffering fur-ther drops in the value of their bonds.

The bank did not provide an esti-mate for how much it could see its cap-ital ratio bolstered by the deal.

Barclays will see 17.7bn of its debtmature next year, according to ana-lysts, and therefore is likely to have toissue new bonds in a highly uncertainregulatory atmosphere exacerbated bythe UKs Vickers Commission.

Barclays makes 2.5bn offerfor its debt to boost capital

Services sector in the UK grows

as euro countries slump further

BY JULIET SAMUEL

BANKING

ECONOMICS

Bob Diamonds firmwants to book somegains on the fallingvalue of its debt

Picture: REUTERS

BY JULIET SAMUELBANKING

News 3CITYA.M. 6 DECEMBER 2011

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HSBC was ordered to pay a 10.5mfine yesterday and accepted it wouldhave to pay almost 30m of compensa-tion to clients of one of its subsidiariesfor advising elderly pensioners toinvest in risky products.

The Financial Services Authority hitHSBC with the fine, its biggest ever forretail practices, after the banks NHFAadvisory business wrongly told almost2,500 of its clients to invest in unsuit-able investment products for fiveyears until 2010.

The FSA said it found the wrongdo-ing particularly significant becauseNHFAs customer base was particular-ly vulnerable.

NHFA was trusted by its vulnerableand elderly customers. It breachedthat trust to sell them unsuitableproducts. This type of behaviourundermines confidence in the finan-cial services sector, said the FSAsTracey McDermott.

NHFAs customers, aged almost 83 years on average, were advised toinvest in asset-backed products suchas investment bonds to help pay fortheir long-term care at the time when

they entered into residential homes orother care services.

But the bonds minimum five-yearinvestment period was frequentlylonger than their life expectancy andthe clients, who invested about115,000 each or almost 285m intotal, were forced to pay high fees andlose money to withdraw early.

This should not have happenedand I am profoundly sorry that it did,said HSBC Bank chief executive BrianRobertson. The bank received a 30 percent discount on the fine after agree-ing to settle early.

Separately, HSBC said it would cut330 UK jobs from its commercialbanking operations as it restructuresits regional presence.

HSBC hit with

10.5m FSAmis-sale fineBYALISON LOCK

ENFORCEMENT


BP ACCUSES HALLIBURTON OF COVER UP OVER OIL SPILL

BP has accusedHalliburton ofdestroying evi-dence of its inad-equate cementwork on the Gulfof Mexico oil wellthat blew out lastyear, and called

for the firm to bepunished. Theaccusation, in aBP court filing,comes ahead of atrial, expected inFebruary, toassign blame anddamages for theApril 2010Macondo spill.

ANALYSIS l HSBC Holdings

p

29 Nov 30 Nov 1 Dec 2 Dec 5 Dec

500

510

520

490

480

518.005 Dec

ANALYSIS: THE FSAS BIGGEST RETAIL FINES

Bank Fine Date

HSBC 10.5m December 2011

Barclays 7.7m January 2011

Alliance & Leicester 7m October 2008

Coutts 6.3m November 2011

Credit Suisse 5.95m October 2001

Bank of Scotland 3.5m May 2011

RBS and Natwest 2.8m January 2001

Scottish Equitable 2.8m December 2010

GMAC-RFC 2.8m October 2009

Standard Life Assurance 2.45m January 2010

Source: FSA

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GERMANYS second-biggest bank,Commerzbank, said it would buyback600m (515m) of its own hybridequity from investors yesterday in abid to shore up its capital position tomeet tough new Basel III capitalrequirements due to take effect in2013.

Commerzbank said it would buy back the trust-preferred securities,which are a mixture of debt and equi-ty, at only between 40 and 52.5 per

cent of their original issue price,allowing it to book a capital gain.

The bank will buy back about1.2bn of a total 2.23bn of its hybridinstruments in issue to increase itscore Tier 1 capital ratio, which needsto be nine per cent by 2013.

The transaction marks anotherstep in optimising Commerzbankscapital structure in light of the transi-tion to the new regulatory require-ments of Basel III. Execution of thetransaction will have a one-off posi-

tive effect on the consolidated resultsof the bank, it said in a statement.

Commerzbank is loaded up withholdings of Eurozone sovereign debtand has said it needs at least 2.9bn ofadditional capital to meet the newhigher threshold for capital heldagainst risky assets specified by theEuropean Banking Authority.

It fell to a worse-than-expected687m quarterly loss last month after writing down its Greek bond hold-ings by 50 per cent in line with theagreement struck with European gov-ernments.

German bankto buy back600m debt STRICKEN bank Dexia has securedtemporary financing guarantees fromBelgium, France and Luxembourg tokeep it running while the countries

cement the bailout they put togetherin October.

Yesterday the Franco-Belgian banksaid a draft temporary guaranteeagreement had been submitted to its board of directors and to theEuropean Commission, which willneed to determine whether the res-cue complies with state aid rules.

KBC Securities said in a note thatthe agreement gave Dexia temporaryrelief, although it was still tapping aconsiderable amount of funds fromthe European Central Bank and theguarantee fee was a potential nega-tive.

Dexia was rescued by the three

states in October, receiving 90bn(77bn) of guarantees to cover its bor-rowings and accepting that Belgiumwould take over its operations therefor4bn.

However, these guarantee have yetto take effect, sparking talk the stateswere wrangling about how the bur-den should be shared.

Dexia said the temporary guaran-tee agreement would cover as muchas 45bn of its financing needs up to31 May.

Dexia closer towinning freshaid guarantees

Commerzbank boss Martin Blessing wants to increase bank capital Picture: REUTERS

BYALISON LOCK

BANKING

BANKING


COMMERZBANKS CAPITAL BASE

Q.WHAT IS HYBRID DEBT?

A.Hybrid debt is a broad term forinstruments that act like bothdebt and equity and often convertfrom a debt-like security to equity in

a trigger scenario such as a finan-cial crisis. Hybrid securities usuallypay a coupon or dividend until theirmaturity date, in the same way as aloan or bond would, but can givethe investor the option of convert-ing them to shares when theymature. A common form used bybanks are convertible contingentcapital or CoCos, which increasetheir capital base without issuingadditional equity and can be writ-ten off in a crisis.

Q.WHY IS THEBANK BUYINGBACK DEBT?

A.The bank holds billions of eurosof Eurozone sovereign debt andrequires at least 2.9bn of fresh capi-

tal as it writes off the value of riski-er assets such as Greek bonds. It stillhas to repay the 18.2bn bailout itreceived from the German govern-ment in 2008, is still 25 per centstate-owned, and may be forced toseek further aid if it cannot raise itsregulatory capital ratio to nine percent by 2013 as authorities demand.Buying back its hybrid debt at abouthalf of the original sale price willcreate a capital gain and boost itsregulatory capital ratio.

