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FTSE 100 5,905.70 +53.31 DOW 12,874.04 +72.81 NASDAQ 2,931.39 +27.51 /$ 1.58 +0.01 / 1.20 +0.01 /$ 1.32 unc

Boris slams

EuropeanTobin tax

BORIS Johnson has launched an all-out attack on nine EU states afterthey called for a new financial trans-actions tax to be in troduced urgently.

The mayor promised to fight theproposal, which would cause seriousdamage to Londons economy.

Addressing the countries Johnsondeclared: Non, nein, no! I will notallow jobs, growth and the liveli-hoods of Londoners to be jeopardised

by an unholy alliance of Europeanstates who view financial services asan easy target, despite the fact that itis crucial to the economic recovery of its members.

Last Tuesday the finance ministersof France, Germany, Austria, Belgium,Finland, Greece, Spain, Portugal andItaly wrote to Denmark holders of the EU Presidency to petition for thefast-track introduction of a 0.1 percent tax on stocks and 0.01 per centon derivatives trading.

Johnson said: Do they not under-stand that our crucial wealthproviders will be on the first flightout to the US and Far East if their illthought out plans succeed?

But Labour mayoral candidate KenLivingstone argued: Boris Johnsonspends more time defending theinterests of the wealthiest bankersthan fighting for ordinary Londoners.

Unemployment in the capital is

rocketing and Londoners are feelingsqueezed, yet the Mayor refuses to callon the banks to do more to fulfil theirobligations to the rest of society.

BY J AMES WATERSONPOLITICS

MOODYS last night threatened theUKs coveted triple-A credit rating by moving the country to a negative out-look.

This means the UK now has a one inthree chance of a downgrade in thenext 12 to 18 months.

The ratings agency blamed itsactions on the increased uncertainty regarding the pace of fiscal consolida-tion in the UK due to materially

weaker growth prospects.It also warned that economic head-

winds could jeopardise the govern-ments goal of cutting the debt to GDPratio, which looks set to peak at 95 percent in 2014 or 2015 higher and laterthan other countries with a top rating.

The agency said that the high risk of further shocks in the fragileEurozone also put the UKs debt reduc-tion plans at risk, given its trade andfinancial links.

Moodys verdict is a significant blow for chancellor George Osborne, whopromised in his 2010 manifesto to safe-guard Britains gold-plated ratingthrough the coalitions austerity plans.

Osborne said last night: This isproof that, in the current global situa-tion, Britain cannot waiver from deal-ing with its debts.

The chancellor claimed that his aus-terity measures were the only thingprotecting Britain from an immediatedowngrade, saying this is a reality

BY KASMIRA J EFFORDUK ECONOMY

www.cityam.com FREE

check for anyone who thinks Britaincan duck confronting its debts.

Indeed, Moodys said the govern-ments move to cut spending morequickly last year was a reason for keep-ing Britains top rating. It also said theUKs low refinancing risk and relative-ly strong banking sector work in our

favour. Austria and Frances triple-A creditratings were also put on negative out-look by the agency yesterday.

Moodys also lowered the ratings of Italy, Portugal, Slovakia, Slovenia andMalta by one notch and slashedSpains sovereign rating by two notch-es from A1 to A3.

The outlook on the Bank of Englands triple-A debt rating was alsodowngraded to negative, in parallel

with the UK.However, Moodys said theEuropean Financial Stability Facility (EFSF), the single currencys bailout

fund, has not been downgraded,despite it being previously linked toEurozone sovereigns own ratings.

Moodys left the triple-A ratings of Denmark, Finland, Germany,Luxembourg, Netherlands andSweden unchanged and also leftBelgium, Estonia, and Irelands ratings

untouched. The euro and sterling fell againstthe dollar after the news last night.

EUROZONE: P4-5

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Certified Distribution02/01/12 till 29/01/12 is 92,258

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BUSINESS WITH PERSONALITY

Chancellor George Osborne defended his budget plans after the outlook change by Moodys Picture: GETTY

MOODYS PUTS UKON CREDIT WATCH

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News2 CITYA.M.14 FEBRUARY 20

Obama taxesto target rich

TAX HIKES amounting to an extra $1.5trillion (950bn) over the next decade

were proposed yesterday by PresidentBarack Obama.

He called for increased taxes on cap-ital gains and dividends, as well as aBuffett rule to increase taxes onhouseholds earning over $1m per year.

Bush-era tax breaks will be allowedto expire, hitting those earning over$250,000, and the maximum rate of income tax will rise to almost 40 percent in 2013, from 35 per cent now.

We built this budget around theidea that our country has always done

best when everyone gets a fair shot,Obama said. It rejects the youre on

your own economics that have led to a widening gap between the richest andpoorest Americans.

Although the plan includes $4 tril-lion in spending cuts, it also requests$800bn more spending on public sec-tor workers and infrastructure, and

would still let the national debt grow by $6 trillion over the next decade.

However, the plan has little chanceof making it through Congress or theRepublican-controlled House of Representatives.

This proposal isnt really a budgetat all. Its a campaign document, saidleading Republican Mitch McConnell.Its bad for job creation and it willmake the economy worse.

BY T IM W ALLACEUS POLITICS

HONDA TO ACCELERATE OUTPUT INEUROPEHonda says it will nearly double itsproduction of cars in Europe as itseeks to reduce its reliance onimports form Japan and recover froma disastrous year. The carmakersEuropean boss said that Honda aimedto increase production at its mainEuropean plant in Swindon to180,000 in 2012, up from 97,000 last

year.

SMALL SHOPKEEPERS BENEFIT AS BIGCHAINS RETREATIndependent retailers have reported asurprise sales boost as national retailchains continue to retreat from thehigh streets. In the last quarter of

2011, more than half of small shop-keepers surveyed by the British

Independent Retailers Associationreported higher sales than the sameperiod last year.

CAR TRADE DEFICIT IS LOWEST FOR 36YEARSBritains trade deficit in cars is at itssmallest since 1976 as the countrysautomakers profit from buoyant over-seas demand for their vehicles,unpublished official statistics show.

TEPCO TOLD TO CEDE OWNERSHIP FORFUNDING

Japans government has threatenedto withhold a 1 trillion yen financialrescue of Tokyo Electric Power , ownerof Fukushima Daiichi nuclear powerstation, unless the struggling utility allows itself to be nationalised.

BANKING CHIEF FAILED TO DISCLOSE2M SHARES DEAL

Jaspal Singh Bindra, the Hong Kong- based chief executive of StandardChartereds Asia business is facing apossible investigation by theFinancial Services Authority after fail-ing to disclose a 2m shares deal tothe bank for more than three weeks.

CITY OFFICE SPACE IS SHRINKINGFAST

Job cuts and fears of another reces-sion are causing large businesses tocut the amount of office space they occupy in Londons Square Mile. A report by DTZ shows a space efficien-cy drive by tenants has led to a 7.3per cent drop in occupancy costs.

SONY AND APPLE ANGER WHITNEYHOUSTON FANS OVER ALBUM PRICEHIKESony and Apple were heavily criticised

yesterday after the cost of buying Whitney Houstons greatest hitsalbum nearly doubled shortly afterher death over the weekend. The priceof the singer's Ultimate Collection

jumped to 7.99 from 4.99 on iTunes,although it is now the original price.

KUWAITS CENTRAL BANK BOSSSHEIKH SALEM ABDULAZIZ AL SABAHQUITS AFTER CRITICISING STATE

The governor of the Central Bank of Kuwait has quit amid apparent dis-agreements over the governmentsspending policies.

EX-BEAR HEDGE-FUND MANSETTLE SEC CHARGES

Two former Bear Stearns hedge-fundmanagers agreed with the Securitiesand Exchange Commission to settlecivil-fraud charges for a total of $1.05m. The two managers of theBear funds also agreed to securities-industry bans.

DEUTSCHE DEAL ON KIRCH IS WORKSDeutsche Bank is closing in on anagreement to pay about 800m to set-tle decade-old claims that a formerchief executive officer helped driveGerman media company Kirch Groupinto bankruptcy, according to peoplefamiliar with the negotiations.

WHAT THE OTHER PAPERS SAY THIS MORNING

Coalitions crazy credit contradiction

YOU cant have lending without bor-rowing. They are the two sides of thesame coin. Yet try telling that to those

who, in the same sentence, want morelending yet also want the UK todeleverage. As contradictions go, ittakes some beating.

But this entire debate is disturbingly muddled. Two different concepts aremixed up: net lending the increase indebt after accounting for repayments and gross lending which tallies upnew loans and doesnt account for therepayment of previous loans. Unless

you ban people from paying back

debts, nobody can control net lending banks and politicians can only impact gross lending, and even thenreally only have influence on thepotential supply of new loans (unless

you force people to accept loans, orincrease their untapped facilities, suchas overdrafts, without telling them,and classify it as an increase in credit).

The Merlin deal, which supposedly fixed targets for lending, the results of

which were published yesterday, wasalways a joke on that the Labourparty is right, albeit for the wrong rea-sons. The agreement was defined insuch a way that it was never meaning-ful. It was a preposterous attempt by the Treasury to centrally plan credit

without actually doing anything aboutit. At least it was never going to triggeranother epidemic of sub-prime lend-ing, which is what it sometimes seemsthis government would like (eventhough the crisis was caused by toomuch cheap money lent to the wrongpeople). The Treasurys forthcomingattempt at boosting small business

loans via credit easing could meanloans that now get turned down

because they are deemed too risky willhappen, backed by controversial new guarantees from taxpayers.

