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HONGKONG

NEWYORK

DUBAI

BP closer toselling out

in RussiaBPS plan to rid itself of troublesomeRussian venture TNK-BP took anoth-er twist yesterday, as the oil firmagreed to sit down with its oligarchpartners to discuss a sale.

Alfa Access-Renova, the vehicleused by the Russian tycoons tocontrol half of TNK-BP, saidyesterday it would use its right tofirst refusal on BPs 50 per centstake in the firm, entitling it to 90days of good faith negotiations.

AAR said it would be interestedin buying out BP completely, ortaking a 25 per cent stake atcurrent market price.

But in typically spiky form, theoligarchs claimed BP did not haveapproval to give confidential dataon TNK-BP to any other potentialbidders. They also warned theycould still sue BP for its botched tie-in with Rosneft, which was lastyear blocked by AAR, sparking thelatest flare-up between the jointventure partners.

BP, meanwhile, insisted that itcan and will meet with alternativebuyers while it conducts talks withAAR, although it cannot do a dealduring the 90 days of negotiations.

AAR and BP both realise that afundamental realignment in theownership of TNK-BP is necessaryin order to allow each of theshareholders to achieve its strategicobjectives and eliminate theinternal contradictions that arepreventing further development ofTNK-BP, said AAR chief executiveStan Polovets.

TNK-BP generates around 10 percent of BPs profits, but conflictswith AAR have marred thelucrative partnership.

Lord Green published a book in 2009 on morality, which noted the importance of truth and honesty for a sustainable business

GOVERNMENT minister Lord Greenwas last night dragged into the scan-dal surrounding HSBC after theLabour party said the peer has seriousquestions to answer regarding histime in charge of the bank.

Green was chief executive of HSBCbetween 2003 and 2006, then chair-man until 2010. During this periodsome of HSBCs clients were involvedin routing funds through drug cartels,terrorists and renegade states, accord-ing to a US Senate investigation thatreleased its findings this week.

In one incident HSBCs Mexican armtransferred $7bn (4.5bn) cash into thebanks US operations using armouredvehicles, even though both Mexicanand US authorities warned HSBC thatthe money must be tied to illegal pro-ceeds from drug gangs.The Senate report also claims that

lax controls saw the bank route suspi-cious funds from countries includingIran, Syria and Burma and assist aSaudi bank with links to al-Qaeda.

The report is so serious that thebanks head of compliance has alreadyresigned, Chris Leslie MP, Laboursshadow financial secretary to theTreasury, said yesterday.

Stephen Green, who was executivechairman of the bank when this took

place and is now a trade minister inDavid Camerons government, nowhas serious questions to answer aboutwhat he knew and when.

Emails released as part of the investi-gation reveal that Green was keptinformed by the banks then compli-ance chief David Bagley.

Bagley resigned in spectacular fash-ion in front of the US Senate subcom-mittee on Tuesday during a session inwhich six HSBC executives answeredquestions on compliance failures atthe bank.

In 2005 Green was told there waslittle doubt that a transaction fromBurma breached US government sanc-tions, raising the prospect of a signif-

icant risk of financial penalty.He was also updated on growing

concerns about HSBCs involvementin so-called U-turn transactionsinvolving Iran, whereby funds wererouted from a third party foreignbank into HSBC and then back outinto another foreign bank.

HSBC now faces a US JusticeDepartment investigation with pre-

dictions that the fine could hit $1bn.Green, 63, is an ordained Church ofEngland vicar and had been men-tioned as a candidate to succeed Sir

Mervyn King as Bank of England gov-ernor, a move which looks much lesslikely in light of the row over HSBC.Appointed a Conservative peer in2010, he is responsible for UK Trade &Investment.

In 2009 he published a book entitledGood Value: Reflections on Money,Morality and an Uncertain World.Between 2006 and 2010 he was chair-

man of the British BankersAssociation (BBA), the trade body thatcompiles Libor.

Green declined to comment.