Q A&

ANALYSIS l Commerzbank AG


1.45

1.50

1.55

1.40

1.35

1.30

1.445 Dec

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City A.M. Christmas Appeal8 CITYA.M. 6 DECEMBER 2011

CHIEF EXECUTIVEOPPORTUNITY INTERNATIONAL UK

EDWARD FOX

City wealth

manager addsto our appeal

Proudly sponsored by Matching your donations with

WERE delighted at the huge support for the appealso far and want to push our fundraising even higher

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Lots include 18 holes of golf with Sam Torrance,former European Ryder Cup team captain; watchingArsenal play Queens Park Rangers on New YearsEve;and lunch and polo at the Hurlingham Club.

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Innovation is the key to this. Weve pio-neered the use of electronic and mobiletechnologies to reduce transaction costs tobring banking services to people in theirown communities.

THERE is more good news for CityA.M.s Christmas appealwith the addition of a gen-erous personal gift fromGreg Knight (pictured),practice principal at Citywealth manager WelbeckGroup today.

Knights significantdonation takes our totalto an incredible 200,000after only two weeks offundraising.

Knight, a formerLondon Scottish rugby player whofounded Welbeck in 2001, wanted to back our appeal because it chimes with his self-starting approach toboth business and life.

Not only does OpportunityInternational provide business loansto African nations and the poor it

helps deliver long-term, self-support-ing projects that are crucial for eco-

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starters and we stronglysupport the City A.M.Christmas appeal but alsothe ethos of the charity. It isa fresh and sensibleapproach to long-termdevelopment and we areright behind them. It is apleasure to support finan-cially and philosophically.

With two weeks of our appeal leftto go, there is still time to donate andwe welcome all gifts large and smallby text, by telephone or via our web-site. Through our match fundingagreement, all donations from UKindividuals will be matched by theGovernment pound for pound.

WEEK TWO UPDATE

CITY A.M. CHRISTMAS APPEAL

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NEWS | IN BRIEF

Banks pitch for diamonds IPOSeveral banks pitched yesterday for arole in the forthcoming Hong Kong IPOof the UK high-end jewellery chain GraffDiamonds. The beauty parade wasarranged by Rothschild, which is acting

as an adviser to the company. Onebanker said he expected just four banksto be chosen for the process. Graff isexpected to be valued at around $5bn(3.2bn) and is scheduled for a flotation

in the first half of 2012. Analyst meet-ings with the company are due withinthe next 24 hours. Although the IPOitself will take place in Hong Kong,sources said the pitching process wasbeing dealt with in London. Banks have

to demonstrate a large far eastern pres-ence. Bankers described the process ashectic and said they hoped to find outwho the members of the syndicate arebefore the end of the month.

BoA Merrill Lynch wants little Osborne fallout

LOSING a star banker is obviouslynever easy for an investment

bank, dependent as it is on a raftof client relationships. But losing

a banker amid speculation of a regu-latory probe is especially problematic,since the bank is forced to keep a lidon the reasons for the departure untilthe regulatory issues have all been

dealt with.So it is that BoA Merrill Lynchfinds itself in a bind, having last weekparted company with AndrewOsborne, one of its best known

bankers, while he awaits a hearingwith the Financial Services Authority.There was no official comment yester-day on what the FSA inquiry is allabout, but interestingly the issue has

been known about for months bysome at Merrill Lynch.

Osborne had a host of solid clientrelationships that now appear to be

vulnerable to poaching from hungrycompetitors such as Morgan Stanley,Goldman Sachs, RBC or Barclays

Capital.How long, for example, will TullowOil, who yesterday described Osborneas a very important and crucialadviser after he engineered twofund-raisings in the past couple of

years for the group, remain loyal tothe bank?

Clients may wait some time beforeditching advisers in the aftermath ofa bankers departure to give a sense ofdecency to the changeover, but there

is no disputing the importance ofindividual relationships to such man-dates.

Merrill, which has beefed up its UK banking business on a number of

fronts in recent months, is optimisticthat many of the personal and strongrelationships Osborne had, with com-panies such as Cairn, Bowleven, and

Afren Energy, will not lead to thecompanies themselves now runningto new advisers.

The bank points out that its rela-tionships with such companies have

been deep and dont revolve justaround one man but include manyothers toiling away in the research

and lending departments, for exam-ple.

Furthermore, in Julian Mylchreest,Merrill has recruited an outstandinghead of its power and energy sectors

and there has been some steadyrecruiting in the groups corporate broking team. The whole UK andIreland business is headed by theredoubtable Simon Mackenzie-Smith.

But these are testing times for the banks UK banking business whichalso recently lost Simon Fraser, itshead of broking, to the joys of earlyretirement and farming.

[email protected] me on Twitter: @hellierd

INSIDE TRACK

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UBS tried to kick out protesters fromits disused City office block by send-ing a text message, the High Court

was told yesterday.The Swiss bank also made a series

of errors in its late-night legal effortsto remove the Occupy group, and

sent the text on the suggestion of the judge handling the case initially, itwas claimed.

The bank served the Sun Streetactivists with a series of legal papers,including its claim for possession, butthen failed to give them any realclue how to take part in the 9.45pmtelephone hearing, according to a

written argument filed against SunStreet Properties, a subsidiary of UBS.

It is of fundamental importancethat everybody has the right to con-test the case against them and to

bring evidence in the case, saidStephen Knafler, QC, for the handfulof activists who have been named inlegal papers.

It may be a case of a claimant mak-ing more haste and less speed.

The protesters entered the buildingin the early hours of 18 Novemberand set up a Bank of Ideas. They are

now challenging the eviction on thegrounds it was awarded without

notice and there is no need to pro-tect people from imminent, seriousinjury as they say they have carriedout a health and safety assessment ofthe empty building.

Their legal papers also claim UBShas engaged in risky banking prac-tices and that its equity release prod-ucts have caused hardship anddistress for elderly customers.

Around a dozen activists, somesporting thick beards, black and white dreadlocks and combatfatigues, filled the High Court yester-day and exchanged clenched fist sig-nals when they felt proceedings weregoing in their favour.

UBS said the protesters should beremoved because of urgent healthand safety concerns. The case wasadjourned and Mr Justice Roth is dueto rule tomorrow or on Thursday.

Activists and

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ANALYSIS l UBS.AG

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

Yes, Im hopeful, because it looks asif things are moving along

and they are under pres-sure to do something. Ithink since theexpectancy is there,that it will be solved.