So given that retail banks makemoney from lending, why arent we ina new credit bubble? Why arent the

banks doing what so many people want, and lending like crazy? Theanswer is two-fold: the demand forcredit is down cautious individualsand firms are deleveraging. The supply of credit is also being restrained. UK

banks have rightly realised that they must be safer. Foreign lenders havepartly withdrawn from the UK;finance is deglobalising. And official

banking policy as devised by Basel,the EU, the FSA and so on is to make

banks hold more, higher quality capi-tal and maintain increased liquidity.

Because banks need to make a cer-tain return on their capital to be

viable, and cant lend as much as they did before for every given unit of capi-tal, this is reducing the supply and

increasing the cost of credit. Long-run,this makes banks safer; short-run, itconstrains the economy and themoney supply. On top of that, lendingto small businesses is deemed by regu-

lators higher risk than other kinds of lending so banks are forced to holdmore capital against loans to smallfirms, making lending to them evenless profitable. Marginal loans will nolonger be viable and wont happen. Yeta government that claims to want to

boost small firms has signed up to this. The capital adequacy rules are

designed to encourage some lendingand discourage other kinds. They are

working too well. If politicians are real-ly worried about the availability of credit for small firms, they should sus-pend the rules not embark on QE orcredit easing, which merely addressthe consequences, rather root causes,of the problem, and guarantee nasty side-effects. The current situation isone giant, preposterous contradiction.

[email protected] Follow me on Twitter: @allisterheath

GOLDMAN SACHS has promotedDavid Dusty Philip to co-head of investment banking for industrialcompanies, as incumbent GeorgeMattson retires.

Philip will work alongside fellow co-head Alex Dibelius, with Mattson stay-ing on for an unspecified handoverperiod, Goldman said in a memo.

Philip was previously co-head of Americas mergers and acquisitions.

New York-based Mattson, who has been with the bank for 18 years, start-ed as an associate in investment bank-ing before being made partner andhead of the global industries group in2002.

He advised Tyco last year on its break-up and United Technologies onits $16.5bn bid for Goodrich.

The bank has also promoted ClareScherrer, head of the industrials groupin EMEA, to the additional role of chief operating officer of the global indus-trials group.

BY M ARION DAKERSBANKING

Goldman dealmaker retGoldman, led by Lloyd Blankfein, has replaced George Mattson Picture: GETTY

NEWS | IN BRIEF

BHP and Rio spend $4.5bn on mBHP Billiton and Rio Tinto have approvedplans for a $4.5bn (2.8bn) expansion of the Escondida mine in Chile, the worldsbiggest copper mine, where BHP saidthis morning the ore reserve estimatehas been increased by 25 per cent. BHP,operator of the mine, plans to spend

$2.6bn on two projects to boost outputat the mine, while Rio's share of the proj-ects is $1.4bn. The projects are designedto give the partners access to higher oregrades, with a new concentrator plantand mineral handling system that willboost production to more than 1.3mtonnes a year by June 2015.

Volcker: rule wont hit UK bondsFormer Federal Reserve chairman PaulVolcker last night insisted a proposedban on proprietary trading by US banks named the Volcker Rule after him would not threaten the UK governmentbond market. The UK has voiced concernthat the Volcker rule would disrupt sov-ereign bond markets. But Volcker wrotein the FT: The simple fact is that Dodd-Frank specifically permits both marketmaking in response to customer needsand underwriting.

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 at www.pcc.org.uk

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President Obamawants a Buffett ruleto increase taxes forhouseholds earningover $1m a year

4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900 Fax: 020 7248 2711Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features EditorMarc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Gavin BillennessPictures Alice Hepple

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DAVID Cameron will today announceplans to reduce insurance premiums

by cutting red tape, reducing legal bills and tackling the high number of spurious claims.

Proposals include a plan to reducethe number of whiplash claims by enforcing a higher evidence thresh-old for injuries and cutting the 1,200fee that lawyers can earn for smallpersonal injury cases.

He also wants to assist business-es facing trivial claims by extend-ing the rigorous road trafficaccident claims process to coveremployer liability and publicliability insurance.

The Prime Ministerhas summonedBritains leadinginsurers to

Downing Street to discuss how suchchanges in government policy can bereflected in real decreases in the pre-miums paid by consumers.

Over 1,500 whiplash claims aremade every day in Britain. Accordingto the Association of British Insurers(ABI) this costs the industry 2bn andadds 90 to the average car insurancepremium.

David Cameron will say: I amdetermined to tackle this damag-

ing compensation culture which has been pushing uppremiums.

Downing Street confirmedthat companies represented atthe summit will include Admiral, Aviva, AXA, Royal

Bank of Scotland,USwitch and the Co-operative. The ABI,

Health and Safety Executive andFederation of Small Businesses will also be pres-ent.

Cameron callson insurers tocut premiums APPLES shares topped $500 for thefirst time ever yesterday, in a new milestone that underscores the tech-nology giants place as the worlds

most valuable company by market value at around $460bn.

The companys shares have surged by more than 20 per cent so far this year, after the success of its iPhonesand iPads helped the group postrecord-breaking quarterly profits lastmonth of $13.1bn (8.4bn).

The California-based firm recently overtook oil giant Exxon as the

worlds most valuable company.Rival technology firm Google has amarket cap of $198m and Microsoftof $256m, making Apple bigger than

both companies put together.Meanwhile, the computing giant

said it has agreed to let a US non-prof-it labour group inspect working con-ditions at its main contractmanufacturers, including Foxconnsplants in southern China.

The Fair Labor Association willaudit several suppliers and interview thousands of employees, as Appleattempts to counter criticism that it

was glossing over problems at thesefacilities.

Apples shares closed up 1.86 percent yesterday at $502.60 after reach-ing $503.83 earlier in the day.

Apples sharepass $500 fothe first time

BY J AMES W ATERSONINSURANCE

TECHNOLOGY

News 3CITYA.M. 14 FEBRUARY 2012

EMPIRE STATE OWNER FILES FOR IPO

ORDINARY investors will soon have the chance to own a piece of an iconic US skyscraper,after Empire State Realty Trust, owners of the Empire State Building, yesterday filed to sellup to $1bn of its Class A common stock in an initial public offering. The proceeds will beused to pay existing stakeholders in the buildings who chose to receive cash in exchange for their interests, and to repay debt. The Malkin family bought the property in 2002 but only

gained total control of the 102-story building in 2010 after much wrangling. Picture: GETTY

David Cameronhas called for lower premiums.

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ATHENIANS spent yesterday inspect-ing the damage to their city after yetanother night of social unrest left itsmark on Greeces capital.

City authorities said 150 shops were looted and 93 buildings were wrecked or seriously damaged.

Youth unemployment is runningat 50 per cent and groups from the

provinces have flocked to the capitalto fight police. Rioting also spread tothe second city of Thessaloniki, townsacross the country and the islands of Crete and Corfu.

I wouldnt mind paying for thenext two years if I knew austerity

would take us somewhere but thiscrisis seems endless. said LetoPapadopoulou, a civil servant.

The famous Attikon cinema,housed in a neo-classical building dat-

ing from 1870, was burnt to a shell while graffiti artists repainted thesign on the outside of the Bank of Greece to read Bank of Berlin.

People sent a message yesterday:Enough is enough! They cant take itany more, said Ilias Iliopoulos, gener-al secretary of public sector union

ADEDY.The social explosion will come

one way or another, there is nothingthey can do about it any more.

18 month Flexible Bond Issue 8 is a limited offer which may be withdrawn at any time. Rate featured is for interest paid at the end of the 18 month term.Rates are xed for the term of the Bond, but the amount of interest you receive will depend on the number and size of the withdrawals you make. Ratescorrect at time of going to press 11/01/2012. AER (Annual Equivalent Rate) illustrates what the interest rate would be if interest was paid andcompounded once each year. Gross means the rate of interest payable before income tax is deducted. Withdrawals may take the balance into thelower tier. Income tax will be deducted at the basic rate of income tax. The interest paid forms part of the investors taxable income and should bereposted on any self-assessment return. Interest can be payable without the deduction of income tax to non-taxpayers subject to required certication.Available to UK residents aged 18 years or over. Additional deposits are not allowed. For BT residential customers, calls will cost no more than 4.5p perminute, plus 13.1p call set-up fee (current at December 2011). The price on non-BT phone lines may be dif ferent. Calls may be monitored or recordedfor security and training purposes. Barclays Bank PLC is authorised and regulated by the Financial Services Authority (FSA). Registered No 1026167. Registered Ofce:1 Churchill Place, London E14 5HP.

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Austerity vote gets throubut ordinary citizens despBYJ AMES W ATERSON

POLITICS

News 5CITYA.M.14 FEBRUARY 2012

tensions posebailout dealthe policy that is being imposed uponus today.

Yesterday a government spokesman,Pantelis Kapsis, attempted to reassureobservers by insisting that the party leaders would sign a pledge.

