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Should financial regulation intervene in theportfolio choice of investors?Francesca Cornelli, Professor of Finance

Masters in Finance (full-time and weekend formats available)Meet us on campus at an information event and speak with alumni, students and admissions staff:

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Leading FinancialThinking

FTSE 100 5,791.41 +25.61 DOW 12,837.48 +78.33 NASDAQ 2,935.69 +25.37 /$ 1.57 unc / 1.19 -0.01 /$ 1.32 +0.01

Greece set

to imposewritedown

MOST private sector bond holders areexpected to agree to swap their assetsinto fewer, longer-term bills bytonights deadline but Greece willprobably have to use new laws to forcethe stubborn remainder to take losses.

The arrangement is part of Greeces130bn (108.5bn) bailout which aimsto cut its debts from 160 per cent ofGDP now to 120.5 per cent by 2020.

Dozens of major banks belonging tothe Private Creditor InvestmentCommittee for Greece (PCIC) yesterdayagreed to the swap, with investmentstotalling124bn, or 60 per cent of the206bn of bonds involved.

If bondholders accounting for 66per cent, roughly150bn, of the totalagree to the swap by todays 8pm GMTdeadline, the government can forcethe others to take losses too, throughcollective action clauses (CACs).

The government will not reach the95 per cent it wanted to declare the

bond swap voluntary, but it will prob-ably get over 75 per cent of bondhold-ers to agree, said Raoul Ruparel, ananalyst at Open Europe.

This is the outcome everyone has worked for six months to avoid forsuch a small write-down, this deal rep-resents a lot of wasted time and effort.

Eurozone finance ministers areexpected to hold a teleconference thisafternoon at which CACs will be dis-

cussed before Greece puts them intoforce after markets close.The bond swap is then expected to

be carried out over the weekend.

BY TIM WALLACE

EUROZONE

Tim Cooks firm sold 15.4m iPads in the final quarter of 2011.

APPLE launched its latest bid to extendits dominance of the tablet computermarket last night as it revealed a next-generation iPad and delivered a rally-ing cry that the days of personalcomputers are over.

We think the iPad is the posterchild of the postPC world, chief exec-utive Tim Cook told the tech elite whohad gathered in San Francisco for thelaunch. The momentum behind theiPad has been incredible and has sur-prised virtually everyone.

The long-awaited device wasunveiled last night and features a newhigh definition screen, a faster proces-sor and an improved camera.

High-end models will be compatiblewith fast 4G mobile phone networks,due to launch later this year in the UK,allowing users to stream high defini-tion video on the move.

The new iPad will launch in the UKin just 10 days on Friday 16 March,

with a starting price of 399 for themost basic model.

In an attempt to head off competi-tion from rivals producing cheapertablets using Googles Android soft-

ware, the old iPad will remain on saleat the reduced price of 329.

Cook shied away from using theterm iPad 3 in his presentation,instead referring to it simply as thenew model.

BY JAMES WATERSONTECHNOLOGY

www.cityam.comIssue 1,587 Thursday 8 March 2012 FREE

Michael Holt, an analyst atMorningstar, said the announcement

was about evolution rather than radi-cal change: They want you to think ofit as the iPad, not which model. Its aninteresting choice. People who are into

bragging rights would have liked to saythis is the iPad 3.

Fred Huet of Greenwich Consultingadded: While the hardware is notablyenhanced there are still some areas ofimprovement that Apple needs to work

on in order to stay ahead of itsencroaching competitors.

The tablet market has boomed since Apple introduced the first iPad inApril 2010. Although initially met withscepticism, sales of the device haveexploded, with Apple boasting that itsold 15.4m iPads in the last quarter.

Leading PC maker Hewlett-Packardonly sold 15.1m PCs in the same period.Apple shares were up 0.2 per cent to

$530.85 in after-hours trading.

Certified Distribution

02/01/12 till 29/01/12 is 92,258

BUSINESS WITH PERSONALITY

ANALYSIS l Apple

US$

1 Mar 2 Mar 5 Mar 6 Mar 7 Mar

545

540

535

530

525

520

530.697 Mar

MEET THE BILLIONAIRESFROM TELECOMS AND MINING

TYCOONS TO TV STARS P18

APPLE:NEW iPADWILL CRUSH PCs

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News2 CITYA.M. 8 MARCH 2012

Ratings execsunder attack TOP credit ratings agency executivesfaced a wave of criticism from MPs yes-terday for the mistakes made by theirinstitutions before the financial crisis.

The industry was either incompe-tent or its judgment affected by a con-flict of interest, Tory MP David Ruffleytold directors from Moodys, Fitch,Standard & Poors, as well as smallerCanadian agency DBRS, at theTreasury Select Committee.

Andrew Tyrie, Tory chairman of theTSC, said MPs were unconvinced theratings agencies problems had beentackled and pressed directors to makea full apology to the millions of peopleaffected because of the enormity ofthe blunders over poor quality assets.

Tory MP Jesse Norman claimed theratings process had been compro-

mised, saying: There was an enor-mous profit stream... from takinggoodness knows what quality assets, bundling them together into struc-tured products and then asking youguys to bless them.

Agencies say the scale of the crisiscouldnt have been predicted andexpressed regret. Dominic Crawley,director at S&P, said: We like manyothers... did not forsee the severity ofthe downturn in asset values and inthe US economy. Fitch director PaulTaylor said he absolutely apologisesover the structured products ratings.

BY PETER EDWARDS

FINANCIAL SERVICES

Mortgage time-bomb UKs top threat

SOME time-bombs can be defused. Notthis one. At some point in a year, intwo, or perhaps even in five the costof borrowing for consumers will climb back to the sorts of levels we wereused to 15 years ago. Complacent bor-rowers addicted to rock-bottom inter-est rates and for whom an 8 per centmortgage is almost inconceivable will be in for the rudest awakening oftheir lives. The timings are unclear;the direction of travel isnt. The Bankof England, which will doubtless keepbase rates on hold today, has been des-perately trying to keep money cheap,

but it only controls very short-terminterest rates.

Longer-term rates are determined by powerful market and regulatoryforces that are largely independent of

the official base rate; and they arealready beginning to shoot up. Halifax(part of Lloyds) will increase its stan-dard variable rate from 3.5 to 3.99 percent on 1 May and the rate on twoother products from 3.4 to 3.89 percent. Royal Bank of Scotland has hikedthe rate for new and existing cus-tomers on two products, includingone from NatWest, from 3.75 per centto 4 per cent. Santander has hiked therate for new borrowers on four prod-ucts by 0.1 per cent. Bank of Ireland yesterday announced a rise of 1.5points to 4.49 per cent in two stages,affecting 100,000 customers in Britain. Around 850,000 existing borrowers will be hit by Halifaxs move and200,000 by RBS. Capital Economics cal-culates that for the average mortgagemonthly payments at Halifax wouldrise 30 per month on a repayment

basis and 45 per month on an inter-est-only basis a hike of 3-14 per cent.

The good news is that the changesannounced so far will increase totalUK mortgage payments by only one

per cent. The bad news is that this is just the beginning; far more peopleare already struggling with theirmortgages than is usually understoodand other costs, such as petrol, arealso rocketing at the same time. Sowhy are borrowing costs rising? Thereis no conspiracy but regulatorychanges are the main drivers, paradox-ically given that politicians love easymoney yet have introduced changes(some good, some silly) that will leadto the opposite outcome. Mortgagesare never financed by money bor-rowed at overnight rates from theBank of England. Rather, banks fundtheir lending using wholesale money(borrowed from other institutions)and deposits; new rules incentivisebanks to focus on the latter. Both ofthese sources of funding have becomedearer. It is hard for banks to quickly

build up deposits, so they have beenforced to offer higher rates excellentnews for long-suffering savers, but badfor borrowers. Banks are now havingto offer up to two-three per cent more

than the Bank base rate (currently 0.5per cent): before the crisis, savingsrates were usually lower than the baserate. The other change is that banksmust now hold more than twice theamount of capital against their loansto protect themselves against defaults;this is expensive and being passed on. The securitisation market remainssluggish, which means loans cant besold on, further adding to costs.

Borrowing costs need to normalise.The bubble was caused by excessivelycheap money; we cant delay the nec-essary readjustment forever. But thepain will be almost unbearable forthose caught unaware. They need toevaluate their debt levels, stress testthemselves for rate hikes anddeleverage as fast as possible.

[email protected] me on Twitter: @allisterheath

QUANTITATIVE easing (QE) haspushed down bond yields, hittingpension funds and pushing finalsalary schemes deeper into the red,two new studies have shown.

Deficits at FTSE350 firms rose9bn in February to 92bn, accord-ing to data published yesterday byMercer, as falling yields offset thepositive impact of rising equityprices.

The National Association oPension Funds revealed today thatfinal salary schemes across the coun-try have fallen 90bn deeper intodeficit since QE started in October,forcing firms to divert money awayfrom jobs and investment and intofilling the hole.

Annuity rates on defined contri-bution pensions have also fallen.

