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SKYNEWS/GETTY

HSBC execresigns over

probe in USA SENIOR HSBC executiveresigned yesterday amid claims

by the US Senate that the bankallowed drug kingpins androgue nations to laundermoney through its accounts.

David Bagley stepped down ashead of compliance at Britains

biggest bank in front of a Senatesubcommittee after a report

was released revealing HSBChad failed to heed warningsabout its compliance measures.

The report said billions ofdollars from Iran and Syria,Mexican drug traffickers, andSaudi and Bangladeshi banksfunding terrorist groups werechannelled through Mexico andoffshore accounts into the USfinancial system.

In the latest blow to the Citysreputation, HSBC could beforced to pay as much as $1bn(641m) to US authorities more than double Barclaysfines for manipulating Libor.

HSBC executives apologised infront of the homeland securityand governmental affairssubcommittee yesterday afterthe results of a multiyearinvestigation into the bankspractices were published.

Subcommittee chairman CarlLevin told executives: Theculture at HSBC was pervasivelypolluted for a long time. The

banks American branchspresident and chief executive,Irene Dorner, said we deeply

regret and apologise forHSBCs failings.Bagley, who has led the

compliance division for tenyears, will remain at HSBC. Hesaid: Now is the appropriatetime, for me and the bank, forsomeone new to serve as thehead of group compliance.

HSBC saidyesterday itwould giveour absolutecommitmentto fixing what

went wrong.

REGULATORS grossly overreachedthemselves by forcing Bob Diamondout of the top job at Barclays, top back-bench MP Andrew Tyrie declared yes-terday, accusing Sir Mervyn King andLord Turner of handing the chairmana revolver to shoot the chief executiveat the troubled bank.

MPs on the Treasury select commit-tee (TSC) also dealt a blow to PaulTuckers chances of becoming the nextgovernor of the Bank of England byforcing him to admit he missed signsthat Libor was being manipulated,while newly released emails reveal thedeputy governors warm relationshipwith Diamond.

And in the US, Federal Reserve chair-man Ben Bernanke called Libor fatal-ly flawed and said he would continueto push for changes to the way theinterbank rate is governed.

Committee chairman Tyrie said hebelieves the Barclays debacle showsyet another gaping hole in gover-nance of the Bank of England whichallowed regulators to hand the chair-man a revolver to shoot the chief exec-utive at the troubled bank.

We do need urgently some gover-nance put in place both in the FSA and

the Bank of England to offer some pro-tection against arbitrary meetings ofthis type taking place, he said.

But the regulators hit back, arguingthat they were acting in the interestsof financial stability, and Barclays ownshareholders.

If Diamond had stayed on, giventhe extensiveness of the calls for hisresignation from politicians and thepress, I strongly suspect that wouldhave been to the disadvantage of theshareholders, said the FSAs Turner.

I dont see a problem with the gover-nor of the Bank of England choosing tosee the chairman or chief executive ifthey want, in order to express a pointof view; a point of view which we haddiscussed in the course of the after-noon and what we agreed on.

MPs turned up the heat on deputygovernor Tucker, asking how he acted

on US tip-offs on the manipulation.It didnt set off any dishonesty

alarm bells, he said, explaining thathe and the Feds Bill Dudley worriedmore about confidence in the marketwhen trading rates were higher thandollar Libor rates.And emails obtained by Labour MP

John Mann under the Freedom ofInformation act hint at a closer rela-tionship between Tucker and formerBarclays chief executive than either

man had previously implied.One, sent to Diamond in May 2008,

suggests Tucker had talked to bosses atboth HSBC and RBS about Libor. Itread: Have spoken to hsbc and rbs,stuart and johnny. Sense similar acrossall three of you. I encouraged contactamongst Mark Dearlove peer group.Johnny Cameron was head of RBSs

investment bank at the time, whileStuart Gulliver is chief executive ofHSBC. Barclays Mark Dearlove, who

led the money markets desk in 2008,was the man to whom former execu-tive Jerry del Missier said he hadpassed the order to lower Libor.

Meanwhile Bernanke called for morereforms to the way Libor is set.

We are advocating reforms to theLibor process, he told a Senate hear-ing. But it is constructed by privateorganisation in the UK, and so ourdirect ability to influence it is limited.

BY JAMES TITCOMB

FTSE 100 M5,629.09 -33.34 DOW 12,805.54 +78.33 NASDAQ 2,910.04 +13.10 /$ 1.56 unc / 1.27 unc /$ 1.23 unc

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LONDON2012

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FED HEAD FRETS ABOUT AMERICAN SLOWDOWN See Page 4 9www.cityam.com FREEISSUE 1,676 WEDNESDAY 18 JULY 2012

BY TIM WALLACE AND

JAMES WATERSON

MPS CALL FOR CAPON KINGS POWER

Certified Distribution28/05/2012 till 01/07/2012 is 132,857

11 December 2008

Paul Tucker:

Bank of Englandgovernor MervynKing denied hewas wrong topush for BobDiamond to befired. Meanwhilerecords of emailsshow a warmrelationshipbetween Diamondand Kings deputy,Paul Tucker.

Bob,

Have spoken to hsbc and rbs, stuart and johnny.Sense similar across all three of you. I encouragedcontact amongst mark dearlove peer groupBest, Paul

From: Paul.TuckerSent: Wednesday, May 28 , 2008 11:24 AMTo: bobSubject: Libor

BUCKLES UNDER PRESSURE

Paul, Congratulations Well done, man. I am

really, really proud of you. Talk soon. Bob

(the day after Tucker wasappointed deputy governorof the Bank of England)

Thanks so much Bob. You've been anabsolute brick through this. Paul.

G4S BOSS FACES MPS OVER OLYMPIC SECURITY FIASCO

Bob Diamond:

David Bagleyresigned infront of the USSenate

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[email protected]

Follow me on Twitter: @allisterheath

YAHOO reported a fall in profits lastnight, the day after its new chiefexecutive was appointed.

The struggling internet gianthired Marissa Mayer Yahoos thirdnon-interim boss in a year onMonday night as it attempts to turnaround a decline in fortunes.

Revenue for the three months toJune was $1.08bn (692m), flatcompared with the same period lastyear, while profits fell 4.4 per centto $226.6m.

Mayer joined from Google, whereshe had started as its 20th employeein 1999. She is tasked withrejuvenating a company that hasstruggled to keep up with webgiants Facebook and Google.

Her appointment follows aturbulent year for Yahoo, whoseprevious CEO Scott Thompsonresigned in May after allegations hehad embellished his CV. Previouschief Carol Bartz was fired lastSeptember having failed to changethe companys fortunes.

Mayer sat out last nights earningcall, with Yahoos chief financialofficer Tim Morse saying sheneeded to acclimatise before layingout her vision for the company.

Morse said Yahoo had movedaggressively in recent months,agreeing an advertising deal withFacebook and launching severalnew partnerships with other firms.

Yahoo chiefs

first day seesincome dropBY JAMES TITCOMB

GETTY

Goldman promises to cutcosts to shore up profitsGOLDMAN Sachs profits fell in thesecond quarter as the Eurozone cri-sis continued to drain confidencefrom the market and the bank lostmoney on an investment in a lead-ing Chinese bank.

But the earnings figures were bet-ter than analysts expected becauseof a major cost-cutting programmeand a large share buyback.

Revenues fell nine per cent on theyear to $6.63bn (4.24bn), whileoperating expenses fell eight percent to $5.21bn.That took profits down 11 per cent

to $962m slower than the 23 percent fall recorded in the first quar-ter.

Shares closed up 0.3 per cent afterthe results.The firm blamed the Eurozone cri-

sis for much of the decline as cau-tious clients cut back on marketactivity.

Investment banking revenues fell17 per cent to $1.2bn, with financialadvisory revenues down 26 per centon falling merger and acquisitionactivity, while equities underwritingrevenues fell nine per cent.

Falling equities prices also hitearnings, led by a $194m loss on astake in the Industrial CommercialBank of China (ICBC).

But the firm is trimming costs to

M&S to charge for current accountsMarks and Spencer is set to become thefirst UK bank to shun free currentaccounts as it plans to charge allcustomers a monthly fee for bankingservices when it launches later this year.The retailer said it would offer twoaccounts, priced at 15 and 20 a monthwhen its first branch opens tomorrow.

Brussels probes Windows 8Brussels is investigating allegations thatMicrosofts flagship Windows 8 operating

system will unlawfully stifle competition,resurrecting the antitrust troubles thattormented the US group for more than adecade.

EU to push for Japan trade dealThe European Commission is todayexpected to ask EU member states forpermission to negotiate with Japan on afree trade agreement putting it on acollision course with the blocs strugglingcarmakers. If concluded, an EU-Japan freetrade agreement would rank as theworlds largest, uniting two tradingpartners that account for roughly a thirdof global economic output.

Brussels moves on bonusesThe European Commission has openedthe door to a possible compromise overcontroversial bonus rules that haveprovoked fears of an investment bankingexodus from London.

Green investors left blowing in windPlans to invest billions of pounds in newwind farms and biomass plants were leftin limbo yesterday after the governmentmissed its latest deadline to setconsumer-funded subsidies.

Homeserve rejects buyout approachHomeserve, the embattled FTSE 250 homerepair and insurance company, has beenapproached by private equity buyerslooking to bid up to 1bn to take thecompany private.