RYAN LEHMANNBLOOMBERG

CITY VIEWS: ARE YOU MORE OR LESS OPTIMISTIC ABOUT THE EUROZONESOLVING ITS DEBT CRISIS THIS WEEK? Interviews by Caty Hirst

They have had so many meetingswhere nothing was solved,

that I am not any moreoptimistic. If evenCommerzbank could benationalised, I dont havemuch hope for all ofthe Eurozone.

DEEPAK ARORAFOX WILLIAMS

I was so pessimistic a week ago, Iguess you could say Im optimistic

this week. There are justso many things theyhave to get right; it isstill an incredible hurdle.But we are close to thesummit and the mar-kets are up.

ED NEWMANGRANT THORNTON

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RECRUITMENT consultant MichaelPage yesterday warned of falling

profits for the second time this year, blaming the worseningEurozone crisis for a spate ofemployers and jobhunters abandon-ing their plans to hire or changejobs.

Shares in the global recruitmentgroup slumped more than ten percent in early trading and closed 5.2per cent down after it said its prof-its would come in below its lowestexpected level of 86.5m this year,amid increasing levels of macro-

economic uncertainty.The Eurozone crisis and the low-

ering of GDP forecasts worldwidehave reduced client and candidateconfidence levels, it warned in its

third-quarter trading update.As markets weaken and becomemore unpredictable, our short-term visibility reduces, particularly inrespect of permanent placements,

the company said.Its profits were previously fore-

cast to reach up to 114.2m for theyear, but the company said its profitgrowth levels had worsened since

10 October when it last updated themarket.While profit growth in its critical

Europe, Middle East and Africaregion hit 30.8 per cent in the threemonths to 10 October, from thenuntil November it fell to 18.5 percent.

In the Americas, which accountfor 14 per cent of the groups prof-its, profitability slumped fromalmost 50 per cent to 23.8 per centin those weeks.

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RECRUITMENT


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Michael Page, led bychief executive SteveIngham, said the firmwill cut its headcount toreflect the market slump

NEWS | IN BRIEF

OECD: tax more to cut inequalityInequality in the UK rose more quicklythan in any other member country of theOrganisation for Economic Cooperationand Development (OECD) from 1975 to

the present day, the group revealed in areport published yesterday. The highest-earning 10 per cent earn an average of12 times more than the lowest ten percent, according to the research, up fromeight times more in 1980. The increasing

proportion compares with an OECDaverage of eight times, and a peak of 24time in Mexico and Chile. Incomeinequality has risen in the majority ofOECD nations, the report said, largely

driven by wages rising more quickly atthe top end of the spectrum than at thebottom. The group claims this means theUK needs to create more jobs, and con-sider taxing the rich and giving more tothe poor.

SALES on the British high street dwin-dled to their lowest level of annualgrowth since May last month, despiteretailers slashing prices to try anddrum up a pre-Christmas rush.

Figures from the British RetailConsortium showed that like-for-likesales volumes were 1.6 per cent lowerthan a year ago in November, thoughtotal sales including new shops wereup 0.7 per cent on last year.

Stephen Robertson, director gener-al of British Retail Consortium, said:

Theres a worrying lack of cheer inthese figures. The weakest increase in

sales for six months suggests con-sumers are keeping a tight rein ontheir spending, despite Christmasbeing so near.

This Novembers mild weathercontrasted with much lower tempera-tures last year, is hitting sales of win-ter clothing and footwear particularlyhard.

In the three months to the end ofNovember, like-for-like food sales wereup 1.5 per cent on a year ago, whilenon-food sales slumped 2.1 per cent.

High street has its worstsales growth since MayRETAIL

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Offsetting isthe new saving


THE BANK of Englands downbeatview risks dragging Britain back intorecession, the head of Aberdeen AssetManagement has warned.

Martin Gilbert, the chief executiveof Aberdeen which posted a sharpexodus of funds in the run-up to its

year-end said Sir Mervyn Kings atti-tude could hit the economy in 2012.

Last week King warned of a newcredit crunch and Gilbert told CityA.M.: The recovery is pretty fragile.

People dont know whether there isgoing to be a recession or not. We havegot the Governor of the Bank ofEngland saying everything is bad people do listen and cut back.

Clients pulled 900m fromAberdeen in Septembers stormy mar-

kets, taking net outflows to 1.7bnover the year to 30 September. Gilbertsaid, however, that he thought thepeak of the worry had now passed.

Assets under management fell 4.9per cent to 169.9bn but Aberdeenposted a surprise a 44 per cent rise inpre-tax profits to 301.9m, beatinganalysts forecasts of 288m to 295m.

Gilberts fearover Banksgloomy view

INVESTORS have moved away fromprivate equity and hedge funds andtowards assets such as gold, accordingto new research.

Market volatility has driven thechange over the last six months,according to a study from LPEQ, theassociation of listed private equityinvestment companies, and theScorpio Partnership.

It said, however, that fund man-agers will move back to private equityin the next six months as they seek

better returns. Half of the chief execu-tives and investment professionalsasked said they plan to invest in listedprivate equity in the next six months.

Michael Spencer raises aglass to wine investment

ICAP chief executive MichaelSpencer took his self-confessedirrational passion for wine way

beyond the odd bottle of his much-loved Petrus yesterday, becoming ashareholder in and chairman offine wine merchant the BordeauxIndex.

Spencer has made a seven-figureinvestment in the online tradingexchange, which was set up 15 yearsago by former Icap board memberGary Boom and made pre-tax prof-its of more than 6m last year.

Im genuinely impressed by the

growth of the business, and the wayit has developed its market in Asia

by applying the techniques andtechnology of financial markets tofine wines, said Spencer.

Spencer famously promised tocelebrate the appointment of anyfuture Conservative Prime Minister

by hosting a dinner party lubricated by bottles of Petrus, the Bordeauxlabel that is among the worldsmost expensive wines.

In 2010 he made good on hispromise, marking his steppingdown as party treasurer by present-ing David Cameron with a bottlefrom the year he first became anMP.

Fund bossesgo for gold

BY PETER EDWARDS

ASSET MANAGEMENT

EMPLOYERS offering defined-benefitpension schemes will need to meetstricter standards in future, the UKspensions watchdog will say today as itstarts a consultation on new princi-ples for schemes to comply with.

The Pensions Regulator is settingout six new principles for pensionproviders covering the featuresschemes should include, their gover-nance and administration.

At present defined contributionstandards are mixed, with too manyschemes providing poor value formoney, said Pensions Regulator chiefexecutive Bill Galvin.

But Jim Bligh, head of employeerelations at business lobby group theCBI, warned against putting too largea burden for schemes onto employers.

In defined contribution schemesemployees also have responsibility to

keep track of their investments, hesaid. Businesses have had a bad expe-rience with the regulation of defined

benefit schemes and employers willbe looking for reassurance from theregulator that it wont be repeatingthis mistake.