Kapsis added that elections would be held in April, following theassumed resolution of a second

bailout package to Greece in March. THE FORUM: P25

WEALTH MANGEMENT: P28

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BEN BALLARD |CITY OF LONDON

Yes, I think they will follow through with the government spending cuts,despite the public feeling. It is their only possibility to survive.

MICHAELSCOTT |SJ BERWIN

I do not think they will be able to; the government doesnt havesufficient par to follow through. Realistically they will ultimatelydefault and leave the euro.

STU GOODERHAM |LEXIS NEXIS

No, based on its previous mistakes I dont think they will be able tokeep their promises. It seems like they bail out on any harddecisions.

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

CITY VIEWS: DO YOU THINK GREECE WILL CUTSPENDING AS IT HAS PLEDGED?Interviews by Phoebe Torrance

...BUT GREEKS MUST PAY THEPRICE OF DEBT REDUCTION

AUSTERITY PLANS

MINIMUM WAGEto be slashed toencourage new jobs

CIVIL SERVANTS150,000 jobs to becut by 2015

PENSIONSto be slashed by300m a year

EMPLOYMENTLaws will make iteasier to fire workers

HEALTH & MILITARYFace large spending cuts

ANALYSIS l State debt as % of GDP% GDP

Greek debt

2006 2008 2010 2012

200

180

160

140

120

100

80

60

Eurozone

ANALYSIS l Unemployment is soaring

Greek unemployment

2006 2008 2010 2012

25

20

15

10

5

Eurozone

% GDP

22%

150K

300m

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VIRGINMEDIALINERENTAL 13.90APPLIES.SERVICES AVAILABLEINVIRGINMEDIAC ABLEDSTREETS ONLY.Subjectto networkcapacity,status andcreditchecks. 18-monthminimumcontractapplies. I youcancel duringyourminimumcontract periodanearly disconnection eewill apply.Thisofer requiresyouto paybyDirect Debitanduse ebilling.I you pre ernotto paybyDirect Debityouwill incuramonthly 5paymenthandling eepayableto VirginMediaPayments Ltd.I you wouldlikepaper bills,the eeis1.75 amonth.

Equipmentremainspropertyo VirginMedia. Oferends31/03/12: Newcustomersonly(subjecttostatusandcreditchecks):Toget bundlediscountapplied orthreemonthsyoumusttakeabundlecontainingBroadbandXLwitha phoneline.Adiscounto 13.50/monthwillbeappliedwitha BroadbandXLphonebundle.Standardpricesapplya terrstthreemonths.VirginMediareservestherightto withdraworamenddiscounti youchangeanyparto youroferpackage.Maynotbeusedin conjunctionwithanyotheroferunlessstatedbyVirginMedia.Headlinebundle prices(i.e.prices be orediscountis applied)mayvary duringthisofer. *Source:O comsreviewo UKbroadbandspeeds publishedinJuly 2011,basedon O comMay2011test results. General: Allprices includeVAT.In ormationcorrectat Jan2012.Payment mayberequired inadvance. Furtherlegalstuf applies.Go tovirginmedia.com ordetails.

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ECONOMISTS have dismissed the gov-ernments Project Merlin figures as

bearing no relation at all to the avail-ability of credit in the economy.

The government struck a deal with banks last year under which they agreed to boost lending in return forless anti-bank rhetoric from ministers.

The Bank of England released fig-ures yesterday showing that bankshad met the overall target to increasegross lending but fallen slightly shorton the small business lending target.

The Merlin data says that the UKsfive biggest banks made 214.9bn of credit facilities available to business-es, 74.9bn of which was to smallfirms, versus targets of 190bn and76bn respectively.

The response from City economists was to shrug, however. They say thefigures are meaningless when assess-ing the health of the economy.

Hendersons Simon Ward said netlending data is more useful: I haventgiven the [Merlin] figures much of a

look. You want to concentrate on theamount of money actually lent fromthe point of view of the impact on theeconomy.

Instead, Merlin targets gross lend-ing the credit banks have madeavailable to firms but uses a lessstringent definition of the term thanthat used by the Bank of Englanditself, which says the Merlin data arenot collected under the Bank of Englands statistical code of practice.

Citigroup economist MichaelSaunders said: The figures bear norelation to the cost and availability of credit to the UK corporate sector Ithink the Bank of England is embar-rassed at having to publish them.

The Bank highlights its officialdata alongside the Merlin figures.Due to a change in statistical method,the gross lending data is not compa-rable throughout 2011, but the netfigure shows a steady contraction in

borrowing. Overall, firms borrowed6.6bn less in 2011 than they repaidin loans.

But financial secretary Mark Hobancalled the Merlin figures good news.

Economists:Merlin datais worthless A PARLIAMENTARY committee hasslammed the governments inability

to explain what safeguards it wasdemanding from European nations

when Prime Minister David Cameron vetoed an EU treaty in December.

The House of Lords EU Committeesaid that it has repeatedly asked min-isters what exactly was at stake at thesummit and has yet to get a satisfacto-ry answer.

It is unacceptable that the govern-ment have not released appropriatedetails of the safeguards which thePrime Minister sought at theDecember European Council, thelords say in a report released today.This makes it impossible to form a

balanced judgement about the out-come.

At a separate inquiry by the Houseof Commons Treasury SelectCommittee, chancellor GeorgeOsborne suggested that the safe-guards demanded were aimed atshoring up the UKs negotiating posi-tion in thrashing out the details of technical directives, in particular onthe ability of EU regulatory bodies to

wield certain powers.But the government has yet to pro-

duce a consistent explanation of whatit was seeking at the summit.

THE administrators of the British armof MF Global said payments to clientsof the defunct brokerage will reach$31m (19.6m) in the coming days.

KPMG said $19m will be releasedthis week after it agreed on Friday tohand back $12m. The interim payouts

will affect about 1,900 clients in total.Staff from KPMG have been criticisedfor the time taken to return cash but

Richard Heis, joint special adminis-trator, said he wanted to act quickly despite the fact some legal uncertain-ties have still to be resolved.

Clearly in a situation where we arepaying clients without having com-plete certainty as to the extent of claims, we must take a conservativeapproach to payments... but this firstpayment marks an important mile-stone.

US broker MF Global collapsed on31 October.

Lords demandfacts on EU venegotiations

New payout for clients of failed broker MF Global

Former boss Jon Corzine has apologised for MF Globals collapse Picture: GETTY

BY J ULIET S AMUELPOLITICS

BY J ULIET S AMUELPOLITICS

NewsCITYA.M. 14 FEBRUARY 2012

BY P ETER EDWARDSFINANCIAL SERVICES

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SHARES in Cable & Wireless Worldwide (CWW) soared 45 per cent yesterday as Vodafone admitted it was weighing up the benefits of a bid to buy the dwindling telecoms group.

Following reports over the weekend, Vodafone released a statement con-firming it is in the very early stages of evaluating the merits of a potentialoffer for CWW.

Under the Takeover Code, Vodafonehas until 5pm on 12 March either toconfirm its intention to make an offeror withdraw its interest.

The telecoms giant said any offermade will be in cash, but declined tocomment on the likelihood of a bid orany terms it might include.

CWW released a statement noting

Vodafones confirmation. Vodafone could be looking at CWW for its fixed-line network something

Vodafone lacks in Britain or tocement its position in the corporatemarket as consumer uptake of mobilephones reaches saturation point.

CWWs Friday closing share price of 20p and market cap of 530m led toanalyst speculation of a 700m bid.But CWW closed yesterday at 28.5p,

valuing the group at 771m already.Private equity firm Apax Partners,

which lately bought Oranges Swissarm, is said to be eyeing CWW too.

Confirmed:Vodafone eyeon CWW dealBY LAUREN DAVIDSON

TELECOMS

GOOGLE has won the approval of USand European regulators for the$12.5bn (7.9bn) purchase of MotorolaMobility.

Both the US Justice Department andEuropean antitrust authorities both

warned, however, that they wouldmonitor how patents are used toensure they comply with antitrustrules.

Antitrust enforcers on both sides of the Atlantic are concerned thatpatents essential to ensuring commu-nications devices sold by differentcompanies work together are licensedfor a reasonable fee.

The Justice Department said in astatement yesterday that it will nothesitate to take appropriate enforce-ment action to stop any anticompeti-tive use of SEP [standard essentialpatent] rights.

Google, whose Android software is

the top operating system for internet-enabled smart phones, said in Augustthat it would buy phone-makerMotorola for its 17,000 patents and7,500 patent applications, as it looks tocompete with rivals such as Apple anddefend itself and Android manufactur-ers in patent litigations.

The deal will give Google one of theindustrys largest patent libraries, as

well as hardware manufacturing oper-ations that will allow Google to devel-op its own line of smart phones.

Google gets EU and US greenlight over Motorola takeoverBY H ARRY B ANKS

RETAIL

News8 CITYA.M. 14 FEBRUARY 20

Both Vodafone and Cable & WirelessWorldwide have been quick to maintainthat there is, as yet, no deal on the table.

But, should Vodafone serve an offer,CWW has its usual advisory team comprising Barclays Capital andRothschild at the ready.

Heading the BarCap squad is Will

Peters, who has been at the investment

bank since 2004 and is a director in itsComms and Media department.

He previously served as a captain inthe army.