Universal to sell three record labelsUniversal Music could sell three EMI labelsincluding Virgin Records to push itstakeover of the group past EU regulators.Universal has been warned the deal couldbe vetoed under competition grounds

Spains bank chief admits mistakesSpain's new central bank chief Luis MariaLinde said the bank failed to act swiftlyafter the country's housing marketcrashed half a decade ago, a rare show ofself-criticism of national institutions.

Inclement weather hits sugar rushSugar prices have soared over recentweeks as unseasonably wet weather hasraised concerns over the size of Brazil'scrop and demand has surged ahead of theRamadan holiday.

BRITAINs biggest banks were toldto perform internal stress tests to

judge the impact of member statescrashing out of the euro, theFinancial Services Authority (FSA)chief Adair Turner said yesterday.

The chance of countries leavingthe single currency is only slight,Turner said, yet argued that banksshould still be prompted intopreparing for such eventualities.

Weve certainly encouragedthem to run those scenarios forGreece, Spain, Italy, Portugal andIreland, Turner told parliamentsTreasury select committee in

Westminster yesterday.I think we consider the chances

very low, very very low for at leastsome of those countries on thatlist, but I think it is sensible toencourage people to run extremerisk scenarios.

Turner was speaking to MPs inrelation to his senior position onthe embryonic Financial PolicyCommittee (FPC) the Bank ofEnglands super-regulatory wing.

If we were thinking about thepossibility of countries actuallyexiting the Eurozone, then youhave problems arising not fromassets going bad and not beingrepaid, but the assets are paid,redenominated into a newcurrency, but so too may be theliabilities, Turner explained.

FSA encouraged

banks to planfor euro exits

Goldman Sachs chief executive Lloyd Blankfein said worries over the Eurozone hit profits

2 NEWS

BY JULIAN HARRIS

BY TIM WALLACE

To contact the newsdesk email [email protected]

IHAVENT been a fan of all of the

Treasury select committees recentoutings. There have been someexcellent moments and some dire

ones. But Andrew Tyrie, the bodyschairman, did a great job yesterday.He pointed out that the removal ofBob Diamond raises serious questions

about whether regulators should begiven such arbitrary powers over theboards of private firms.

Clearly, Barclays and others behavedappallingly during the Libor scandal.The point here is not whether it wasright or wrong for Diamond to beforced out but whether the way itwas done was right, behind closeddoors, with no due process, no rightof appeal and in somewhat strangeand opaque circumstances. Diamondwasnt even pushed out until manydays after the scandal broke.

So Tyrie was right to highlight the

EDITORSLETTER

ALLISTER HEATH

Somebody needs to guard the City of Londons guardians

WEDNESDAY 18 JULY 2012

risk of arbitrary power being exer-cised. It now appears that the man-agement and in fact the veryexistence of any private bank isnow entirely dependent on being onthe good side of the regulators. Butthe power to strike somebody off or toremove a banking licence is anextreme one. Like everything else, itrequires checks and balances.

Many will disagree, favouring areturn to the old ways when officialswould restore order in the City by tak-

ing secret decisions in smoke-filledrooms. The governor was trusted toact wisely and fairly, and widelyrespected as someone of naturalauthority with an intimate knowl-edge of the City. The 1970s secondarybanking crisis was dealt with in thisway. Old City hands in insurance as

well as banking readily recount howthe Bank of England or other regula-tors used to act.

CEOs were summoned for a quietchat or telephoned. One erstwhilebank chief told me how a senior Bankof England official asked him roundto Threadneedle Street to inform himthat he wasnt comfortable with aproposed course of action. When mycontact asked for an explanation, theofficial expressed surprise that hehadnt been heard correctly the firsttime. The Bank of England also tookdrastic action when Midland Bank

months. The consumer price indexrose by only 2.4 per cent over the pastyear, a great relief and a lucky escapefor the Bank of England, thanks inpart to falling oil prices. The retailprice index (RPI) measure increasedby 2.8 per cent.

But before celebrating we must

remember, as PwCs Andrew Sentancepoints out, that inflation has beenbelow target for just 12 months out ofthe past seven years. Chris Williamsonof Markit reminds us that real averagepay is still falling but the presentone per cent per annum drop (on theRPI measure) is the lowest rate ofdecline since November 2009 andcompares to a peak of 3.9 per cent inSeptember 2011. We should be thank-ful for small mercies.

made a loss in the early 1990s, engi-neering a management change. JohnRedwood, the Tory MP, openly recallshow he acted behind the scenes whenhe was a minister in charge of regulat-ing insurers.Yet we cant have it both ways. We

cant have an open and transparent

regulatory body that is also stillallowed to behave in the clubby waysof yore whenever it chooses. It mustbe one regulatory system or the other and in todays globalised world, wemust choose openness and accounta-bility. There are no Platonic philoso-pher kings and certainly noeconomist kings. Somebody needs toguard the guardians.

INFLATION FALLS AT LASTYesterdays fall in inflation was thefirst piece of good news for the belea-guered George Osborne in many

offset the declines. It shed an addition-al 100 staff in the second quarter, tak-ing headcount to 32,300 down nineper cent compared to a year ago.That contributed to an overall nine

per cent fall in compensation and ben-efits to $2.92bn in the quarter. Basedon these figures, the bank would be inline to pay each employee around$225,000 for the first half, down fiveper cent on a year ago, and well belowpre-crisis levels.And Goldman expects to undertake

a further $500m cost-cutting pro-gramme over the next six months.

Chief finance officer David Viniarrevealed the bank expects its Basel IIIcore tier one capital to stand at justunder eight per cent by the end of thisyear and just under 10 per cent by theend of 2013 down roughly one per-centage point on previous forecasts.

Meanwhile a $1.5bn share buybackboosted earnings per share, whichcame in higher than hoped at $1.78.

Goldmans average daily value atrisk, a measure of the most money itcould lose on 95 per cent of tradingdays, was $92m during the secondquarter, the lowest in nearly six years.

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

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G4S chief executive Nick Buckles facedanger from MPs yesterday as he admit-ted his handling of the Olympic securityfiasco was a humiliating shambles, butsaid the firm would not give up its 57mmanagement fee from the contract.

Buckles told the home affairs selectcommittee he was deeply sorry andthat he regretted signing the 284m dealto provide 10,400 guards for the Games.

G4S may have to spend 50m on pay-ing around 3,500 soldiers because thecompany cannot provide enough securi-ty staff.

Labour MP Keith Vaz, the committeeschairman, called G4Ss handling of the

affair unacceptable, incompetent andamateurish and said it was astonish-ing that Buckles intends to keep itsmanagement fee.

Shares in G4S fell a further six per centto their lowest level since last Novemberyesterday, although the companys sec-ond-biggest shareholder Invesco mount-ed a staunch defence of Buckles.

The interests of shareholders are bestserved by keeping Nick Buckles in thisbusiness because his track record is excel-lent, Neil Woodford, Invescos invest-

BY JAMES TITCOMBment manager, said yesterday.

Buckles said he was deeply sorry forthe affair but felt he was the right per-son at the moment to deliver as manypeople as we can.

He said the security company hoped tohave 7,000 guards in place at the start ofthe Games, but could not guarantee it.

Buckles admitted the damage wasmore reputational than financial, andthat G4S will now no longer be biddingfor security contracts at the nextOlympics or the 2014 World Cup, both ofwhich will be held in Brazil.

Panmure Gordon analyst Mike Allentold City A.M. that it is difficult to seethem doing major events on this scaleagain following the fiasco.

G4S PLC

16 Jul10 Jul 11 Jul 12 Jul 13 Jul

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REVENUES at DLA Piper, the

worlds largest law firm byheadcount, grew by 14.6 per centto 1.4bn last year, helping boost2011 profits to 554.3m.

In the year to 31 December 2011profits climbed 14.3 per centcompared to 2010, despite a dropin revenues from the firms UKoffices.

Turnover across the UK wasdown almost 2.5 per cent, fallingto 283.1m from 290.2m.

DLAs performance was lifted by

DLA Piper gets revenue lift fromoverseas offices as UK stutters

BY ELIZABETH FOURNIER income from both Asia and, moresurprisingly, continental Europe,

where turnover grew by 4.3 per

cent and 2.5 per cent respectively.It also got a boost of 79.7m

from its Australian offices integrated as DLA Phillips Fox inMay last year.

Despite what continues to be atough global legal services marketour performance demonstratesthe advantages of the firms

geographic and practice diversity,said joint chief executives SirNigel Knowles and Lee Miller.

WEDNESDAY 18 JULY 20123NEWScityam.com

Sir Nigel Knowles said the result was testimony to the firms geographic diversity

COMPLIANCE jobs are the newgrowth sector in banking, butits not easy money. In March,a Thomson Reuters survey

found over a third of respondentsspent a day every week just keepingup to speed with the latestalterations to the rulebook.

The survey saw just one in tencompliance officers expecting abudget increase, but there couldbe some more money around forthem now.

The week began with Jerry delMissier connecting a former globalhead of compliance at Barclayswith the Libor scandal. Then

yesterday HSBCs chief complianceofficer David Bagley resigned infront of the US Senate after itsdamning report on the bank.

But its not so much money thatseems to be at issue. At HSBC, itsdecentralised structure left groupcompliance an advisory rump,with responsibility but not muchpower. As Bagley has found, thereslittle job security in such a role.