Those retiring with a pension potof 26,000 will now get 22 per centless in income than if they retiredfour years ago, a fall of 440 per year.

BY TIMWALLACE

PENSIONS

QE knocks pension fundsMervyn Kings Bank of England is using QE as a stimulus Pic: Laura Lean / CITY A.M.

NEWS | IN BRIEF

BG considers $2bn gas saleBritish gas producer BG Group is offer-ing up to a 20 per cent stake in itsQueensland natural gas liquefactionfacilities as it seeks to expand the $15bnproject. BG will undertake a global road-show to attract bidders for the 15-20per cent stake, which could be valued at

around $2bn based on past transactions.A deal would allow BG to share thecosts of the Queensland project, lock incustomers and reinvest in other explo-ration and production activities.

More banks join Facebooks IPOFacebook added 25 banks to help under-write the companys initial public offer-ing (IPO), meaning most of Wall Streetwill have a role in the share sale, accord-ing to an amended IPO filing last night.The new banks, including Citigroup,Credit Suisse and Deutsche Bank,increase the number of underwriters onthe deal to 31, the filing said. Facebookalso said that it had secured two newcredit facilities, one of which will helpthe company satisfy hefty tax withhold-ing obligations and remittances relatedto employees' stock units following itsinitial public offering.

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

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

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

Andrew Tyrie called onthe heads of ratingsagencies to issue anapology for theircompanies mistakes.

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 Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Gavin BillennessPictures Alice Hepple

CommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

CURRENCY TRADING VOLUMES DROPVolumes in the worlds multi-trilliondollar foreign exchange market havedropped to six-year lows as nervousinvestors have shied away from trad-ing the euro and central banks havecontinued to maintain a tight grip onthe value of their currencies.

SOCGEN TO FACE REGULATOR PROBESocit Gnrale is to face a discipli-nary probe, which could result infines, by the Autorit de ContrlePrudentiel, the French banking regu-lator. Frances second-largest banksaid that the regulators inquiryfocused on controls in its privatebank over money-laundering and ter-rorism financing.

VODAFONE HEADS TOWARDS C&WW BIDVodafone is edging towards making

an indicative offer for Cable & Wireless Worldwide ahead of the Takeover Panels put-up-or-shut-updeadline on Monday. The situation isstill said to be fluid by those withknowledge of the company, however,and Vodafone could still withdraw,given continued deliberations overprice.

RATING AGENCY BACKS ROTATIONDBRS, the upstart Canadian creditrating agency, broke ranks with itslarger US-based competitors and tolda UK parliamentary committee thatforcing companies to change theirrating agency regularly wouldincrease competition and preventgroup think. Representatives of thebig three agencies oppose reform.

CHINESE STEEL MANUFACTURER TURNSTO PIG FARMINGOne of Chinas biggest steel firms hasbecome so exasperated with the stateof the industry that it is investing4bn in pig farming, chicken-rearing,drain clearance and kindergartentaxi services. The diversification ofthe Wuhan Iron and Steel Group wasmade after managers realised theycould make more profit on a porkchop than they could on 1kg of steel.

TRAINS SHOULD OFFER NO-FRILLS SEATSTrains should copy airlines and intro-duce premium economy seats to easeovercrowding, said Alok Sharma MP,calling on operators to introduce ano-frills version of first class.

BRITAIN LEADS WAY IN FINANCIALCRISIS MANAGEMENTThe UK has excelled in crisis manage-ment over the five years of the globaldownturn, according to analysts.Deutsche Bank said the UK authori-ties have done a good job to date inlimiting the effects of the crisis, bene-fiting from control over its currencyand its own central bank.

LADBROKES BOSS TAKES 491,000BONUS DESPITE PROFITS FALLLadbrokes chief executive RichardGlynn was handed a 491,000 bonuslast year as part of his total 1.22mpay despite a fall in profits and anoth-er failed attempt to buy an onlinegambling company.

COURT CHALLENGES EU ON BANKDOWNSIZINGSA decision from the European UnionCourt of Justice has called into ques-tion the tough downsizings imposedon many of the region's banks as theprice of approval for the giant govern-ment bailouts they received duringthe financial crisis.

BIG REWARDS FOR FORD DIRECTORSTop company executives at Ford aregetting big rewards for a turnaroundthat avoided government bailouts.The firm gave 17 of its top executivesstock valued at $56.5m for sharesgranted in 2009, the year Fordrebounded to a $2.7bn profit after arecord loss of $14.6bn the year before.

WHAT THE OTHER PAPERS SAY THIS MORNING

The new jobs website for London professionalsCAREERS.com

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News 3CITYA.M. 8 MARCH 2012

DAVID Cameron has claimed he isworking extremely hard to miti-gate the impact of new Europeanrules for insurers that could forcethe Prudential to quit London forHong Kong.

The Prime Minister said the so-called Solvency II rules were agood example of ill thought-outEU legislation endangering a greatBritish business that should have itsheadquarters in the UK.

He added: We are workingextremely hard at a European leveland with the Prudential to try anddeal with this.

Cameron made the remarks at yesterdays session of PrimeMinisters questions, after he was

asked whether he supported Boris Johnsons campaign to keep thePrudential headquartered in the UK.

Earlier this week, City A.M.revealed that Johnson had writtento Prudential chief executive

Tidjane Thiam to promise to fightthe Solvency II legislation so thecompany could stay in London.

Last week, the insurance giantadmitted it was considering chang-ing its domicile, but it is notthought to have any plans to quitBritain imminently.

Chief among its concerns is thatit could be forced to raise a largeamount of expensive capitalagainst its US business, Jackson Life,

because the EU is afraid thatAmerican regulators are too lax.

A spokesperson for Prudentialsaid: We have been working with

the government and the rest of theindustry to try to ensure thatSolvency II ends up in the rightplace. It is also important for theeconomy that we can continue toinvest for the long term in UK busi-ness and infrastructure, an abilitythat could be endangered by thenew rules as currently drafted.

Cameron: Ill fightto keep Pru in UKBYDAVID CROW

POLITICS

US FEDERAL Reserve officials areconsidering a new approach to

bond buying that aims to avoidfuelling inflation.

The Fed is considering new waysto buy bonds in order to boostgrowth. One possibility is that itcould borrow back the money itused to buy those bonds for shortperiods of time at low interest rates,according to the Wall Street Journal.

Doing so would take that money

out of circulation, or sterilise it.Representatives from the Federal

Reserve and the New York FederalReserve Bank, which conducts thecentral banks bond trading,declined to comment.

The Fed is holding a regularpolicy meeting next week but isnot expected to launch anotherround of bond buying at thattime.

However, chair-man BenBernanke (inset)has signalledthat he would

c o n s i d e ra n o t h e r

round of bond buying to supportthe fragile recovery if tepid

growth and modestimprovements in thelabour market falter.

Many analysts believethat the Fed will resortto quantitative easing,

later this year as high-er oil prices andEuropes eco-nomic prob-lems weighon the

Amer i c anrecovery.

US Federal Reserve is consideringnew methods of quantitative easingECONOMY

NEWS | IN BRIEF

Asian defence spending boomsAsian military spending will top that ofEurope in 2012 for the first time in cen-turies, a global defence survey said yes-terday, pointing to high regionaleconomic growth and an increasinglyambitious China. The InternationalInstitute for Strategic Studies said US

military spending was also falling withwithdrawal from Iraq and Afghanistan although Washingtons $739bn(469.5bn) budget still dwarfs that ofother nations. With the Pentagon explic-itly refocusing its strategic attention onAsia, the annual Military Balance reportsaid it was clear that a major historicalshift was underway.

US to offload $6bn AIG sharesThe US Treasury yesterday revealedplans to sell $6bn of AmericanInternational Group (AIG) shares andstruck another deal for the insurer topay down $8.5bn more in obligations, ina bid to hasten its unwinding. AIG saidthe agreement would allow it to paydown what it owed in a special purposevehicle, AIA Aurora, and free up some ofthe company's collateral, includinginterests in aircraft lessor InternationalLease Finance Corp and Asian insurer

AIA Group. The special purpose vehiclewas set up in December 2009 inexchange for a reduction in the debtthat AIG owed the New YorkFederal Reserve.

LAWYERS and pension funds yesterdayhit out at proposals to remove taxrelief from high-earners pension con-tributions, arguing it would be unfairand overly complicated.

Removing the relief on employeecontributions for those earning over150,000 a year could be a temptingmove for the government, raisingaround 8bn per year for the Treasury.

However, that would mean taxingpension contributions as they aresaved, and then taxing the income asit is paid out in later years.

If this change is made, it would be

equitable to remove tax on moneybeing paid out of pensions, said DavidHeaton from Baker Tilly.

However, I cant see them doingthat as the aim is to raise money.

Firms could avoid the new tax byincreasing employers contributions,

which Heaton believes may promptthe government to cancel nationalinsurance relief on contributions potentially raising 13bn per year.

But that would hit more peoplethan just top earners, he warned.