BY MARION DAKERS

FTSE 100 5,685.77 +56.68 DOW 12,908.7 +103.16 NASDAQ 2,942.6 +32.56 /$ 1.57 +0.01 / 1.27 unc /$ 1.23 unc

BUSINESS WITH PERSONALITY

LONDON2012

days to go

See Page 24

See Forum, Page 18 8www.cityam.com FREEISSUE 1,677 THURSDAY 19 JULY 2012

BY JAMES WATERSON

GREEN CAUGHT UPIN HSBC SCANDAL

Certified Distribution

28/05/2012 till 01/07/2012 is 132,857

GOVERNMENT SHOULD LOOK TO SUPPLY SIDE TO DRIVE GROWTH

NEW WORD ON THE STREETTHE LOWDOWN ON THE LATEST VERSION OF MICROSOFT OFFICE

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Follow me on Twitter: @allisterheath

IN BRIEFMF Global UK asset return beginsnMF Global UK will return roughly

54m of client assets after itsdistribution plan was accepted by theHigh Court yesterday. The return ofclient assets will begin on 1 August,but its worth noting that there arestill over 1bn of alleged outstandingclaims, which this approval goes onlya tiny way towards. Still, Richard Heis,joint special administrator of MFGlobal UK and restructuring partner atKPMG described the court hearing asan important milestone in theadministration process.

eBay does roaring trade in Europen Online marketplace eBay last nightreported a 23 per cent leap inquarterly revenues to $3.4bn(2.2bn), topping forecasts andblowing away fears that tepidconsumer sentiment in Europe would

damage the firms sales. Profitsclimbed 16 per cent to $730m andeBay boasted of strong growth inEurope and Asia Pacific. Paypal, thefirms internet payment system, grewits revenues by 26 per cent on lastyear.

Border workers set to strikenWorkers that man Britains bordershave threatened to strike during theOlympics on the same day Londonsbus drivers accepted a bonus deal toavoid walkouts during the Games. ThePublic and Commercial Services unionsaid yesterday its members havevoted to strike over pay and job cutsat the Border Agency, and willannounce a date for the action today.

Cameron pledges to takeback G4S Olympic moneyTHE GOVERNMENT will activate allpossible clauses in G4Ss Olympicsecurity contract to claw backmoney from the firm, including the57m management fee it hasrefused to give up, David Cameronand sports minister HughRobertson vowed yesterday.

Speaking during a trip toAfghanistan, Prime MinisterCameron said his government willgo after G4S to make it pay for thethousands of soldiers filling the gapfor the company.

Robertson was similarly bold yes-terday when asked at a press confer-ence how much G4S could expect tolose. He said: We are workingthrough that at the moment, butall the penalty clauses that are inthe contract will be activated.A government spokesman toldCity

A.M. last night that there were sev-eral penalty clauses in the contract,including ones related to the man-agement fee.

G4Ss chief executive Nick Bucklesprovoked MP anger on Tuesdaywhen he said the company wouldhold onto the 57m payment,despite falling short on the numberof guards G4S had promised.Around 3,500 soldiers will be draft-ed in to make up for the deficit.

Numis analyst Steve Woolf told

Four banks targeted in Euribor probeRegulators are focusing on at least four o fEuropes biggest banks as theyinvestigate the attempted manipulationof the regions benchmark interest rate,suspecting the Barclays traders were theringleaders of a circle that included CreditAgricole, HSBC, Deutsche Bank andSociete Generale. Evidence of linksbetween traders at all four banks andBarclays former euroswaps traderPhilippe Moryoussef is under scrutiny,people involved in the process have toldthe Financial Times.

Pimcos Bill Gross returns to formPimco has doubled the size of its flagshipexchange traded fund in less than twomonths, hitting $2bn in assets asperformance of the Total Return Fund ETFoutpaces the far larger mutual fund onwhich it is based.

China to buy US assets via GM pensionThe Chinese government has agreed tobuy investment stakes currently held byGeneral Motors pension plan, in a dealthat will make Beijing a sizeable investorin many of the US and Europes largestprivate equity funds.

Global private equity grabs hold of aBritish lifelineWhile global private equity investmentsslumped by a quarter to $93bn (60bn)during the first half, Britain bucked thetrend and increased its deal-making,according to TheCityUK.