Marc Sidwell is City A.M.s managingeditor

BOTTOM

LINEMARC SIDWELL

Playing by therules needs astrong referee

G4S boss saysOlympic affair

is humiliating

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AMERICAS sluggish economic recoveryis worrying the Federal Reserve, itschairman Ben Bernanke told politi-cians in Washington DC yester-day, yet he remained guardedover prospects for more quan-titative easing (QE3).

Bernanke predicted that anyreduction in the US unemploy-ment rate which remainsabove eight per cent would befrustratingly slow.

Economic activityappears to havedecelerated some-

what during thefirst half of thisyear, he toldCongress on thefirst day of a testi-

BY JULIAN HARRIS mony that will conclude this afternoon.The last bout of asset purchases (QE2)

contributed to economic growth,Bernanke argued, also acknowledgingthat economists differ on how effectivethe tools have been.

Yet the Fed chief added that uncon-ventional monetary tools shouldnot be used lightly and refused tosuggest that they are about to deliv-er QE3. Stocks, copper, oil and goldall sank as investors reacted to

Bernankes words.The debt crisis in theEurozone threatensto drag on with policymakers muddling-

through, Bernankeadded.

Christies sets recordwith booming sales

BY CITY A.M. REPORTER

CHRISTIES announced record first-half art sales of 2.2bn yesterday, a

rise of 13 per cent over the sameperiod of 2011 and further evidenceof strength at the high end of themarket.

The worlds largest auctioneerreported auction sales of 1.8bn inthe first six months of 2012, sevenper cent up on a year ago, whileprivate art sales soared 53 per centto 413m. All figures includebuyers premium.

However, there was a steep drop

in Asian and Middle Easternauction revenues to 234m, 23 percent down on the first half of 2011as rampant Chinese buying cooled.

The top lot at Christies duringthe first half of the year was MarkRothkos Orange, Red, Yellow whichsold for 53.9m at auction in NewYork in May.

Two Yves Klein works came insecond and third place, with Le rosedu bleu fetching 23.6m in Londonin June setting an auction recordfor the artist. A Henry Mooresculpture also set a record when itsold in February for 19.1m.

Bernanke warnedover the euro crisis

Rothkos Orange, Red, Yellow sold for 54m

WEDNESDAY 18 JULY 20124 NEWS cityam.com

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Bernanke waryof slowdown yet

drops no QE hint

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Its unfortunate theyve had to bring the army in solate in the process; I would have paid G4S a bit more

and managed them more closely, if it had been my decision. Withso many people coming in and out of London, I think the inner cityarea, the transport network and the Olympic Park itself are at risk.

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

OLLIE ROSEWELLIG INDEX

I am a little concerned, though not necessarilybecause of how the issue has been handled. An event

of this size was always going to be a target, and if people want to

disrupt they will see this as an opportunity. The government isbeing castigated for going over the top, but I dont think it is.

MIKE SCOTTMIZUHO

The G4S shortages are a complete disaster. Theyre

part of the usual political nightmare and eventually itwill all come out who said what to whom and when. You have tostop things in advance, not on the day. I think the G4S chief exec-utive should lose his job.

MATT HOGANFIDELITY

CITYVIEWS

THE TREASURY today revealedplans to underwriteinfrastructure investment andsubsidise exports, in an attemptto buttress the faltering economy.

UK Guarantees, as the plans aretogether known, will guaranteeup to 40bn of nearly readyinfrastructure projects, supportup to 5bn of loans to exportcustomers, and ensure theprogression of around 6bn

worth of public-privatepartnerships.

The credibility thegovernment has earned throughtackling the deficit is alreadyhelping millions of Britishfamilies and businesses throughkeeping down the cost of

borrowing, claimed chancellorGeorge Osborne.

Treasury to underwrite 40bnof investment in infrastructure

BY BEN SOUTHWOOD Investment projects eligible forguarantee by the state will haveto meet five key criteria,including readiness to begin

within 12 months, nationalsignificance, financial credibility,the necessity of a guarantee, and

value to the taxpayer.Chief secretary to the Treasury

Danny Alexander said: Themeasures were announcing today

will help work get started onmany important infrastructureprojects and help our majorexporters, providing lasting

benefits for thousands of peopleand a significant boost to theeconomy.

Analysts have questionedwhether such a scheme can claimto offer low-risk loans with thecondition that recipients require

them to proceed with theirprojects.


INFLATION hit the brakes in June, asfalling oil prices and high street dis-counting dragged consumer pricegrowth to the slowest pace sinceDecember 2009, according to datareleased yesterday by the Office forNational Statistics (ONS).

CPI grew 2.4 per cent in the year toJune, approaching the Bank ofEnglands two per cent target anddown from 2.8 per cent in the year toMay. The Tax and Prices Index, whichtakes into account the effects of taxes,rose 2.3 per cent in the year, from 2.6per cent in May.

The sharp decline in oil prices andits feed through to prices at the pumpare clearly having a major impact, butthats not the whole story, saidAndrew Goodwin at Ernst & YoungsItem club.

Weak demand, no doubt partly dueto the bad weather, has forced retail-ers to discount earlier and more heav-

BY BEN SOUTHWOOD

BY JOHN DUNNE

ily than normal, particularly in theclothing sector, he added.

Clothing contributed nearly 0.2 percent to the 0.4 per cent lower rate, asprices dived 4.2 per cent on the month the biggest fall June has seen sincerecords began. ONS statisticians wereunsure whether this was an earlierarrival of usual July sales the propor-tion of sale items in the mix hadincreased or whether July would seefurther falls.Transport contributed 0.13 per cent

to the drop, as the continuing oil priceadjustment drove dips in fuel prices;compared to May petrol was 4.3pcheaper per litre while diesel was 4.7pcheaper. MoneySupermarket pointedto the benefits for savers, who, if theywere basic rate taxpayers, only had tofind a three per cent return on theirmoney to gain real benefits. Those pay-ing the higher rate needed four percent and those paying 50 per centneeded 4.8 per cent.

INFLATION CONTINUES DOWNWARD IN JUNE

CONTRIBUTION TO MONEY FALL OF 0.4%

Jun 12Dec 11Jun 11Dec 10Jun 10

1

0

2

3

4

5

6

RPI

CPI

0

-0.12%-0.17%

-0.02% -0.02%-0.03%

-0.13%

0.01% 0.02%

0.15%

0% 0%Foo

d&non-

alco

ho

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beverages

Alco

ho

l&tobacco

Clothing

&foo

twear

Housing

&

house

ho

ldserv

ices

Furn

iture

&

house

ho

ld

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Transport

Communca

tion

Educa

tion

Recrea

tion

&cu

lture

Restauran

ts&ho

tels

Miscgoo

ds

&serv

ices

Alcohol &Tobacco

-0.5% -4.2%

0.4% -0.5%

Clothing &Footwear

Health Transport

Inflation dives

to slowest risesince late 2009

BUDGET supermarket chains Aldiand Lidl have raised their marketshare again, new figures showed

yesterday.The latest Kantar Worldpanel

survey revealed that Lidl and Aldihave 2.9 per cent each of the UKmarket, a record for the budgetchains, which have been catchingtheir rivals as austerity bites.

Among the big four grocers,Asda and Sainsburys again pickedup market share while Tesco andMorrisons lost ground. Tesco hasa 30.7 per cent share compared

with 31.1 per cent a year ago, theKantar figures showed.

Clothing, meat and fuel lead inflation dip Budget grocersup market slice

ARE YOU WORRIED ABOUTSECURITY DURING THE OLYMPICS?Interviews by Jamie Sutherland and Francesca Davie

DEBATE: Page 1 9

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WE protected the shareholders,cried one regulator.

We were making clear the publicsanger, called another.

But what were you actually regulat-ing? asked the MP.

Well, that isnt our job, came theinflammatory reply.

So it came to pass that yesterday theTreasury select committee (TSC) dug alittle deeper into the roles of the Bankof England and the Financial ServicesAuthority: apparently not to stopproblems when they build up, nor tokeep the system safe, but to force outbad bankers when it all gets tooembarrassing.The war of words escalated rap-

idly as the nature of regulatorsinvolvement in Bob Diamondsresignation became clear.

You handed the chair-man of Barclays arevolver and told himto shoot the chiefexecutive, said TSCchair Andrew Tyrie.

I told MarcusAgius what theyhad to thinkabout as aboard, replied

FSA boss Lord

A gunslinging

row after Tyriedraws on KingBY TIM WALLACE

Turner in less dramatic language.But Tyrie was not convinced, push-

ing Turner to concede that Agiustook the revolver and shot himself.

It was not what I was expecting, orthe most sensible decision in the cir-cumstances. But it was an honourabledecision, said Turner.Tyries violent choice of words

showed his disgust that the FSA andBank of England could tip CEOs out ofa job so easily, but Kings responseimplied it was nothing he wouldnt doagain insisting he had spoken to alegal adviser and acted for both share-holders and stability.The governor then tried to argue

that it was also his duty to explain tothe Barclays board that they had lostthe confidence of regulators while simultaneously pushing thepoint that the Bank of England

was not a regulator and so shouldnot have investigated Libor in the

first place.With that clarified, Kingalso rallied against Tyrieschoice of metaphor: I dontlike these firearm analo-gies, and they are false, hetold the angry MP.