Jeremy Boardman leads from theRothschild side. Before joining the firmin 1995, where he is now managingdirector, Boardman was assistant vice-president of Bankers Trust.

Herbert Smith, led by corporatepartner Christopher Haynes, is actingfor CWW on the legal side.

Vodafone has its usual bank UBS onhand to guide it through this potentialdeal with Linklaters, its long-standing

adviser, on the legal side.

MEET THE ADVISERS

BARCLAYSCAPITAL

WILL PETERS

ANALYSIS l Cable and Wireless Worldwide

p

7 Feb 8 Feb 9 Feb 10 Feb 13 Feb

30

28

26

24

22

20

28.5413Feb

FACEBOOK UNDER FIRE FOR STOCK STR

Facebooks proposed shareholder structure, outlined ahead of its forthcoming IPO, has failed to impress Institutional Shareholder Services. The proxy advisory group criticisedthe social networks dual-class stock which will give Zuckerberg (pictured) voting control of 57 per cent of Facebook for diminishing shareholder rights. ISS also condemnedthe limited board accountability at Facebook, which as a controlled company is not required to have a majority independent board. Picture: GETTY

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HELICAL BAR, the listed property developer, said it has made acquisi-tions totalling 90m since 30September 2011 against a backdrop of severely constrained lending.

Helica said acquisitions and new let-tings had helped boost its rentalincome, net of irrecoverable property costs, from 20m to 25.8ma year.

It also disposed of non-income pro-ducing properties, totalling 40m dur-ing the same period.

The developer said it also agreed133m of new bank facilities including

a 100m revolving credit facility with The Royal Bank of Scotland.

REGULATORS in France and Belgiumhave finally lifted the bans on theshort-selling of certain financialstocks, six months after they wereintroduced as markets plunged onEurozone debt fears.

The separate decisions, by French watchdog AMF and BelgiumsFinancial Services and Markets

Authority (FSMA), come after a boostto market sentiment and are expect-ed to bring more liquidity to trading.

They stop short of a full easing of restrictions, however.

AMF has lifted a ban on 10 institu-tions BNP Paribas, Socit Gnrale,Credit Agricole, Natixis, AXA, April,CNP, Credit Mutuel-CIC, Scor andEuler Hermes but introduced a new regime of disclosing short positions

The FSMA lifted its ban on the cov-ered short selling of KBC, KBC Ancora,Dexia, and Ageas because of thelower volatility of the markets butsaid a ban on so-called naked shortselling, where the seller does notactually own the shares in question,

would remain in place.It also said that significant net

short positions in Belgian financials would be subject to a reporting obli-gation. Nobody from the Frenchfinance ministry and the Frenchtreasury were available for comment.

France, Italy, Spain and Belgiumintroduced bans on short-sellingfinancial stocks on 12 August in a co-ordinated attempt to restore marketconfidence as borrowing costs soared.

Short-selling normally involves bor-rowing a stock on the expectation it

will fall in price. Traders then make aprofit when they buy back the shareat a cheaper rate.

The bans were triggered by a col-lapse in confidence in banks, includ-ing Soc Gen, but were criticised by institutional investors who com-plained that it barred them fromengaging in legitimate hedging activ-ities.

Spain has given little indication of when it will lift its indefinite ban onshort-selling while in Italy curbs have

been extended until 24 February. Yesterday banks, many of which

have exposure to Eurozone sovereigndebt, pared earlier session gains, withthe STOXX Europe 600 Banks indexclosing up 0.5 per cent after being upover one per cent in the morning.

France and

Belgium endshorting ban

KNIGHT VINKE, the activist USinvestor, has increased its stake inKesa, sending shares in the electricalsretailer up by 1.42 per cent yesterday.

Kesa revealed yesterday that its biggest shareholder has upped itsholding by 2.2m shares, takings itsstake to 107.6m shares, or 20.32 percent.

The electricals group sold its loss-making Comet chain after pressurefrom Knight Vinke, which wanted itto focus on its profitable French elec-trical goods business Darty.

Shares in Kesa closed up 1.4 percent at 82.2p last night.

Knight Vinkeups Kesa stakeHelical Bar tokeep spending

BY P ETER E DWARDSCAPITAL MARKETS

PROPERTY RETAIL

SWISS corporations have taken aglobal lead in international acquisi-tions during 2012 and are responsiblefor 16 per cent of cross-bordertakeovers this year.

The relative strength of thenations financial sector has allowedSwitzerland to surge the top of theM&A rankings, with outbound acqui-sitions by Swiss firms totalling

$12.8bn (8.1bn) in 36 deals so far this year over sixteen times higher at thesame point in 2011.

Switzerlands success has pushed Japan (14 per cent of foreign takeovers by volume) and the US (10 per cent)into second and third place respec-tively, according to information fromdata provider Dealogic.

Several major deals have helpedSwitzerland hit such heights, led by Roche Holdings $5.8bn bid for

Illumina, which is being resisted by the US company.Other major deals include ABBs

intended takeover $4bn of Thomas &Betts and Temenos $1.9bn bid forBritish technology firm Misys.

A major beneficiary has beenCredit Suisse, who advised on $10.4bnof the deals.

Total Swiss acquisition volume is at$61.2bn, largely due to the $48.4bnmerger of Glencore and Xstrata.

Swiss are global leaders for2012 cross-border takeovers

M&A

The AMFs Jean-Pierre Jouyet has retained some restrictions on shorting Picture: GETTY


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REFORMS designed to regulate the world of independent financial advis-ers will lead to higher costs for con-sumers who seek investmentguidance, according to a survey by accountancy firm BDO.

The report suggests that 90 percent of advisers expect their earningsto stay stable or increase after thereforms and claims that the new reg-ulations may change very little interms of direct benefits to con-sumers.

It also suggests that although theinitial charge to the consumer willfall by 0.1 per cent of investment

value, the overall cost of advice willincrease as advisers compensate forlost revenue and increase ongoingcharges by around 0.2 per cent of investment value.

The long-awaited RetailDistribution Review (RDR) aims to

improve the quality of financial

advice by banning financial advisersfrom earning commissions on thesales of savings plans and enforcing aminimum level of training.

Banning direct commissions fromproduct providers is intended toimprove the reliability of advice by removing incentives to recommendinvestments that are associated withhigh referral fees but offer a poorreturn for clients.

Alex Ellerton, financial servicesdirector at BDO, said: The mostprominent form of remuneration in apost-RDR world will simply becharges deducted from the cus-tomers premium by the productprovider and passed back to the IFA

just the same way as commission works now.

A spokesman for the FinancialServices Authority said: We strongly

believe the RDR will raise profession-al standards, remove commission

bias and help restore trust in the way

people receive investment advice.

IFA reformsmay result inhigher feesBY J AMES W ATERSON

FINANCIAL ADVICE

CONCERNS over liquidity in Japanhave forced GLG to close the door on akey fund in the nation.

Stephen Harkers 1.1bn JapanCoreAlpha fund faces a soft closurefrom 30 March, meaning it will placerestrictions on new investment.

The fund, which has beaten the Japanese sector average for the lastthree years, will re-open when market

conditions improve.Richard Phillips, head of UK retail

at Man, said liquidity in the Japaneseequity market had fallen in the after-math of the earthquake in March of last year.

While this has not impinged onthe teams ability to manage portfo-lios with the desired degree of liquid-ity and flexibility, it has created a risk that performance could become con-strained if inflows into the strategy increase, Phillips said.

GLG was bought by Man Group, the

worlds largest listed hedge fund, for$1.6bn (now 1.01bn) in 2010.

Turmoil forces GLG to shut thedoor on Harkers Japanese fund

HEDGE FUNDS

BRITISH trading software firmFidessa yesterday announced that itspre-tax profit had risen to 43.2m in2011, up from 40m a year earlier.

The results beat analysts predictions,despite the tough trading conditionscaused by a wave of insolvencies andconsolidation in the sector.

Revenue for last year was up six per

cent at 278.3m but the firm warnedthat growth levels will be slower in2012 as it continues to invest in devel-opment and struggles with the loss of smaller clients.

Fidessa suffered in its traditional Western markets, typified by the col-lapse of MF Global, which was respon-sible for 1.3 per cent of Fidessasglobal revenue.

However such declines were offset by strong demand for its products in

the Americas and Asia. The Woking-based company is thedominant provider of trading soft-

ware to the financial industry, with$10 trillion worth of transactionsusing its network each year. Thefirms flagship sell-side suite is used

by 85 per cent of tier one global equi-ty brokers.

Fidessa shares, which had gained12 per cent from the start of the year,closed down 4.8 per cent.

Fidessa beats profit forecabut warns of slowdown ahBY J AMES W ATERSON

TECHNOLOGY


ANALYST VIEWS: CAN FIDESSA CONTINUE TOGROW AT ITS CURRENT RATE?Interviews by James Waterson

DAVID TOMS |NUMIS

Fidessa's results are modestly ahead of our expectations.Management's increasing confidence in the multi-asset opportunity and the poten-tial for a new engine of growth from hosted platforms for larger customers con-

tinue to support our positive stance.

JULIAN YATES |INVESTEC

Unsurprisingly the company is seeing continued weakness in its SMEcustomer base and it expects these trends to continue. New asset classes will notbe enough to sustain previous levels of growth and we would expect sales growthin low single digits.