Ex-BP chief sets his sights on AfricaGenel, the oil and gas producer led byTony Hayward has made its firstacquisition in Morocco and the IvoryCoast, The Times has learnt.

40pc of savers think pensions are freeHundreds of thousands of savers are in thedark about how much they pay forpensions, research from Friends Life finds.More than 40 per cent believe they are notpaying charges on their pensions, with 26per cent saying their employers pay.

Samsonite buys US backpack brandLuggage-maker Samsonite is to buy USbackpack brand High Sierra for $110m(70m) as it seeks to build a biggerfoothold in the $4bn North Americancasual bag market.

Shake-up continues at GM's Opel unitGeneral Motors troubled European Opelunit yesterday replaced two more topexecutives, the latest step in a radicalshake-up designed to put the auto makerback on the road to profitability.

Vatican urged to step up oversightA watchdog has called on the Vatican tostrengthen measures aimed at preventingmoney-laundering and terrorist financing,warning that Holy See regulators lackedpower to oversee the flow of moneythrough the worlds smallest state.

THE TRAIL of losses and lawsuitsstemming from Facebooks botchedfloat in May got longer yesterday, asone of the market-makers on theinitial public offering said it wasconsidering legal action to recoupits losses.

Knight Capital, one of fourmarket-makers on the 10bn f loat,revealed its plans after its quarterlyearnings plunged 81 per cent dueto a $35.4m loss on the share issue.

Facebook and stock exchangeNasdaq are facing a raft of civilclaims over a glitch on IPO day thatsaw trading orders delayed by up to30 minutes, plus complaints aboutthe social networks growthforecasts ahead of the float.

In total, market participants lostan estimated $200m because of themalfunction.

We are evaluating all legal rightsand remedies in connection withthe Facebook IPO, said KnightCapital chief executive andchairman Thomas M Joyce.

Knight had to compensate itsclients for the glitch, and alsosuffered its own trading losses inthe first two hours the Facebookshares traded.

Knight was one of the four majormarket makers in the Facebookdeal, along with Swiss bank UBS,Citigroups Automated TradingDesk and Citadel Securities.

Knight Capital

could sue overFacebook loss

Nick Buckles has said G4S will not give up its 57m management fee for the contract

2 NEWS

BY MARION DAKERS

BY JAMES TITCOMB

To contact the newsdesk email [email protected]

THERE is something strangegoing on in the UK economy or at least with the officialstatistics that we all have to rely

on. The economy is shrinking andyet employment and total hoursworked are rising. Such acombination is possible, of course,

but it implies a slump in productivity.The total number of hours workedper week reached 937.8m in the threemonths to May 2012, up 26.8m on ayear earlier. This is partly explained bythe timing of bank holidays. But a 2.9per cent rise in working hours, com-bined with roughly zero growth inoutput during that time, simply does-nt sound plausible. One possibility isthat the economy did a bit better thanthe figures suggest or that thelabour market is weaker.There are, of course, other possible

explanations for the unusual data

EDITORSLETTER

ALLISTER HEATH

Britains economy: a case of lies, damn lies and statistics

THURSDAY 19 JULY 2012

which assume that it is in fact correct.In a truly flexible economy, wages canadjust to supply and demand easily,which means that one could have fullemployment even at the height of amajor depression. In practice, ofcourse, we dont have this in the UK.But real wages are falling, helpingprice some people back into work.Nominal wages (including bonuses)are up 1.5 per cent over the past year;with the retail price index measure ofinflation still going up by 2.8 per cent

a year, that implies a real wage cut of1.3 per cent. This is clearly having aterrible effect on the demand forgoods and services, as peoples pur-chasing power is slumping but itdoes mean that workers are cheaperand therefore more likely to findwork. A related way of looking at this

is that workers share of the econo-mys total output is falling, while thatof owners of capital is going up.