Defined benefitpensions to getnew regulation

FUND MANAGEMENT

FUND MANAGEMENT

ALTERNATIVE INVESTMENT

ANALYSIS l Aberdeen Asset Management

p


210

215

220

205

200

195

211.205 Dec

Football-mad boss knows Aberdeenfunds cant win new fans all the timeWe have got to do it all over again and that is always very difficult,Martin Gilbert said yesterday, as heunveiled soaring profits for

Aberdeen Asset Management. Cashflowed into its higher-margin areas,

with demand growing for its emerg-ing market funds.

If he sounded like a footballer,repeating the mantra that its alwaysharder to retain a title than win itinitially, then its no surprise. Gilbertis a lifelong fan of Aberdeen FC and

he faces a major challenge in repeat-ing the funds 2011 performance, ashe nearly admitted when he said:We are always dependent on mar-kets.

Analysts praised the rise in operat-

ing margin, however, up to 39.5 percent from 34.8 per cent.

BOTTOMLINEAnalysis by Peter Edwards

Gilbert won thefund managersprize at the CityA.M. awards

Icap bossMichael Spencerhas invested aseven-figure sumin wine exchangeBordeaux Index

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EASYJET founder Sir Stelios Haji-Ioannou (pictured below) yesterdayunveiled his plans to rival the budgetairline he set up in 1995.

Stelios hopes to set up an Africa-focused carrier through Rubicon, anunprofitable software companythat just over two weeks agoaltered its investment strategyto focus on aviation.

Rubicon, using the Fastjetname that Stelios unveiled inSeptember, will look at optionsfor launching an airline focusedon budget travel across Africa.

The plan could putFastjet in direct competi-tion with EasyJet, whichflies to Morocco, Egyptand Jordan.

Stelios firm EasyGroup will get a five per centstake in Rubicon, and willhave the option to take afurther 10 per cent.

He will also hand-pick four or fiveaviation experts to help Rubicon settleon a strategy. Rubicons chief executiveAlistair Hancock, who set up the firm while studying for a computer sci-ences degree, and chairman RobBurnham have scant experience out-side the tech sector.

Rubicon said in July that it wouldchange its aims after struggl[ing] to

achieve satisfactory levels of tradingand associated revenues as a software firm.

In November, African minerLonrho took a 12.7 per cent stake

in Rubicon, and the firm willtake two seats on theboard after a meet-

ing next week.Rubicon said

Lonrhos deepknowledge of African busi-ness would behelpful duringits attempts toturn into anairline.

New Stelios

plan crossesthe Rubicon

Kraft names new executives

KRAFT Foods has named its currentchief executive, Irene Rosenfeld, to

lead its snacks business andAnthony Vernon to lead its North American grocery business, whenthe giant packaged food companysplits in two.

Vernon is currently president ofKraft Foods North America.

The maker of Cadbury chocolateand Oscar Mayer lunch meat said itstill expects to complete the split-up

by the end of 2012.Rosenfeld, 58, has been chief

executive of Kraft since 2006 and iscredited with integrating Nabisco,leading Kraft through its spin-off

from Altria and acquiring Lu bis-cuits and the Cadbury brand. She was widely expected to lead thesnack business.

Kraft also said John Cahill, cur-rently a partner at RipplewoodHoldings, would join the companyand become non-executive chair-man of the North American grocerycompany.

Cahill has held senior financepositions with PepsiCo and YumBrands KFC and was chairman andchief executive of Pepsi BottlingGroup, the bottling business spun

off from Pepsi in 1999.Rosenfeld surprised the marketin August by announcing the splitof the businesses.

The move is designed to giveinvestors the chance to bet on asnacks business that is growing fastin emerging markets, or opt for thestable dividends offered by a slower-growing general grocery business.

BYMARION DAKERS

TRANSPORT

BYHARRY BANKS

CONSUMER

ANALYST VIEWS: WHY IS TUI PERFORMINGSO STRONGLY AGAINST RIVALS? Interviews by John Dunne

DOUGLAS MCNEILL | CHARLES STANLEY

The fourth full year since the merger of Tui and First Choice has been agood one, with earnings hitting a post-merger high, Demand in the year nowunder way looks lacklustre, but t hats expected and our 2012 forecasts look safeenough at this stage. We retain our positive view on the stock.

KEITH BOWMAN | HARGREAVES LANSDOWN

Quick action to provide increased alternatives to troubled North Africandestinations and consumers reluctance to forgo their summer holidays also appearto have played their part. In all, transport and travel remain volatile. However, thedifficulties of rivals currently support favourable sentiment.

RICHARD CURR | PRIME MARKETS

The results from TUI Travel are truly impressive, with a return to profitsand growth in revenues. Prime Markets believe that this exceptional performancehas yet to be reflected in the current share price, which up to today has been heldback by the woes at Thomas Cook.

TUI profitsrise despite

uncertaintyLEISURETUI TRAVEL has delivered another bloto its struggling rival Thomas Cook, delivering profits and a dividend rise despitthe tough market.

The company, which has the Thomsoand First Choice brands, reported pre-taprofits of 144m in the year to 3September.

Chief executive Peter Long said thcompanys expertise was second tnone in a thinly disguised swipe at riva Thomas Cook, whose share price hplummeted in recent months.

He attributed his companys relativsuccess to providing exclusive holidadeals while developing online sales tkeep pace with changing custometrends. Long suggested that ThomaCook and other rivals were being hit bthe stretched budgets of families lookinfor cheap deals. Long added: We havhad a robust performance in difficumarkets. We sell unique holidays anthat is proving a real attraction.

The companys performance in tNordic regions was especially stronwhile political upheaval in North Africtook its toll on sales to French holidaymakers, who traditionally visit thregion. A final dividend of 8p per sharwas proposed, bringing the full year paout to 11.3p per share three per cent up

Irene Rosenfeld will lead Krafts snacks business Picture: REUTERS

Chief executive PeterLong boasted that thecompanys expertisewas second-to-none

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ALL BETSARE OFF FOR

DEL BONOSCASINO PLOTIT WAS like the Marie Celeste when LucaDel Bono first looked round 50 St Jamess:the tables in the restaurant were still laidfor dinner and the staff uniforms were stillhanging on their hooks in the hall.

Thats what happens when you aban-don ship so abruptly as the sites previ-ous owner, the Planet Hollywood ownerRobert Earl, did in 2009 when he ran thepremises as the casino Fifty in partner-ship with London Clubs International.

In the interests of the companys credi-tors, as a statement from the joint ven-ture read at the time, Fifty finally filed foradministration in November 2009, andthe historic site and its gambling licence

have remained dormant ever since.So it is perhaps no surprise that new

owner Del Bono, who has just securedplanning permission to change the casi-no into a private members club with a14-room boutique hotel and a restaurant,has not bothered to renew the premisesgambling licence.

