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FTSE 100 5,945.43 -10.48 DOW 13,194.10 +16.42 NASDAQ 3,040.73 +0.85 /$ 1.57 unc / 1.20 unc /$ 1.30 -0.01

www.cityam.comIssue 1,592 Thursday 15 March 2012 FREEBUSINESS WITH PERSONALITY

Certified Distribution

30/01/2012 till 26/02/2012 is 98,573

TESCOS chief executive of UK operationsRichard Brasher is set to step down just oneyear after taking the position, it is expected tobe announced this morning.

Group chief executive Philip Clarke willassume responsibility for Tescos home opera-tions.

Richard Brasher (pictured) joined Tesco in1986 and was appointed to its board eight yearsago today, on 15 March 2004.

He took the helm of the supermarket giants

UK operations in March last year and was theforce behind Tescos Big Price Drop campaign,launched last autumn, which led to the retail-

ers worst festive trading period indecades.

In January Tesco released its firstprofit warning in 20 years, admit-ting that underlying profit in 2012 would be 450m lower thanexpected.

The announcement sent itsshares plummeting 17 per cent, cut-ting its market cap by 5bn in one day.

Tescos stock has failed to recov-er from its Januaryplunge and remainsat a three-year low.

Brasher is thethird Tesco seniorexecutive to leave

the British company since former boss Sir Terry Leahy left the group this time

last year.David Potts, head of Tescos Asia

business, announced his retirementin December just a few months after

Andrew Higginson, the retailersexecutive director of banking and

online operations, said in August hewas leaving the company.

Tescos legal and corporate affairsdirector Lucy Neville-Rolfe

plans to step down inJanuary 2013.

Analysts last nightquestioned whetherPhilip Clarke would

successfully juggle both Tescos group and UKbusinesses, although Leahy ran both.

Retail analyst Nick Bubb tweeted, Its notgood when the CEO of a huge global group likeTesco tries to micro-manage the UK business...the cracks are showing, adding: Lucy Neville-Rolfe would be a more obvious replacement forRichard Brasher.

Bubb also called for Tim Mason, Tescosdeputy chief executive and the boss of its USarm Fresh and Easy, to step into the Tesco UKbreach, tweeting: Tim Mason, your countryneeds you.

It is not clear whether Brasher will leave

immediately, nor whether Clarke will fill thevacant role on a permanent or interim basis.Tesco declined to comment.

Tescos UK chief Richard Brasher set to step down

BIG government debts and a slowerthan expected economic recovery have

seen the UKs outlook slashed by anoth-er credit rating agency, in a major blowto chancellor George Osborne.

Fitch announced last night that it wasrevising the UKs outlook from stable tonegative, one week ahead of the Budget placing pressure on Osborne to get thepublic finances under control andreform policies to boost economicgrowth.

The verdict comes exactly one monthafter fellow rating agency Moodys alsoplaced the UK on negative outlook.

The UK retains its gold-plated rating,but the weaker outlooks suggest that itcould be under threat in the near future.

This is just another warning to any-one who believes there can be deficit-financed giveaways in next weeksbudget, a Treasury spokesperson saidlast night.

Fitchs statement praised the coali-tions efforts to rein in the govern-ments huge annual deficit, yet warned:

The governments structural budgetdeficit is second in size only to the USand indebtedness is significantly abovethe AAA median.

The governments own fiscal watch-

dog expects general government grossdebt to peak at the equivalent of 93.9per cent of GDP in 2014-15, Fitch noted.The public sector net debt measure is oncourse to hit 78 per cent of GDP in thesame year. Net debt excluding financialinterventions is suspected to havealready passed the 1 trillion mark.

Fitch said that British banks are rela-tively well placed to deal with potentialshocks, but that the UK economy wasstill vulnerable to a hit from theEurozone debt crisis. The crisis is notresolved and could once more intensify,the note said.

Osborne had also faced criticism earli-er in the day over a new plan to issueextremely long term gilts to fund thegovernments debts.

City economists said that the impactof the treasurys plan to issue new 100-year government bonds will be minimaldue to the Bank of Englands quantita-tive easing (QE) programme.

Osborne will use the Budget to kickoff a study of demand for the issuanceof 100-year or perpetual gilts in anattempt to lock in historically lowinterest rates on state borrowing.

City analysts said that the plan wassensible but that any benefit it couldbring is being far outweighed by QE.

Hendersons Simon Ward published anew analysis yesterday showing that theeffective average maturity of Britainsdebt stock has dropped by 2.2 yearssince the Bank kicked off QE.

He said: QE is having a much biggerimpact in the other direction becausethe Bank of England is taking long-termbonds out of circulation and replacingthem with bank deposits. The effectivematurity of the UKs public debt has fall-en substantially over the last few years.

Joanne Segar, chief executive of theNational Association of Pension Funds(NAPF), also criticised the 100-yearbonds, saying they were too long formost pension funds. Pension funds arelooking for 30, 40 and 50-year index-linked debt, and would much rather thegovernment issue more of those.

ALLISTER HEATH: P2, JOBS RISE: P3

BY LAUREN DAVIDSONRETAIL

NOW FITCH PLACES UKON NEGATIVE OUTLOOKBY JULIAN HARRIS AND JULIET SAMUEL

UK ECONOMY

George Osborne was knocked by Fitchs negative outlook for the UK

GOLDMANFORCED TODEFENDITSELFPAGES 2&6

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News2 CITYA.M. 15 MARCH 2012

NOTORIOUSLY private investment bank Goldman Sachs was last nightforced to make public an internalemail reassuring its 30,000 employ-ees, after a tumultuous day saw a dis-gruntled ex-employee write a scathingattack on the firm in the New York Times newspaper, after he hadresigned.

The employees critique of thebank, in which it was alleged that sen-ior bosses regularly described clientsas muppets, was seized upon by rivalbankers only too pleased to denigratethe bank they fear most in the finan-cial markets. The article alsodescribed the culture at GoldmanSachs as toxic and destructive.

After a day of massively negativepublicity, Goldman Sachs top two

executives Lloyd Blankfein and GaryCohn emailed all staff, rejecting theallegations made by its recent ex-employee Greg Smith (pictured).Instead, they highlighted recent sur-veys that named the bank as a goodplace to work and one that treated itsclients well.

Blankfein and Cohn said: Just two weeks ago, Goldman Sachs wasnamed one of the best places to work in the United Kingdom,where this employee resides. The firm was the highestplaced financial servicescompany for the third con-secutive year and was theonly one in its peer groupto make the top 25.

We are far from perfect,but where the firm has seen aproblem, weve respondedto it seriously and

substantively, the email continues.However, around the City bankers

could hardly contain their pleasure inwatching Goldman Sachs reputationbeing questioned.

That was a bulls-eye of a rant, saidone banker. It was almost like anangry love letter.

Another banker said: This is big. They will find it hard to deal with

this.In his New York Times piece,Smith, who worked in equityderivatives, had described adecline in culture at the bank, which, he claimed,had become increasinglyfocused on making deci-sions based on short-termprofit-making.Outsiders said this observa-

tion might come as a blowto Michael Sherwood,

the London-based executive whomany see as likely to replace Blankfeinin the next couple of years or so.Sherwood is the last person to giveculture to that bank, said one banker.

The Goldman staff email offered aroute for employees to come forwardwith any concerns they had about theway the firm was run and it promisedthat Smiths concerns, as articulatedin the New York Times article, wouldalso be looked at carefully.

It said that anybody that wasunhappy about issues about the waythe firm was being run had a mech-anism for anonymously expressingtheir concerns. We are not aware thatthe writer of the opinion pieceexpressed misgivings through thisavenue, however, if an individualexpresses issues, we examine themcarefully and we will be doing so inthis case. MORE: P6

BYDAVID HELLIER

BANKING

Rating blow must act as wake-up call

FIRST it was Moodys, now it is Fitchsturn. Ahead of next weeks Budget, thedecision by the credit rating agency toput the UK on negative credit watchlast night is another blow to GeorgeOsborne, the chancellor, who hadmade retaining Britains AAA-rating akey priority. Fitchs decision puts thechance of a downgrade at slightly over50 per cent over the next two years.

I am no fan of the rating agencies,but not for the usual reasons. Far frombeing too harsh, or too ruthless, thesebodies are invariably too soft, too back- wards-looking and cautious. Their

decisions are always months out ofdate and they utterly failed during the bubble. But Fitchs reasoning looksplausible in this case. It highlightedthe risks posed to economic recovery

by ongoing financial tensions in theEurozone and against the backdrop ofa still large structural budget deficitand high and rising government debt.All of this makes sense.

The data is foggy and hard to deci-pher; so it is tricky to predict what thefirst quarters GDP performance willbe, let alone that of the remainder ofthe year. Plenty of green shoots are vis-ible but that has been the case fortwo years now, and actual, officialrecorded growth has disappointed.