But how could productivity be col-lapsing so much? People producemore per hour worked when the tech-nology and tools they use improve and less when they get worse. Soplummeting productivity may becaused by the fact that the stock ofcapital may be falling, either becausea lot of it has become either too old orhas turned out to be obsolete a caseof malinvestment caused by faultydecisions taken during the bubble

public sector (other measures give abigger reading) peaked at 6.353m inthe third quarter of 2009, beginningits descent in the fourth quarter ofthat year under Labour and reaching5.899m in the first quarter of thisyear, a level previously seen in 2003.

Total employment hit a record

29.528m in the first quarter of 2008, atrough of 28.831m in the second quar-ter of 2009 and 29.35m in May 2012,up 181,000 on the quarter. So what isreally going on? We know that theeconomy isnt doing well, realincomes are falling and that there isalso some job creation. But as to theexact details, whether the economy isgrowing slightly or shrinking slightly,the depressing reality is that nobodyreally has a clue.

years or because new investmenthas collapsed.While this may be part of the story,

it cannot explain everything. Usually,employment figures are less wrongthan GDP figures, which tend to berevised endlessly over the years andsometimes even over the decades. The

current set of jobs figures are fasci-nating, though they hide many othertrends, such as the surge in self-employment, the still extremely highunemployment (much of it camou-flaged) and the fact that many areworking fewer hours than they wish.

Private sector employment peakedat 23.515m in the first quarter of2008, before tumbling to 22.490m inthe final quarter of 2009. Since then,the private sector has bounced back,hitting 23.382m jobs in the first quar-ter of 2012, a rise of 892,000. By con-trast, the official measure of the

LAURALEA

N/CITYA.M.

City A.M. that penalty charges couldbe based on the number of staff G4Sfailed to supply for the games. WithBuckles firm falling short by thou-sands of people, its losses on the con-tract could be substantial.

G4S did not respond to the govern-ment or reveal if it would be adjust-ing its expected losses from the affair.The company said last week it couldface a fine of between 10m and20m, and with the firm liable for thesoldiers pay, its total loss on the con-tract was estimated at 50m.

Shares in G4S rose slightly before

Cameron and Robertson spoke, andremained stable yesterday.

Neither Cameron nor Robertsoncalled for Buckles to step down imme-diately. Robertson said: I dont wantresignations causing chaos. Whathappens to Mr Buckles afterwards is amatter for others in the post-Gamesenvironment.When grilled by MPs on Tuesday,

Buckles said he was the right personat the moment to deliver as manypeople as we can.

MORE ON OLYMPICS: Page 9, 19

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

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RESOLUTION chief executive CliveCowdery has lost friends in the Cityand current shareholders may bereluctant to back him in new ven-tures, according to views canvassed byDeutsche Bank, one of the banks mostrespected in the insurance sector.The feedback is part of a presenta-

tion to senior members of the insur-ance group earlier this month fromDeutsche Banks team.

One UK long fund says the follow-ing: They did themselves quite a lotof damage with the 250m capitalreturn which didnt get delivered. Itsnot clear why it was postponed andyou start to get really worried aboutsome of the possibilities.Another institution says, according

to documents seen by City A.M.: Imust say I am getting bored with therhetoric on this and would much pre-fer to see some action. I struggle to see

how financial engineering betweensplitting the back book and the frontbook is really going to create value.The institution adds: They wont begetting any support from us for newvehicles until this one is finished.

Deutsche has a top-class reputationin the sector and in Mike Lamb hasone of the industrys top corporate fin-anciers. It does not advise Resolution,whose brokers are RBC and Barclays.

Resolution yesterday said some ofthe views canvassed by the bank didnot reflect its own view of how it isperceived in the City, adding that itdid not commission the feedback. CityA.M. has not seen all the feedback,some of which may well be positive.

Earlier this year Resolution disap-pointed many by failing to deliver on a250m return of capital. At the time itsaid: What we are doing in the firsthalf of this year is to study whetherthat capital can continue to comeback to shareholders bearing in mindmarket volatility.

Strategy fails to convince

A BOMB blast in Damascus killed key staff in Syrian President Bashar Al-Assads regimeyesterday, including his defence minister Dawoud Rajiha (pictured) and his brother-in-law Assef Shawkat, as a 16-month-old popular uprising took a fresh violent turn. The UNSecurity Council is today due to vote on the Wests latest efforts to halt the bloodshed.