Instead, the existing gaming room willbe turned into a breakfast, tea and draw-ing room, seating 300 when buildingstarts next February on the retreat that

will rival gentlemens clubs Whites,

Central Bank has launched an iPad versionof itsconomia game that spells out exact-ly how monetary policy works.

Ever wondered how key interest ratesaffect inflation? says the gimmick mak-ing financial meltdown fun, which mayor may not have been designed with thetop economic brains of Italy and Greece inmind. At least they can afford it: the app isfree to download.

ON HOME TURFHE SPENT a night in a rat-infested cave on

the reality show Im A Celebrity before being kicked out of the jungle lastThursday. And now ex-jockey Willie Carson(left) is back on home turf as Epsom DownsRacecourse announces that the four-timesDerby winner will be guest of honour atthe 2012 Investec Derby Festival.

Nobody knows the Derby better thanCarson, said Epsom Downs chairman

Anthony Cane. Except the Queen, possi-bly, whose horse Dunfermline was riddento victory in the Oaks by Carson in hermajestys silver jubilee year in 1977.

directly opposite, and Brookss andBoodles down the road.

Del Bonos Opus Holdings has madeone concession to Westminster Council,

however the members roof terrace has been scrapped, over concerns the pro-posed materials for the Grade II-listed

building were incongruous in their con-text. The physical alterations are nowconfined to the internal spaces of theproperty, assures Opus.

CAUSE AND FXNO-ONE doubts that Schneider ForeignExchange is a fun place to work.

But the opportunities created by the

volatility in the currency markets haveproved too tempting for three of thecompanys senior traders Harry Adams,Carl Jani and Andrew Egan, who have

left as a unit to start a new venture backed by a well-known City firm either an investment bank or a brokercurrently without an FX business.

All will be announced to the City next April; until then, Adams is making themost of his non-compete period by takingoff to South America. Because we wont

be taking much holiday after that.

GAME CHANGERIT WAS only a matter of time: the European

Timothy Hatton Architects plans for the first floor breakfast room at 50 St Jamess Street

EDITED BY

HARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @dennysharriet

The CapitalistCITYA.M. 6 DECEMBER 2011 17

Economy by numbers: the eurozone-savingconomia monetary game

8/3/2019 Cityam 2011-12-06

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CENTRICA has signed a memoran-dum of understanding to look at

joint investment opportunities withQatar Petroleum, two weeks afterannouncing a 1bn exploration andsupply deal with Norwegian groupStatoil.

The British Gas owner said invest-ment targets will include new orexisting projects in upstream oiland gas including gas storage, as

well as combined-cycle gas turbinegeneration assets and downstreamopportunities.

The news comes as the companytargets growing production by 50per cent to 75m barrels of oil equiva-lent annually in the next three tofive years, prompting speculationmore deals as big as the one withStatoil could be in the offing.

Centrica also said last month itwould invest in its upstream oil andgas business to strengthen its ener-gy hedge.

The agreement, signed at the World Petroleum Conference inDoha, follows the long-term LNGcontract Centrica signed with theemirate earlier this year.

Qatar Petroleum International isthe international investment arm ofQatar Petroleum.

The partnership will enable us to jointly develop significant energyinvestments that will further boostthe long-term security of the UK'sgas supply, Centrica chief executiveSam Laidlaw said in a statement.

We will also explore joint oppor-tunities to deploy capital andexpertise in other markets to delivergrowth and value for the group,Laidlaw added.

Carillion yesterday signed itsmaiden deal in Qatar, agreeing a395m joint venture contract tohelp build a mixed-use projectacross 21 hectares in downtownDoha.

GULFSANDS Petroleum said it wasreviewing the impact of the latest EUsanctions on Syria on its productionactivities and on its contracts withthe Syrian government and theGeneral Petroleum Corporation.

The EU stepped up its sanctionsagainst Syrias oil industry last week,

blacklisting state-owned firms includ-ing GPC that oversee trade and explo-ration, as part of international effortsto isolate President Bashar al-Assadsgovernment.

Gulfsands said in November it was

producing at around a fifth of its nor-mal output in Syria.

Shares in Gulfsands plummetedmore than 10 per cent yesterday, asinvestors feared Syria, the firms

biggest customer, is facing long-terminternational boycotts.

Gulfsands hit by EU action over Syria

The UK oil industry is at risk of underinvestment in the next twenty years,according to 78 per cent of respon-dents to a survey of senior executivesin the energy sector by Lloyds BankCorporate Markets.

And four-fifths of respondents tothe survey thought the industry wasnot producing engineers in sufficientnumbers to ensure UK energy securi-ty over the next 50 years.

As the largest lender in the North

Sea, we know from speaking to ourclients that an emigration to other

markets with more favourable invest-ment conditions, such as Norway, isnot motivated by self-interest,

Andrew Moorfield, global head of oiland gas at Lloyds Bank CorporateMarkets said.

Rather, the costs of productioncan be lower and more predictablethan in the UK, a fact which is havinga serious impact on the North Seasability to compete for investmentinternationally.

UK oil industry sufferingfrom a lack of investment

ENERGY

GLENCORE boss Ivan Glasenbergsaid yesterday that he would not sell

any of his shares in the company aslong as he worked there.None of us has sold a single share.

Neither before nor after the flota-tion. And Ive often said that Im notthinking about selling any shares aslong as I work here, chief executiveGlasenberg (pictured right) told Swisspaper 20 Minuten in an interview.

Glasenberg holds the largest singleholding of Glencores shares, ataround 15.8 per cent, according to

Thomson Reuters data. He boughtmore shares in September this year.

The company floated in May at aprice of 530p.

South African born

Glasenberg became chief exec-utive in 2002 having joined in1984 working in the coaldepartment in South Africaand Australia. He managedGlencores Hong Kongand Beijing officesfrom 1989 to 1990.

Last weekGlencore can-celled a303m deal

to buy a major stake in a Peru copperproject from Hong Kongs CSTMining Group.

Analysts generally approved ofthe move, seen as prudent in

volatile markets. However thecompany expanded its invest-ment in the PolyMet MiningCorp on Wednesday, buying anadditional 13.3m shares of the

startup copper mine.The move showed that

the company would stillin the market foracquisitions withunder the correct con-ditions.