Unsurprising, perhaps,from a man better knownfor his seafaring references.

Former chancellor and a bishopto probe Libor-rigging scandalFORMER chancellor Nigel Lawson

and the Bishop of Durham areamong the five peers yesterdayappointed to the parliamentaryinvestigation into banks abuse ofthe London inter-bank offered rate(Libor).

In recent years Lawson hasbecome a leading proponent of thecampaign to split banks retailoperations from their investmentbanking arms.

Other peers appointed to the

BY JAMES WATERSON committee include former LabourMP John McFall, who was chairmanof the House of Commons Treasury

select committee during thefinancial crisis. Lib Dem SusanKramer and former cabinetsecretary Andrew Turnbull will alsosit on the panel.

Although the appointment of theBishop of Durham may seemunusual, the Right Revd JustinWelby is a former City trader withknowledge of relevant markets.

Having started dealing in thesemarkets from the oil industry side

in the late 1970s, and withexperience not only of Libor relatedinstruments but also of a range of

derivatives and many other forms ofmarket, as well as being involved inthe City of London through work onethical investing in recent years, thisis an area where I hope to be able tomake a useful contribution, theBishop said yesterday.

Five MPs were appointed to thecommittee last week. Andrew Tyriewill be chairman while John Thurso,Pat McFadden, Mark Garnier andAndy Love will also be involved.

Clockwise from top left: ex-civil servant Lord Turnbull, Labour peer Lord McFall, formerchancellor Lord Lawson, Lib Dem Baroness Kramer, and Bishop of Durham Justin Welby

TSC chair Andrew Tyrie


THE RACE to succeed Sir MervynKing as the next governor of theBank of England is heating up aspotential candidates areembroiled in various scandals.

Formerly the frontrunner, PaulTuckers odds slipped after the

bad press associated with hiscontact with ex-Barclays boss BobDiamond. Lord ODonnell, the

countrys most senior civil servantbetween 2005 and 2011, is now in

Gus ODonnell leads race to benext Bank of England governor

BY BEN SOUTHWOOD

the lead, according to bookmakerPaddy Power.

Jim ONeill of Goldman Sachs isin third place while former Prime

Minister Gordon Brown isavailable to back at 200/1.

n Gus O'Donnell 15/8

n Paul Tucker 5/2

n Jim O'Neill 10/3

n Adair Turner 10/3

n Stephen Green 7/2

LATEST ODDS

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UKs CSR in 200m Samsung dealBRITISH microchip firm CSR has soldits mobile phone technology divisionto South Korean electronics giantSamsung for $310m (198.2m).The Cambridge-based company said

its Bluetooth, WiFi and GPS locationtechnology which features inSamsungs Galaxy smartphones, aswell as Apples iPhone and iPad iscutting edge. But the firm decided tosell because it was losing ground tolarger rivals in the smartphone mar-ket.

There is a big war going onbetween the giants of the semicon-ductor industry like Qualcomm,Intel and Samsung to deliver the

BY JAMES WATERSONcomplete solution into smartphones,chief executive Joep van Beurden saidyesterday.

I believe that under Samsungsownership the handset operationswill be in a better position to prosperin the global handset market.

Shares in the FTSE 250-listed firmjumped 35 per cent on the news,making CSR the days biggest riser onthe London market.

Disposing of the handset businesswhere CSR has been struggling toremain competitive looks to be agood move, said Singer CapitalMarkets.

Following the deal around 310 staffwill transfer to Samsung, while theSouth Korean firm has agreed to

JP MORGAN Cazenove advised on the dealfor CSR, with a team led by Rupert Sadler.The Cambridge graduate previously workedat NM Rothschild & Sons before joining thebank in January 2006 and becoming amanaging director in the telecom, mediaand technology team within the corporatefinance division.Also in JP Morgan team was DwayneLysaght, who advised News Corp on itsaborted bid for control of BSkyB in 2010.

Last month he helped complete a deal tosell Dairy Crests French spreads businessto a private equity firm for around 350m.James Robinson, another managing direc-tor at the investment bank, was alsoinvolved.Sadler and Robinson know CSR well, hav-ing previously advised on the firms 2011merger with Zoran Corporation.Slaughter and May acted as CSR's legalcounsel on yesterdays deal, alongsideWilson Sonsini Goodrich & Rosati. JamesMelville-Ross at FTI Consulting handledpress communications for the Cambridgefirm.Samsung were advised by EvercorePartners International, while Paul Hastingsacted as the South Korean firms legalcounsel.

ADVISERS CSR AND SAMSUNG

JP MORGAN CAZENOVE

CSR chief executive Joep van Beurden


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invest $34.4m (22m) for a 4.9 percent stake in the remainder of CSR.

In addition to acquiring the devel-opment team Samsung will gain 21patents and a royalty-free, non-exclu-sive licence to use the relevant chipsin perpetuity.

Van Beurden said CSR could nowfocus its attention on areas where itwas already successful, such as voice,music and in-car devices.

Its technology is used in high-endheadphones such as those made bySennheiser and the bestselling Beatsby Dr Dre range.

The company intends to return upto $285m to shareholders followingthe transaction, which is expected tocomplete in the fourth quarter.

Brian Park, semiconductor analystat Tong Yang Securities, said thatuntil now Samsungs growth in themobile sector had been driven by itsstrength in memory chips.

With this development, Samsunghas set up a foundation to bolster itsnon-memory capabilities, he said.

Access to CSRs patents could also

serve as a buffer in future patent dis-putes.

Samsung and Apple are waginglegal battles in multiple countries,accusing each other of patentinfringement as they vie for suprema-cy in the global mobile device mar-

ket.By leveraging CSRs R&D capability,Samsung will strengthen its applica-tion processor platform and solidifyits position as a leading semiconduc-tor solutions provider, said StephenWoo, Samsungs president of SystemLSI Business, Device Solutions.

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ROBERT Hingley, a former directorgeneral of the Citys TakeoverPanel, was yesterdayappointed to the Associationof British Insurers to be itsnew director of investmentaffairs.

Hingley, whose stay at theTakeover Panel was prolongedwhen his successor got caughtup in a conflict of interest overthe Cadbury/Krafttakeover, hashad 30 yearsexperience inthe Cityworking asaninvestment

banker and lawyer.When he was at the Panel he said about it:

The good thing is we remain nimble and wehave the ability to get round the table within20 minutes.

In the current turmoil in the City, theTakeover Panel, which is a self-regulatedbody, seems to be coming out relatively well.

Hingley will retain his advisory role at

Lazard, the independent investment bank,which means he will stand aside from certainmatters where there may be a clash.

Hingley said yesterday: The ABI has a keyrole to play with regards to corporate

governance and the relationshipbetween companies and investors

and I look forward to contributingto its work in these and otherareas.

FORMER Ofcom boss Lord Currie has beenchosen as the first chair of the Competitionand Markets Authority the UKs newantitrust regulator.

Currie will earn 185,000 a yearfor the three-day a weekcommitment, serving as chair of

the body for a four-year termbeginning this summer.The CMA is part of the

governmentsregulatorystreamlining,replacing both theOffice of FairTrading and theCompetitionCommission.

Curries main

regulatory experience comes in the form ofseven years as the chair of Ofcoms board. He

was also one of the Treasurys Panel ofIndependent Forecasters during the JohnMajor years, and was made a life peer in 1996.

Recently, he has served on the Levesoninquirys panel and as a non-executive boardmember for Dubai Financial ServicesAuthority and the London Philharmonic

Orchestra among others.Bruce Kilpatrick, head of competition lawat Addleshaw Goddard, said yesterday

that Currie was a sensibleappointment, adding: it may alsomean the CMA favours a lawyer inthe chief executive role, as the OFTtypically appoints an economistand a lawyer in each of its seniorroles.

BY JAMIE SUTHERLAND

SPREAD betting firm IG Group yester-day announced a 14 per cent rise inyear-end pre-tax profit but admittedthat increased stability in the finan-cial markets could dent growth thisyear.

Most of what our clients are doingis trading on short term markets andits an increase in volatility that drivesvolume, chief executive Tim Howkinstold City A.M..

In the last six weeks revenues havebeen down because relative calm inthe Eurozone means clients have seenfewer opportunities to make a trade.This pushed the firms shares down

2.5 per cent yesterday to 450.7p.But Howkins said the firms invest-

ment in technology helped retain its60,000 to 70,000 monthly users, withone in ten customers never trading ona traditional desktop PC.

Something like 43 per cent of ourclients are using mobile devices fortrading. About 6,000 only ever tradeusing mobile. The competition simplycant afford to do native apps foriPhone, iPad, Android, Windows 7and BlackBerry, he added.

IG profits jump

but betting firmseeks volatilityBY JAMES WATERSON

The FTSE 250 company said revenuefor the year to May rose 17.3 per cent to366.8m, producing adjusted profitsof 185.7m.

It saw strong growth in all marketsapart from Japan, with revenues fromthe European operation growing by 26per cent to 72.2m amid the conti-nents economic woes.Analyst James Hamilton at Numis

called IGs offering unmatched andsaid the firms investment pro-gramme is building sustainable barri-ers to entry.

With significant surplus capital andliquidity building over time IG will beable to return more to shareholders,he added.