BOMB KILLS TOP SYRIAN GOVERNMENT STAFF

BANK of England governor SirMervyn King has written to othercentral bankers from around the

world to propose talks over how

to reform, or even scrap, the nowcontroversial Libor lending rate.King suggested that the issue

should be top of the agenda atthe Economic ConsultativeCommittee meeting in the Swisstown of Basle on 9 September,City A.M. understands.

It is very clear that radicalreforms of the Libor system areneeded, King said in his letter.

And yesterday Bank of Canada

King calls fellow central bankchiefs for summit over Libor

BY JULIAN HARRIS governor Mark Carney alsorevealed that discussions over theinter-bank lending rate willcontinue the following week inBasle, at the Financial StabilityBoards meeting.

Meanwhile, US Treasurysecretary Timothy Geithnerinsisted yesterday that the New

York Fed which he used to head was not culpable over the Liborscandal. American authoritiesacted early once they were awareof potential problems with Libor,Geithner said, arguing that moreof their suggestions should have

been implemented by the BritishBankers Association.

IBM has raised its profit forecast forthe year for the second time in threemonths, despite falling revenues inthe second quarter.

The firm fell short of Wall Streets

predictions with quarterly revenuesof $25.8bn, down three per cent on ayear ago due to a $1bn currency hit.

But the computing giant last nightrevealed a six per cent jump in netincome to $3.9bn, and said its focuson higher margin products such asbusiness analytics had helped pushup its earnings per share forecast forthe year by $0.10 to $15.10.

Analysts welcomed the sign thattech spending is holding up well.

IBM raises itsprofit forecast

BY MARION DAKERS

EXCLUSIVEBY DAVID HELLIER

THURSDAY 19 JULY 20123NEWScityam.com

What investors think of Cowderys strategy at Resolution

"I must say I am getting bored with the

rhetoric on thisandwouldmuchprefer

to see some action. I struggle tosee how

financial engineeringbetween splitting

the backbook andthe front book is

really goingto createvalue... ...They

wont begetting any support fromusfor

newvehiclesuntilthis one isfinished."

"Theydidthemselvesquitealotofdamagewiththe250mcapitalreturnwhichdidn'tgetdelivered.It'snotclearwhyitwaspostponedandyoucanstarttogetreallyworriedaboutsomeofthepossibilities.IstheFSAmakingthemholdmorecapital?"

"Iam notconvinced by

this frontand back

booksplit. It seemsa

bitgimmickytome."

"The Resolution corporate structure is wrong and

the board structure is wrong. They are paying

Clive and the team to do M&A and chase after

fresh products where the shareholders have no

appetite to back Clive on M&A."

Scathing thoughts of a UK/US hedge fund

Signs that investor patience is running outA none-too-impressed UK investor

Investors slamResolution indamning report

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MORE JOB cuts could be on the wayat Bank of America Merrill Lynch(BoAML), it emerged yesterday, astough market conditions push firmsacross the sector to slash costs in aneffort to shore up profits.The bank reported second quarter

profits of $2.46bn (1.57bn), stronglyup on the $8.83bn loss a year ago.

It has already pared back spendingheavily expenses came in at$17.05bn in the three-month period,down 25.4 per cent on the year.The company cut 12,624 staff on

the year bringing total headcountdown to 275,460.

Furthermore, after saving $5bn peryear in its retail operations by askingstaff for cost-saving ideas, it expectsto save another $3bn by extending

BY TIM WALLACE the scheme to its client-facing arms.The bank also paid back all debt

related to the temporary liquidityguarantee programme as part ofwider debt redemptions which itexpects to give interest savings of$100m in 2012 and $180m in 2013.

In addition, the bank stressed itsgrowing focus on credit quality withprovisions for loan losses falling to$1.77bn its lowest level since 2007.