Glencore chief to keep stockBYHARRY BANKS

MINING

Centrica eyes

Qatar withnew contractBY JOHN DUNNE

ENERGY

BYHARRY BANKS

ENERGY


ANALYSIS l Centrica

p


300.00

302.50

305.00

297.50

295.00

292.50

290.00

293.105 Dec

NEWS | IN BRIEF

Lonmin signs union pay dealLonmin has signed a two-year wageagreement with the South AfricanNational Union of Mineworkers.In the first year of the agreement which

will be backdated to 1 October employ-ees will receive pay increases andimprovements in benefits of up to 10 percent, depending on their job grades. Thefigures, which will also apply to year twoof the agreement, are in line with industrywage settlements. Barnard Mokwena,Lonmins executive vice president forhuman capital & external affairs, said:This is a good deal for the company andthe unions, and is in line with the expecta-tions of the market and industry settle-ments.

Ultra Electronics buys two firmsUltra Electronics, a supplier for the USNavy, announced yesterday thepurchase of two surveillance technologycompanies for a combined priceof $115m (73.3m), in order to expand itsaccess to work from the US government.Special Operations Technology, purchasedfor $38.4m, is a communications surveil-lance systems that manages largeamounts of data from mobile, fixed lineand broadband networks. Zu Industries,which specialises in cyber surveillance,was bought for $76.6m. The company fil-ters communication data, such as voice,text, email and broadband networks.

Lo-Q partners with MasterCardLo-Q, an online queuing system, andMasterCard have agreed to develop a con-tactless payment solution for theme parksThe agreement between the companieswill last three years and is expected toincrease Lo-Qs market value over thelong-term. The companies will combineMasterCards PayPass payments technology, which allows users to checkout usingtheir mobile phones, with Lo-Qs virtualqueuing software to decrease the waittime in theme parks and other attractions

WHITEHAVEN Coal and AstonResources are discussing what could

be a $5bn (3.1bn) merger to createAustralias biggest independent coalcompany, the two confirmed yester-day, sending Astons shares up asmuch as seven per cent.

The coal industry has beenAustralias hottest sector for deals inthe past three years, topped by US

miner Peabody Energys takeover ofMacarthur Coal for $5bn last month,

tapping into booming Chinese andIndian demand for coal.

A deal would put together Astons75 per cent stake in the MaulesCreek coal project with

Whitehavens mines in the samebasin in New South Wales state, toovertake rival independent NewHope Corp, which itself is on the

block. Maules Creek is expected toproduce mainly coking coal for steelmills and high quality thermal coal

for export. Both companies said noagreement had been reached.

Whitehaven and Aston in$5bn merger discussions

MINING

QATAR DEALS IN THE SPOTLIGHT

4 DECEMBERQatar signed a deal with Royal DutchShell to develop a $6.4bn (4.1bn)petrochemicals complex in the RasLaffan industrial city in the Gulf Arabstate.

13 NOVEMBERQatar in negotiations to take a stake inan Arctic liquefied natural gas (LNG)project under development by Russiangas producer Novatek

30 OCTOBERQatar's Rasgas extended a long-termdeal to supply France's EDF with up to

3.4m tonnes of liquefied natural gas ayear for delivery to north west Europe.

10 OCTOBERChina National Petroleum Corp (CNPC) ,Qatar Petroleum International andRoyal Dutch Shell signed a frameworkto build a joint refining and petrochemi-cal complex in China.

26 AUGUSTSouth Hook Gas Company signed adeal giving energy trader Trafigura,owned by Qatar Petroleum (70 percent) and ExxonMobil (30 per cent),access to spare import capacity.

ANALYSIS l Gulfsands Petroleum

p


210

215

220

205

200

195

190

185

185.005 Dec

The Gulf

Qatar

Doha

United ArabEmirates

Saudi Arabia

NOTICE OF APPLICATION FOR A

PREMISES LICENCE UNDER THE

GAMBLING ACT 2005

Notice is hereby given that: William Hill of thefollowing address: Greenside House 50Station Road Wood Green London N22 7TP, isapplying for a Betting (Other) PremisesLicence under Section 159 of the GamblingAct 2005. The application relates to thefollowing premises: 55-56 Aldgate High StreetLondon EC3N 1AL. The application has beenmade to: City of London Corporation.Information about the application is availablefrom the licensing authority, including thearrangements for viewing the details of theapplication. Any of the following persons maymake representations in writing to the licensingauthority about the application: A person wholives sufficiently close to the premises to belikely to be affected by the authorisedactivities. A person who has business intereststhat might be affected by the authorisedactivities. A person who represents someonein any of the above two categories. Anyrepresentations must be made by the followingdate: 30 December 2011. It is an offenceunder Section 342 of the Gambling Act 2005 ifa person, without reasonable excuse, gives toa Licensing Authority for a purpose connected

with that Act information which is false ormisleading. T334787

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NEWSPAPER group Mecom yesterdayagreed the sale of its Norwegian divi-sion Edda Media to publishing and broadcasting corporation A-Pressenin a 190m deal.

This value represents 7.9 timesEdda Medias earnings before inter-est, taxes, depreciation and amortisa-tion (EBITDA) for 2010 and will helpMecom cut its net debt of 302m(259m), the company said.

The deal will unite Norways sec-ond and third largest media groupsby revenue, giving them a combined28 per cent share of the countrysnewspaper circulation market.

Mecoms sale of Edda, its fastestgrowing division, comes threemonths after Tom Toumazis joinedthe company as chief executive andinstigated a review of the group inlight of a bad six month period thatsaw Mecoms shares fall by aroundhalf.

Toumazis said: The sale will of

course materially improve our bal-ance sheet. It will allow us to consid-er, in due course and subject to arefinancing, an enhancement to thecompanys cash returns to sharehold-ers, to focus on our future strategyand to invest to improve profitabilityin the remainder of the group.

The sale is conditional upon theapproval of Mecoms shareholdersand the go-ahead from theNorwegian Competition Authority.

Mecom shares leapt 14 per cent toas much as 215p during yesterdaysmorning trading before closing at197p.

APPLE has lost its most recent battlein a legal fight against Samsung, asits bid to stop Galaxy sales in the US was denied, causing shares in theSouth Korean company to jump bymore than two per cent.

Apple was trying to get an injunc-tion against the sale of certainSamsung products in the US, claim-ing that the companys Galaxy lineinfringes the patented design ofiPhones and iPads.

The two smartphone and tablet

makers will go to trial in America on30 July next year.

This case is the most important ina long-standing conflict between thetwo companies, which has clockedup over 20 cases in 10 countries sinceApril.

Samsung recently reported arecord $2.2bn (1.4bn) third quarteroperating profit, which analysts atMorgan Stanley estimated could havedropped by as much as $1.5bn hadSamsung lost this court case.

It also overtook Apple as theworlds biggest smartphone providerby both revenue and volume.

It was revealed last night that a UScourt error on Friday offered a

glimpse into internal workings at thetwo technology giants as Judge Kucy

Kohs published ruling included pri-vate details which she had intendedto black out.