But while the public finances havebeen doing better than expected so farthis fiscal year, thanks to lower thanexpected spending, the jobs marketremains stagnant, as yesterdays unem-ployment figures showed, while wageshave taken a hit. Around 45,000 netnew jobs were created in the privatesector between November and January,

which wasnt great but neverthelessenough to mop up the 37,000 jobs lostin the public sector. But the surprisewas that pay rose by just 1.4 per centyear on year in the three months to

January as a result of collapsing bonus-es. This amounts to a large fall in realterms, will hit spending and meansincome tax receipts will disappoint.

Although Fitch did not put it in thisway, the UKs problems are simple: thegovernment is spending far too muchand the economy is not growing quick-ly enough. The OECD estimates publicspending was a crippling 49.8 per centof GDP last year, following two yearswhere it was just above half. The gov-ernments net debt will jump from905.3bn in 2010-11 to 1.515 trillion by2016-17, a massive increase.

Fitchs move came just 24 hoursafter the chancellor had announcedplans for 100-year gilts, in an attemptto lock in the UKs present unsustain-ably low cost of government borrow-ing. From the Treasurys narrowperspective, such a move may make

sense yields would be artificially lowthanks to quantitative easing, slightlyeasing the burden on taxpayers but itreflects misplaced priorities. The gov-ernment should be obsessed with lib-

erating the economy to boost growth(and cut our scandalously high unem-ployment) and with finding more sav-ings in the public sector to cut thedeficit faster. It should not beannouncing with great fanfare fancydebt schemes. It should be incentivis-ing the creation of more wealth, notendlessly seeking ways of taxing exist-ing wealth.

There were other contradictions. The government hates interest-onlymortgages but it thinks 100-year giltsare fine. It rightly argues that largedeficits are morally wrong becausethey lead to our children having to payfor our profligacy. Yet it proposes a giltwhich will be repaid by our grand-chil-dren and our great grand-children. Nowonder the public is confused.

[email protected] me on Twitter: @allisterheath

NEWS | IN BRIEF

Facebook traders charged by SECTwo private funds established specificallyto acquire Facebook shares have beencharged by the Securities and ExchangeCommission for misleading investors andpocketing undisclosed fees. The SECclaims the fund managers FrankMazzola and Laurence Albukerk collec-

tively raised more than $70m. TheCommission also charged online tradingplatform SharesPost, which has been facil-itating private trading of Facebook stock,for failing to register as a broker-dealer.SharesPost will pay fines of $80,000 andits chief Greg Brogger will pay $20,000.

Tube stops to have Wi-FiLondons commuters will be able to con-nect to the internet while undergroundfrom July when a Wi-Fi network is rolledout across the Tube. Virgin Media willsponsor free Wi-Fi during the Olympics at80 of the London Undergrounds 270stops. A further 40 stations will be addedto the network after the summer, whenpassengers who are not Virgin mobile orbroadband subscribers will have to payon a use-by-use basis except for a newtravel information service which TfL willprovide for free.

EDITORS LETTER

ALLISTER HEATH

Editorial StatementThis newspaper adheres to the system of

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

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Stunned Goldman is forcedto fight for its reputation

FINANCIAL AUTHORITY URGED TO DROPOPAQUE CHARGESThe new Financial Conduct Authorityshould use its powers to removeopaque banking charges and make itcheaper for new lenders to enter themarket, a panel that represents theinterests of retail customers hasurged. In a paper to be publishedtoday, the Financial ServicesAuthoritys consumer panel warns ofstagnant and ineffective competi-tion in the current account marketthat needs addressing urgently.

DROUGHT AND OIL PRICE RISE SET TODRIVE INFLATIONFood prices are set to surge asdroughts across England and the ris-

ing oil price drive inflation, analystsare warning. Signs of growing infla-

tionary pressure, already evident atthe petrol pumps, come at a timewhen British shoppers were expect-ing a breather.

COALITION NOT SEEN AS BUSINESSFRIENDLYOne in three of the UKs biggest com-panies think that the coalition gov-ernment is not business friendly,according to the first FT/ICSABusiness Bellwether survey. By con-trast, just 13 per cent believe the gov-ernment is favourably disposedtowards business. The results, basedon answers from FTSE-350 companysecretaries, come as new proposalsfrom Vince Cable, business secretary,to curb excessive executive pay havealready been attacked.

AIRPORT IN DISPUTE OVER GROWTHPLAN The operator of Luton airport hasstepped up its dispute with the localcouncil by announcing a rival expan-sion plan to counter the councilsblueprint for growth.

AFTER LONE PRICE RISE, WILL BIG SIXFOLLOW SUIT?An independent energy supplier hasbroken ranks to lift its prices.Ovo Energy blamed higher wholesalecosts for its decision to increase itsduel electricity and gas tariff by 7.7 percent to 1,140 per year, equivalent to81 per household. Analysts warnedthat the Big Six energy companieswere likely to follow suit.

FSA CALLED TO ACCOUNT ON INTERESTRATE SWAP CONCERNS The chairman of the powerfulTreasury Select Committee has inter-vened in the growing controversy overthe sale of complex derivatives byinvestment banks to small businesses.Andrew Tyrie said firms had attempt-ed to raise the issue with the FSA andhe wanted to clarify what it had found.

BHP BILLITON PICKS LONDON FORTRADING UNITSBHP Billiton, the worlds biggestminer, is bringing key trading opera-tions to the UK, a move seen as a voteof confidence in Londons position asa global centre for the naturalresources industry.

QATAR WEALTH FUND BUYS TWO PERCENT OF FRANCES TOTALQatars sovereign-wealth fund hasaccumulated a two per cent stake inFrench oil company Total SA over sev-eral months, according to a personfamiliar with the matter, the latestsign of the tiny emirates buyingpower in France.

EU SEEKS FACTS ON TELECOMMEETINGSThe European Unions antitrust watch-dog has requested information fromfive of the regions biggest telecommu-nications companies concerning meet-ings they held to discuss standards inmobile communications, an EU com-petition spokesman said yesterday.

WHAT THE OTHER PAPERS SAY THIS MORNING

The new jobs website for London professionalsCAREERS.com

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JOBLESSNESS fell again from itsNovember peak, new data showed yes-terday, but youth unemployment hit anew high.

Unemployment stood at 2.666m inthe three months to January, down5,000 on the same period to Decemberand 19,000 a month earlier, figuresfrom the Office for National Statistics(ONS) revealed, though the changesare small enough that unemploymentheld at 8.4 per cent.

Optimism among employers is byno means strong, but it is starting toreturn, said Yakub Zolynski fromrecruiters Market Mavens.

Over the past month or so, morecompanies have committed to takingon senior staff, which bodes well foremployment numbers.

There was a large shift towards part-time employment, which rose 59,000 while full-time employment fell50,000. An additional 110,000 part-time workers said they could not findfull time work, taking the total that

want to work longer hours to a record1.38m.Youth unemployment rose 16,000 in

the three-month period to 1.04m, or22.5 per cent of economically active 16to 24-year olds the highest level sincerecords began in the late 1980s,prompting more calls for action fromGeorge Osborne in his Budget next

week.We cannot afford to see fresh

records broken in youth joblessnesswith such depressing frequency, saidBrendan Barber, general secretary ofthe Trades Union Congress.

Bold new measures such as a youth jobs guarantee and tax breaks forinvestment are needed to get our econ-omy growing again.

Employment minister ChrisGrayling agreed, saying businessesneed support to keep creating jobs.

By gender, male employment fell2,000 while an additional 10,000 women were in work in the threemonths to January.

The private sector created 45,000jobs in the final quarter of 2011, out-stripping the 37,000 fall in public sec-tor employment and leaving arounded gain of 9,000 jobs.

Of those public sector job losses,33,000 were in local government, while central government employ-ment increased by 3,000 in the quarter though the figures are slightlyskewed as academy school staff countas central government employees,

pushing up that headcount anddiminishing local payrolls.Over the twelve months to

December, public sector layoffs out-stripped private sector job creation, as270,000 state jobs were lost while pri-vate employment rose by only 226,000jobs.

FORUM: P25, VOICE OF THE CITY: P10

Jobs rise asconfidenceboosts hiring

FINANCIAL services workers sawweekly pay fall in January as bonusescame in far lower than last year, datashowed yesterday.

Wages in the industry fell to anaverage of 592 per week, down oneper cent on the same month of 2011figures from the Office for NationalStatistics (ONS) revealed.

January was the first month of thisyears bonus season in which the cashwas paid out, and they were down22.8 per cent on the same month lastyear.

Wage growth in the private sectorfell from 2.2 per cent to 1.7 per cent,while in the government sector it fellfrom 1.7 per cent to 1.3 per cent.

The small rises in pay are wellbelow the rate of change in consumerprices, which rose 3.6 per cent in the

year to January, and retail priceswhich rose 3.9 per cent.Continued high prices are likely to

impact on the wider economy, econo-mists warned.