The pensions industry is also waryof any new taxes on contributions.

The pensions regime has been subject to massive upheaval in recent years, and more changes would fur-ther hit incentives to save and place ahuge administration burden onfunds, said Paul Platt from theNational Association of Pension Funds.

The annual cap on tax-free contribu-

tions has already been lowered fromover 200,000 to 50,000, and the NAPF

believes the government may compro-mise by reducing that to 40,000, rais-ing an extra 600m per year.

Lawyers: Removingpension tax relief

will hit savers twiceBY TIMWALLACE

UK ECONOMY

DEUTSCHE Bank is shaking up its topmanagement to give investment bank-ing and emerging markets moreprominence, and will oust risk officerHugo Baenziger, two sources familiar

with the matter said yesterday.It will elevate US banker William

Broeksmit, currently head of risk atthe corporate and investment bank, toits seven-member management board

as group risk chief, the sources said.The move also foresees the appoint-

ment of Canadian trader Colin Fan,and Australian Robert Rankin as co-chief executives of the investment

bank, the source said.Fan is head of credit and emerging

markets, while Rankin, who heads thebanks Asia Pacific operations, helpedthe bank secure roles on the AIA and

Agricultural Bank of China initial pub-lic offerings.

Deutsche plans reshufflein investment banking

Colin Fan (left) and Robert Rankin (right) are lined up as co-heads of the investment bank

BYHARRY BANKS

BANKING

Fit

ORISJohnsonhasw rittentothe chief

executiveofPrudentialin abi dto con-

vincetheinsuranceg iant tokeepits

headquartersin London, CityA.M.has

learned.TheMayor sentthe lettertoTidjane

ThiamlastFriday,follow ingthe revela-

tion thatPr udentialw asconsidering

movingitsh eadquarterstoHongKong

toavoidtoughnewEuropeanrulesfor

insurersknownasSolvenc yII.

Johnson,whois campaigning tobe

re-elected in May, said he was

extremely concernedto learnthat a

changeofdomicilewasunderreview

and promises to lobby bothin

Brusselsand Londonto ensurethat

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PRUTOSTAYEXCLUSIVE

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Tuesdays front page

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NATIONAL Australia Bank (NAB) islikely to position its UK bank assetsfor sale after separating off its trou-

bled commercial real-estate businessat the end of an ongoing review of itsUK operations, two sources said.

The result of the review is due inMay, and it is still classified withinNAB as an operational review with afocus on raising the returns from the

business that is a drag on NABs earn-ings, they said.

NABs UK bank business spans 335 branches through its Yorkshire and

Clydesdale branches. It also holdsabout 6bn ($9.4bn) in commercialreal estate exposure, with close to atenth of that stressed, the sourcessaid.

Analysts estimate NAB UK assets tohave a book value of around 3.0-3.5bn ($4.7-$5.5bn) and a sale couldraise anywhere between 0.5 to 0.7times book in current market condi-tions, or between $2.3bn and $3.9bn.

The sources said the core portfoliohad the likelihood of fetching closerto book value, if not more in the short

term, once the real-estate exposurewas hived off.

TREASURY sources talked down theidea of a state-owned business bank

yesterday as Vince Cable appeared torow back from the idea in a speech atMansion House.

A treasury source told City A.M. thatthe creation of a wholly publiclyowned bank that channels cheapfunds into small business (SME) is notgoing to happen.

It is also understood that Cable hasmade no serious moves to examinethe policy despite writing a letter tohis Tory coalition rivals pitching it.

And the business secretary told Cityleaders last night that it is in factunlikely to be pursued

because it would delay re-privatising RBS and Lloydsand would not get past EUlaw.

He also said it couldhinder the development ofa functional small businesscredit market, which is

being examined by TimBreedon, formerly ofLegal & General, ina special gov-

ernment taskforce.Cable said that instead of a state

bank: Our focus at the moment is oncredit easing where the governmentuses its own access to currently cheap

bond finance to support cheaper andhopefully more plentiful bank credit.

He suggested that small businessescurrently occupy a death valley infinance terms.

He told leading City figures thatSMEs inability to get funding mightnot show up in surveys which do notreveal high demand if they donteven apply for loans because they areperhaps scarred by recent experience,or simply scared of what might go

wrong. But he hinted at sympathy forlenders arguments that regulations

are choking off SME credit, sayingthat adjusting rules would besensible but difficult toachieve.

Cable, who was an economistfor Shell, also compared thefinance industry to oil compa-

nies that extract resources fromcountries with little regard

for what hap-pens outsidethe perimeterfence.

Treasury cool

on Cable statebank policyBY JULIET SAMUEL

POLITICS

BANKING

HSBC has agreed to sell its generalinsurance businesses to French insur-er AXA Group and Australias QBEInsurance Group for $914m (580m)in cash, as Europes biggest bankmoves ahead with its plan to divestnon-core assets.

HSBCs decision to exit the businesscould be a precursor to similar dealsas lenders globally consider sellingcapital-intensive businesses as reserve

requirements become more strict.

We expect rising capitalisationrequirements across the banking andinsurance sectors to continue to driveportfolio re-balancing, with some

banks in particular reflecting on the value of manufacturing and/or dis-tributing non-life insurance going for-

ward, said Ron Kozlowski, director of Towers Watsons general insuranceconsulting business in Asia Pacific.

The deal, the latest in a series ofcost-cutting initiatives under new

HSBC chief executive Stuart Gulliver,

includes 10-year bancassurance agree-ments with AXA and QBE.The agreements will earn commis-

sions and profit-related payments forHSBC on top of the cash value of thedeal.

For AXA, the acquisition is a stepforward in its effort to boost emerg-ing markets presence and potentiallyhelp Europes second-biggest insurerto achieve its 2015 targets ahead oftime.

HSBC sells non-core insuranceunits to AXA for over $900mINSURANCE


HSBCs Stuart Gull iver is trying to streamline the bank Picture : GETTY

National Australia Bankprepping for UK sell-off

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THE BRITISH Bankers Association(BBA) said it is keen to keep a centralrole in compiling the LondonInterbank Offered Rate (Libor), a keyfinancial benchmark, despite recentscandals.

The industry body also insisted thatthe number, which is used as a meas-ure of interbank interest rates borrow-ing costs in trillions of pounds worth

of financial products, continues to be

the authoritative benchmark of thewholesale money market.The compilation of Libor is current-

ly under investigation by nine regula-tory bodies in different countries overallegations that it was manipulatedduring the 2008 financial crisis by weak banks whose borrowing costshad risen.

The scandal has sparked calls forLibors key role to be scrapped or forregulatory involvement in supervising

it potentially taking it over entirely,

which would be a blow for the BBA. The data is currently compiled bythe BBA and then crunched by Thomson Reuters by removal of theoutliers at the bottom and top of therange.

The BBA claims that it has beennotable for its objectivity and accura-cy, but trust has been eroded as thescandal engulfs banks and hedgefunds accused of trying to manipulatethe data.

BBA keen to maintainrole in compiling LiborBY JULIET SAMUEL

BANKING


INVESTMENT bank Goldman Sachs isreshuffling the board of directors

that oversees its UK-based subsidiary,with four senior executives steppingdown from their board-level roles,including investment banking rain-maker Yoel Zaoui.

Zaoui, Christopher French, DavidWildermuth and the soon-to-be relo-cated to Hong Kong MatthewWesterman have stepped down fromthe board of Goldman Sachs

International (GSI), the UK andEuropean subsidiary of GoldmanSachs Group. The 10 person boardwill now comprise an equal numberof executives and non-execs.

Goldman Sachs rejigs itsUK subsidiarys boardroom

Goldmans Matthew Westerman and three others will step down from the GSI board

BYDAVID HELLIER

INVESTMENT BANKS

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THE ASSOCIATION of British Insurers(ABI) says the government must cometo a new agreement soon if it wantsto secure a sustainable flood insur-ance market in the UK.

It claims that up to 200,000 proper-ty owners will struggle to get afford-able insurance when the currentagreement ends in June 2013.

At the moment insurers agree toprovide flood cover as standard forlow-risk properties, on the conditionthat the government invests in

defences. The industry feels that thegovernments decision to cut spend-

ing on defences means it has renegedon its part of the deal.

Richard Benyon, the ministerresponsible, yesterday ruled outrenewing the existing agreement.

James Dalton, the ABIs Head ofProperty Insurance, said: We are run-ning out of time to ensure that peo-ple in high flood risk areas cancontinue to get affordable floodinsurance when the Statement ofPrinciples expires in June 2013.

It is widely recognised that thecurrent industry agreement with thegovernment is unsustainable, [and]

has thwarted choice for consumers,ABI said in a statement.

ADMIRAL shares climbed 11 per centyesterday after the firm overcame last years profit warning to announce better-than-expected results.

The car insurance giant increasedprofits to 299m in 2011, up 13 percent on the year before, largelythanks to the addition of 600,000new customers. Turnover increased38 per cent to 2.19bn.

But although the board waspleased to announce record-breakingyear-end figures, it was disappointedby the absence of further growth.