An injunction against Galaxy salesin Australia will end on 9 December.

Samsung soars as Apple loses court bid

LOVEFILM, Europes largest sub-scription service, today becomesavailable on Microsofts videogames console Xbox.

The company, which was original-ly established in May 2002 as OnlineRentals Limited and was acquired by Amazon in February 2011, hastraditionally operated as a mail-order DVD rental service.

However, in the last two yearsLovefilm has enabled its customers

to watch online in addition toreceiving physical DVDs at theirdoor.

While the video-on-demand serv-ice became available on the SonyPlayStation 3 in November 2010, itsnew compatibility with Xbox marksthe first time that Lovefilm will becontrollable using voice commandsor gestures.

Simon Calver, chief executive ofLovefilm, said: It is an auspiciousday for the TV entertainment indus-try as a whole.

Launching Lovefilm Instant onXbox 360 and Kinect means bring-ing the service to a million more liv-ing rooms a huge achievement,he added.

Lovefilm boasts more than 1.8mmembers across the UK and Europe.

This move to make film watchingmore accessible comes in the wakeof Tescos announcement last weekthat a DVD bought in-store will alsobe available to the customer in itsdigital version through partnerservice Blinkbox.

Amazon launches its video on demandservice Lovefilm on Microsofts XboxTECHNOLOGY

ONLINE gaming company Nexon yes-terday announced a public offeringexpected to raise 91bn (745.5m) when it joins the Tokyo StockExchange on 14 December.

After gauging interest frominvestors last week, the company set-tled at the mid-point of a speculativeprice range to sell shares at 1,300each, in what is set to be Japansbiggest IPO this year.

Nexon, which has a network of

1.14bn players worldwide, will put 14bn from the public offering

towards paying off debt. The companys operating profittripled to 30bn in 2010 while itssales increased more than 70 per centto 70bn.

This announcement comes in the wake of Farmville creator Zyngasdecision to go public for an expected$1bn (640m) and amid speculationof a $10bn Facebook flotation which would value the social networkingcompany at more than $100bn.

Nexon flotation will beJapans biggest this yearTECHNOLOGY

PUBLISHING group Trinity Mirror yesterday announced that Sir Ian

Gibson will be stepping down aschairman in August 2012 to bereplaced by accountant DavidGrigson (pictured), who will join theboard as a non-executive director andchairman designate from 1 January.

Grigson is currently the chairmanof communications group Crestonand a non-executive director of bothStandard Life and supermarket deliv-ery service Ocado. He was previouslythe chief financial officer of Reuters,

where he oversaw its merger withrival media group Thomson, untilApril 2008.

During Sir Ians tenure, TrinityMirror has reduced its portfolio from

240 to 160 regional titles andseen its shares plummet 92per cent from as high as582p to a 2011 average ofaround 45p.

But since the closure ofthe News of the World inJuly, the group which pub-lishes the Sunday Mirror andPeople has seen itsSunday circulationimprove significantly

on last years figures.An interim statement released by

Trinity Mirror earlier this monthshowed a slower rate of decline inadvertising revenues and a strong

cash flow in the seventeen-week peri-od to the end of October 2011, which allowed the group to

reduce its net debt by 20m to242m.

Sir Ian has been chairmansince May 2006, when his prede-

cessor Sir Victor Blank moved to become chairman of Lloyds

TSB.Its shares lifted four

per cent to close at 51p.

New chair for Trinity MirrorBY LAUREN DAVIDSON

MEDIA

Mecom sells

in Norway tocut net debtBY LAUREN DAVIDSON

MEDIA

BY LAUREN DAVIDSON

TECHNOLOGY


ANALYSIS l Mecom Group

P

30 Nov 1 Dec 2 Dec 5 Dec

200

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197.005 Dec

MECOM chose Gleacher Shacklockto advise on the sale of Edda Mediain place of its usual adviser Cenkos,while Pareto Securities acted asadviser on the Norwegian end ofthe deal.

Leading the team at GleacherShacklock was partner EdwardCumming-Bruce, who joined thefirm in its early days in 2003.

He had previously worked forSchroders and held several seniorpositions at Dresdner KleinwortWasserstein, including co-head ofglobal telecoms investment bank-ing and global head of equity capi-

tal markets. He has also advised

Deutsche Telekom, telecoms giant

Orange and insurance firm Legal &General.He said: The deal has been on

the cards for most of the 2010.There has been a lot of talkbetween several Norwegian mediagroups about a potential consolida-tion throughout this year.

Cumming-Bruce was joined byGleacher Shacklock vice presidentSandor de Jasay, who joined thefirm in 2009 from Lazard. Hisclients include Sky, multiplatformmedia group Emap and theGovernment Offices of Sweden.

Mecom was also advised byNorwegian firm Pareto Securities,the investment banking arm of thePareto Group. Founded in 1986 byOslobanken, it has since beenbought by private investors.

The Oslo team was headed byTarjei Mellin-Olsen and Simen

Landmark Bjrnstad.

ANALYSIS l Samsung Electronics Co Ltd

KRW


1,080,000

1,060,000

1,040,000

1,020,000

1,000,000

1,066,000.005 Dec

CONSOLE COMPATIBILITY FOR VIDEO ON DEMAND SERVICES

PC

Wii

Xbox

PS3

iOS

Android

Blackberry

BBC iPlayer Netfl ix Bl in kbox ITV Player 4O D LoveFilm

ADVISERS: GLEACHER SHACKLOCK

EDWARD

CUMMING-BRUCE

GLEACHER

SHACKLOCK

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INTERNATIONAL Airlines Group,formed by the merger of BA andIberia, has posted a 2.1 per cent rise inpassenger traffic in November, boost-ed by 4.6 per cent growth in premiumtraffic.

Traffic, measured in revenue pas-senger kilometres, rose by 2.1 percent versus November 2010, whilepassenger load factor a measure ofhow well it fills its planes was down0.3 percentage points at 75.3 per cent.

IAG said its first and business-classtravel the most profitable part of itspassenger business rose 4.6 per cent,while non-premium traffic was up 1.6per cent.

Industry body IATA last week saidinternational passenger trafficgrowth had slowed in recent monthsand that it expects to suffer from waning consumer confidence, slug-gish international trade and high fuelprices in 2012.

IAG, which recently agreed to buyLufthansas British unit bmi, lastmonth reported a 31 per cent fall inthird-quarter profit, better thanexpected and outperforming peers.However, its traffic growth has

slowed in recent months.International Airlines Group said

last week its transatlantic joint ven-ture with American Airlines wouldcontinue to operate as normal afterthe US carrier filed for bankruptcyprotection.