Increases in consumer spendingare likely to be weak over the year asreal income erosions from inflationcontinue and the persistently highprice of oil hits household budgetsthrough fuel costs, said the Centrefor Economics and Business Research.

MOTHERS DAY

SUNDAY18THMARCH

VISIT YOUR LOCAL STORE

ONENEWCHANGE CANARYWHARFCOVENTGARDENKNIGHTSBRIDGE

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PANDORA.NET

City bonuses tumble as pricerises keep outstripping wages

BY TIMWALLACE

UK ECONOMY

BY TIMWALLACEUK ECONOMY

Economics 3CITYA.M. 15 MARCH 2012

Employment minister Chris Grayling welcomed rising private employment Picture: GETTY

ANALYSIS l Male jobless rate is higher

Nov/Jan2011

Feb/Apr2011

May/Jun2011

Aug/Oct2011

Nov/Jan2012

9.0

7.0

8.0

6.0

percent

Men

Woman

ANALYSIS l Unemployment has begun to fall

Nov/Jan2011

Feb/Apr2011

May/Jun2011

Aug/Oct2011

Nov/Jan2012

2,700

2,450

2,550

2,300

The labour market shows tentative signs of life

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HERON has appointed Savills as theleasing agent for the Heron Tower inthe City as the company kicks off anew marketing campaign in May tolease the remaining floors of the sky-scraper.

Savills has won the prized mandateafter Heron decided last month toshake-up its leasing teams as part of anew drive to secure tenants for thebuilding, which is 50 per cent let.

Cushman & Wakefield one ofthe two incumbent agentsalongside CBRE wasasked to re-pitch.Cushman willretain the man-agement of thebuilding.

City landlordshave been hit by a

lack in demandfor office space, asfirms put off com-mitting to newspace amid eco-nomic uncertain-ty.

The Heron,completed last year, is still look-ing to lease floors2-8 and the topfloors from 23-37.

Heron appointsSavills for Citytower mandate

PROPERTY


THE NEW concourse at KingsCross station was unveiled yester-day, marking the end of a five- year makeover at the centralLondon station.

The steel and glass dome,which weighs 1,700 tonnes, wasdesigned by architect JohnMcAslan to complement the restof the Grade I listed station.

Commuters will be able towalk through the new wing fromnext Monday.

Mayor of London BorisJohnson and transport secretary Justine Greening officially

opened the station yesterdayalongside Network Rail chiefDavid Higgins.

The new western concourse, ata cost of 550m, is part ofNetwork Rails 2.5bn, 10-yearupgrade of the Kings Cross StPancras and surrounding area, which runs until 2013. Morethan 45m people travel throughKings Cross station a year.

BYMARION DAKERS

TRANSPORT

Stunning new concourse at Kings Cross opens

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MPs told government agency UKFinancial Investments (UKFI) that itis wrong to protect high pay atstate-owned banks RBS and Lloydsin a treasury committee hearingyesterday.

But executives at UKFI, whichmanages taxpayers stakes in thebailed-out lenders, declared that itis precisely their role to provide a

nuclear deterrent against such

political meddling so as to preservevalue for the Exchequer.UKFI chairman Robin Budenberg

said: We have a choice. We couldeither pay the employees of RBS ona basis that we consider competi-tive albeit that I think across theboard in RBS pay is at the low endof the competitive range or wecould do away with any pretence ofcompetitive pay. And my own viewis that that would not be in the

public interest. We might find one

or two people who would be pre-pared to do that but you wouldfind it impossible to keep andattract the sort of people you needto run an incredibly complexbank.

Andrea Leadsom MP fired back:I completely disagree with you.She said the proof is in the pud-ding that RBS chief executiveStephen Hester decided to waivehis bonus rather than quit his job.

But UKFIs Jim ONeil confirmed

that major private investors haveraised serious concerns with theagency about how politicians aredamaging the value of their shares.

UKFI also revealed that theadvice fees it paid Deutsche Bankfor the 747m sale of NorthernRock amounted to 1.84m and saidthat building societies had beenput off bidding for the bank due toregulatory confusion over howthey can raise capital.

UKFI clashes with MPs over toplevel pay at state-owned banks

UKFI chair Robin Budenberg said payneeded to be competitive

BY JULIET SAMUEL

POLITICS

News 5CITYA.M. 15 MARCH 2012

NEWS | IN BRIEF

Shadow banking faces reformThe shadow banking sector continuesto pose risks to the UKs financial stabil-ity, Lord Turner, chairman of theFinancial Services Authority warnedyesterday, as he insisted a fresh

approach to its regulation was neces-sary. Turner, speaking to the CASSBusiness school, said it was urgent thatthe shadow sector, such as money mar-ket funds aimed at retail investors,

were reformed in the same way as nor-mal banks.The sprawling array of non-banks thatextend credit and provide other bank-like services are not something parallelto and separate from the core banking

system, but deeply intertwined with it ...We need to ensure that our regulatoryresponse appropriately covers shadowbanking as well as banks, Lord Turnersaid.

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RICHARD Siewert Jnrs appointmentas the new head of public relations atGoldman Sachs was only officiallyannounced to staff on Tuesday.

But by yesterday morning the for-mer press secretary to President BillClinton was thrown into his firstfully-fledged firestorm.

In an unauthorised article for theNew York Times, Greg Smith, aLondon-based employee who workedin derivatives and who had been at

the firm for 12 years, said that theenvironment at the firm had becometoxic and destructive.

Smith said that over the last 12months he had seen five differentmanaging directors refer to theirown clients as muppets some-times over internal e-mail.

There was talk yesterday thatSmith had felt bitter about the size ofhis most recent bonus and others atthe bank pointed out that as a vicepresident, he wasnt especially sen-

ior. But nobody could dismiss hisobservations entirely.

Smith said in his article that hewas most disappointed by how theculture of the firm had becomedegraded under the leadership ofLloyd Blankfein.

He wrote: The culture was thesecret sauce that made this placegreat and allowed us to earn ourclients trust for 143 years. It wasnt just about making money; thisalone will not sustain a firm forso long.

Goldman Sachs, which later

sent an email to all its employ-ees (bottom right) in a bid toreassure them after the articlewas published, said: We dis-agree with the viewsexpressed....In our view, we willonly be successful if our clientsare successful. This fundamentaltruth lies at the heart of howwe conduct ourselves.

One recruiter warned thatSmiths bold

parting shot could make it tricky forhim to find a new employer.

If Smith is looking for a new job,hes playing a very dangerous game,said Dave Way of Marks Sattin.

Like most of the Citys majoremployers, Goldman Sachs have astrong network of alumni runningcompanies across the world whocould be bosses or clients for high-

level professionals changing jobs. Those that didnt

leave for the same rea-sons as Mr Smith maynot think his words

about their formercolleagues wereparticularly wellchosen.

Top PR job at Goldmanwas never going to bea walk in the parkBYDAVID HELLIER

FINANCIAL

Focus on Goldman6 CITYA.M. 15 MARCH 2012

TODAY is my lastday at GoldmanSachs. After almost

12 years at the firm first

as a summer intern while atStanford, then in New Yorkfor 10 years, and now inLondon I believe I haveworked here long enough tounderstand the trajectory ofits culture, its people and itsidentity.And I can honestly say thatthe environment now is astoxic and destructive as Ihave ever seen it.To put the problem in thesimplest terms, the interests

of the client continue to besidelined in the way the firmoperates and thinks aboutmaking money.

Goldman Sachs is one of theworlds largest and mostimportant investment banksand it is too integral to globalfinance to continue to actthis way. The firm hasveered so far from the placeI joined right out of collegethat I can no longer in goodconscience say that I identifywith what it stands for.

Greg Smith

Goldmans new PRboss Richard Siewert

Jnr has been thrownin at the deep end

Dear all,

By now, many of you have read the submission in todays

New York Times by a former employee of the firm. Needlessto say, we were disappointed to read the assertions made bythis individual that do not reflect our values, our culture andhow the vast majority of people at Goldman Sachs thinkabout the firm and the work it does on behalf of our clients

We are far from perfect, but where the firm has seen aproblem, weveresponded to it seriously and substantively.

Thank you.Lloyd C. BlankfeinGary D. Cohn

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LEGAL & General (L&G) posted thebiggest rise on the FTSE 100 afterthe insurer said it would increaseits 2011 dividend by more than athird to 6.4p.

The board justified the bumperpayout which reverses a cutmade during the 2008 financial cri-sis on the basis that the companyenjoyed the combination ofgrowth and strong cash genera-tion.

It still looks very positive for fur-ther increases in future, L&G chiefexecutive Tim Breedon told

reporters yesterday.Operating profit was up five per

cent to 1.06bn as sales gainedseven per cent to hit 1.9bn, assist-ed by a 34 per cent jump in earn-ings at its asset management arm.