Chief executive Henry Englehardtcalled on the spirit of Dickens, saying2011 was the best of times, it was theworst of times.

Profits are up 13 per cent, and inmost situations youd call this a giantwinner. But this is less than most peo-ple thought they would be. Far lessthan I thought they would be, thatsfor sure. It has been a disappointing year. Not because it was a bad year, but because so much more wasexpected.

Analysts had initially pencilled in a22 per cent profit rise for 2011 but

slashed their forecasts in Novemberwhen Admiral which insures onein 10 cars on Britains roads warned it had been hit by a substan-tial jump in personal injury claims,driven by a small number of big pay-outs to cover long-term care forinjured customers.

The firm will look to increase earn-ings during 2012 by increasing premi-ums and developing revenues fromother ventures such as its online com-parison site, Confused.com.

However it faces the threat of regu-latory intervention on ancillary rev-enue, such as highly profitablereferral fees to claims lawyers and carhire firms.

Shares in the firm closed at 11.44.

Admiral hits

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ANALYST VIEWS: CAN ADMIRAL BOOST PROFITS IN 2012?

NICK JOHNSONNUMIS

UK customergrowth slowed in the sec-ond half of the year to a10 per cent annualisedincrease from 30 per cent

in the first half, as Admiralswitched from raisingrates a little less than the market to a littlemore. The group put through average rateincreases of 15 per cent for the year and wesee potential modest downside risk to fore-casts from the slowdown in UK customergrowth and a longer than expected dragfrom International losses. Hold.

RICHARD CURRPRIME MARKETS

More than everin 2011-12, Admiral hasbeen written off as astock that has had its day.Once again, Admiral has

blown profits and revenueexpectations out of thewater, confounding the analysts withgrowth numbers and importantly under-scoring this performance with a record full-year dividend per share. Prime Marketsbelieves that the results today will in timesee the stock recover levels from last sum-mer around 1500-1600p. Buy.

KEVIN RYANINVESTEC

As 58 per centof 2011 profit came fromthe sale of ancillary prod-ucts, it is clear that stronggrowth in new vehicles

insured is needed to growearnings. The share pricedoes not reflect the likelihood of either ofthese events ever occurring, in our view.Admiral remains significantly more prof-itable than the rest of the UK motor market.We believe that as Admiral grows and itscompetitors take remedial action to addresslosses, this leadership position will beeroded. Sell.

CEO Henry Englehardt had a disappointing year Picture: Micha Theiner/CITY A.M.

ANALYSIS l Admiral Group PLC

p


1,200

1,175

1,150

1,125

1,100

1,050

1,025

1,075

1,144.007 Mar

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7/32

THE CHIEF executive of Jupiter warned the financial services sectorwould continue to shrink as a propor-tion of Britains economy as the fundmanager posted a jump in annualprofits.

Edward Bonham Carter also said hissector has to work harder to give valuefor money as the City adjusts after along period of growth before the crisis.

I think we are still in the deleverag-

ing cycle as we work off some of theexcess particularly high debt levels,he told City A.M.

Jupiter has bolstered its balancesheet after a year of deleveraging andits net cash position, of 7.4m at 31December, is the strongest in its histo-ry after nearly halving its debt posi-tion to 143m over the year.

The fund manager pulled in 700mof new money during the year,although assets under managementdropped 5.4 per cent to 22.8bn as

market movements hit its funds.Bonham Carter said markets are likelyto remain volatile and fund flowssubdued, echoing warnings of clientnervousness made last week by thehead of fund manager Henderson.

Its quite reasonable to expect a lagfrom retail investors before they getconfidence into risk, Bonham Cartersaid.

Pre-tax profit jumped 65.8 per centto 70.3m. The firm will continue itsEuropean expansion, believinginvestors in Germany and France will

want to own more equities.

City shrinksbut Jupitergoes red hot AN INVESTMENT fund founded bythe Lebanese Prime Minister yester-day upped its stake in Sainsburys tomore than three per cent, lifting

the supermarkets share duringafternoon trading.

Founded more than 40 years agoby brothers Taha and Najib Mikati who has twice served as LebanesePM since 2005 the M1 Group todayis a diversified investment company

with interest ranging from South African telecoms to London realestate.

The investment arms interest inSainsburys is largely seen as a playon the companys property assets,

which are estimated to be worthalmost twice its market capitalisa-tion.

In the supermarkets last annual

report, its property portfolio was valued at 10.9bn. Its share priceclosed up 1.35 per cent yesterday at292.9p, valuing the company ataround 5.6bn.

Sainsburys largest shareholder isstill the Qatari Investment

Authority with 26 per cent of theretailer. Despite a failed takeover

bid in 2007, speculation remainsthat the Qataris could renew theirinterest in the supermarket in thefuture.

Lebanese PMlifts stake inSainsburys

Edward Bonham Carter issued a warning to the financial services sector Pic: GETTY

BY PETER EDWARDS

ASSET MANAGEMENT

RETAIL

NewsCITYA.M. 8 MARCH 2012 7

ANALYSIS l Jupiter Fund Management PLC

p


260

265

255

250

245

240

242.107 Mar

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US ENGINEERING giant GeneralElectric has signed a deal to occupy aformer Olympic landmark building in

Argents huge Kings Cross centraldevelopment scheme this summer.

The so-called German Gymnasiumnext to Kings Cross Station was built

by the German gymnastic team in1865 and was used to host events at

the 1866 London Olympic games.Roger Madelin, joint-chief executiveof developer Argent, told delegates atproperty trade show MIPIM yesterdaythat GE planned to move in before the2012 Olympics and use the 6,000 sq ftsite to showcase their ecomagina-tion portfolio GEs green energytechnologies such as wind turbines,solar panels and smart grids.

GE will join Camden Council, whichis moving its headquarters to a

150,000-square-foot building on thesite. French bank BNP Paribas is alsobuilding a new office block on the site,and Google is also understood to havesigned a memorandum of understand-ing to take up around 700,000 sq ft ofspace on the site.

The 67-acre site will also include upto 2,000 homes and a primary school.It will also have 500,000 sq ft of retail,

which Madelin boasted would outper-form other retail areas in London.

General Electric strikes dealon Kings Cross Central move

General Electric is moving into the Kings Cross Central development


NEWS | IN BRIEF

Remploy to close factoriesRemploy a specialist employmentagency for people with disabilities isplanning to close 36 of its 54 factories inthe UK, leading to the compulsoryredundancies of 1,752 people. Remploywill close the sites before the end of2012 as they are unlikely to becomefinancially viable, the minister for dis-abled people Maria Miller said yesterday.

GE Healthcare buys XcellerexGE Healthcare is taking over Xcellerex, asupplier of biomanufacturing technolo-gies, to expand its antibodies and vac-cines offerings. This is the first time GEhas made an acquisition in the biopro-cessing sector since August 2011, whenit bought PAA Laboratories. Jeffries wasthe sell-side adviser to Xcellerex, its sev-enth mandate in the past year in the life

sciences sector.

Mulberry forks out for new bossLuxury bag designer Mulberry has spent3.39m on welcoming its new boss fromrival firm Herms. The British labeldished out 200,670 shares to its newchief executive Bruno Guillon, who paid

just 2 for each 18.90 share leavingMulberry to pay for the remaining16.90 per share. However, Guillon willonly reap value from the offering if theshare price exceeds 23.02.

German fund sells City buildingsGerman real estate fund KanAm Grundhas sold two City office buildings toMalaysian investment fund PermodalanNasional Berhad (PNB) in another signof overseas investors flocking to theCapital. KanAm said PNB had agreed tobuy the European Bank ofReconstruction & Developments head

office next to Liverpool Street station.

RETAILERS at Heathrow arebucking the gloom in thehigh street with an 8.8 percent rise in gross turnoverin 2011, fuelled by a grow-ing number of shoppersfrom the BRIC nations,the airport said yester-day.

Heathrow reportedrecord annual trafficlast month, and its shopsare cashing in on this

jump by offering morelucrative luxury

brands.Retail sales topped

1.7bn in 2011, arecord for the hubairport, which is oper-ating at close to full capac-ity and lobbying thegovernment for permis-sion to expand.

The average passengerspent 4.35 in Heathrowsshops last year, it said yes-terday but flyers from

Brazil, Russia, India and China(BRICs) splashed out an average of45.50 per head.

Heathrow said its new MiuMiu concession and pop-up

stores for brands like Chanelare helping bring in morediscerning shoppers.

Duty free sales also rose12.7 per cent during the year.

We now have passengers who are choosing to flythrough Heathrow specificallyto pick up items sold here,said retail concessions director

Muriel Zingraff.Passenger spending, which

includes shop purchases as wellas other charges such as car park-ing and vehicle rental, rose 9.9 per

cent to contribute 391.4m to BAAsrevenues last year, the firm said lastmonth.

Heathrow says its sales put itabove Dubai airport, which reportedduty-free turnover of $1.46bn(929m) last year, and Incheon inSouth Korea, which claimed duty-freesales of $1.53bn.