We have every confidence in thefuture of American Airlines. We arepleased they are taking this stepwhich shows commitment and deter-mination, IAG said in a statement.

Budget rival Ryanair fared less welllast month, seeing its passenger num-bers fall eight per cent to 4.68m inNovember after it grounded up to 80aircraft due to higher oil prices.

Shares in IAG beat the market torise 2.9 per cent yesterday, whileRyanair rose 1.6 per cent.

RUSSIAN power grid companyMRSK is scheduled to list its sharesin London this week, a move ithopes will boost the liquidity of itsstock and enable it to raise funds inthe future, a company spokespersonsaid yesterday.

The technical listing, in which nomoney is raised, will see MRSK list

25 per cent of its stock as globaldepositary receipts the maximum

allowed on Thursday.Russia owns a more-than 50 per

cent controlling stake in MRSK, andstate-controlled Gazprom has 10 percent.

MRSK was he power group worstaffected by the governments U-turnon proposed household electricitytariff rises earlier this year, accord-ing to analysts.

The company is a holding groupfor several local electricity distribu-

tion grids.Its shares are down 47.5 per cent

this year, valuing it at around $4bn,while Russias RTS Electric UtilitiesIndex is down 29 per cent.

The company was expected toreceive more share price supportfrom its recent inclusion in theMSCI Russia Index, which is used byemerging market investors world-wide to track Russian shares.

MRSK chief executive NikolayShvets said in October t he company was preparing to hold a technical

London listing of up to 25 per centof its shares in December.

Russias state-owned power grid MRSKwill list some stock in London this week

TAX disparities between online andland-based gambling firms are unfairand harmful to the economy, RankGroup claimed yesterday.

The low taxes on operations basedoutside the UK, some as low as zeroper cent, encourage the industry tomigrate jobs and tax revenues out-side the UK, according to a paper pub-lished by Rank.

With casinos employing on average150 employees and bingo clubs

employing 40 staff, Rank claims thiscould lead to heavy job losses.

Ian Burke, chief executive andchairman of Rank, said: I believethat the government has the opportu-nity to create jobs in the UK withoutsacrificing tax receipts by replacingthe current patchwork quilt with asingle tax, at a single rate.

The report also argues that placingthe highest taxes on licensed land-based companies, with some taxes ashigh as 50 per cent, could encourageirresponsible gambling.

Rank argues the case forsingle rate of gaming taxLEISURE

REVENUES at potential William Hilltakeover target Probability havesoared by 41 per cent, though thecompany still posted a loss for the sixmonths to September.

Mobile gaming firm Probability,which runs the Lady Luck mobile casi-no brand, said yesterday its revenueshad risen to 3.3m from 2.3m a year

ago, and that cash deposits made bycustomers had increased by 74 per

cent. Though it posted a 65,000 pre-tax loss, this was 91 per cent lowerthan in the same period in 2010,when losses hit 745,000.

Over the half year, revenues derivedfrom iPhone and Android users rosefrom 37 per cent to 50 per cent oftotal.

Shares in AIM-listed Probability roseone per cent to 51p yesterday, valuingthe firm at just under 14m. William

Hills bid talks collapsed on 2November.

Profits lift at William Hillsgaming target ProbabilityTECHNOLOGY

IRISH food group Greencore said yes-terday talks over a possible takeover

had ended due in part to turmoil inglobal debt and equity markets,sending its shares down over 10 percent.

Greencore, one of the biggestsandwich and ready meal suppliersto Britain, said in October it hadreceived a potential takeoverapproach.

Given the boards unanimousview on the strong underlying valueof Greencore and the current dislo-

cation in global equity and debt cap-ital markets, both parties haveagreed to end discussions, it saidyesterday.

Analysts say prepared food players

are being squeezed by a highly con-solidated retail sector, putting pres-sure on them to merge in a bid to cutcosts.

Greencore in July described theBritish consumer food market aschallenging and volatile. It is dueto publish its annual financialresults today.

Greencore makes prepared mealsunder the Weight Watchers brandand supplies sandwiches to super-

markets, garage forecourts and air-lines.

Earlier in the year talks fell apartthat could have led to Greencore buying Northern Foods, after the

companies failed to reach an agree-ment that Greencore said wouldoffer strong returns to its sharehold-ers.

And in July it had paid 113m forBritish rival Uniq, a company thatsells desserts, sandwiches and saladsto retailers across the UK.

The company said it expected togenerate annual cost savings of atleast 10m by cutting duplicatedback office and supply chain costs.

Greencore ends takeover talksBYHARRY BANKS

CONSUMER

IAG traffic

numbers risein NovemberBYHARRY BANKS

TRANSPORT

BYHARRY BANKS

ENERGY


ANALYSIS l International Consolidated

Airlinesp


150

155

160

145

140

157.905 Dec

NEWS | IN BRIEF

Yum expects double-digit growthYum Brands, the parent of the KFC, TacoBell and Pizza Hut fast-food chains, yes-terday raised its 2011 profit forecast andsaid it expects earnings per share to grow

at least 10 per cent in 2012, led by con-tinued sales and profit growth in China.Yum has nearly 4,200 restaurants inChina, its top market for profit and rev-enue. Yum said it expects system sales,which include all restaurants regardlessof ownership, to be up at least 13 per centin China in 2012 and for sales at restau-rants open at least a year to rise at leastfive per cent.

MetLife misses expectationsMetLife expects operating earnings torise as much as seven per cent in 2012,the largest life insurer in the UnitedStates said yesterday, though its fore-casts for the fourth quarter and full-year 2011 were below expectations.MetLife said it expects 2011 operatingearnings of $5.2bn to $5.3bn (3.3bn to3.4bn); and 2012 operating earningsof $5.1bn to $5.6bn, or $4.80 to $5.20per share. MetLife expects to have$6bn to $7bn in capital in 2012 for div-idends and other actions. Analysts havesaid they expect MetLife to raise itsdividend substantially and buy back atleast $1bn in stock.

Toyota to give forecast on FridayToyota Motors will announce an earn-ings forecast on Friday for the financialyear to March 2012, as it steadilyrestores production disrupted by Thaiflooding that forced it to withdraw itsoutlook a month earlier. Toyotas outputhas returned to normal levels at most ofits production sites worldwide, althoughThai and South African plants continueoperating at reduced rates afterThailand's worst floods in 50 years hitsuppliers, cutting global output by215,000 vehicles from 10 October to 25November.

CHINESE automotive manufacturerGeely is set to enter the UK new carmarket next year, with its first mod-els prices starting at around 10,000.

Geely International Corporation, which also owns Volvo, is working with the UKs Manganese BronzeHoldings (MBH) to set up dealerships,parts sales and after-sales serviceu

cityam 2011-12-06

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