Shares in L&G closed the day up5.5 per cent at 134.3p, meaningthey have now gained an astonish-ing 42 per cent in the last sixmonths. The insurer has been atthe forefront of an industry driveto boost cash generation by reduc-ing commission payments to bro-kers and focusing on products thatrequire lower capital reserves.

Although the 2011 dividend iscovered 2.25 times by cash genera-

tion, L&G aims to move towards acoverage ratio of two times.Breedon said it could go even lowerif market and regulatory uncer-tainties are lifted.

L&G leads FTSE 100after dividend riseBY JAMESWATERSON

INSURANCE


ALPHA Bank yesterday scrapped plansto tie up with rival Eurobank, in whatwould have been Greeces largest bankmerger in decades but instead becamea casualty of the countrys bondrestructuring.

Alpha Bank had said in January it would put the merger, agreed in August, on hold until the terms ofdebt-crippled Greeces bond swap werefinalised.

As Greeces cabinet unanimouslyapproved the terms of its 130bn inter-national bailout yesterday, Alpha Banksaid it had decided to go it alone.

The lenders had initially sought toform the nations largest bank to copewith a crisis that has caused rising baddebts and prompted many depositorsto take their cash elsewhere.

Their share swap deal looked as if itwould hit the rocks when it becameclear that the Greek bond exchange also known as private sector involve-ment (PSI) would inflict a bigger hiton their portfolios, and disproportion-ately on Eurobank, which had roughlydouble the exposure to Greeces sover-eign bonds.

The market has known for weeksthat this merger effort had soured, an Athens-based banking analyst said.Todays development is them formal-ly pulling out.

A spokesperson said Alpha Banks board will convene a general share-holders assembly where it will pro-pose calling off the merger. Alphas

board meeting is set for 27 March.The board will explain to share-

holders why the merger is no longer intheir interest, another Alpha Bankofficial said.

Alpha Bank ditchesplan to merge with

Greeces EurobankBYHARRYBANKS

BANKING

ANALYST VIEWS: CAN LEGAL & GENERAL MAINTAIN ITS GROWTH?

MARCUS BARNARDORIEL

The outlook statement is upbeatseeing further opportunities to grow in thecore UK despite the considerable changesand challenges that lie ahead. New businessstrain was helped by better terms in theannuity market meaning net cash genera-tion was 846m, up 11 per cent and fourper cent ahead of expectations of817m. Target price: 162p. BUY.

KEVIN RYANINVESTEC

We continue to view Legal &General as strategically challenged with just13 per cent of profit generated outside theUK. If Solvency II were to insist on signifi-cantly higher levels of capital required forwriting annuities, we believe this would pro-vide the company with a serious challenge.Target price: 104p. SELL.

EAMONN FLANAGAN | SHORE CAPITAL

Legals reported a powerful set of 2011 results with the 35 per cent growth in the full year dividend, to6.4p, the highlight. This finally lays to rest the ghost of the 2008 dividend cut and is supported by excellent cashgeneration, IFRS operating profits and earnings. Legals sees little prospect of a rebound in real economicgrowth in 2012 but remains confident of its own prospects in the risk, annuity and savings marketwe

tend to agree! Target price: 125p. BUY.

ANALYSIS l Legal & General Group PLC

p

8 Mar 9 Mar 12 May 13 May 14 May

135.0

132.5

130.0

127.5

125.0

122.5

120.0

134.3014 Mar

RESCUE could be on its way for GameGroup as private investment firmOpCapita has offered to buy the strug-gling video games vendors debt.

A source close to the proceedingstold City A.M. that OpCapita hasapproached Games lenders a groupled by RBS with an offer to buy theretailers debt and pay off in full itsoverdue bills to suppliers.

Games troubles escalated recently when major suppliers includingNintendo and Electronic Arts refusedto sell their new releases to the videogames shop.

Game confirmed a third party hasshown interest in providing additional

funding for the company.The third party is seeking a dia-

logue with the groups currentlenders, however there is no certainty

to the outcome.RBS declined to comment on any

discussions with OpCapita.On Monday Game, which will face a

quarterly rent bill in under two weeks,cautioned investors that it could sooncrash into administration, leavingshareholders with worthless stock.

Hillco and Walmart have beennamed as potential saviours for Game,which runs 1,270 stores across Europeand Australia. Neither have comment-

ed on their intentions regarding theBritish video games vendor.

Game shares rose 83 per cent, or0.95p, to 2.1p yesterday.

BY LAURENDAVIDSON

RETAIL

Lifeline thrownat Game Group:OpCapita offersto buy its debt

Game, led by boss Ian Shepherd, could be saved if OpCapitas offer is accepted

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VINCE Cables plans to crack down onexecutive pay split opinion yesterday, with shareholder groups welcomingthe proposals as business leaders warned that the plans risk micro-managing.

The business secretary yesterdaylaid out plans to force firms to holdbinding votes on its future remunera-tion and for golden parachute pay-ments worth more than one yearssalary, in a bid to curb spiralling pay at

the top of listed firms.Lawyers, including Freshfields part-

ner Simon Evans, predicted that eventypical executive exit payments will becaught under the proposed rules, andcould force firms to buy directors outof their current terms of employment.

Cable also said a higher than nor-mal portion of investors should berequired to approve future pay pack-ets, to reflect the increasingly frag-mented nature of the stock market.

But CBI director general JohnCridland said: The [threshold] wouldbe damaging, leaving decision makingabout company strategy in the handsof a minority of shareholders who maynot represent the wider group.

The Institute of Directors, whichsupports more powers to curtail execu-tive pay, also voiced concerns aboutsetting arbitrary thresholds.

But investor group PIRC said theplans help foster a retooling of share-holder rights in respect of pay.

PIRC and the National Associationof Pension Funds both pointed outthat shareholders already have somebinding powers.

WORLDSPREADS lost its chief execu-tive yesterday as Conor Foley (pictured)quit his role at the spread bettinghouse.

Worldspreads ex-boss Roger Hynes,who moved from the financial servic-es group to CMC Markets, will resumehis former seat on an interim basis.

The shift comes just two weeks afterWorldspreads released a profit warn-ing due to an unusual pattern ofclient trading. The company said itanticipates a full-year loss due to acombination of benign market condi-

tions and low volatility in certainkey markets.

Worldspreads chairmanLindsay McNeile commented:Whilst Conor has expressed hisdesire to channel his personalenergies into other fields, weare delighted that as thelargest individual shareholderin the group he remains fullysupportive of our manage-ments growth plans.

She welcomed Hynes backto the spread betting compa-ny, saying his insights andreputation are unmatched

within the industry.Niall OKelly, Worldspreads ex-

chief financial officer, departedalongside Foley after announcing

at the end of February his res-ignation.

Worldspreads saidCMC Markets veteranRoger Hynes positionwould be on an interim basis while the firmundertakes a globalsearch for a new chief.

Shares in the AIM-list-ed company fell four

per cent to 35.5p.

FINANCIAL SERVICES


NEWS | IN BRIEF

Unite rejects Olympics Tube bonusUnite the union yesterday rejectedLondon Undergrounds offer of an 850Olympics bonus for its maintenance andmanagement workers. Unite said theoffer, which is still being considered bytransport union RMT, had stringsattached [that] are totally unacceptable

including a requirement to work flexibly.Unite has also announced a ballot ofLondon bus drivers over their proposed500 bonus to work during the Games.

SocialGo reduces its lossesSocialGo has unveiled a softwareupdate which gives the social networkbuilder a closer integration withFacebook and allows its users to createa better featured and bespoke versionof a Facebook group. SocialGo, whichraised 1.63m of capital from two shareplacings last year, reported revenues of734,000. Its operating loss for theyear was 1.18m, down on a pro-ratabasis from a 1.07m loss in the ninemonths before.

CorrectionOn Tuesday, City A.M. printed an articleentitled Gulf Keystone shares plunge,which quoted a note from Seymour

Pierce analysts that included an interviewwith chief executive Todd Kozel that itsaid took place last weekend. SeymourPierce has since corrected the note to theeffect that the quoted interview actuallytook place several years ago. We apolo-gise for any confusion caused.

AT A GLANCE: CABLES EXEC PAY PLANS

CABLES PLANS FOR EXEC PAYBusiness secretary Vince Cables consulta-tion on executive pay published yesterdayset out plans that he hopes will give share-holders more influence over executive pay.

BINDING YEARLY PAY VOTESCable wants an annual binding vote onevery listed companys future remunerationpolicy. Because of the fragmented nature

of shareholders in UK-listed firms, thereport proposes a 75 per cent threshold.

PAST PAY ADVISORY VOTESTo keep tabs on how popular the resultingpay packages are, Cable also sets out anon-binding annual vote on the past years

remuneration. If this fails to pass 75 percent, the firm should give an explanation.

EXIT PAYMENTS WILL FACE A VOTEFirms would also have to win a vote on exitpayments worth more than one yearssalary. The report admits this could lead todelays to payouts, but hopes the plansprompt investors to voice concerns early.