However, there are further costsahead Fannie Mae claims againstmortgage assets from Countrywideare mounting, for example.The results revealed the bank has

increased its Basel III core tier onecapital ratio to 8.1 per cent wellahead of its target of 7.5 per cent bythe year-end.

Stocks fell on the results, endingthe day down 2.59 per cent.

BlackRock earnings and assetsare hurt by market turbulenceASSET manager BlackRock reporteda 10.5 per cent drop in net income

to $554m (353.9m) for the secondquarter, and warned that skittishglobal markets could hamper itsprogress for the rest of the year.

Assets under managementslipped to $3.56 trillion, downthree per cent compared to bothlast quarter and last year, pushedlower by $94.6bn of market-relateddeclines.

For the remainder of 2012,unfortunately, all eyes are still

BY MARION DAKERSgoing to be on politics and theeconomy, said chief executiveLaurence Fink during a call withanalysts.

The firm managed to attract netinflows to its fixed income andmulti-asset class products, but thiswas offset by investor exits fromequities and alternatives to takenet outflows to $29.4bn.

Meanwhile the firms iSharesbusiness added $6.1bn inadditional investor funds, thoughthis was overwhelmingly wipedout by a $32.8bn slump in marketvaluations. The exchange-traded

platform unit generated $596m inrevenues, or 31 per cent of overalllong-term base fees.

Since the quarter ended, iShares

alone has pulled in another $3.5bnin July so far, Fink said.Group revenues fell 5.1 per cent

on last year to $2.2bn, with theslide in the equities business alsoknocking performance fees downby half on the previous quarter to$41m.

Total remuneration costs fell 2.6per cent to $1.61bn as the volatilemarkets took a chunk out ofperformance-related bonuses.

EIGHTEEN investors including Aviva, F&C and the Co-op have urged News Corp to hirean independent chairman and split the role of Rupert Murdoch, who is currently bothchairman and chief executive. The institutions said in an open letter to the board thatthe firm is in need of independent leadership in the wake of the phone hackingscandal.

NEWS CORP INVESTORS CALL FOR NEW CHAIR

PROFITS slumped in the secondquarter as BNY Mellon settled apricey lawsuit and struggled withfalling client activity thanks to theheightened Eurozone crisis.

Rock bottom interest rates alsohit earnings as the custodian wasforced to waive money market fundfees, because returns were too lowto levy a charge.

Earnings came in at $466m(298m) in the three-month period,down 37 per cent on the $735m inthe same quarter of 2011.

Much of the drop came from a$212m charge settling an investorlawsuit.

But total revenues also fell,dropping six per cent from $3.85bn

Eurozone takes heavy toll on

BNY Mellons earnings outlookBY TIM WALLACE to $3.62bn.

Meanwhile total non-interestexpense rose eight per cent to$3.05bn, in part because of thecosts of holding deposits cautiousclients are increasingly reluctant toinvest in shares and bonds thanksto the Eurozone crisis, leading the

bank to consider charging fordeposit facilities.

However some costs did drop the bank cut headcount by 700 overthe year to 48,200, helping toreduce staff costs from $1.463bn to$1.415bn.

Meanwhile the bank reported itsBasel III core tier one capital ratio

jumped from 6.5 per cent a yearago to 8.7 per cent now.

BNY Mellons stocks held steady,rising 0.07 per cent on the day.

NEWS CORP PHILANTHROPY: Pag e 11

THURSDAY 19 JULY 20124 NEWS cityam.com

BAML boostsprofits in costcutting drive

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This publication is issued by NYSE Euronext London. It is for information purposes and to promote the services of NYSE Euronext London. It does not constitute legal or investment advice. NYSE Euronext accepts no liability for this

publication and no reliance should therefore be placed on it. It is not an offer, distribution, solicitation or recommendation to acquire or dispose of any financial instrument or to engage in any transaction. Persons wishing to trade

products available on NYSE Euronext markets or wishing to offer such products to third parties are advised, before doing so, to check their legal and regulatory position in the relevant territory (in particular as to any applicable

selling restrictions) and to understand the related risks. Shares can go down as well as up. 2012 NYSE Euronext. NYSE Euronext London is a Regulated Market operated by LIFFE Administration and Management in accordance

with Title III of the Markets in Financial Instruments Directive (2004/39/EC). All rights reserved. www.nyx.com

GROUPE EUROTUNNEL IS GOING PLACES.