IG Group Holdings PLC


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Lord Currie of Marylebone

BROKER ICAP yesterday closed its50m retail bond issue earlier thanexpected following a strongresponse from investors.

ICAP has met sufficientdemand for the bond, aspokesman said. They declined tocomment on the likelihood offuture issues.

The bond offered a 5.5 per centreturn over a six year period andsubscribers could buy 100 units,

with a minimum subscription of1,000. It was only launched lastThursday and had been due to

close on 24 July.

Retail bonds boom as ICAP shutsits 50m issue ahead of scheduleBY JAMES WATERSON

Retail bonds are a new marketthat has proved to be a hit withinvestors seeking a guaranteedrate of return. Initially focusing on

well-known firms such as TescoBank, National Grid and SevernTrent, they are set to be offered byfirms outside the FTSE 100.

Unlike bank accounts the bondsare not covered by the FinancialServices Compensation Scheme sosubscribers could lose their capitalif a firm goes bankrupt.

However most retail bonds aretraded on the London StockExchange, giving subscribers thechance to claw back some of theirinvestment if they wish to exit

early.


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For the third year running, first direct have

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Currie to head antitrust body ...BY DAVID HELLIER

...as ex-takeover boss joins ABI

Robert Hingley will keep his Lazard role

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THE annual festivities of Cowes

week start just two days beforethe end of the Olympics inAugust, and with so much on

offer in the sporting world thissummer those behind the eventhave already begun in earnest withtheir efforts to entice City workersdown to the Isle of Wight.Yesterday the organisers of the

event, sponsored by Aberdeen AssetManagement, descended onCheapside in the Square Mile to offerworkers the chance to try their handat grinding the most physicallystrenuous job on a yacht, mastering

the winches that reel in the sheetsduring sail hoists.

Prizes were presented to the fastestscoring males Scott Millar andMathew Greenlay (who works forAberdeen Asset Managementstrangely enough), the winningfemales Stephanie Knoll and LisaThomson, while Gemma Wade andSamuel Grantham represented themixed pairs. The overall winnerswere Millar and Greenlay with the

Cowes reps out in forcein City to rev up interest

fastest grinding time of 09.82 secondsto winch the sail.Among the top prizes were

Aeroliner collection Hugo Boss watch-es, luxury Liz Earle beauty hampersand Ondeck sailing excursions/expe-riences.

Over a two hour lunch-time periodmore than 150 City workers joined inthe fun, with competition said to befierce.The organisers of Cowes week, one

of the worlds largest sailing regattas,are hoping beyond hope that theOlympics will have a positive impacton the numbers of people attending

this year.They reckon that the Games, com-

bined with the warm feelings engen-dered by the Diamond Jubilee, willonly add to the regattas theme of cel-ebrating the best of the British, cul-minating with an opportunity forvisitors, on Friday 16 August, to seethe GB sailing team in person.

For more information on AberdeenAsset Management Cowes Week see:www.aamcowesweek.co.uk

L A U R A L E A N / C I T Y A M

Got A Story? Email

[email protected]

10 cityam.com

cityam.com/the-capitalistTHECAPITALISTWEDNESDAY 18 JULY 2012

QIPCO British Champions Series features the top 35 Flat races in the

British horseracing calendar, encompassing all British Flat racings key

festivals and featuring no less than 12 of the worlds top 20 races.

It culminates in QIPCO British Champions Day at Ascot on 20 October, the

richest day in British Flat racing with an unrivalled 3 million in prize money.

Dont miss your chance to witness history being made.

For tickets, fixtures, stats and news, visit

britishchampionsseries.com

History inthe making

Wenlock, one of the Olympic Games mascots, popped up in the Square Mile yesterday.He and his Paralympic colleague Mandeville have been travelling around the UK in thebuild-up to the Games.

OLYMPIC MASCOT ARRIVES ON CHEAPSIDE

Two competitors yesterday lunchtime

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PLUMBING and building suppliesgroup Wolseley said yesterday it mayshut its French business because ofthe difficult market conditions hit-ting trade in continental Europe,sending its shares lower.Wolseley said it would explore

strategic options for its operationsin France, where it intends to start aconsultation process with itsemployees.

It now looks as if Wolseley is aboutto grasp the nettle and exit its opera-tions in France, said Seymour Pierceanalyst Kevin Lapwood.

A sale is unlikely in our view ashad it been possible, it would havehappened already. We thereforebelieve the company will opt to closea significant part or all of the Frenchbusiness.

Wolseleys French business, whichincludes do-it-yourself chain ReseauPro and kitchen retailer SolutionsCuisines, accounts for around 10 percent of group revenues.

It holds assets worth some 500mand generated sales of 1.3bn in its

Wolseley falls

as it mulls saleof French unitBY HARRY BANKS

last full year. In the three months tothe end of April its revenues in Francefell 6.1 per cent.

In light of this review the appropri-ate carrying value of these [French]assets will be assessed at year-end andthis is likely to give rise to a non-cashimpairment charge, Wolseley said.

Businesses around Europe havebeen hit by the Eurozone debt crisis,which has dented consumer confi-dence.The company, which operates the

Plumb Center and Ferguson chains inthe UK and the US, said it hadincurred one-off restructuring costsof around 20m since 1 August 2011.

Anton Biltons Raven Russia setto snap up more property sitesPROPERTY group Raven Russia is

expected to unveil more than$70m-worth of real estateacquisitions near Moscow today.

The FTSE 250-listed firm isbelieved to have snapped up a largewarehouse to the north of theRussian capital, which is let to twotenants, as well as 38 hectares ofdevelopment land to the west.

Raven plans to build furtherwarehouses on the site, and isthought to be in talks with a bank

to fund the project.While it has set its sights on

building 200,000 square feet ofindustrial properties on the

site, Ravens plan remainssubject to regulatoryconsent and theability to attracttenants.

The group, whichis run by RavenGroup founderAnton Bilton andformer UBS financierGlyn Hirsch andfocuses on commercial

property in Russia, is due toupdate the market on its plansthis morning. Singer CapitalMarkets is advising on the

transactions.The firm floated in 2005 andjoined the main Londonmarket in August 2010.

Todays expected dealfollows a string of acquisitionsincluding the 215macquisition of Pushkinologistics park last month.

IN BRIEFShell faces $5bn spill finen Nigerian regulators have toldparliament that Royal Dutch Shellshould be fined $5bn for environmentaldamaged caused by an oil spill at itsoffshore Bonga field, one of the biggestin the history of Africas largest energyindustry. Shell said yesterday there wasno legal basis for the proposed fine.

Henderson ventures into Francen Fund manager Henderson yesterdayannounced the purchase of Frenchproperty management firm HorizonInvestment Management France SAS foran undisclosed sum. Founded in 1998,Horizon advises advising on assetmanagement in the French real estatemarket and comprises a 250mLuxembourg close-end property fundand a number of asset management

contracts to manage 25 properties.

Entrepreneurs hopeful for 2013n British entrepreneurs have not yetshaken their gloom about the UKeconomy but are increasinglyconfident about their own ventures,according to Investec data seen by CityA.M. A third of entrepreneu rs expect theeconomy to deteriorate in the next year,compared to 27 per cent who predict anuptick. But for their own firms, 87 percent expect revenue growth.

Guardian cuts after 44m lossesn Guardian News & Media reopened itsvoluntary redundancy scheme yesterdayas it revealed it lost 44.2m for the lastyear, thanks in part to its investment indigital publishing. Digital revenues rose16.3 per cent to 45.7m, overtaking printadvertising revenues, which fell four percent to 43.7m. The firm will report full

results next month.

LUXURY brand Burberry has ratcheted up the pressure on fragrance partnerInterparfums to offer a new agreement on more favourable terms, by serving notice onthe French firm to terminate their current deal. Upon termination, Burberry would payInterparfums approximately 181m (141.6m), it said.

BURBERRY LOOKS TO END PERFUME DEAL

Wolseley PLC


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Anton Biltons firm was recentlypromoted to the FTSE 250

EXCLUSIVEBY MARION DAKERS


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Because we want to make sure were doing a good job, we may monitor and/or record calls. We hope you dont mind. Applicants must be 18or over. We reserve the right to decline to open an account. Written details, terms and conditions are available on request. Well take intoaccount your current standing orders and direct debits when assessing your application for an overdraft, using our usual criteria. If there is adelay or mistake in the switching process we will refund any charges or interest youve paid to us. If youre a Northern Ireland customer yourold bank will also refund any charges or interest youve paid to them and if youve used our switching service we can offer you an interest-freeoverdraft for up to three months. HSBC Bank plc 2012. first direct, 40 Wakefield Road, Leeds LS98 1FD. All rights reserved. AC22907.

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BHP BILLITON, the worlds biggest

miner, this morning contrasted withRio Tintos cautious stance byposting a forecast-beating 15 per centrise in iron ore output in the Junequarter from a year ago, adding thatexpects its iron ore output to risefive per cent in the 2013 financialyear.

Iron ore production rose to 40.9mtonnes in the June quarter from35.5m tonnes a year ago for theAnglo-Australian mining giant. UBShad expected output of 38.5mtonnes.

Copper production rose to 15 percent to 312,500 tonnes in the finalquarter of BHPs f inancial year,compared with a forecast of 311,200tonnes from UBS.