MORE DETAIL AND TIMINGSThe government will later this year bringout a more rigid guide to what companiesshould include in their remuneration report.Companies can submit responses until 27April, and the government aims to bringnew rules into law by spring 2013.

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ROBIN CULLIGAN | PRICE FORBES AND PARTNERS

Im most concerned about youth unemployment to behonest. I have siblings graduating university soon andIm worried about them finding jobs.

NICK BROWN | ALLIANZ

Im not worried for myself, but I am worried about theyoungsters. I work with a lot of young people and I fear forthem. Theyre in debt from university and cant get jobs.

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

Worldspreads takes back oldboss as chief exec Foley quits

CITY VIEWS: ARE YOU WORRIED ABOUT UKUNEMPLOYMENT?* Interviews by Kendal Gapinski

Yes, I am worried about the unemployment rate. At the end ofthe day, the high unemployment rate is not good for anybody.

Cables planfor pay votessplits the CityBYMARION DAKERS

CORPORATE GOVERNANCE

Business secretary Vince Cable wants more shareholder power over pay Picture: GETTY

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CITYA.M. 15 MARCH 2012

The Capitalist

Life in the Citys financial advisorysector has been full of change late-ly, especially at the firms which tai-lor their expertise to the small to

mid-cap corporates. Theres been a merging of Evolution

and Investec; theres a possible mergerbetween Canaccord and Collins Stewartto come, with likely job cuts on thecards; there have been job cuts this weekat Oriel Securities; and theres been themerger of the Spanish group N + 1 andBrewin Dolphins advisory business tomake N + 1 Brewin.

Nowthe Capitalistis hearing tales, sadlyuncorroborated, that N + 1 Brewin itselfcould be looking at merging its opera-tions with another.

Sources have suggested there have

been talks between it and Singer CapitalMarkets but a phone-call to Singer chiefexecutive Tim Cockcroft leaves us nonethe wiser.

Cockcroft, who is away from the office

nursing a sports injury, declined to com-ment on market speculation.

Our sources suggest that if a deal wentahead, Cockcroft, a former Peel Huntman, would be in charge rather than N +1s James Cumming. Sadly Cummingwas unavailable for comment.

It would be very soon after the launchof N + 1 Brewin for such a deal to be con-templated but it is a fast-moving worldfor the sectors top players at themoment, whether theyre injured or not.The Capitalist would love to hear morefrom anybody who manages to eke outsome details.

13

N + 1 PLUSANOTHER

ONE.........

JP MORGAN STARTSITS MOVE

There was much clattering of chairsand sideboards yesterday at JPMorgans Aldermanbury offices in theCity of London as removal people beganthe shift eastwards to the US banksnew London headquarters atthe former Lehmanbuilding in CanaryWharf. JP Morgan startedmoving people lastmonth and has alreadyinstalled its name-plate at the newbuilding.Sources say it will contin-ue moving people until the startof the Olympics, after which there willbe a fortnights break before the moveis finally completed some-time in the autumn.

Lets hope the client liftat the new building isblessed by the same

courteous butler-dressed attendant toassist clients alongtheir way in the firmsnew shiny home.

Got A Story? [email protected]

City workers may have noticed arise in the number of lycra-clad

runners pounding the pavements dur-ing lunchtime breaks, as the date ofthe London marathon (22 April) drawsnearer.

Yet two Linklaters lawyers aregoing far further: Richard Youle andPeter Lewis are running the Marathondes Sables next month, a gruelling 150mile trek through the Sahara Desert.Three charities will benefit from thepairs arduous adventure MissingPeople, Neuro Foundation, and the

Morocco-based Solidarite.To contribute to their fundraising,readers ofthe Capitalistcan visit:uk.virginmoneygiving.com/teamshuffle

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ZYNGA is planning a secondary offer-ing of $400m (255m) in a bid to keepits current investors happy.

The social gaming company, whichlisted for $10 a share in December,wants its main shareholders to agreeto a longer lock-up period usuallysix months in which they cantoffload their shares.

It could be trying to avoid the fate ofLinkedIn, whose stock dropped 14 percent in the days after its six monthperiod came to an end in November.

Zynga, which works closely with

Facebook, will not receive any pro-ceeds from the offering.

PUB operator Marstons reported solidtrading yesterday despite a tough peri-od for the leisure sector and said itwas looking ahead to a strong 2012.

Like for like sales over the last 23 weeks were up 3.5 per cent on lastyear at the British brewer which has2,150 outlets across the country asfood sales grew 3.9 per cent and drinksales rose 3.4 per cent.

Although this is a slight decline onthe five per cent Marstons was upover the Christmas and New Year peri-od, it remains significantly ahead ofthe industry, which fell 2.1 per cent inJanuary and 3.7 per cent in Februaryaccording to the Peach Tracker whichmonitors sales of eating and drinkingout.

But pub operators remain onunsteady footing ahead of next weeksBudget which could add 10p or moreto the price of a pint.

Marstons chief executive RalphFindlay told City A.M., The beer dutyescalator, which rises tax by two percent over and above inflation, is huge-ly damaging to the pub sector.

Its simply staggering how muchtheyre taking out of the pub sector

and its not sustainable in the longrun. The situation cant afford to getany worse.

But the pub and bar operator isincreasing its rate of investment, plan-ning to open 25 new pubs this yearcompared to 19 last year and 15 in2010.

The Euro 2012 championship andthe Queens Jubilee are expected toboost sales over the summer butthis also depends on the sunshine andhow well Englands football teamdoes, Findlay told City A.M.

Marstons, whose rivals includeMitchells & Butlers, Greene King andJD Wetherspoon, said sales of its own-brewed beer, which includes Pedigreeand Hobgoblin beer, were up two percent.

Marstons up

despite fearsover Budget

EUROPEAN publishing group Mecomreported a two per cent drop in rev-enues to1.06bn in 2011 as advertisingincome fell seven per cent to461.5m.

Pre-tax losses were 33.4m animprovement on 2010s loss of94.8m.

Mecom also said it had acquirednear total control of Wegener, itsDutch regional newspaper unit thataccounts for 83 per cent of the groupsprofit, by buying a 13.3 per cent stakefrom Governance for Owners therebytaking its holding to 99.7 per cent.

Mecom boss Tom Toumazis said the

company was considering delistingWegener from the Dutch exchange.

Mecom rockedby low ad salesZynga: secondshare offering

BY LAUREN DAVIDSON

LEISURE

TECHNOLOGY

MEDIA

ANALYSIS l Marston's PLC

p


102

101

100

99

98

97

96

99.7014 Mar

BRITISH technology firm SmithsGroup yesterday reported a slightincrease in first-half pre-tax profit ashigher sales to the oil and gas industryoffset weakness at its detection busi-ness, which has been hit by govern-ment spending cuts.

Smiths detection unit, which

makes X-ray scanners used at airports

and advanced explosion scanners, hasbeen especially hit by delays in largeorders from government agencieslooking to cut public spending, andthe company warned this would likelycontinue through the year.

The economic environmentremains uncertain and continuedpressures on government spendingare likely to affect some of our divi-

sions, Smiths said yesterday.

However, the company, which alsomakes medical devices and fuel hoses,said it saw further potential to growoverall sales, and added it was confi-dent of meeting full-year expectations.

For the six months ended 28 January, pre-tax profit rose two percent to 217m, beating estimates of181.5m. Sales rose three per cent to1.42bn, in line with estimates.

Smiths Group warns of theimpact from spending cutsBYHARRY BANKS

TECHNOLOGY

Smiths Group boss Philip Bowman said revenues in its detection arm had fallen

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FRENCH CONNECTION said yesterdayit was launching a review of its UKoperations after a disappointing per-formance caused profits to slide by 32per cent in 2011.

The group, whose eponymousbrand accounts for over 90 per cent ofits revenue, reported pre-tax profits of5m in the year to the end of January,in line with expectations after a profitwarning in November last year.

Chairman and chief executiveStephen Marks, who founded the com-pany in 1977, said after experiencingthe most difficult winter season inall his years in the business, French

Connection would be reviewing itsoperations to improve sales and mar-gins.

We are very aware that there will be no quick solutions and thachanges we make will take time tohave an impact.

Marks, however, was more upbeatabout the groups international opera-tions and said it would look to expandoverseas this year and open morestores in China, Hong Kong and India.

BYKASMIRA JEFFORD

RETAIL

GREGGS said it has introduced extrapromotions and discounts in its worstperforming regions to entice cash-strapped customers, as sales slowed inthe first weeks of the year.

Chief executive Ken McMeikan saidthe 1.8 per cent fall in like for likesales in the first 10 weeks of 2012

reflected a four per cent drop in the

number of shoppers on the highstreet.While trading in London remained

positive, McMeikan said the company was offering deals like two sausagerolls for 1 in Scotland, the north east,and the Midlands to boost trade.