ROGER PHILLIPS |MERCHANT SECURITIES

The statement says to expect a slower year in terms of growth due tomarket conditions persisting and further product investment. In the short termthe reaction will be a disappointment and the shares will come under pressure.Longer term we see Fidessa as one of the outstanding stocks in the sector.

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JOE LEWIS TO HOST HIGH-ROLLERSGOLF IN HIS TAKEOVER DOWNTIME

THERE IS still more than a month togo before Bahamas-based billionaire

Joe Lewis can come back with a bidfor pub chain Mitchells & Butlers.

To occupy himself in the mean-time, the financier is hosting two of the worlds most high net worth golf tournaments. The first, the Albany International Challenge co-hosted

with Rob Hersovs Adoreum Partnersnear Lewiss Bahamas home; the sec-ond, the Tavistock Cup in Orlando.

Both are extremely private. Only 50 business associates of the man whoowns Tottenham Hotspurs are invitedto the Bahamas tournament from 9to 11 March, where cleared Spursmanager Harry Redknapp would bereceived with open arms.[Redknapp] is not on our current list,

but he absolutely would be welcome,said an aide. As for the Tavistock Cupten days later part of Lewiss leisure,finance, energy and property con-

glomerate Tavistock Group only sponsors, invited guests and membersof the Albany, Isleworth, Queenwoodand Lake Nona clubs are welcome.

That means Aidan Heavey, thefounding director of Tullow Oil;

banking executives from fellow spon-sors Citi Private Bank and RBC CapitalMarkets; plus Andrew White, CEO of marketing agency WSM, and perhapshis father-in-law Sir Martyn Arbib,

who ran Perpetual in the late 1990s.

Golfers Tiger Woods and Ernie Els, backers of Lewiss Albany develop-ment, will represent the resortsteam, but Lewis himself has too muchgoing on to take part. There are a lotof interesting opportunities at themoment for people with good cash

balances, hints a source. Whatevercould El Rico be looking to buy next?

COMMITMENT ISSUEITS THE thought that counts. So

thanks to ex-Liontrust chief NigelLegges new fund Vinculum, whichsent The Capitalist a card remindingthat love like the asset managersfees is performance related.

Commitment may involve a high-er element of interpersonal risk,reads the Valentines-themed circularto would-be investors. This can resultin profound and lasting resentment,chronic loss of self-esteem, mutualloathing, and periodic bouts of seething rage. Where do I sign?

Joe Lewis (centre) with associates Aidan Heavey and Rob Hersov Pictures: GETTY / RE

The Capitalist14 CITYA.M. 14 FEBRUARY 2012EDITED BY

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

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HEATHROW is lagging behind majorrivals in the race to attract passengersfrom China due to a lack of capacity,BAA warned yesterday.

Londons biggest airport is losing outto the likes of Paris, Amsterdam andFrankfurt, airport chief Colin Matthewssaid. Heathrows January traffic fromChina, including Hong Kong, was down

by 0.7 per cent compared with the previous year.

Matthews said that the trend showedthat capacity constraints at Heathrow,Europes busiest airport, were damag-ing the UK economy when the country can least afford it.

For 2011 as a whole, HeathrowsChina traffic was up three per centcompared with 2010 but that com-pared with nine per cent in Frankfurtand Paris and six per cent in

Amsterdam. Meanwhile the proposedLondon hub airport in the Thames estu-ary, backed by Mayor Boris Johnson, isnot off the starting blocks.

Overall BAA, which is mostly owned by Spanish group Ferrovial, said it han-dled 7.5m passengers in January, up 0.5per cent. Heathrow served 5.2m passen-gers last month, a record for January and up 2.3 per cent on a year ago.

Heathrows bleak China figures arereflected in a report from Visit Britainlast year which showed that Chinesespent $54.9bn (3.4bn) on tourism in2010, a fourfold increase in a decade.But the UKs share of the pie was a mea-gre 0.4 per cent. Airline seat capacity from the countrys airports to the UK remained stable at 40,000 per annum,

while rivals has risen.

Heathrow hit

as Chinese goto rival hubs

Airbus joins aviation tax rowGLOBAL planemaker Airbus joined achorus of concern that a European

scheme to charge airlines for carbonemissions risks triggering a full-blowntrade war, with implications for planedeals and even Europes crippling sov-ereign debt crisis.

The EUs Emissions Trading Scheme(ETS), introduced on 1 January, hasdrawn howls of protest from airlinesaround the world, with China ban-ning its carriers from taking part.

The escalating row comes on theeve of a China-EU summit in Beijing,

with the EU looking to China to dipinto its huge foreign exchangereserves to help the Eurozone tackle a

debt build-up that threatens its eco-nomic stability. Airbus chief executive Tom Enders

said he was increasingly concerned atthe potential fall-out if tensions arenot defused.

I am very worried about the conse-quences of that. What started out as asolution for the environment has

become a source of potential trade

conflict and that should be a worry for all of us, he told an aviation con-ference yesterday ahead of theSingapore Airshow.

China is a strategic market for the

worlds two big planemakers, as itcoordinates purchases centrally andregularly places orders with Airbusand Boeing in batches of 100 or moreto coincide with high-level politicalcontacts.

Foreign governments argueBrussels is exceeding its legal jurisdic-tion by calculating the carbon costover the whole flight, not just Europe.

BY J OHN DUNNETRANSPORT

BY HARRY B ANKSAVIATION

QANTAS Airways has played down asteering issue that forced an Airbus A380 to twice abandon departure before taking off from Heathrow air-port on Saturday, saying it was unre-lated to wing cracks that have ledEuropes air safety officials to orderglobal checks on the superjumbo.

Qantas said the plane, due to fly from London to Singapore, was travel-

ling at a very slow speed when thedecision was made to return to bay.

It was due to the steering issue. Ithas no relation to the cracks in the wing ribs at all, Qantas spokeswomanCourtney Treak said. Our engineers

were able to fix the issue, so we donthave any further concerns.

A spokesman for manufacturer Airbus declined to comment, sayingthat only the airline could commenton operational matters.

Qantas says A380 delaunrelated to wing crack

AVIATION


ANALYSIS l Ferrovial


9.55

9.50

9.45

9.40

9.35

9.5013Feb

Britains share of outbound Chinese visitscompared to closest competitors

2005

2010

Austria France Germany Italy Switzerland UK Canada USA

35

30

25

15

20

10

5

0

%

000s

Asia

Europe

AmericasAfrica

Middle East

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

25,000

20,000

15,000

10,000

5,000

0

Chinese tourism to Europe is set tosurge in the coming years butBritain will miss out due tocapacity constraints

ANALYSIS l Britain is failing to cash in onthe Chinese tourism boom

of all outbound visits froChina in 2010

0.4%Britain accounted

for just

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REVENUES tripled at Monitise inthe first half of the fiscal year onrecord demand for the mobile bank-ing groups services, which now process an annual 480m transac-tions, up from 120m in 2010.

The British company raised itsfull year revenue guidance by 21 percent to 34m after a successful sixmonths which saw revenues reach15.8m three times the revenueof the first half of fiscal 2011.

Despite ending the period with43m in cash and a record order

book of 83m, the group reportedan operating loss of 6.9m albeitan improvement on last years7.5m.

The period saw strong growth inthe US, where Monitise now sellsdirectly into the market due to itsacquisition of FISs majority stake in

joint venture Monitise Americas. This will be boosted by last weeks

announcement of a new mobilepayments collaboration with Visasdebit processing service.

The partnership with Visa alsosaw Monitises European presencegrow, due to a 24.7m investmentfrom the credit card company inOctober and the subsequent launchof a mobile banking alerts service.

Monitise said it expects grossmargins to increase to more than 70per cent by the end of fiscal 2013.

Chief executive Alastair Lukiessaid: The platform is scaling global-ly through our continued invest-

ment as we deliver against our strat-egy. We have particularly seenmomentum accelerate in the USmobile money market and we

believe we are well placed to benefitfrom this.

Shares teetered throughout theday, before closing level at 36.5p.

US growth triplesMonitise revenuesBY LAUREN DAVIDSON

TECHNOLOGY

OLYMPUS, the scandal-hit technolo-gy company, said it may shun out-side investment as it forecast it

would fall to a 32bn (260m) full year loss.

It had been considering a cashinjection from other Far East electri-cal companies but its medical equip-ment arm appears solid.

When asked if Olympus could con-tinue without a capital boost, presi-dent Shuichi Takayama said

yesterday: I think its a possibility. The firm said it now expects a

32bn net loss for the financial yearending 31 March, hit by impairmentlosses in its ailing camera businessand tax asset write-downs.

That compared with a 3.87bn netprofit in the prior year, and its previ-ous forecast for an 18bn profit thatit withdrew in the wake of the 1bnaccounting scandal.

Olympus wantsto go it alonedespite fallingto 260m loss

TECHNOLOGY


DATA centre Telecity is ready toreward investors as the groupannounced it will pay its first dividendfollowing first half 2012 results laterthis year.

The company, which is based inLondon, yesterday reported revenuesup 22 per cent to 239.8m for the yearto the end of December, largely boost-ed by the growth of cloud computingas mobile data demand increases andlarge companies outsourcing theirdata hosting.