Petroleum output, being closelywatched for clues on a possiblemultibillion dollar writedown onBHPs US shale gas assets, jumped 30

per cent to 56.4m barrels of oilequivalent (boe) from 43.3m boe.

The firm said in a statement it hadenjoyed robust operatingperformance in a challengingenvironment, breaking productionrecords in 10 of its divisions.

But BHP warned that due to along-running labour dispute whichis nearing a resolution itsmetallurgical coal business inQueensland state had sufferedsignificant margin compression.

Robust rise inproduction forBHP Billiton

BY CITY A.M. REPORTER

GETTY

RIO TINTO yesterday reported flatiron ore production in the secondquarter compared with the sameperiod last year.

Sales fell slightly short of output,putting pressure on its shares andheightening concerns about coolingChinese demand.

Rio Tintos iron ore production wassteady at 48.6m tonnes in the Junequarter, compared with 48.9mtonnes a year earlier and 45.6mtonnes in the first quarter.The global miner generates about

80 per cent of its earnings from iron

ore and recently committed tospending $3.7bn towards expandingits Australian iron ore capacity byanother 25 per cent, calling iron orethe best-returning commodities busi-ness in a tough global environment.

Chief executive Tom Albanese saidthat despite global volatility, thecompanys expansion projects stillstack up. Global economic condi-tions and sentiment droppedmarkedly in the second quarter,

We are keeping a close eye on the

Rio Tinto seesflat iron output

as China dragsBY HARRY BANKS

pace of the US recovery, the continu-ing Eurozone crisis and the impact ofefforts to stimulate the Chinese econ-omy on the markets that we serve.

Shipments from Rio TintosWestern Australian iron ore opera-tions were 57.4m tonnes, comparedwith production of 58.4m tonnes.

Rio, the worlds second largest ironore producer, said it remained ontrack to produce 250m tonnes in2012, which some analysts said maybe difficult to achieve if Chinese steelproduction growth remains weak,Iron ore didnt recover as much[from the first quarter] as people hadhoped, said JP Morgan analystLyndon Fagan.

Chief executive Tom Albanese is pressing on with expanding the business

Rio Tinto PLC


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A small downgrade in copper, but balanced by performance throughother divisions. A predictably cautious outlook on global demand, with thecompany keeping a close eye on the pace of the US recovery. Overall, afairly in line update despite the slight disappointment in copper.

ANALYST VIEWS

Operationally, the iron ore unit saw the largest beat versus our expecta-tions and the refined copper unit the largest miss on a shutdown at Kenneco.There is a possibility that management will announce a further sharebuyback programme after finishing the last one in the first half.

We have revised down our full year 2011 earnings per share estimate by

15 per cent to reflect weak quarter two commodity prices, softer coal production,higher unit costs in coal and copper and the recently approved Simandouinfrastructure expenditures ($500m).

WHAT DO THE SECONDQUARTER FIGURES MEANFOR RIO TINTO?Interviews by John Dunne

CAILEY BARKER NUMIS

TIM DUDLEY CANACCORD

RICHARD KNIGHTS LIBERUM CAPITAL


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SHARES in Monitise outperformedthe general market yesterday, afterthe mobile banking technologyfirm said it expected its full-yearrevenues to double in 2012 thanksto strong demand.

Monitise is predicting that rev-enues will hit $53m (34m) when itpublishes its full-year figures inSeptember, compared to revenuesof $22m in 2011.

Gross margins, meanwhile, areforecast to edge up slightly from 62per cent last year to 63 per cent forthe last 12 months.

The company also took a bullishstance on its performance over thecourse of next year, predicting that2013 revenue would double againto $110m.Though it did not release profit or

loss figures, Monitise reiterated itsplan to break even on earningsbefore interest, tax, depreciationand amortisation (Ebitda) by theend of next year.At the end of last month,

Monitise announced that it had

Monitise saysrevenues will

double in 2012BY ELIZABETH FOURNIER bought US rival f irm Clai rmail for

108m, helping it expand its reachin the North American market.

Over the last year it has also inkedmulti-year deals with HSBC, RBSand the Co-operative Bank, andlaunched pan-European mobile per-son-to-person payments with part-ner Visa Europe.

Monitise continues to executeagainst strong growth targets,which we see as a ref lection of thestrength of the mobile money mar-ket and Monitise establishing itselfas the markets clear leader, saidanalysts at Canaccord Genuity in anote yesterday.

Monitise PLC


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TAX breaks on overtime in Franceare set to be scrapped by newPresident Francois Hollandes

socialist government, it announcedyesterday.

The decision to reverse thepolicy, which was introduced byformer President Nicolas Sarkozy, is

being taken under the belief that itwill create jobs.

Prime Minister Jean-Marc Ayraultargues that the measuredisincentivises firms from creatingnew jobs because each extra hourof overtime is taxed less than eachhour worked by a new employee.

Hollandes party set to scrapFrench tax break on overtime

BY JULIAN HARRIS His views clashed markedly withthose of the former administration,

which brought in the tax breaks aspart of a bid to allow hard workingFrench people to be rewarded for

their efforts.Former Prime Minister Francois

Fillion lashed out at the socialistsreversal of the policy, yesterday.

Its making an economy that isalready the most rigid of allEuropean economies even morerigid, the opposite of what weshould be doing in a time of crisis,Fillion said.

Yet the government is likely to gothrough with the plans, arguingthat the hike will cut the deficit.


Former President Sarkozy, left, will see his policy dumped by Francois Hollande, right

US RESULTS IN BRIEFIntel revenues fall shortn Chipmaker Intel said last night itsrevenue in the second quarter was alower-than-expected $13.5bn(8.6bn), as it warned that turnoverwill be weak in the current quarter.The firms net income was $2.8bn,down from $2.95bn a year ago, asshaky demand for PCs took its toll.

Mattel gets a Batman boostn Barbie and Batman gave a lift totoymaker Mattel yesterday, as itreported a higher-than-expectedquarterly profit. Shares rose nearly10 per cent as the firm kept a tight lidon costs. Mattel said sales werebroadly flat at $1.16bn, despiteeconomic turbulence, which helpedto boost net income to $96.2m, upnearly 20 per cent on a year ago.

Coca-Cola grows in new marketsn A thirst in emerging marketsoffset falling demand in Europe tohelp Coca-Cola beat quarterly profitforecasts, the firm said yesterday.Net income was $2.79bn, down from$2.8bn a year ago, while salesvolumes rose four per cent.

Johnson & Johnson missesn Johnson & Johnson cut its 2012profit forecast yesterday, blaming thestrength of the dollar, as theconsumer products groups quarterlysales also missed targets. Thecompany earned $1.41bn in thesecond quarter, compared to $2.78bna year ago, while sales fell 0.7 per centto $16.48bn.

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IN BRIEFSpanish debt costs slip slowlyn The Spanish government saw itsborrowing costs fall yesterday in its firstauction since new austerity measureswere announced. It borrowed 3.56bn(2.79bn), paying 3.918 per cent on 12-month bills, down from 5.074 per centlast month, and 4.242 per cent on 18-month debt, down from 5.107 per cent.But yields on 10-year bonds remainhigh at 6.81 per cent despite PMMariano Rajoys latest austerity plan.

Monti fears Sicily could defaultn Italian Prime Minister Mario Montiexpressed serious concern yesterdayover a possible default by theautonomous region of Sicily. Monti saidin a statement there were grave con-cerns that the southern island coulddefault and he said he had written tothe governor Raffaele Lombardo seek-ing confirmation that he would resignby the end of the month.

Confidence falls in Germanyn German investor confidence slumpedto a six-month low in July, the ZEWindex showed yesterday, leading econo-mists to forecast a further slowdown.Theexpectations index fell for the third con-

secutive month in Germany, dropping2.7 points to minus 19.6. For theEurozone, the index also slid 2.2 pointsto minus 22.3.

Final salary pensions almost gonenOnly nine per cent of UK employeeswere members of a private sectordefined benefit scheme in 2011, theOffice for National Statistics revealedyesterday down from 34 per cent in1997. Meanwhile the proportion pay-ing into an employer-sponsored pen-sion scheme fell to 48 per cent, thelowest since records began in 1997.

BTG ups revenue forecastsn Healthcare company BTG yesterdayhiked its revenue estimate for the yearto 31 March 2013 after receiving a finalroyalty payment from Pfizer for theBeneFIX product. BTG expects revenuefor the period to come in at 190m-200m rather than 180m-190m.

Hochschild production dipsn Precious metals companyHochschild Mining reported a seven percent drop in its attributable productionof silver equivalent for the secondquarter, and said there was an invento-ry pile-up at its San Jose mine inArgentina due to regulatory changes.

GETTY

THE UKS house price recovery con-tinued in May, led by a buoyantLondon market, according to datareleased yesterday by the Off ice forNational Statistics.

In the year to May UK house pricesclimbed 2.3 per cent, driven by a 7.2per cent jump in London thelargest since November 2010 andrises of over three per cent in Walesand south east England.

Month-on-month prices were f lat,adjusting for seasonal variations,but values have climbed comparedto May 2011, which along withFebruary 2011 saw two-year lows.

While property prices in Londoncontinue to rise, in other parts ofthe country the picture is quite dif-ferent, argued independent buyingagent Gabby Adler.