He was speaking as the grouprevealed a 1.1 per cent rise in pre-taxprofits to 53.1m in 2011.

Sales rose eight per cent to 701m

as meal deals and breakfast offersproved popular with customers and itsold a record 17.3m cups of coffee.

McMeikan said despite tough mar-ket conditions the group was forgingahead with 90 new store openingsthis year, adding that the closure ofseveral high street retailers was insome cases allowing the group to getcheaper deals in new locations.

Greggs hopes special offerswill reverse its slowing salesBYKASMIRA JEFFORD

RETAIL

HUGO Boss said sales growth would halve this year, cooled by a likely slowdown in red-hot Chinese demand for designer labels. The German fashion house, controlled by private

equity house Permira, also announced plans to convert all its preference shares into ordi-nary shares, rekindling speculation that the buyout firm could seek an exit soon. InNovember Permira denied having any imminent exit plans. Picture: GETTY


RED-HOT GROWTH COOLS FOR HUGO BOSS

Slump in UKhurts French

Connection

ANALYSIS l French Connection Group PLC

p


56

55

54

53

52

51

50.7514 Mar

Another firm looks to Asia for growth

ITS an increasingly familiar story.A UK firm, starved of revenue athome, looks east to expand, hop-ing the growing middle classes

in India and China will pick upwhere the British squeezed middlehave dropped out.

French Connections position atthe more expensive end of the highstreet means it may be able to hangonto the coat tails of demand for lux-ury and heritage British brands suchas Burberry and Mulberry in expand-ing Asian economies but has itwaited too long?

By saying its pulling back from

the UK, the company is ensuring alleyes will be on domestic operationsfor the next 12 months at least.

If it can juggle lease negotiations,price tweaks and getting the productrange right at home while simulta-neously expanding abroad, then per-haps next year will bring theprofitability that Stephen Marksforsees.

But right now, we wouldnt bet onit.

BOTTOMLINEAnalysis by Elizabeth Fournier

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GROWTH declined in the final quar-ter of 2011 across most of the worlds20 biggest economies, according toresearch published yesterday.

Aggregate GDP growth slowed to0.7 per cent, following a 0.9 per centexpansion in the previous threemonth period and taking growth forthe year as a whole to 2.8 per cent.

That represents a marked dropfrom growth of five per cent in 2010,and the quarterly growth is the weakest since early-2009 when the

top 20 economies contracted by 1.6per cent.

Indonesia led the field withgrowth of 2.1 per cent in the fourthquarter, closely followed by China, attwo per cent, and India at 1.8 percent.

The worst performances came inItaly, where GDP contracted by 0.7per cent, and Japan and the UK,which both saw contractions of 0.2per cent.

Brazils economy accelerated inthe quarter, reversing a 0.1 per centfall in the three months toSeptember to grow by 0.3 per cent,

while South Africas growth rate alsoimproved from 0.4 to 0.8 per cent.

EVERY major EU economy exceptGermanys saw industrial productionfall in the year to January, official fig-ures showed yesterday.

The data reflects output from facto-ries, as well as other industrial activi-ties such as mining.

Output fell 1.2 per cent in the 12-month period in the Eurozone andone per cent in the EU as a whole thesecond consecutive fall after the 1.8per cent and one per cent dropsrespectively in the year to December,Eurostat revealed.

Germanys industrial productionincreased 1.6 per cent, while Frenchoutput dropped 2.2 per cent, Spains4.2 per cent, the UKs 4.4 per cent andItalys five per cent.

Energy output in the Eurozonedropped 6.2 per cent, consumerdurables by 2.2 per cent and interme-diate goods by 1.3 per cent, althoughcapital goods output rose 3.1 per cent.

However, there were some signs ofstabilisation in the monthly data.

Both the Eurozone and EU saw a 0.2per cent rise in output in January com-pared with December, with growth of1.5 per cent in Germany and 0.4 percent in France, although Italian,Spanish and UK output fell 2.5 percent, 0.2 per cent and 0.4 per centrespectively. These figures do not pro-vide much comfort and point to a rea-sonably high chance that the widerEurozone economy entered a techni-cal recession in the first quarter,warned Capital Economics Ben May.

Weak factorydata fuels fearof recession

Economic growth slowsacross major economies

BY TIMWALLACE

EUROZONE

WORLD ECONOMY

Industrial production fell in most major European economies Picture: GETTY

Economics16

ANALYSIS l EU industrial output

Jan2003

Jan2005

Jan2007

Jan2009

Jan2012

110

105

100

95

90

85

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THE US ECONOMIC recovery has beenfrustratingly slow, despite recentindications that growth was return-ing, Federal Reserve chairman BenBernanke (pictured) said yesterday, asthe USs trade position deteriorated.

New data showed the currentaccount deficit expanded unexpect-edly in the final quarter of last year,hitting $124.1bn (79.2bn) asexports dropped and importsrose. The deteriorating meas-

ure, which includes factorslike government transfers as

well as trade, showed a sharpfall in the investment surplus.

Meanwhile, speaking to anaudience of community

b a n k e r s ,Bernanke saidfinancial reg-ulations likeDodd Frank

were aimedat larger

banks in an attempt to end the toobig to fail era, and that he is workingto clarify whether or not smallercommunity banks will be hit by therules.

He said the goal is to prevent com-munity banks from wasting time andmoney trying to figure out if a newregulation applies to them.

Although this change seems rela-tively simple, we hope it will help

banks avoid allocating preciousresources to poring over supervisory

guidance that does not apply tothem, Bernanke told the

bankers.Bernanke said the Fed is

also taking steps to improvecommunications with small

banks in a bit to better under-stand the challenges fac-

ing the industry,including the cre-ation of a subcom-mittee to reviewhow community banks are super-vised.

Fed boss playsdown US GDPgrowth spurt A CONFUSING array of different lan-guages used in financial communica-tions increases risks and damagescompetition, a top Bank of England

official said yesterday.The Banks director for financial sta-

bility, Andy Haldane, said a global tag-ging system for trades would makemarkets safer and improve risk assess-ment an area of confusion which

worsened the Lehman collapse.His intervention backs moves by

leaders of the G20 economies toendorse a global governance frame-

work for a legal entity identifier (LEI).The aim is for each firm that trades

on financial markets to have its ownunique code, so it can be quickly recog-nised when regulators want to check ifexposures are becoming risky.

Missing inventories and mistaken

counterparties could be all but elimi-nated if financial firms informationsystems spoke in a common tongue,said Haldane.

Markets were unnerved when ittook regulators so long to find out who

was exposed to derivatives transac-tions on the books of Lehmans.

It is clear these failures in datainfrastructure and aggregation werenot unique to Lehman. They wereendemic across the financial indus-try, Haldane said.

Haldane: Betterdata could stopnext Lehmans

BY TIMWALLACE

US ECONOMY

FINANCIAL REGULATION


EUROZONE INFLATION PICKS UP

INFLATION in the Eurozone rose from 2.4 per cent in the year to February 2011 to 2.7 percent a year later, Eurostat figures showed yesterday. Price rises accelerated in France,from 1.8 per cent to 2.5 per cent, Italy, from 2.1 per cent to 3.4 per cent, and Germanyfrom 2.2 per cent to 2.5 per cent. However, the rise was not uniform with Spain seeinginf lation fall from 3.4 per cent to 1.9 per cent. Picture: GETTY

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THE TAKEOVER battle for hedge fundadministrator GlobeOp was on aknife-edge last night after SS&C

Technologies trumped a rival offerfrom private equity firm TPG Capital.

American financial software firmSS&Cs 485p-a-share cash deal, valu-ing GlobeOp at 572m, has won

backing from the independent direc-tors after beating the 435p cashoffer TPG had agreed last month.

GlobeOp shares rose 1.59 percent to 495p last night as themarket waited to see if TPG came

back with another bid for thefirm, which is based in Londonand New York.

The US buyout firm,which has $49bn ofassets under man-agement, said it isconsidering itsoptions and againurged sharehold-

ers to take no action. Along withits allies it has support covering 27.2of GlobeOp shares.

SS&C, which is part-owned by pri-vate equity firm Carlyle, believes itcan make cost-savings of at least$25m within three years if it com-pletes a deal, for which it needs to

win 70 per cent shareholder backing.Chief executive Bill Stone (pic-

tured) told City A.M. a tie-up wouldcreate a 500-strong new business

development team, makelives easier for investors

and improve industrytransparency.

It would also create theworlds third-largest hedgefund administrator. Stoneplans to offer jobs to mem-

bers of GlobeOp man-agement who

want to stay on.G l o b e O p

a d m i n i s t e r s$173bn in clientassets.