Fashionista Florrie Arnold with a bagfrom Miu Miu

BY MARION DAKERS

TRANSPORT

BY KASMIRA JEFFORD IN CANNES

PROPERTY

Heathrows

retail salesare booming

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INVESTMENT bank Goldman Sachshas sold out its investment in LMAX,the online trading platform owned byBetfair.

The banks exit comes as the plat-form struggles to live up to its earlierexpectations. Its chief executive leftlast year as trading volumes failed tolive up to hopes.

Betfair said that its decision toinvest a further 10m in LMAX dilut-ed Goldmans 12.5 per cent share-holding to less than five per cent,meaning it no longer qualified for aseat on the board.

Former equity trader PhilHylander, Goldmans representative, who has himself retired from the bank, subsequently stepped downfrom the LMAX board and Betfairbought out the banks residual hold-ing.

Betfair said yesterday: Asannounced in last years preliminaryresults, we invested a further 10minto LMAX which in effect diluted theGoldman Sachs holding to the pointwhere they no longer qualified for a

place on the board. It does not bringto an end their involvement in LMAXas they are still the lead market mak-ers and very much Exchange part-ners. LMAX continues to perform welland we are pleased with the volumegrowth this quarter.

Last year Betfairs outgoing chiefexecutive David Yu said about LMAX:I think its fair to say that its been amixed success. Yu went on to saythat whilst the technology had metexpectations, registrations to the sitehad not. However, there are signs thatthe volumes are beginning to come.Last months forex trading volumestouched $16bn, according to the lat-est figures.

Goldman sells

off its entireLMAX stakeBYDAVID HELLIER

TECHNOLOGY

THE VETERAN chief executive ofFTSE 100 miner Antofagasta, MarceloAwad, has paid for the poor perform-ance of the companys flagship minewith his job.

The Chilean copper miner madethe shock announcement yesterday with insiders suggesting that theboard thought Awad had taken hiseye off the ball in failing to ensurethe ramping up of production at theEsperanza mine.

Awad, who has been chief execu-tive for eight of his 16 years at the

company, has been replaced on a

temporary basis by chairman Jean-Paul Luksic, whose family controlsthe miner.

The company is due to publish full-year earnings next week and Awadsdeparture is being seen as a chanceto clean the slate before the companytries to push forward in 2012.

Antofagasta topped its productiontarget for 2011 but rising costs andthe Esperanza disappointment havetaken their toll.

Antofagasta said full-year resultswould be in line with market expec-tations and the company said itwould stick with its current growth

strategy.

Antofagasta chief makes shockexit ahead of full-year results

MINING

INDONESIA is to take more of theprofits from its vast mineralresources by limiting foreign owner-ship of mines in a move likely to scareoff new investment in the worlds topexporter of thermal coal and tin.

Under new rules announced on theenergy ministrys website, Indonesiawill force foreign firms to sell downstakes in mines by the 10th year of

production and increase domesticownership to at least 51 per cent.Southeast Asias largest economy

contains some of the worlds richestmineral deposits and its fast-growingmining sector accounts for morethan a tenth of GDP. Grasberg oneastern Papua island is the worldslargest gold mine. It was not madeclear if the regulation, effective from21 February, will apply only to newinvestors or also to existing mining

investors such as Freeport McMoRanCopper & Gold and Newmont.Holders of mining business permitsand special mining business permits,in terms of foreign investment, arerequired to divest the shares gradual-ly five years after production, theregulation said. Bumi, which oper-ates under the previous licensing sys-tem will be required to shift to thenew licenses when the contractsexpire, Liberum Capital said.

Indonesia hits miners withnew ownership regulationsMINING

Indonesian ownership of its mines is set to increase to 51 per cent Picture: GETTY


ANALYSIS l Betfair Group PLC

p


885

880

875

870

865

860

855

885.007 Mar

8/2/2019 Cityam 2012-03-08

11/32

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THE CHAIRMAN of John Lewis has pre-

dicted a modest recovery for retailersthis year despite unveiling a sharp fallin annual profits.

Charlie Mayfield told City A.M. thesector would shift from decline togrowth this year following a bloodydifficult 2011.

He added: Im not in any wayunderplaying how serious the chal-lenges are. The macro-economic envi-ronment is still severe but it is lesscritical than it was.

The John Lewis Partnership, theemployee-owned co-operative thatowns 25 John Lewis shops and 272

Waitrose supermarkets, said it grewtotal sales excluding VAT by 5.4 percent in the year to the end of January.

That means the group did signifi-cantly better than the retail sectoroverall which grew total sales by justtwo per cent less than half theamount over the same period,

according to the British RetailConsortium (BRC).

But operating profit tumbled by 8.7per cent to 353.8m, after the groupdecided to press ahead with its biggest

ever store expansion programme, which saw it open 29 new Waitroseshops and three John Lewis outlets.

The 80,000 or so partners who own

the business shared a bonus of165.2m, equivalent to 14 per cent oftheir salary or seven weeks pay, lessthan the 18 per cent they pocketed in2010.

Waitrose performed more stronglythan the department stores, with salesat shops open for more than a yeargrowing by three per cent excluding

VAT. Overall sales, which include newopenings, jumped by 7.9 per cent to5.07bn, while operating profit fell by5.2 per cent to 260.06m.

By comparison John Lewis depart-ment stores struggled like most non-food high street retailers. Excluding

VAT, sales at stores open for more thana year dipped by 0.6 per cent. Overallsales, which include new openings like

Westfield Stratford, were up three percent to 3.33bn, while operating profitfell sharply by 20 per cent to 157.9m.

Mayfield added: This was a year

when we upped the pace of innovationand investment. That came at theprice of some short-term profit butleaves us in a good place at the start ofthis year.

John Lewis is upbeat on 2012BYDAVID CROWRETAIL

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It attracts the higher end of the market. The rich are get-ting richer while the poor are getting poorer. It is alsoknown for its quality, service, and matching prices.

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

CITY VIEWS: WHY IS JOHN LEWIS BEATINGTHE HIGH STREET? Interviews by Kendal Gapinski

Chair Charlie Mayfield said 2011 was bloody difficul t Picture: Laura Lean / CITY A.M.

MICHAELA MORAN | BANK OF AMERICA

People know what they are buying at John Lewis. Its reliable.

You know you can purchase something and have no issues. Itsalso convenient you dont want to trawl the high street.

SOPHIE MUNARETTO | SMBC

It is targeting a different kind of customer. It has been renew-ing its stores and the investment is paying off. The stores alsohave a very diverse product range

Price matchingwas expensivebut worth itNEVER knowingly undersold. It

has been the guiding principle behind the John Lewis offeringsince 1925. Despite this thegroup still has an upmarketimage, as exploited by a famousDixons advert in 2009. Step intomiddle Englands best loveddepartment store... where anawfully well brought up youngman will bend over backwards tofind the right TV for you. Thengo to Dixons.co.uk and buy it.

This image is something of adouble-edged sword for JohnLewis: it attracts people seekingquality but it repels bargainhunters. Hence the need for sucha firm price promise. The guar-antee still doesnt apply toonline-only retailers like

Amazon (or Dixons.co.uk for thatmatter), but it has been broad-ened to include the websites of

its high street rivals.Last year, it became more

expensive to keep the promise,as rivals slashed their prices toentice hard-pressed consumersthrough their doors. John Lewissaid it invested an additional23.8m in price matching on topof the tens of millions it alreadycosts. Some will remark that the40.5m profit drop at the depart-ment store business would have

been much smaller if John Lewishad restricted the promise in

various ways. That misses the point. First

because John Lewis needs tocounter that expensive imageand second because by pricematching it managed to grow itsshare of a shrinking pie.

That means the rebates itearned from suppliers increasedsubstantially last year, allowingit to hold its gross margin ofaround five per cent steady.

There are very few retailers whocan claim to have done the samein the annus horribilis that was2011.

[email protected]

BOTTOMLINEAnalysis by David Crow

8/2/2019 Cityam 2012-03-08

13/32

RIVALSacross town, who have forever been envious ofCredit Suisse star banker James Leigh Pembertons brains, good humour and especially his contacts,have been talking wishfully about his possible earlyretirement.

Not so, says the great man to The Capitalist, whenasked the direct question. It aint happening. Ihavent got anything better that I want to do.

So Credit Suisse and Leigh Pemberton clientssuch as Diageo can relax, for the time being, at least.

The son of former governor of the Bank ofEngland and life-peer Lord Kingsdown, James Leigh-Pemberton was educated at Eton and started hiscareer at SG Warburg. He handled masses of govern-ment work during the restructuring of the UK

banks and is still the go-to man for many of CreditSuisses clients.