Strip out Londons performance

London marketdrags up overall

UK house pricesBY BEN SOUTHWOOD from the national average and thenumbers are far less impressive,which is why such an index only haslimited use, masking as it doesregional differences, she added.Analysts are hoping to see how the

recent 50bn of extra quantitativeeasing and the newly-announcedFunding for Lending scheme wouldaffect the markets through lowerrestrictions on credit and reducedinterest rates.

Heat index

Jul12Jan12Jul11Jan11Jul10Jan10Jul09

120

100

80

60

40

20

0

UK all dwellings annual house price rate of change

May12May11May10May09May08

15

10

5

0

-5

-10

-15

%THE EU is no longer the UKs mainexport market, according toresearch published today by theCentre for Economics andBusiness Research (CEBR).

The three months to May 2012registered a sea-change in Britishtrade, with non-EU exports of

goods exceeding those to theunion by 1.5 per cent the firsttime they have done so for a whole

UK sells more outside EU thaninside for first time since 1970s

BY BEN SOUTHWOODquarter since the early 1970s,according to CEBR.

This reordering from the samethree months in 2011, when EUmembers bought 19 per cent moreUK exports than non-members,comes from a 7.3 per cent fall inexports to the EU and a 13.2 per

cent rise in goods going elsewhere.CEBR believes these figures

could in fact overstate EUcountries importance, sinceindirect port transfers distort thenumbers.


Analysts point to surging developing countries and the euro crisis as causes of the turn

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GOOD economic news may not bethat easy to come by, butfollowing on the back ofyesterdays inflation news the

July numbers from YouGov HEAT(Household Economic Activity Tracker)give some cause for optimism, with thesteady decline in economic confidenceof the past few months at last reversing.The Index score, which takes into

account household financial situation,job security, house price sentiment andbusiness activity at respondents placeof work, rose from 94 (out of 200) to 95.That may not be a huge rise but, signif-

icantly, it is no longer falling.The year started promisingly with big

gains between December 2011 andMarch 2012 but since then we have seena decline, coinciding with drops in con-fidence in the governments handlingof the economy following GeorgeOsbornes Budget speech in March.

The biggest positive that we see is therise in job security with the public feel-ing more secure in their jobs (or moreaccurately, less insecure) compared tothe previous month than at any timesince YouGov started collecting thatdata in February 2009.That figure is up from 88 in June to 92

in July and beats the previous high of 90seen in November 2009.Again these scores are out of 200, so

we should not kid ourselves that a scoreof 92 shows that all is rosy in the world.However, it is a start and indicates that

the long-term lack of confidence inBritains households might just bestarting to dissipate.

So there are definitely some positivesto build on, but to put the rises intocontext, I have included three years-worth of data on the chart to show thecountry has, for quite some time, beenstuck in a negative situation.

Occasional rises (such as the boostaround the royal wedding last spring)have given intermittent hope but neverreally amounted to anything.What we really need now is for the

HEAT score to break through theimportant 100 mark and sustain that perhaps the Olympics and (whisper itquietly) the summer might raise themood of the country and help trans-late the small gains of July into some-thing more substantial.Stephan Shakespeare is the chief executive ofYouGov

BRANDINDEX

STEPHAN SHAKESPEARE

Economic confidence seems to be improvingJob Security

Jul12Jan12Jul11Jan11Jul10Jan10Jul09Jan09

95

90

85

80

75

7065

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16/23

WEDNESDAY 18 JULY 201216 cityam.com

LONDON REPORT

WHOS SWITCHING JOBS Edited by Tom Welsh

+44 (0)20 7092 0053morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

Earnings reliefand Fed hintslift Wall Street

US stocks rose yesterday afterCoca-Cola and Goldman Sachsjoined the growing roster ofS&P companies that beat profit

forecasts and as Federal Reservechairman Ben Bernanke left the dooropen to more stimulus.The Dow Jones industrial average

rose 78.33 points, or 0.62 per cent, at12,805.54. The Standard & Poors 500

Index added 10.03 points, or 0.74 percent, at 1,363.67. The NasdaqComposite Index gained 13.10 points,or 0.45 per cent, at 2,910.04

Fears of a collapse in earnings havenot been borne out thus far. Thoughthe earnings season has been underway a short time, some 72 per cent ofcompanies have beaten estimates,albeit from a significantly loweredbar.

Goldman Sachs shares ended up 0.3per cent even as its quarterly profitfell 12 per cent. Coca-Cola, which alsotopped consensus forecasts, rose 1.6per cent.

Frustration over Bernankes lack ofspecifics about stimulative quantita-tive easing measures, or QE3, in testi-mony before a Senate committeedrove equities lower early in the trad-ing session.

But the Fed chief said policymakerswould consider a range of tools to fur-ther stimulate growth if it becameclear unemployment was not fallingor if deflation risks mounted.

We do expect the Fed to launchQE3, possibly by as early as August,said Oliver Pursche, president of GaryGoldberg Financial Services. The onlygame in town to revive or raise GDPgrowth is the Fed.

Pursche cautioned about readingtoo much into earnings that beat low-ered forecasts. Analysts sharply cuttheir estimates over the last year.Second-quarter S&P 500 earnings areexpected to rise six per cent from ayear ago, down from an estimated of9.2 per cent on 1 April, according toThomson Reuters data.

When you look at Coke, when youlook at Goldman, when you look atsome of the reports last week the

beats were there, but theyre based onpretty low expectations, he said.In the last month, most gains on the

S&P have come from the telecommu-nications services, consumer staplesand healthcare sectors, which are con-sidered defensive, safer plays.Industrials, technology and materialshave posted losses in that period.

Healthcare products makerJohnson& Johnson cut its full-year profit fore-cast yesterday. But the shares, whichhave risen 12 per cent since the startof June, climbed a further 0.8 per centto $69, hitting their highest level inmore than three years.

Shares of financial companyStateStreet fell 6.4 per cent after it said sec-ond-quarter net income fell.

Excitement aroundYahoos newchief executive, Marissa Mayer, for-merly a top executive at Google, fadedand Yahoo shares slipped 0.3 per cent

after a two per cent rise. Yahoo hascycled through three CEOs in a year.

BRITAINS top share indexdropped in thin volumeyesterday, hit by falls for severalheavyweight banks and miners,

and was expected to remaintechnically range-bound in the nearterm.While some in the market had hoped

US Federal Reserve chairman BenBernanke would signal it was closer tolaunching a fresh round of monetarystimulus, when he spoke to politiciansin Congress, he again just reiteratedtheir willingness to act.

Concerns about growth and itsimpact on corporate earnings, as wellas the long-running debt crisis inEurope, continued to keep many on thesidelines and once again volumes onthe FTSE 100 were light, at two thirdsof the 90-day daily average.

Volumes are lower than where theyhave been but thats partly a ref lectionof the low risk appetite, people havebecome risk averse they dont want totake a defensive portfolio or a pro-cycli-cal portfolio, said Gerard Lane a strate-gist at Shore Capital.

By the close, the FTSE 100 was down0.6 per cent, or 33.34 points, at5,629.09 points.

Miners, were once again among theworst performers after weak sales fromRio Tinto, down 2.3 per cent, spurredfears about a slowdown in demand bymajor metals consumer China.

Other heavyweight resources stocksalso dipped into the red, including

Anglo American, down 1.1 per cent,although some said recent falls in thesector could be seen as a buying oppor-tunity.

Strategists at BNP Paribas said whilethe broader STOXX Europe 600 BasicResources sector had been hit bygrowth fears and move away from riski-er sectors, some, including Xstrata,may have been oversold.

They have fallen by around the sameamount as the sector, but t he down-grades of 2013e consensus earnings

over the past three months have beenmore modest, they wrote in a note.

They also backed a broader rotationout of some heavily bought defensivesectors and into relatively cheap cycli-cal sectors ahead of the earnings sea-son.Taking most points off the index and

driving the banking sector into the redwas HSBC, hit by a US Senate report onthe company which called the bank'sculture pervasively polluted.

HSBC was down 1.7 per cent by theclose to shave seven points off theindex.

[The] most important consequence isthat the bank is now under the micro-scope ... at a very bad time where banksare used as scapegoats by politiciansglobally, analysts at Italian bankMediobanca said in a research note,adding that they expect HSBC to face a$1bn fine as well.

Leading fallers for the fourth straightday, however, was security firm G4S,down 5.7 per cent in volume nearly sixand a half times its 90-day average, as ittook a fresh hit from its Olympics con-tract troubles.

Since the news broke, demand to bor-

row the companys stock by short-sell-ers had rocketed.Shares of G4S on loan have doubled

in the past week as traders seek sharesto fulfill short sales of the stock andtake advantage of the falling shareprice, David Lewis, senior vice presi-dent at securities lending firm AstecAnalytics.

Cornerstone stocks drag down theFTSE 100 in thin trading volumes

BESTof the BROKERSBorders and Southern Petroleum PLC

11Jul 12Jul 13Jul 16Jul 17Jul

p80

70

60

50

30

20

40

16.0017 Jul

BORDERS & SOUTHERNNumis rates the Falklands energy explorer buy and has a target priceof 35p, slashed from its previous target of 175p. Despite disappointingresults at the firms Stebbing well, the broker remains convinced thatthe South Falklands Basin has potential for commercial success. Numis ishoping for positive results from the firms Darwin exploration project assoon as next month.