Pre-tax profits jumped more than aquarter on last year to 67m, surpass-ing market expectations of 65.7m.

Adjusted earnings per share grew 11per cent to 24.1p.

Telecity, the leading provider of car-rier-neutral data centres across

Europe, now has total available cus-tomer power of 68 megawatts, upfrom 58MW at the end of 2010.

Telecity chief executive Michael Tobin (pictured) said in a statement:We have significantly enhanced thegroups future growth prospects, withinvestments beingmade in capac-ity acrossEurope and

with theacquisitionsof DataElectronics inDublin and UK Grid inManchester.

Shares in theFTSE 250-list-ed firm fellone per centto 648.5p.

Cloud computingguides Telecity tomaiden dividendBY LAUREN DAVIDSON

TECHNOLOGY

ANALYSIS l Monitise

p


39

38

37

36

35

34

33

36.5013Feb

Real potential is in emerging mark WHEN I first met Alistair Lukies back in 2009, things were not look-ing good for his company, themobile payments providerMonitise. The firms share price

was languishing at 5p, way below its IPO price of 21.25p, and it wasoperating in not one but two trou-

bled sectors: tech and financialservices. To make matters worse, it

was quoted on the then-belea-guered Aim market. Lukies, a for-mer rugby pro, was unfazed,

believing that mobile banking would hit the tipping point roundabout now. As it happens, he wasright.

Yesterday, the firm upgraded itsfull-year revenue guidance by 21per cent to 34m. That is more

than double the 14m it pulled in

in 2011 and over five times its 2010haul of 6m. It is a blistering paceof revenue growth, which hashelped it narrow its ebitda lossfrom 7.5m in the first half of 2011to 6.9m this time round. Its tar-get to break even in cash terms by the end of 2013 no longer looks sodistant. Analysts at Evolutionexpect profits of 8m in 2014.

This is all the product of years of painstaking work, which saw Monitise build partnerships withthe likes of Visa and VocaLink, theoperator of the UK cash-machinenetwork. It also had to convinceinvestors and the authorities thatits security was bank grade. Thegood news is that while all thisheavy lifting was pretty arduous, it

means the barriers to entry are

now quite high.It is the US that is now driving

revenue growth, but the excitingthing about this company hasalways been its ability to conquer

young emerging markets. Thesecountries are likely to skip inter-net banking (due to patchy con-nectivity) and go straight formobile banking.

The shares still look like a goodpunt, but the returns on offer will

be nothing compared to thekilling that those who stood by Lukies in the dark days of 2009stand to make.

[email protected]

BOTTOMLINEAnalysis by David Crow

GELDOF AFRICA FUND RAISES $200M

IRISH rock star Bob Geldof has raised $200m (126.4m) for his 8 Mile African privateequity fund, cementing a shift in his global anti-poverty crusade from rich world debt

forgiveness to promoting private enterprise. Private equity is one way to support theenterprise and dynamism of the people of the continent and help provide the jobs andskills that are needed," Geldof said yesterday. Picture: GETTY

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Why Barclays Capital is set to go marching o

WHENEVER I speak to a direc-tor at Goldman Sachs orMorgan Stanley aboutBarCap, Barclays Banks

investment banking arm, I am

reminded by them that it takes a very long time to build up a sustainableleading position in the equity mar-kets.

As Barclays geared up for publica-

tion of its f inancial results last Friday,questions were being asked againabout its commitment to investment

banking.For sure, BarCap has leapt up the

league tables of equity advisory, equi-ty capital markets and equity trading,

but the critics say this has all come attoo heavy a cost.

Bob Diamond, the Barclays chief executive, has set a rate of return onequity target of 13 per cent by 2013,

which now seems too optimisticgiven that last years figure came in at6.6 per cent.

Barclays blames the recent marketdownturn and argues that although

revenues, for example, in fixedincome and commodities, camedown by 27 per cent in 2011, this wasless of a fall than at Goldman Sachs (-46 per cent) or Bank of AmericaMerrill Lynch (-36 per cent). Barclaysalso says that its cost income ratio of 71 per cent beats that of rivals such asCiti, BoA, Goldman, Morgan Stanley and Deutsche.

But still it knows there is investorpressure to make some inroads on

costs. I expect BarCap to be one of the survivors and relative winners,says Ian Gordon, banking analyst atInvestec, but the bank cannotachieve its targeted returns and sus-

tain the existing cost base without aparticularly strong rebound in invest-ment banking revenues.

I expect the outcome to include amore material and sustainable focuson cost reduction in BarCap.

The question is will it be possibleto keep winning new mandates andkeep levels of morale high whilesimultaneously reducing headcountor remuneration?

Fortunately for BarCap the lousy

market conditions may work in itsfavour. For one, it is hard for employ-ees to find better positions elsewherein a contracting market. And compa-nies are more likely to look for new

advisers in fragile markets. Add to that the fact that RBS hasconceded its position at the top tableof UK investment banking, UBS isretreating and few other houses arein expansion mode.

Look how aggressively BarCapfought to get on the Xstrata deal and

you get the sense that theres no wavering of commitment to thecause.

[email protected]

INSIDE TRACK

DAVID HELLIER

Merchant House slumpsSHARES in broker Merchant Housedropped by a sixth yesterday after itsaid it was transferring money fromDorset stockbroker Pritchard, whoseactivities have been restricted by theFinancial Services Authority.

The stock closed down 16.67 percent at 0.1p. Merchant said the cashheld by Pritchard, in the structuredproducts group, is safe because it wasin a client account.

Last week the FSA said Pritchardhad failed to arrange sufficient pro-tection for clients assets.

FINANCIAL SERVICES

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FRENCH cosmetics maker LOreal said yesterday it expected increased rev-enue and profits again this year, withemerging markets set to eclipse

Western Europe as the biggest con-tributor to sales.

The group also said that LOrealheiress Liliane Bettencourt, 89,Frances richest woman with a 30 percent stake in the 49bn (40.1bn)company, was leaving the board to bereplaced by her 25-year-old grandson

Jean-Victor Meyers. The maker of Garnier shampoo,

Lancome creams and Yves SaintLaurent perfume posted 2011 operat-ing profit of 3.29bn, up 7.7 per centand ahead of estimates.

The worlds biggest cosmeticsgroups operating margin rose to 16.2per cent from 15.7 per cent the previ-ous year. Full-year sales rose 5.1 percent like-for-like to 20.34bn, also justahead of forecasts.

Chief executive Jean-Paul Agon saidthe group was well-equipped toachieve another year of sales andprofit growth in 2012 following a

year in which the global cosmeticsmarket trend was favourable.

The chief exec also thankedBettencourt for what he called herunrelenting support to the man-agers of the group, adding that herinterest for the group remainsstrong.

The Bettencourts have a 10-yeardeal with Swiss group Nestle, whichowns 31 per cent of LOreal, givingeach party first refusal for theirstakes. Neither can raise their stakesduring Liliane Bettencourts lifetime.

Bettencourt lost control of her busi-ness affairs to daughter FrancoiseMeyers-Bettencourt, mother of Jean-

Victor Meyers, in an October judg-ment on the basis of a medicalexamination that concluded she wassuffering from a form of dementia.

Meyers, who has been a member of the supervisory board of Bettencourtfamily holding Tethys since January 2011, was given responsibility for hisgrandmothers health and physical

well-being.

DAIRY Crest said yesterday it hadmade a 4m provision for bad debtafter one of its customers, QuadraFoods, appointed administrators.

The group said it was in a strongposition to absorb the debt and itsdividend would not be adversely affected.

In a statement the foods group

Dairy Crest said: This is the totaldebt owed to us by Quadra, although

we are looking at several options toreduce the amount involved.

Dairy Crest has annual sales of 1.6bn and this is an isolated inci-dent. It will have no material effecton our year end borrowings.

Dairy Crest said the 4m owed will be accounted for as an exceptionalitem.

Quadra is best known for itsDairystix liquid milk pouches.

In an interim management state-

ment earlier this month, Dairy Crestsaid group sales had risen two per

cent, thanks to new products butadmitted that trading was tough inthe dairy products business.

Its main brands are Cathedral City,Country Life, St Hubert Omega 3,Clover and Frijj.

The group said it was is on track tomeet its promised annual cost sav-ings of 20m.

Analyst Charles Hall at Peel Huntsaid: The loss will obviously be seenas negative to sentiment in the short

term, but should have minimal effectlong term.

Dairy Crest warns investors over 4mhit as Quadra calls in administrators

EXPECTATIONS that the directors of FTSE 250 miner Bumi will strike a dealto resolve a row over board member-ship rose yesterday, driving the shareprice of the company up in morningtrading.

Samin Tan, the newest major share-holder in Bumi, is due in London this

week to talk with other shareholdersabout a plan to remove Nat Rothschildas the miners co-chairman.

But he and the Bakrie Group, whichhad both proposed Rothschilds

removal and replacement by Tan,sounded a more conciliatory tone yes-terday.

Tan claimed: The resolution [toremove Rothschild and four otherdirectors] has never been targeted atany individual or individuals.

We are keen to get to work to helpcreate value for all shareholders, Tantold the Wall Street Journal. As City

A.M. revealed yesterday, Tan wants toget more money into the developmentof Bumis non-coal assets as quickly as

possible but it is not clear how othershareholders will react to the plan.