BORIS Johnson likes to make much of thefact that he has convinced the private sectorto give him oodles of cash. Barclays gave25m to help pay for his Boris bikes whileEmirates, the airline, will pay 36m over thenext ten years to sponsor the Thames cablecar. But his method of extracting cash from

benefactors can sometimes prove a littleunconventional. The Capitalisthears that hetapped Lakshmi Mittal for cash while the pair

were taking a leak at aurinal in Davos, where they wereattending 2010s World Economic

Forum. Just twomonths later, Mittalsaid he was donat-ing 16m to help build the UKstallest sculpture,designed by TurnerP r i z e - w i n n i n gartist AnishKapoor, to com-memorate theLondon 2012Olympics.

13

The CapitalistCITYA.M. 8 MARCH 2012

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THE OLYMPICS will lead to a businessboom for London as the city is show-cased to heads of states who will usetheir visit as a diplomatic opportunity,insisted the Department for

Transports London director JonathanSharrock yesterday.

Deloitte director Mark Naysmithsaid: Two weeks before the Athens

Olympics the smell of fresh paint lin-gered in the air, but London will dobetter as long as businesses deliver.

However, Britains biggest banks,retailers and professional servicesfirms, from John Lewis to HSBC, wereurged yesterday to change their habitsor face serious disruption this sum-mer. British gold-medallist Kieran

West implored the companies to keepLondon moving for the sake of Brit-ains Olympians, if not its businesses.

Olympics to boostLondon businessesBY LAUREN DAVIDSON

OLYMPICS


Funeral firm Dignity postsa year of steady growth

FUNERAL company Dignity said deathand taxes had helped it grow last year,after it posted a 1.3 per cent rise in pre-tax profit to 40.3m.

The firm, which conducts morethan one in every ten funerals in theUK, said its tax bill had dropped from10.8m to 6m in the year, mostlythanks to one-off credits.

Revenues rose 5.5 per cent to210.1m. The firm said it had been arecord year for sales of pre-arranged

funeral plans, with 265,000 peoplenow paying in advance for their

funerals.But it added that the number of

deaths in the first quarter of 2012 isexpected to be a lower proportion ofthe year as a whole than in 2011.

Dignity added 33 new locationsduring the year, as part of its expan-sion programme that started in 2010.It also completed construction on twonew crematoria, taking its marketshare up to 8.8 per cent.

The firm said it had 14.1m in cashavailable to make further acquisi-tions. Costs grew five per cent to

31.1m due to higher pension costsand a rise in headcount.

SUPPORT SERVICES

HOLIDAY AT HOME IN 2012

VISITENGLAND, thenational tourist board,

yesterday launched acampaign aimed atboosting domestictourism in the UK. ItsTV advert, which airstoday for the first

time, features actressJulie Walters (pic-tured), and is aimed atshowcasing the special

20.12 per cent discountdeals on offer onattractions and accom-modation during theOlympic year.

Picture:VisitEnglandBiz

DEUTSCHE Lufthansa posted a netloss of13m (10.86m) in 2011, aftertaking a larger-than-expected chargeon the sale of its British Midland unit.

British Airways owner IAG inDecember agreed to buy LufthansasBritish Midland for 172.5m in therace to grab the loss-making unitscoveted runway slots at LondonHeathrow.

A loss of285m from discontinuedoperations reflects current losses atBritish Midland and valuation effectslinked to its disposal, the German air-line said in an unscheduled statement

yesterday.Analysts on average had expected a

full-year net profit of324m, accord-ing to a Thomson Reuters poll, follow-ing a net profit of1.1bn a year earlier.

The German flagship carrier alsosaid it would pay a dividend of0.25 almost half analysts expectations of0.47 as an exception to its dividendpolicy.

This is intended to let shareholdersparticipate in the successful operating

performance in the reporting year ina way that is justifiable to the finan-cial profile, the group said.

Meanwhile, Franco-Dutch airline Air France KLM, which yesterdayannounced it was suspending allflights to Damascus due to the wors-ening security situation in Syria, saidpassenger traffic for February rose 6.2per cent despite a strike action thathit its European network.

But cargo traffic fell 5.1 per cent, hitby the weak economy.

Air France KLM shares were up oneper cent to 4.18.

Lufthansa shares wavered slightlybefore closing flat at 10.02.

Sale of BMI

takes its tollon Lufthansa

BYHARRY BANKS

TRANSPORT

ANALYSIS l Deutsche Lufthansa AG


10.60

10.50

10.40

10.30

10.20

10.10

10.00

10.027 Mar

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BILL GATES has stepped into theonline song sales market by launchinghis music licensing business,GreenLight, as an internet service

which could evolve to rival iTunes.GreenLight, the three-year old enter-

tainment rights vendor, has venturedonline with the backing of musicgiants Warner, EMI, Universal andSony ATV and already has a portfolioof more than one million tracks.

The online auction house for musicrights allows customers to bid onlineto negotiate a price for the rights touse a song for adverts, websites andstage productions or to get it nowfor a selection of popular songs avail-able for immediate purchase.

The website facilitates price compar-

ison and allows users to browse accord-ing to themes includingmemories, driving and cocky

and moods, from restrained toeuphoric.

GreenLight is owned by Corbis, thedigital images licenser founded by BillGates in 1989 when he gained the dig-ital rights to art masterpieces such asthe Mona Lisa and Whistlers Mother.

Corbis has made a strong start to2012, acquiring Norm Marshall &

Associates which facilitates productplacement in films in January, andin February launching On DemandEntertainment, a subscription servicefor licensing images.

Gary Shenk, chief executive ofCorbis, said the move was about sim-plifying the complex process of musiclicensing to make popular music moreeasily accessible to the clients whomight otherwise have shied awayfrom the area.

Mark Pinkus, a Warner executive,

praised GreenLight Music for comingat a time when music is being used inmore ways than ever before.

BY LAUREN DAVIDSON

TECHNOLOGY

TOKYO prosecutors yesterday chargedOlympus and six key figures in the1.1bn accounting fraud at the cameraand endoscope maker, tighteningtheir case in the investigation of one of

Japans biggest corporate scandals.Prosecutors charged ex-chairman

Tsuyoshi Kikukawa, former executive vice-president Hisashi Mori and for-mer auditor Hideo Yamada with

inflating the companys net worth infinancial statements for the fiscalyears ended March 2007 and 2008, in violation of the FinancialInstruments and Exchange Law.

Also charged were former bankers Akio Nakagawa, Nobumasa Yokooand Taku Hada, prosecutors said.

The six were arrested in Februaryon suspicion of filing false financialstatements to help hide huge invest-ment losses through complextakeover deals at the company.

Prosecutors did not charge a seventhperson they arrested last month.We take these charges very seri-

ously and will continue to strengthenour corporate governance, Olympussaid in a statement. We againexpress our deep apologies to share-holders, investors, business partners,customers and other related partiesfor causing trouble.

Shares of Olympus, which have lostabout half of their value since thescandal broke, fell 1.1 per cent.

Olympus and six former staffcharged over firms accountsBYHARRY BANKSTECHNOLOGY


Gates GreenLight has partnered with Warner, EMI, Universal and Sony Picture: GETTY

Bill Gates putsmusic salesservice online

THE EUROPEAN Commission hasgiven the green light to Ofcoms pro-posed price caps for Openreach, BTs

wholesale broadband division.Ofcom, which regulates BT

Openreach due to its significant mar-ket power, will lower annual charges

by five to 20 per cent, with furtherreductions each year until March 2014.

BT said it disagrees with some assump-tions and will consider appealing.

GAMBLING group Sportechs 2010acquisition of Scientific GamesRacing, the US racetrack business, hasfinally proved a success as it swungthe British company to profit last year.

Sportech posted pre-tax profits of8m, up from a loss of 5.9m in 2010.

Revenues jumped 66 per cent to118.2m, of which 67.3m came from

the American acquisition, rebrandedSportech Racing.

Buyout deliversfor Sportech

Ofcom confirmsBTs price capsTELECOMS

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BRITISH manufacturing buyoutgroup Melrose posted full-year profitat the top end of expectations andsaid strong energy and mining mar-kets meant it was set for furthergrowth.

The strong end-markets we haveare proving their worth, financedirector Geoffrey Martin said

We are 50 per cent into energy, oiland gas, and mining, which are goodplaces to be in right now.

Melroses 2011 pre-tax profit rose32 per cent to 161m, compared with

a forecast for 157m. Sales, 11 percent higher at 1.15bn, were in line.

ENGINEER Costain said yesterday it was on course to double its profitswith its oil services operations set toexpand.

The company reported a 38 percent rise in full year adjusted operat-ing profit for 2011 to 24.1m.

Finance director Tony Bickerstafftold City A.M. the company was buoy-ant in the UK due to a string of recentcontract wins, and that it was also tar-geting more work with oil companies.

We work with a lot of big oil com-panies and want to do more particu-larly in upstream (recovery of oil).

He added that its winning of highprofile contracts in the UK, includingthe London Bridge redevelopment,

were testament to its success in tar-geting blue chip customers.

Costain, which has won contractssuch as London Bridges 400m rede-

velopment, reported that its year-end

order book edged up to 2.5bn com-pared to 2.4bn in 2010.