FTSE

11 Jul 12 Jul 13 Jul 16 Jul 17 Jul

5,680

5,660

5,640

5,620

5,600

5,629.0917 Jul

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p15.25

15.00

14.75

14.50

14.25

15.0017 Jul

THOMAS COOKUBS rates the holiday firm neutral and has dropped its target pricefrom 21p to 15p. Following a meeting with the firms new finance chief,

the broker is encouraged by the turnaround plan but remains concernedabout the costs involved. UBS expects to see a rationalisation of ThomasCooks various brands, with added focus on improving online bookingoperations.

National Grid PLC


p695

690

685

680

670

665

675

662.0017 Jul

NATIONAL GRIDCharles Stanley has downgraded the utility from accumulate tohold. The broker does see a positive catalyst for the shares untildetails of the UKs regulatory review of the energy market emerge at theend of the year. It warns that the firm could struggle to finance its

ambitious capital expenditure programme in light of disagreementswith Ofgem.

Brooks MacdonaldThe asset management firm has

appointed two new investmentdirectors to its London team.Richard Wayne-Wynne is afounding partner of VestraWealth and previously worked atUBS Wealth Management as aninvestment director. MarkGodwin joins from City AssetManagement, where he was aninvestment manager responsible for private clients.

National Savings & InvestmentRodney Norman has been appointed director of financeand business insight at the savings organisation. He joinsfrom the Treasury, where he was the treasury accountant,head of exchequer funds and accounts. Prior to this, hewas finance director of the banking arm of Close Brothers.

Palamon Capital PartnersMichael Beetz has been appointed associate principal at

the mid-market private equity firm. He joins from CollerCapital, where he was a senior associate in its London-based investment team. Beetz has also previously workedfor UBS Investment Bank, where he advised on buyouts,mergers and acquisitions and initial public offerings.

Zolfo CooperThe corporate advisory firm has appointed Alfredo Belloas a managing director. He has over 20 years experiencein financial services restructuring and will be based inZolfo Coopers London office.

Old Mutual Asset ManagementPascal Vernaeve has been appointed head of Beneluxsales at the asset management business. He joins fromMan Group, where he served as a manager for institutional

clients covering Benelux institutions.

Momentum Global Investment ManagementKris Richmond has been appointed as a hedge fundanalyst at the investment management and advisory firm.He joins from Pacific Alternative Asset ManagementCompany (PAAMCO), where he focused on long shortequity, event driven, and convertible bond arbitragestrategies.

BearingPointThe business consultancy firm has announced two newappointments. Nick Dussuyer has been promoted topartner and will be responsible for its natural resourcespractice. He has been with the firm for 12 years. StefanSpohr will become industry leader for financial services.Currently regional leader for UK & Ireland in the samepractice, he has 20 years experience in managementconsultancy.

7/31/2019 cityam 2012-07-18

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THE International MonetaryFund (IMF) has slashed itsgrowth forecasts for the UKeconomy. This august bodyhas just pronounced that

Britains economy will come to avirtual standstill. Growth in 2012will be just 0.2 per cent, comparedwith the IMFs April forecast of 0.8per cent growth. It cut its 2013growth forecast by the same marginto 1.4 per cent from 2 per cent.Britains growth downgrade for2012 is the largest of any country inthe developed world.

Am I bovvered? More importantly,should anyone else be? Lets look atthe track record.

The last major economic crisis

was the East Asian one in 1998,

OPEN almost any paper and

you will read at least oneeditorial or comment pieceslamming the financialsector. Of course, the banking

industry has given its critics plenty ofammunition: HSBC failed to stop thelaundering of billions of dollars ofLatin American drug money; JPMorgans mammoth losses; the Liborscandal; mis-selling paymentprotection insurance. And that listdoesnt even include the industrys

role as one of the major players inone of the greatest financial crises ofall time.Across all classes and political spec-

trums, banker bashing appeals wide-ly. Readers of the red top Sun enjoyedits top ten banker jokes yesterday,while both the left wing Guardianand the right wing Daily Telegraphhave published their top banker gagsfor readers entertainment.

But this is nothing new. Bankershave been the brunt of jokes and crit-icisms for centuries. If you steal $25youre a thief, if you steal $250,000youre an embezzler and if you steal

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Extended deadline: 20 JulyThree days left to register.

cityam.com/forum

Banks need to be

financially secure toprovide credit, which isthe engine of growth

THEFORUM

Twitter: @cityamforum on the web: cityam.com/forum or by email: [email protected]? Disagree? Got a sharp comment?

The Forum wants you to join the debate. Top responses will be reprinted in The Forum.

18WEDNESDAY 18 JULY 2012

LOUISE COOPER

Many banks are at fault but westill need a strong finance sector

$2.5m, youre a financier. This waswritten in The Nation magazine dur-ing Americas banking crisis of the1930s. Just as today, bankers were

increasingly viewed as rogues andcrooks, and banksters were criti-cised for leading America into theGreat Depression.

Has the scapegoating of the bank-ing industry gone too far? In a word:yes. Most bankers are honest; there isnothing inherently wrong withfinance; the recession was caused bya multiplicity of factors; and banksare vital to UK Plc.A strong country needs a strong

banking industry. Banks need to befinancially secure to provide credit,which is the engine of growth. But astrong banking industry is not just

required for a strong economy it isalso required for a country to bestrong politically. History is litteredwith examples where national politi-cal power has been compromised byfinancial weakness.At the outbreak of the First World

War, America was heavily indebted toEurope. When war was announced,the US was threatened with financialruin, as European countries, facedwith the immense cost of the con-flict, demanded the repayment of

their loans. The dependence on for-eign capital left Americas bankingindustry weak and exposed a lessonthat many modern politicians needto remember. More recently, inAutumn of last year, American moneymarket funds withdrew their short-term deposits from Europe, whichleft the French banking system with-out an important source of funding.

Banking is an industry built to takethe position of a scapegoat. In thegood times, everyone loves credit, asit enables us all to buy things holi-day homes, handbags and red-soledshoes that we probably cannot

afford. In the bad times, it is all tooeasy to blame the banks for lendingus the money when we cannot pay itback.

Now is not a good time to force newregulation on banks liquidity andcapital rules which only risks mak-ing the banking system weaker in theshort term. Banks are already delever-

aging, asset quality has gone throughthe floor, funding (except from theEuropean Central Bank) is difficult,and many European banks are threat-ened with insolvency. Imposing newregulatory rules at this moment intime is not a great idea. What is need-ed is a grand plan to acknowledge thescale of the problem, recapitalise

some banks and let some fail. Oncethis is achieved, new regulatory rulescan be imposed. Imposing regulationwithout a plan to sort out the mess islike expecting the cart to lead thehorse.The European banking industry is

teetering on the brink and its destruc-tion could take us all into an econom-ic abyss. In America, in the threeyears between 1930 and 1933, com-mercial bank credit contracted from$50bn to $30bn and a quarter of the

countrys banks failed. Nationalincome had shrunk from $100bn to$55bn and a quarter of the workforcewas unemployed. This is the terrify-ing damage that a banking meltdowncan cause.

On 4 March 1933 Franklin DRoosevelt was sworn in as USPresident. One of his first acts, to tryto stabilise the banking system, wasto close every bank in the countryuntil 14 March. We must hope, thathere in Europe, we dont experience abank holiday of that kind.

Louise Cooper is a markets analyst atBGC Partners.

when the previously boomingeconomies experienced spectacularfalls in output. But where was theIMF in this? In May of 1997, the IMFpredicted for 1998 a continuation ofthe enormous growth rates whichthose economies had experiencedfor a number of years: 7 per centgrowth was projected for Thailand

in 1998, 7.5 per cent for Indonesia

and 8 per cent for Malaysia. Yet theactual outturn in 1998 for thesecountries were spectacularly worse,with output not growing but fallingby large amounts. Real GDP inThailand fell by 10 per cent in 1998,and fell by 7 per cent and 13 percent in Malaysia and Indonesia,respectively.

Think back to 2008. In Januarythat year, according to theconsensus forecasts, it was going tobe business as usual in 2009. Asteady 2 per cent growth in both theUK and the Eurozone, and 2.7 percent in the US. In fact, as we nowknow, there was the worst collapsein output since the GreatDepression of the 1930s. GDP fell by

4 per cent in the UK, 4.3 per cent in

the EU and 3.5 per cent in America.The forecasts were, admittedly,

revised down as the year went on.But as late as August 2008, just afew weeks before the collapse ofLehman Brothers, positive growthof GDP was still being predicted for2009.

Even more incredibly, by then theUK economy was already inrecession. Output had started to fallin the April to June quarter of thatyear. And the same sharp falls beganin America.

Things havent really got anybetter than when the Americaneconometrician Lawrence Kleinpublished the first forecasts of theUS economy in 1945. Klein was

eventually awarded the Nobel Prize

for his work in this area. Hepredicted that in 1946,unemployment in America wouldbe 8m. It turned out to be 3m.

The lesson of all this is thateconomic forecasts need to be takennot just with the proverbial pinch,but with the entire contents of aSiberian salt mine. Yes, people liketo have them, and need to form aview about the future. But they areat their worst exactly when anaccurate forecast would be mostuseful. At turning points, when theeconomy is going into a recession ora boom.

Paul Ormerod is an economist andauthor of Positive

cityam 2012-07-18

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