Bumi investor says boshake-up is not person

MINING

ANGLO American Platinum, the worlds largest platinum producer, yes-terday said its production continuedto be dented by safety issues whichhave triggered a string of shutdowns.

Amplats, which had 81 government-enforced safety stops in 2011, over dou-

ble the number the year before, saidproduction in 2012 was likely to beflat.

The firm is listed in Johannesburg but is a managed subsidiary of mining

giant Anglo American.Meanwhile headline earnings per

share the main gauge of earnings inSouth Africa fell almost 30 per centas expected to 1,365 cents in 2011.

The rise in stoppages was a key rea-son behind Amplats failure last yearto meet its initial production target of 2.7m ounces. It produced just over2.5m and is targeting 2.5 to 2.6mounces this year.

The company has been critical of the scale of some of the shutdownsimposed on it by the authorities.

Anglo American Platindented by mine stoppag

MININGUS PRESIDENT Barack Obamaunveiled a 2013 defence budget yester-

day that proposes cuts in Pentagonspending for the first time since 1998,slashing military personnel costs and

weapons purchases as it trims $487bn(308.7bn) in projected outlays overthe next decade.

The Presidents spending plan callsfor a Pentagon base budget of $525.4bn, about $5.1bn less thanapproved in 2012.

The cost of US wars abroad wouldfall 23 per cent, to $88.5bn, primarily

due to the US withdrawal from Iraqand a drawdown in Afghanistan.

Shares in UK-listed defence giantssuch as BAE Systems and Qinetiq wereleft unchanged by the news, however,

as the firms have already looked toother markets to offset spending cutsin the UK and US.

The defence budget slashes person-nel costs by $6.7bn as the military

begins to cut its overall force size by about 100,000 troops over five years.

The Army is to take the bulk of thereductions about 72,000 soldiers.

The budget also would delay devel-opment of the Armys ground combat

vehicle, saving $1.3bn over five years,

and reduce the Navys shipbuildingprogram, for savings of $13.1bn.

The spending plan terminates one version of the Global Hawk unmannedsurveillance drone, a defence weather

satellite system and the C-27A trans-port plane, for total savings of $9.6bnover five years.

Obama unveils defence cutsBY HARRY B ANKS

DEFENCE

Heiress quitsLOreal as firmreveals profitBY HARRY B ANKS

CONSUMER

BY J OHN DUNNECONSUMER

The United States has pledged to cut $487bnfrom its defence budget over ten years This comes after the UK said in October2010 that it would trim eight per cent from its33bn annual defence budget over five years

FAST FACTS |DEFENCE SPENDING

News 19CITYA.M.14 FEBRUARY 2012

BARRICK Gold, the worlds largestgold producer, plans to sell its 20 percent stake in Russias Highland Gold,it announced yesterday.

Barrick bought the stake inHighland, a venture backed by tycoonRoman Abramovich, almost a decadeago, with the aim of using it to gain afoothold to grow in Russia, home tothe worlds second-largest goldreserves after South Africa.

Instead, as Highland failed to sig-

nificantly ramp up its production and with Russia still a tough environmentfor foreign miners, Barrick Gold hasfocused on its more lucrative US andLatin American growth assets.

Aim-listed Highland, which missedits 2011 output target after hittingoperational hitches, was Barricksonly major asset in Russia.

Highland is 40 per cent owned by entities linked to Millhouse,

Abramovichs investment vehicle, which said that a sale could be goodfor the stock as it could boost a freefloat, currently around 30 per cent.

Barrick to offload stakein Russias Highland Gold

Barrick is to sell its 20 per cent interest in Highland Gold Picture: GETTY

BY HARRY BANKSMINING

NEWS | IN BRIEF

Rusal aluminium output dipsRusal said yesterday that it expectsmore companies to cut aluminium out-put this year, with China accounting forabout a third of global cuts, but stillforecast that global output would topdemand. A supply glut on the back of adeepening European debt crisis andglobal economic slowdown has hurtdemand and prices for the lightweightmetal. Russias Rusal is one of thebiggest aluminium companies in theworld.

Ronson petrol purchase nears OKGerald Ronsons deal to acquire petrolstations from Total and sell some toShell is close to clearing its final compe-tition hurdle. Ronsons Snax 24 forecourtbusiness, alongside Investec andGrovepoint Capital, made the deal forTotal UKs assets in June under the nameRontec. At the time, Rontec said itwould end up operating 556 sites acrossthe UK, owning 238 of these outrightand selling 254 to Shell. The Office of Fair Trading approved the purchase fromTotal last month, and said yesterday thesale to Shell will be considered for clear-ance now that Shell has offered to sellsome sites to overcome local competi-tion issues.

Stobart property deal gets nodHaulage group Stobart has won thebacking of almost all its shareholders tobuy up property from a company con-trolled by its own directors. Despite crit-icism from institutional investor groupPirc, 97.9 per cent of Stobart investorswho voted by proxy before the meetingwere in favour of the deal. Stobart saidlast month it planned to buy 18 proper-ties from WA Developments for12.35m plus 88.85m of debt. WA andits subsidiary WADI Properties are con-trolled by two Stobart directors: chief exec Andrew Tinkler and chief operatingofficer William Stobart.

Liliane Bettencourt hasleft the board of LOreal after medicsconcluded she had aform of dementia

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EUROPEAN plans aimed at protect-ing pension pots will destroy finalsalary schemes in the UK and cost

businesses hundreds of billions of pounds, a consortium of industry and labour bodies warned yesterday.

In a letter to EC boss Jose ManuelBarroso, the Confederation of BritishIndustry (CBI), Trades UnionCongress (TUC) and National

Association of Pension Funds (NAPF)argued that applying new capitalrules to pension funds will cost anestimated 300bn, hitting the work-ers saving for retirement and threat-ening to tip the companies offeringthe schemes into bankruptcy.

The European Insurance andOccupational Pensions Authority (EIOPA) will tomorrow present itsrecommendations to the EuropeanCommission, and is expected topush for Solvency II-style regulationsto be implemented, bringing pen-sion funds into line with insurancecompanies.

The aim is to make funds safer,giving them a capital buffer in casean economic shock puts them at risk and means risk-free, liquid assets

like government bonds will be priori-tised over riskier assets like equities.

However, the NAPF argues thismisunderstands how pension funds

work: theirs are long-term invest-ments, but insurers face more short-term risk if major events result inlarge payouts to customers.

By demanding dramatic increas-es in funding from employers, theECs plans would at best force allremaining defined benefit schemesto close and at worst push many

businesses into insolvency, leadingto significant job losses, the lettersaid.

Far from benefitting employeesand protecting scheme members,this would create a system in which

job creation would be seriously hurtand pension provision inevitably damaged.

It will also harm firms looking toraise cash by issuing shares.

Pensions minister Steve Webb joined the push to stop the rules being implemented, telling City A.M.:Why are we even thinking aboutthis? It is hard to see what questionSolvency II is the answer to. Thesechanges would be catastrophic, and

we need to get in early to make ourcase before the decisions are made.

JAPANS economy shrank much moresharply that expected in the finalquarter of 2011, official GDP estimatesshowed yesterday.

The strong yen and Thai floodshelped cut exports by 3.1 per cent overthe three-month period, leading GDPto contract by 0.6 per cent.

Public fixed capital formation fell by

2.5 per cent, a second consecutivequarterly decline, also hitting output,

which declined by 0.9 per cent for the year as a whole.

Analysts expect the grim news toincrease pressure on the Bank of Japanto tweak its monetary policy outlook.

Since the Fed enhanced its policy guidance on 25 January and draggeddown the USD by pushing back its pol-icy rate hike expectation toward late2014, both ruling and oppositionpoliticians have said the Bank shouldclarify its current monetary policy

regime, said Barclays CapitalsMasafumi Yamamoto.

To weaken the yen, Yamamoto sug-gested the Bank either increase itsasset purchases or publicly seek to out-do the Fed by promising lower interestrates and more QE beyond the Fedsstated forecast periods.

The Bank of Japan believes morespending on reconstruction shouldhelp boost GDP into 2012.

However, economists worry slowingconsumer demand growth fell to 0.1per cent in the fourth quarter from 0.9

per cent in the third may dent thosehopes of recovery.

Japans economy falls sharply as Thaifloods and strong yen pull on exports

UK JOBSEEKERS face the worst labourmarket environment since early 2009, according to a study from theChartered Institute for Personnel(CIPD), published yesterday.

A net balance of eight per cent of firms are set to cut headcount, thegroups survey showed, which isexpected to take unemployment upto 2.85m by the end of the year.

Meanwhile the Trades UnionCongress today argued that the gov-

ernment should take more note of the U6 measure of unemployment,

which takes into account discour-aged workers who have given upseeking jobs, and those who areunderemployed, taking part time

work when they would prefer fulltime jobs.

On this measure, the TUC estimat-ed, unemployment stands at 6.3m its highest level since records beganin April 1993, and well above the offi-cial level of 2.68m or the claimantcount, which stands at 1.6m.

Unemployment headintoward 3m, warns stud

UK ECONOMY

HUNDREDS of thousands of house-holds are coping better with paying

bills and debts than they were latelast year, Legal and GeneralsMoneyMood survey showed yesterday.