570m offerputs GlobeOpfight in a spin

US REPUBLICAN presidential candidate Rick Santorum won critical primaries inMississippi and Alabama in the early hours yesterday, narrowly defeating NewtGingrich and front-runner Mitt Romney. Santorums wins put pressure on Gingrich towithdraw from the race, although he has pledged to continue campaigning until theRepublican convention in August. Despite Santorums wins in the deep south, Romneycontinues to lead the Republican race, with a total of 494 delegates out of the 1,144 need-ed to secure the presidential nomination. Picture: GETTY

BY PETER EDWARDS

M&A

NewsCITYA.M. 15 MARCH 2012 19

SANTORUM WINS KEY PRIMARIES

BAIN Capital, the private equityhouse co-founded by Mitt Romney,has moved to defend its record ofinvestments after months of being

criticised as a corporate raider. The firm wrote to investors afterRomneys former position at thehelm took on a high-profile role inthe race for the Republican nomina-tion for US president.

Bain said it had created hundredsof thousands of jobs in its 28-year his-tory and that fewer than five per centof the companies in which it investedhad filed for bankruptcy.

PRIVATE EQUITY

Bain bites backagainst critics

RUSSIAN billionaire Viktor Vekselberg is considering suing

Rusal over accusations that he failedto fulfil his duties as its chairman,intensifying a battle with rival oli-garch Oleg Deripaska at the worldslargest aluminium producer.

The two billionaires have beenfighting over Deripaskas ambitionof merging the firm with NorilskNickel.

Vekselberg quit as chairman onTuesday, criticising the managementof the heavily indebted company andsaying it was in deep crisis.

MINING

Rusal chairmancould now sue

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GERMAN energy group E.ON yester-day cut its dividend as it posted a netloss of2.2bn (1.8bn) for the year, itsfirst ever full-year loss.

The firm blamed the abrupt shut-down of nuclear plants in Germanyand the lower price of wholesale gasfor the loss, which came despite a 22per cent rise in sales to113bn.

The companys energy trading divi-sion made a631m loss, compared to a1.2bn profit the previous year.

In a statement entitled Past the Worst, E.ON said it has made goodprogress with its restructuring andthat operations outside of Europewere reporting strong growth.

Chief executive Johannes Teyssensaid the firm was in talks with poten-tial partners in India and Turkey.

It forecast underlying net income of

up to

2.7bn this year, and still plans topay a dividend of1.10 a share.In the UK, its retail business posted a

profit of 304m, down 7.6 per cent onthe previous year, despite the firmgaining more than 12,000 new resi-dential customers.

Other UK operations including wind farms and gas storage earned972m, down 4.4 per cent.

Even if E.ON was adversely affectedby a number of key issues such as gasprices, the nuclear phase-out or depre-ciations, we believe that the companyhas a good starting base for a positivedevelopment, said DZ Bank analystHasim Senguel.

BYMARION DAKERS

ENERGY

UK COAL shares lost a quarter of their value yesterday after it revealed itcould close the largest coal-producingmine in Britain, the underperformingDaw Mill mine, by early 2014.

UK Coal said it had suspended devel-opments at Daw Mill beyond the end

of 2013 due to low productivity, butretains the option to re-open the mine

.UK Coal, which acquired its assetsunder a privatisation drive in 1994,returned to profit last year, but hassaid in recent months that Daw Millremains a concern.

It has begun talks with stakehold-ers, including the government, theCoal Authority and pension trusteesover the mines future. It is also intalks with its banks to refinance debts.

Its shares closed 25.4 per cent lowerat 22p yesterday.

UK Coal warns Britains biggestmine could be closed by 2014


CATHAY EARNINGS HAMMERED BY FUEL COSTS

HONG KONGS Cathay Pacific airline posted a 61 per cent drop in net profits yesterday,blaming rising fuel prices and a decrease in cargo shipments. The airline madeHK$5.5bn (450m) in 2011, down from HK$14bn in 2010. The airline, one of the worldslargest cargo carriers, reported an 8.6 per cent drop in its freight services while its

biggest expense, fuel, was hit by a price increase of 44 per cent. Picture: GETTY

ANALYSIS l E.ON

8 Mar 9 Mar 12 Mar 13 Mar 14 Mar

18.5

18.25

18.00

17.75

17.50

17.25

17.00

16.75

18.1414Mar

Yule Catto doubles its profitsBritish chemicals maker Yule Cattosacquisition of German peerPolymerLatex helped it to double its2011 profit, despite several years of lowgrowth in western economies that con-tribute to a majority of its revenue. YuleCatto, whose chemicals are used by the

adhesive, textile, paper, and pharmaceu-tical businesses, yesterday reported anunderlying pre-tax profit of 84.8m for2011, compared with 42.6m in 2010.Shares in FTSE 250-listed Yule Cattosoared more than nine per cent yester-day.

Ferrexpo gains on new marketsUkrainian iron ore miner Ferrexpo post-ed a 37 per cent jump in 2011 pre-taxprofit to $801m (510.8m) yesterday,at the higher end of expectations,

thanks to robust prices for the key steel-making ingredient and an increase inAsian sales that offset softer Europeandemand. The London-listed pellet pro-ducer has been reducing its dependenceon its traditional European markets.

Vietnam pays off for Soco

Soco International's profit jumped morethan five-fold on the back of a key oilfield in Vietnam coming onstream lastyear, and said it was confident ofachieving the field's targeted output bythe third quarter of this year. The groupreported a pre-tax profit of $158.6m(101.2m) for 2011, compared with$30.9m a year earlier.

BA drops Kingfisher allianceBritish Airways yesterday said it hassuspended its code sharing agreement

with India's troubled Kingfisher Airlines.Kingfisher Airlines is undergoing afinancial restructure, said ChristopherFordyce, regional commercial managerfor south Asia at British Airways, with-out elaborating the reason for the sus-pension. Cash-strapped Kingfisher saidyesterday it will cut back its overseas

flights as the troubled carrier looks toslash costs and attract funding fromwary bankers and sceptical investors.

SIG forecasts flat 2012 salesBuilding products group SIG said yes-terday that volumes would be at bestflat in 2012, but it expects new branch-es and price increases to help it getthrough a tough construction market inEurope. The firm said its annual underly-ing pre-tax profit grew 27 per cent to81.7m.

NEWS | IN BRIEF

BYKENDAL GAPINSKI

MINING

E.ON upbeatdespite 2bnannual losses

8/2/2019 Cityam 2012-03-15

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Wall St seesend of 5-daywinning run

THE S&P 500 broke a five-daystreak of gains yesterday asinvestors found little reason toextend a rally that took the

benchmark index to four-year highs.Momentum continued in Apple, as

its shares climbed 3.8 per cent to$589.58 following positive analystcomment. Morgan Stanley andCanaccord Genuity both lifted theirprice targets to above $700.

Three stocks fell for every gainer onthe New York Stock Exchange, a signof investors pulling back from gains

that have lifted numerous blue-chipsto 52-week highs. Procter & Gamble,hit a 52-week high at $67.95 beforedipping 0.1 per cent to close at $67.85.

The Dow Jones industrial averagerose 16.42 points, or 0.12 per cent, to13,194.10 at the close. The Standard &Poors 500 Index slipped 1.67 points,or 0.12 per cent, to 1,394.28. TheNasdaq Composite Index inched upjust 0.85 of a point, or 0.03 per cent, to3,040.73.

THENEW YORKREPORT

BEST OF THE BROKERS

To appear in Best of the Brokers email your research to [email protected]

ANALYSIS lG4S PLC

295.0

292.5

290.0

287.5

285.0

282.5

280.0

277.5


p278.00

14 Mar

G4SExane BNP Paribas downgraded G4S fromoutperform to neutral after the securitygroup posted a drop in annual profits.Exane said the results, which included a50m cost from last years failed mergerwith Danish catering firm ISS, were unin-

spiring. It held the target price at 305pbut highlighted a loss of managementcredibility after the ISS deal.

ANALYSIS lMoneysupermarket Com Group PLC

134

132

130

128

126


p130.30

14 Mar

MONEYSUPERMARKET.COMN+1 Brewin upgraded the price comparisonwebsite from buy to add after it posteda doubling in full-year profits as more peo-ple used its online services. The brokerliked the firms save over 1,000 on yourhousehold bills marketing campaign whichit said would increase awareness and useof Moneysupermarket services. It held the12-month target price at 140p.

ANALYSIS lMarston's PLC

102

101

100

99

98

97

96


p99.7014 Mar

MARSTONSPeel Hunt switched from hold to buy

after the brewer and pubs group said prof-its would meet expectations. The brokerraised the target price from 100p to 114pand said the firms focus on on value andservice would help it to increase marketshare in value food. It added: The shareshave been on the sidelines for too long andthe time is right for a fresh look.

OIL explorer Tullow Oils profitssurged last year thanks to the rampup of a major new field in Ghanaand the buoyant price of crude,allowing the company to announcea doubling of its dividend yesterday.

Tullow said pre-tax profits rose499 per cent to $1.07bn (683m) in2011, on sales revenues up 111 percent to a record $2.3bn.