Costain is debt free and had 140min cash at the end of last year. It saidits support services activities now rep-resent 25 per cent of work secured for2012. The group recommended aneight per cent dividend hike thefifth consecutive year that there has

been a rise. Bickerstaff added: We arein good shape. We are employingmore people and will look at acquisi-tion opportunities as they arise.

Costain looksto oil to fuelrapid growth BRITISH aero electronics groupCobham expects to deliver furthergrowth this year after cost cuts and a

strong performance from commer-cial aviation boosted 2011 profit.

Cobham, whose equipment helpsmilitary vehicles such as F-35 fighterplanes communicate with one anoth-er, yesterday said 2011 pre-tax profit

rose seven per cent to 328m on salesthree per cent lower at 1.85bn.Cobhams revenue growth has beenhit by cuts to government defence

budgets in the US, which account for56 per cent of its sales.

The company, which said it wouldincrease its full-year dividend by athird to eight pence, said a fall in USdefence sales was offset by growingmilitary sales in emerging marketssuch as Brazil and a buoyant civil avi-

ation business, which it expects tokeep growing.The positive trend in our export

and commercial markets are expect-ed to continue in 2012 and we expectto deliver underlying progress this

year, said Cobhams chief financialofficer Warren Tucker.

The increase in the dividend is aclear statement of confidence in the

business model said Investec analystAndrew Gollan.

Cobham eyes lift as its civilaviation sales head upwards

RPS GROUPS full-year results toppedanalysts expectations, and the Britishengineering consultancy said itexpected 2012 growth to be fuelled byacquisitions and exposure to globalenergy markets.

The company derived more than 70per cent of its underlying profit fromoutside Europe and made five acquisi-tions during the year in a bid toexpand its international operations.

Pre-tax profit for the year was50.8m, beating analysts estimates of50.3m.

RPS said January to December rev-enue rose 15 per cent to 528.7m.

RPS profits onoverseas salesMelrose seesenergy boost

BY JOHN DUNNE

ENGINEERING

MANUFACTURING

ENGINEERING

BYHARRY BANKSENGINEERING


Costain, last year, won a 400m contract to redevelop London Bridge station

ANALYSIS l Costain Group PLC

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The world now has a record numberof billionaires says Forbes, but its beena turbulent year for those at the top

Its tough at the top: worlds

richest fight to keep wealth


REAL ESTATE TYCOONS DOMINATE UK LISTWHICH SECTORS MAKE THE MOST BILLIONAIRES? TMT

The tech and telecoms sector isholding firm towards the top ofthe table, with Carlos Slim, BillGates and Oracle owner LarryEllison inside the top 10 andmore than 100 across the entirelist. Savvy investments in thelikes of Facebook and Twitter canalso make billions, as Netscapefounder James Clark has found.On the media side, OprahWinfrey is one of the few televi-sion faces to boast a personalwealth of more than a billion, andeven she is outstripped by thelikes of Reuters chair DavidThomson ($17.5bn) and News

Corps Rupert Murdoch ($8.3bn).

Investments

The Sage of Omaha, WarrenBuffett, leads more than 150investors holding spots on thisyears billionaires list. But hedgefund tycoon George Sorosdemonstrated the perils of thesector, with his wealth swingingfrom $14.5bn to $22bn thenback to $20bn in the space of ayear though it still makes himthe worlds 22nd richest man.

Fashion and retail

Some 130 billionaires have madetheir fortunes in retail, withbrands ranging from Aldi toLouis Vuitton peppering the top10. Despite the miserable state

of the UK high street, the likes ofH&Ms Stefan Persson and NikesPhil Knight still expanded theirfortunes.

Industry

With around 80 energy billion-aires, 90 or so in manufacturingand dozens more labelled simplyas diversified by Forbes, mak-ing stuff is still a popular pathto the top of the worlds wealthpile. Lakshmi Mittal might havecrashed out of the top 20, butthe Koch brothers, steel tycoonRoman Abramovich andSwedish packaging scion BirgitRausing are still doing well.

By Marion Dakers

Gerald CavendishGrosvenor - real estate

Gerald Cavendish Grosvenor isranked 78 on the list. As thesixth Duke of Westminster,Grosvenor is the wealthiestlandowner in the UK with a networth of $11bn (7bn), downfrom $13bn from last year.Grosvenor, age 60, is based inChester. He made his fortunethough his private companyGrosvenor Group, which ownsreal estate on five continents.

Reuben Brothers - realestate

David and Simon Reuben, with anet worth of $9bn (5.7bn), are

ranked 100 on the list. Thebrothers made their fortunethrough investments and realestate. Last month, they boughtLondons only private heliport.

Charles Cadogan - realestateRanked number 230 on the list,Charles Cadogan, age 75, isworth $4.6bn (3bn) due to hiswork in real estate. The eighthEarl Cadogans fortune rose againthis year with his real estateinvestments in London. Cadoganbegan his career as a merchantbanker at Schroder Wagg. Hisfamily owns a 90-acre estate in

Chelsea and Knightsbridge.

Sir Richard Branson/SirJames Dyson/Sir Philip Green

Richard Branson is in a three-way tie for position 255.Branson, 61, is a self-made bil-lionaire through his soft drinks-to-air travel Virgin Company. Thisyear, Branson opened the worldsfirst commercial spaceport inNew Mexico. His net worth is$4.2bn, which has held steadysince last year. Sir James Dyson,owner of Dyson vacuum cleaners,also ranks at 255 with a networth of $4.2bn, as do ArcadiaGroup owners Sir Philip andCristina Green, whose net worthsank by almost 40 per cent.

By Kendal Gapinski

2 Microsoft founder Bill Gatess net worth has risen this year

4 Europes richest man, LVMH chairman Bernard Arnault3 Investor Warren Buffett has gained despite market turmoil

11 Christy Walton, Wal-Mart heiress and worlds richest woman9 Li Ka-Shing, who reclaims the title of Asias richest man

1,153 New entrant, Spanx founder Sara Blakely21 Steel magnate Lakshmi Mittal has fallen out of the top 20

1 Carlos Slim, the worlds richest man for third year runningMEXICAN telecoms magnate CarlosSlim Helu has kept his spot as theworlds richest man for the third yearrunning, according to the Forbes list of

billionaires out yesterday.But his family fortune slid $5bn to

$69bn over the year, closing the gap between him and Microsoft founderBill Gates, who remains in second placewith a net wealth of $61bn, up $6bn onlast year.

The pairs performance over the yearis mirrored in the rest of the list, withplenty of movement up and down thetable as the turbulent world economypays off handsomely for some but swal-lows others.

Forbes said 128 new entrants hadmade it onto its list of the worlds wealthiest, while 117 dropped off in what it called a year of churn andburn. It estimates there are a record1,226 dollar billionaires worldwide, with a combined wealth of $4.6 tril-lion up by $100bn on last year.

The worlds wealthiest are still most-ly based in the US, with 425 billionairescompared with Asia-Pacifics 315. Bothregions enjoyed slight gains.

Forbes names 37 UK-based billion-aires, with the Duke of Westminster,Gerald Cavendish Grosvenor (picturedinset), still the most valuable thanks tohis lucrative land holdings.

Grosvenors family wealth slid from$13bn to $11bn over the year, accordingto Forbes estimates, making him the78th richest man in the world.

The biggest gainer wasMexicos Ricardo SalinasPliego, a broadcasting andelectronics magnate whoadded $9.2bn to his networth in the year, clinching$17.4bn and 37th place.

Notable new entrantsinclude Sara Blakely, theself-made founder of the

Spanx underwear range, with a networth of $1bn.

The $10bn float of Glencore last Maymade new billionaires out of a handfulof its partners, with head of oil AlexBeard, coal head Tor Peterson and jointheads of zinc and copper Daniel

Badenes and Aristotelis Mistakidis mak-ing their debuts on the list.

Mark Zuckerberg is the youngest ofthe listed billionaires at 27 years of age,closely followed by his Facebook co-founder Dustin Moskovitz.

The duo are among 100 or so billion-aires who have made their fortunes intelecoms and technology. But while thesector is proving lucrative for manyintrepid business owners, the Forbeslist also charts the decline of those whofail to keep up with the fast-movingindustry.

Former Research in Motion co-chiefs Jim Balsillie and Mike Lazardis bothcrashed out, following the dire per-formance of their BlackBerry range.

Another prominent faller was steelmagnate Lakshmi Mittal, who lost aneye-watering $10.4bn to drop out of thetop 20 rankings for the first time since2004.

Amid the volatility of this yearstable, the Forbes list

itself is facing downa challenger.Bloomberg thisweek launched itsown billionaireslist, to be updated

daily.

BYMARION DAKERS

WEALTH

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STRONG jobs figures published yester-day raised hopes that the economicrecovery is finally underway.

Permanent staff placements byrecruitment firms grew for the secondmonth running in February, accord-ing to the KPMG and Recruitment andEmployment Confederation (REC)report on jobs, though temporaryplacements fell.

Overall demand for staff rose at thefastest pace in four months particular-ly in the IT and computing sector.