The number struggling with finan-cial commitments has fallen by 244,000 since the final quarter of 2011, to 1.89m.

Of those, 189,000 are in London down 81,000 on the quarter.

The average household nationwidethat is short of cash needs an extra96 per month to get by, but those inLondon are 261 short.

Households in Scotland and East Anglia with a shortfall have the low-est on average, at just 25 per month.

At the other end of the spectrum,households that manage to save

money put away an average of 93each month but Londons saversmanage 159.

The biggest savers are in the EastMidlands, at 177 per month.

There is a clear north/south divide with the south saving between 25 percent and 90 per cent more than thenational average and double the levelof savings achieved by those in thenorthern regions, the report said.

Household finances show signs owith Londoners savings racing a

UK ECONOMY

AN ECONOMIC upturn is on the way,and economies should start growing

more strongly in the next six months,according to the Organisation forEconomic Cooperation andDevelopments (OECD) leadingindices, published yesterday.

Using indicators like business senti-ment and job expectations to esti-mate economic growth in sixmonths time, the study found posi-tive figures in the US and Japan inDecember, pulling global growthupwards.

However, the index registered below-trend growth for the UK, hold-ing steady at 98.7, and the Eurozone,

which fell 0.2 to 98.3, and a slowdownin China, which saw its reading slide

from 99.8 to 99.3. A reading of 100 indicates trend-rate economic growth.

The near-stabilisation for the UK in December ties in with recent indi-cators and survey evidence suggest-ing economic activity picked uparound the turn of the year and

boosts hopes the economy can avoidrecession, said economist Howard

Archer from IHS Global Insight. The OECD as a whole registered a

positive change in momentum, hit-ting 100.4, up from 100.2 inNovember.

Global growth getting betterBY T IM W ALLACE

WORLD ECONOMY

EU plan risksfinal salarypension dealsBY T IM W ALLACE

REGULATION

BY T IM W ALLACEJAPANESE ECONOMY


FIRST TIME BUYERS HURRY TO BEAT STAMP DUTY DEADLIN

THE HOUSINGmarket saw a

jump in activity in December and January as first- time buyerssnapped up housesbefore the stampduty exemptionruns out next month, data fromthe Council of

Mortgage Lenders(CML) showed yesterday, and Royal

Institute of CharteredSurveyors (RICS)today. Loans to

first-time buyerswere up 14 per cent on December 2010,CML reported.

Picture: GETTY

NEWS | IN BRIEF

EU sees jump in trade to ChinaExports from the EU to China dramaticallyoutgrew sales to other countries andregions in the last decade, Eurostat datarevealed yesterday. The 27 countries sawexports to China rise consistently from26bn (21.78bn) in 2000 to 113bn in2010, defying the overall drop in exportsexperienced in 2009. Imports rose from79bn to 283bn over the period, leavinga trade deficit of 169bn. Data from thefirst 10 months of 2011 registered a 21per cent jump in exports on the same peri-od of 2010. German exports represented48 per cent of the total last year, followedby France with 10 per cent and the UKand Italy with seven per cent each. TheUK has the second largest trade deficit

with China after the Netherlands, at24bn in the 10-month period.

Debt consolidation hits 1.5bnConsumers are set to borrow 1.5bn fordebt consolidation in the thirst threemonths of 2012, according to data outyesterday from Sainsburys Finance. The157,000 loans account for almost one inthree of all unsecured loans taken out inthe period, and average 9,800 each.For those who perhaps have balances oncredit cards where they are no longerbenefiting from an introductory offer orare paying a high interest rate on one ormore store cards, consolidating the debtcould make a big difference by making iteasier to budget monthly outgoings, saidSteven Baillie of Sainsburys. Anyoneconsidering taking out a personal loanfor this purpose should make sure they

shop around and find the most competi-tive rate or reward package.

ANALYSIS l The OECD economies maybe looking up

Leadingindex

2001 02 03 04 05 06 07 08 09 10 11

100

105

100

95

90

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New from City A.M., we bring you the latest

THE BEST ROLES NEED

THE BEST CANDIDATES.

W W W . C I T Y A M C A R E E R S . C O M

F I N A N C E B A N K I N G L E G A L I T

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IOSCOThe International Organization of Securities Commissions has appointedDavid Wright as its new secretary gen-

eral. Wright, who will start the new jobin March, has been a senior adviser tothe European Commission during thecurrent financial crisis, most recently

as a member of the Commissions taskforce on Greece.

Merchant SecuritiesMerchant Securities has hired the for-mer corporate finance team at EvolutionSecurities Leeds office, who will move

to the Leeds office on 6 March. Theteam will be led by Joanne Lake, whobecomes director of corporate financeand head of Merchant Securities Leedsoffice, working with Peter Steel andCasper Kaars Sijpesteijn. In addition,Jeff Keating has been appointed as adirector of corporate finance in London.

Grant ThorntonIan Corfield has been appointed as a

partner in the London mid-marketrecovery and re-organisation team toexpand the business alongside existingpartners David Dunckley and DavidRiley. Corfield specialises in advising onthe turnaround of distressed businesses,notably the administration of the Hilton

Manchester and First Quench Retailing.Cavendish Corporate FinanceThe corporate finance adviser has pro-moted directors Michael Jewell andAndrew Jeffs to partner. Jeffs andJewell have worked at Cavendish since2002 and 2006 respectively.

EvershedsEversheds has expanded its pensions

practice with three new partnerhires. Sarah Swift joins the Londonoffice from Freshfields BruckhausDeringer, and pensions specialistsEmma King and Sarah Franklin joinEversheds Birmingham office fromSquires Saunders.

IFRSJames H Quigley, the chief executiveof Deloitte Touche Tohmatsu between2007 and 2011, has been appointedas a trustee of the InternationalFinancial Reporting StandardsFoundation, the oversight body of theInternational Accounting StandardsBoard. Quigley will hold the appoint-ment until 31 December 2014.

CITY MOVES |WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

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

in association with

US stocks rise anApple hits its pea

US stocks rose yesterday, with theS&P 500 near seven-monthhighs, after Greeces parlia-ment approved reforms needed

to qualify for a bailout and avoid anunruly default.

Apple shares closed above $500 forthe first time after a gain of 1.9 percent, leading the Nasdaq Compositeto close at a more than 11-year high.

Greek lawmakers backed drasticcuts in wages, pensions and jobs onSunday as the price of a 130bn(109bn) bailout by the EuropeanUnion and International Monetary Fund.

But unrest in the streets and a vot-ing rebellion by lawmakers of the rul-ing coalition suggested Greece may

be on the brink of massive socialunrest, which would make it difficultfor Athens to stick to the rescueterms.

Doug Roberts, chief investmentstrategist for the websiteChannelCapitalResearch.com, saidthere is some scepticism about

whether the Greek public will acceptthe reforms. But current market con-

ditions make it hard for money man-agers to avoid stocks.

Mutual fund managers have aherd instinct and if everyone else isplaying the game, with cash yieldingzero, they have to participate,Roberts said.

The S&P 500 last week hit a seven-month high and is up more than 25percent from a low in early October,in part on bets the Greek reforms

would pass. The benchmark index ishitting strong resistance in the 1,355-1,360 area, a possible trigger for apullback.

You have to respect the fact themarket has been as strong as it has been, but we wouldn't buy into thisstrength, said Bruce McCain, chief investment strategist at Key PrivateBank in Cleveland.

The Dow Jones industrial averagegained 72.81 points, or 0.57 per cent,to 12,874.04. The S&P 500 Indexgained 9.12 points, or 0.68 per cent, to1,351.76. The Nasdaq Composite rose27.51 points, or 0.95 per cent, to2,931.39.

Apple raised the stakes in an inten-sifying global patent battle withSamsung Electronics by targetingSamsungs latest model that usesGoogles Android software.

Apple shares rose as high as$503.83 and ended up 1.9 per cent toa record close of $502.60. Google roseone per cent to $612.20. Google isexpected to win approval from regula-

tors for a $12.5bn purchase of Motorola Mobility.

BRITAINS leading shares indexclosed higher yesterday, led by commodity and financialstocks, after Greece moved a

step closer to securing an internation-al bailout and avoiding a messy default.

At the close, the FTSE 100 index was up 53.31 points, or 0.9 per cent, at5,905.70, in volume just 70 per cent of the 90-day average, with many tradersin London away for the school half-term holiday.

Buyers lifted the FTSE on the back of the Greek news, but it was not asconfidence building a rally as one

would have hoped, said AngusCampbell, head of sales at CapitalSpreads.

Investors are still wary as it doesnot mean Greece is immune todefaulting sometime in the future,and investors continue to keep a closeeye on the likes of Portugal, Ireland,Spain and Italy, Campell added.

Banks provided a boost for the bluechips after the Greek parliament

voted through a bill that sets out 3.3bn (2.8bn) of extra budget cutsfor this year alone and provides for a

bond swap to ease Greeces debt bur-den by cutting the real value of pri-

vate-sector investors bond holdings by 70 per cent.

Insurers were in demand as bonddefault worries eased and equity valu-ations recovered, with RSA Insuranceup 1.8 per cent, helped by positivecomment from Nomura ahead of full-

year results due on 23 February.RSA has performed in line with

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