Oil and gas production rose 35per cent to average 78,200 barrels of

oil equivalent per day (boepd).But output at the FTSE 100 firms

Jubilee field in Ghana was lowerthan first expected, and the compa-ny said it planned to work on thefield this year to improve output.

Tullow said it was now eyeingstart-up of its Ugandan fields in2016, after delays to regulatoryclearance, but that it was workingon potentially transformationalexploration work in Kenya,Ethiopia and Senegal this year.

The firm intends to spend $2bnon development and explorationthis year, up from $1.2bn in 2011.

Analysts said the results werearound seven per cent ahead offorecasts, but that lower produc-tion outlook at Jubilee would keepa lid on the share price for now.

The firm also announced that Transocean non-executive directorand former National Grid financeboss Steve Lucas will join its boardin May.

The firms shares rose 1.9 percent to close at 1,482p.

Tullow Oilsearnings rise500 per centBYMARION DAKERS

ENERGY

ANALYSIS l Tullow Oil PLC

p


1,490

1,480

1,470

1,460

1,450

1,440

1,430

1,482.0014 Mar

8/2/2019 Cityam 2012-03-15

22/40


Barratt DevelopmentsOne of the countrys leading house-builders has appointed Richard Akers asnon-executive director. Akers currentlyserves as executive director of LandSecurities Group, which he joined in1995. Previously he worked at AMEC

Developments. Akers is a member of theRoyal Institution of Chartered Surveyors.

Reed SmithThe US law firm has appointed ChrisBorg as partner in its London office. He

joins Reed Smiths growing energy andnatural resources and financial industry

group, as the company continues to addto its financial services and commoditiestrading services. Borg, a regulatoryexpert, previously worked in the financialmarkets and regulatory group at SNRDenton.

MacquarieMacquarie, the global financial servicesgroup, has announced the appointmentof Arun Assumail as head of its newcommodity and investor products busi-ness. Assumail will join Macquarie inJune 2012 after eleven years at GoldmanSachs, where he was head of the com-

modity investors sales team. Macquariesnew division will offer bespoke beta andabsolute return commodity index prod-ucts to institutional clients.

New Bridge StreetDavid Tankel is returning to the UKs

leading executive remuneration special-ists, a subsidiary of AON. Tankel was apartner at New Bridge StreetConsultants from 1992 to 2008 but leftin 2011 to lecture on the internationaldirectors programme at Insead inFrance. He will now focus on New BridgeStreets FTSE 100 practice.

CITY MOVES | WHOS SWITCHING JOBS Edited by Tom Welsh

+44 (0)20 7092 0053morganmckinley.com

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in association with

May GurneyMay Gurney, the support services business, hasappointed Mark Hazlewood group finance direc-tor. He joined May Gurney in November 2010 asgroup corporate development director and ledthe successful acquisition of both Turiff and

TransLinc. He has also held interim responsibilityas finance director of the groups regulated serv-ices division. Hazlewood previously worked as achartered accountant at Coopers and Lybrand,and has held senior positions at SouthStaffordshire Water, Homeserve EmergencyServices, and Anglian Home Improvements.

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BRITAINS top share index retreat-ed yesterday, having flirted withthe 6,000 level due to a morepromising global economic out-

look and robust earnings, with heavilyweighted miners hit by concerns overChinese demand.

After five successive days of gains,the longest winning streak since lastsummer, the FTSE 100 ended down10.48 points, or 0.2 per cent, at5,945.43, after an intra-day peak of5,989.07.

Miners were responsible for takingthe index into the red with 11.2 pointsof downside, as they tracked copperprices lower on uncertainty about theoutlook for demand from top con-sumer China, which has tempered itseconomic growth expectations.

Insurers fared well, led higher by a7.2 per cent jump in Legal & General,the top UK blue-chip riser, after itunveiled forecast-busting full-year prof-its and hiked its dividend by more thana third.

L&G has reported a very good set of

FY results this morning with higherthan expected cash and dividend themain highlights, BofA Merrill Lynchsaid, repeating its buy rating.

Merrill said L&G shares had per-formed well so far this year, up around20 per cent, and it expected the stocksre-rating to continue.

Peer Prudential, which posted solidearnings on Tuesday, rose 2.9 per cent.

Neil Dwane of Allianz GlobalInvestors argued that UK equities, witha current price/earnings ratio of around11 times and a yield of nearly four percent, remain attractively valued.

With monetary easing in the UKand globally showing no signs of abat-ing and investors still hunting forincome, equities become, even afterthe rise of the last three years, a saferand safer place to invest, he said.

Miners put end toFTSEs positive runTHELONDONREPORT


6,000

5,800

5,850

5,900

5,950

ANALYSIS l FTSE

5,945.4314 Mar

8/2/2019 Cityam 2012-03-15

23/40

L AW is bigger business than ever.Freshfields employs 5,000 people andhas twenty-seven offices in sixteencountries. Linklaters also has twenty-

seven offices in twenty countries. Its rev-enues in 2010-11 were 1.2bn.

Of course, this is good news for lawyers.But non-lawyers work for law firms too. OfFreshfields 5,000 staff members, 2,000 arebusiness services professionals. AlongsideLinklaters 2,000 lawyers and 500 partners,

it has 2,000 non-legal professionals. Thesearent low-level administrative roles buthighly-skilled, well-remunerated positions.

Job hunters shouldnt see law as opaque,separated from their career prospects bythe expertise of its practitioners. Law is abusiness like any other and, as a business,it needs IT staff, HR managers, finance pro-fessionals, and compliance experts. Giventhe rapid and continuing growth of thesector, it might be time to become one ofthe increasing number of non-legalemployees working in the industry.

INTELLECTUAL HORSEPOWERIn fact, there are reasons, beyond econom-ic necessity, to consider a career in a lawfirm. Phil Jepson, chairman of legalrecruitment specialist Jepson HoltConsulting, thinks they offer unique chal-lenges for ambitious professionals.Theyre high-quality environments,

youre surrounded by able and talentedpeople, brimming with intellectual horse-power. Recent deregulation has madethese firms even more dynamic.

His enthusiasm is mirrored by LucindaMoule, managing director at LawrenceSimons, another specialist legal recruiter.Law may not offer the best work-life bal-ance, but these businesses are exceptional-ly profitable, often global, and allownon-legal employees the chance to work on

an incredibly wide range of projects. Forrecruiters, a previous post at a law firm is asign that the individual can work in ahighly-charged, business-focused and prof-it-driven environment.

DISMANTLING BARRIERSSome may assume that, despite these ben-efits, non-lawyers can only rise so far in thelegal world. Legal partnerships aredesigned to be managed and owned by agroup of legally-trained partners, and themanaging partner is invariably a lawyer.But new legislation and new pressures areallowing and forcing legal partnerships toopen up their top ranks to non-lawyers.

Recent reforms to legal practices allowup to 25 per cent of all partners to lacklegal training. Moule says that, in practice,these tend to be finance officers and oper-ating officers, but theres no real limita-tion. Internal opportunities for

advancement have vastly improved.Jepson suggests that limits to promotion

may depend more on the organisationalculture of the particular law firm. Small ormid-sized partnerships are more nimblethan larger competitors and have a greaterneed to adapt. The pressure to expand, toprovide more cost-effective services toclients, mean theyre keen to develop andpromote talented employees, whatevertheir legal training. Even the relatively

well insulated magic circle or silver circlefirms are starting to adjust to a changingmarket. Jepson predicts that divisionsbetween lawyers and non-lawyers will fur-ther disintegrate as deregulation opensup the industry to greater competition.

SMALL FIRMS, BIG OPPORTUNITIESOne poster-child for non-legal staff in lawfirms is Dan Flint, HR director ofSimmons and Simmons. He joined afterstints at Accenture and Tate and Lyle.Flint agrees that the increasing need torun law firms as businesses, given theirsize and complexity is driving cleverand talented non-lawyers to consider acareer in the legal industry. The indus-try, itself, is changing to harness thesetalents and give non-lawyers the greatestopportunity to succeed.

Flint disputes the idea that law firmshave peculiar quirks that make them dif-ficult for non-lawyers to navigate. Theirmanagement structures, he says, are thesame as partnerships in any other indus-try. Although there may be times whenits difficult to know which partner ormanager to obey, this is no different tothe informal and formal navigation ofrelationships within any other firm.

In fact, Flint says that law firms, despitebeing businesses like any other, are specialplaces with special opportunities for non-legal staff. Simmons and Simmons, typicalin the industry, has a small number ofemployees but great economic clout. Hesays its comparable to working for a FTSE100 company but with the intimacy of amuch smaller firm. In HR, he has themoney and time to innovate and develophis role, but without the pressures of man-aging hundreds of thousands of employ-ees.

There are many ways to widen a jobhunt beyond the obvious options. One of

the most important is to probe beneaththe headline description of an organisa-tions purpose. Sometimes the results can be surprising and open up unique andunexpected opportunities. As the legalindustry shows, unsophisticated assump-tions can inhibit career development.

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