The index of permanent staff place-ments rose from 51.2 in January to53.2 in February, indicating a higherrate of growth.

Any figure above 50 indicates anincreased number of placements.

However, the slowdown in tempo-rary placements accelerated, with theindex falling from 49.4 to 49, andsalaries for permanent staff declinedfor the first time since October 2009.

The vacancies expanded for both,hitting 53.6 for permanent staff, upfrom 52.2 in January, and slowingslightly from 53.7 to 52.7 for tempo-rary work.

In terms of sector, the IT and com-

puting industry and engineering andconstruction sector remained the toptwo growth areas, with indices of 58.5and 57.3 respectively.

Nursing and medical care alsoexpanded strongly with an index read-ing of 54 a major improvement onthe 46.3 decline registered a year ago, when the industry was the weakestperformer in terms of hiring.

The only sector to register a fall invacancies in the month was the hoteland catering industry, scoring 47.3.

The labour market is clearlyimproving, so jobseekers should takeheart that there are vacancies outthere, said Kevin Green from the REC.

Slowly, private sector employers are becoming more confident as thegloom around the Eurozone recedes.

FIDELITY Investments, hit by another year of massive outflows from itsstock mutual funds, said operatingprofit in 2011 rose 13 per cent to$3.3bn due to careful expense man-agement.

Fidelity is one of the worlds largestasset managers. Total assets undermanagement were $1.52 trillion in

20l1, down four per cent from $1.59trillion in 2010.

In its report, Fidelity concededindex and exchange-traded fundscontinued to capture market sharefrom actively managed funds, whileextremely low interest rates led tooutflows from money market funds.

However, Fidelity offset declines inits bread-and-butter stock funds busi-ness by being the leading US providerof 401(k) and retirement planningservices. Total customer assets atFidelity were $3.39 trillion at the end

of 2011, compared with $3.48 trillionin the previous year.

Fidelity, however, said it experi-enced total outflows of $20.1bn in2011. Equity funds, in particular, con-tinued to bleed assets, experiencingoutflows of $46.1bn, Fidelity said inits annual report to shareholders.Money market funds had outflows of$16.1bnduring the year.

Fidelity, which is privately held,said overall equity performancelagged the prior year, with equityfunds outperforming 53 per cent of

peers in 2011, down from 59 percent in 2010.

Fidelity Investments sees jump in 2011profit despite suffering fund outflows

RESTRICTIVE planning laws are hold-ing back economic growth, hurtingthe poor and pushing down the quali-ty of houses, a new report claims.

The Adam Smith Institute (ASI) hascalled for a radical shake up of plan-ning rules that would see the greenbelt scrapped, devolution of planningpowers to local authorities, and theprivatisation of development rights.

The current system makesNIMBYism rational, the report argues.

Property owners have no incentiveto agree to development and every rea-

son to object. The think-tank concludes thiapproach has restricted development,leading to expensive, high-densityhousing within the city. This excludesoutsiders and first time buyers fromLondon.

As an alternative to a full shake-up,the ASI suggests auctioning develop-ment rights or tradable permits, withlocal authorities controlling the over-all level of development.

Think-tank: Scrap greenbelt to boost GDP growth

UK ECONOMY

THE EUROZONE continues to lookweak as industrial data published yes-

terday showed the economy indecline, while the US kept growingwith positive jobs figures.

German industrial orders plum-meted in January, falling 2.7 per centon the month as foreign orders col-lapsed.

Export orders fell 5.5 per cent, ledby an 8.6 per cent fall in non-Eurozonedemand which economists believewill weigh on the economy.

This was a weak report which con-

firmed our view that industrial pro-duction will remain very subdued inthe near term, said Barclays Capitals Thomas Harjes. Our German GDPgrowth forecast remains at 0.1 per

cent for the first quarter of 2012 andwe expect only some slight improve-ment in the following quarter.

Spanish industrial output droppedfor the fifth consecutive month,falling 4.2 per cent in January, fasterthan the 3.5 per cent decline inDecember.

Meanwhile, US employment rose by216,000 in February, up from the173,000 gain in January, ADPEmployer Services reported yesterday.

The upbeat figures point to growthacross the economy, and add to agrowing stack of evidence that theeconomy is gradually speeding up instark contrast to the Eurozones con-

tinuing crisis. Activity in home purchases alsopicked up last week, rising 2.1 per centaccording to the Mortgage Bankers Association (MBA), although overallmortgage applications slumped 1.2per cent on the week as refinancingactivity fell by two per cent.

Meanwhile, Australian GDP growthslowed to 0.4 per cent in the finalquarter of 2011, taking growth for2011 to 2.3 per cent.

Europe slowing as US growsBY TIMWALLACE

WORLD ECONOMY

Employment

lifts as firmsgrow bolderBY TIMWALLACE

UK ECONOMY

BYHARRY BANKS

INVESTMENT


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ANALYSIS l Staff Appointments via Recruitment Consultancies

Permanent Placements

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score

ALLISTER HEATH | CITY A.M.Markets are already providing a degree of tightening, with some banks putting up mortgage rates. This isgood news and means the MPC should stay put this month. There are signs the economy is recovering.

SIMON WARD | HENDERSON

Stop QE but offer ECB-style medium-term funding support to banks the current policy of forcing banks todeleverage while trying to offset the economic consequences with QE is damaging.

GEORGE BUCKLEY | DEUTSCHE BANKWith 50bn of additional asset purchases in progress, no additional policy changes will be required thismonth. The next key decision will be in May following the end of the current asset purchase programme.

TREVOR WILLIAMS | LLOYDSIt looks as if the UK economy will avoid a technical recession, but the fact that Bank rate is still at 0.5 per

cent after three years this month is testimony to the problems that persist so for now, keep rates on hold.

VICKY REDWOOD | CAPITAL ECONOMICSContinue with the 50bn of QE started last month. There are already tentative signs that the recent pick-upin the recovery is losing steam again, suggesting that the economy still needs monetary policy support.

GRAEME LEACH | IODNothing needs to change this week on either interest rates or asset purchases. All eyes need to be on themoney supply for evidence of expansion

HOLGER SCHMIEDING | BERENBERG BANKHold rates. Indicators continue to project a return to modest growth after a mild recession. Inflation has fall-en back sharply, though the recent rise in oil prices clouds the near-term outlook for growth and inflation.

VICKY PRYCE | FTI CONSULTINGHold rates. The UK might escape a further fall in GDP this quarter and high oil prices may push inflation high-er but Eurozone figures are still weak and the contagion from Greece remains a real possibility.

ROSS WALKER | RBSThe recent improvement in the survey data provides some encouragement and is consistent with unalteredpolicy settings but will need to be sustained for some time for a withdrawal of stimulus to be warranted.

CITY A.M. | SHADOW MPC VOTES TO HOLD RATES

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Mecom GroupThe consumer publishing company hasappointed Torben Lundberg as chiefinformation officer. Lundberg has been

working for Mecom since 2008 and hasover 15 years of experience in the mediaindustry. In his new role, Lundberg willfocus on creating group-wide IT solu-

tions. Mecom has also appointed MarkLeimann as group director of itsSweetdeal brand. Leimann has been atMecom since 2006. He will be responsi-ble for the development of internationalconsumer sales products.

WH IrelandThe wealth management and corporatefinance services group has announcedthat Andrew Kitchingman will be joiningthe group as a director in corporatefinance. Analysts Nick Spoliar and AngusMcPhail have also joined the company.Kitchingman and Spoliar both workedpreviously at Arbuthnot Securities, whileMcPhail has moved to WH Ireland fromInvestec. The three combined have more

than 50 years of experience in workingon corporate transactions.

Grant ThorntonThe financial consulting firm has hiredSimon Bevan as partner in the firmsLondon audit practice. Bevan spent 30

years at BDO and left the firm last sum-mer to take a nine-month sabbatical,which he spent in China working as a vis-iting professor at Xiamen University.Bevans main focus will be to develop thefirms privately held audit practice.

Old Mutual Asset ManagementThe investing firm has appointed OlivierLebleu as head of non-US distribution forOld Mutual Asset Management

International. Prior to joining the organi-sation, Lebleu was a partner and a mem-ber of the investment advisorycommittee at Stenham (Montier &Partners). Lebleu will be based in Londonand help to contribute to the firms globalexpansion efforts.

NewedgeThe multi-asset brokerage has namedMarc Lorin as deputy head of originationand structuring for the Americas, JamesShekerdemian as head of origination andstructuring for Europe, the Middle Eastand Africa (EMEA) and Charles Hill as hisdeputy at the alternative investmentsolutions (AIS) division of its prime clear-ing services team.

CITY MOVES | WHOS SWITCHING JOBS Edited by Kendal Gapinski

+44 (0)20 7092 0053morganmckinley.com

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US stocks reversethree day decline

US stocks broke a three-day losingstreak yesterday, recoveringsome recent losses after a reportshowed the US private sector

added more jobs than expected lastmonth.

After suffering their worst declinein

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