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It makes sense that a company which took such a pioneering step has chosen

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NYSE Euronext connects companies to a diverse investor base not just in the

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INDUSTRY groups came out in

favour of the Treasurys new UKGuarantees scheme yesterday, buteconomic think-tank the Institute ofEconomic Affairs (IEA) was opposed.

The business community will beheartened to see signs of innovativethinking on infrastructurefinancing, said Adam Marshall atthe British Chambers of Commerce.Other business lobby groupsincluding the Institute of Directorsand the Confederation of BritishIndustry (CBI) also voiced support.

But independent think-tank theIEA took the opposing view,suggesting that funds might findtheir way into vanity projects.

The plan is likely to producewasteful, loss-making infrastructurethat would never have beenconstructed without artificialsupport, said Richard Wellings, theIEAs head of transport.

The scheme will underwrite up to40bn of infrastructure investmentprojects judged to be in thecountrys interest, in need of aguarantee, and fiscally sound.

The director for the Institute ofCivil Engineers Nick Baveystockcentred his criticism on the criterialimiting guarantees arguing thatgetting taxpayer support should notbe excessively difficult.

Two cheers forinfrastructuresupport plans

BY BEN SOUTHWOOD

CREDIT Suisse bowed to market andcentral bank pressure yesterday,announcing major new measures tobolster its capital position.

The plan was revealed as the bankpublished relatively positive earn-ings figures, showing profits risingin the second quarter as it cut costs.

It plans to raise SFr15.3bn (10bn)by the end of this year, beginningwith SFr8.7bn this month.

The Swiss National Bank lastmonth raised concerns it had insuffi-cient capital, and chief executiveBrady Dougan believes this round of

capital raising should eliminate anydoubt about the banks stability.

Of the SFr15.3bn total, contingentconvertible bond issuance willaccount for around SFr3.8bn whilean accelerated exchange of hybridnotes will also contribute.The remaining SFr6.6bn will be

raised in the coming months.That should take its look-through

Swiss core capital ratio from sevenper cent to 9.4 per cent close to the10 per cent required by 2018.

Credit Suisse incapital boost to

counter criticsBY TIM WALLACE

Markets agreed, with Credit Suissesshares jumping 6.7 per cent yesterdaymorning, before closing up 4.49 percent at the end of the day.

Meanwhile the bank reported prof-its of SFr788m, up 2.6 per cent on thesame quarter last year.Although revenues fell in areas

including equities sales thanks tolower client activity, the bank gainedSFr66m on its partial sale of a stake inAberdeen asset management.

The bank also cut SFr2bn in the firsthalf of 2012, in part by reducing pay.For example pay in investment bank-ing fell 30 per cent on the quarter asperformance-related pay was slashed.

Chief executive Brady Dougan announced better second quarter profits for Credit Suisse

More sandbags are helpful buttheir necessity isnt reassuring

YESTERDAYs announcementfrom Credit Suisse wasintended to eliminate anydoubt raised by the Swiss

National Banks (SNB) June financialstability report. The trouble is, itsnot just banks the SNB doubted. Itstake on the economic situation was

stark: early signs of a possiblerecovery... have vanished; the riskof a rapid and marked deteriorationin conditions... remains high.

The report went on to single outSwitzerlands second-largest bank forhaving loss-absorbing capital levelsbelow the international average, andthe new announcements do much toallay that technical charge.

But the economic storm rages on.And the moral hazard brought by abailout culture persists. The SNB also

warned that the market had a morefavourable assessment of Swiss asagainst other international bankspartly based on the continuingexpectation of state support in theevent of a crisis.

More sandbags against a loomingflood are helpful, but laying them inis hardly a moment for celebration.

Marc Sidwell is City A.M.s managingeditor.

Credit Suisse Group AG

18 Jul12 Jul 13 Jul 16 Jul 17 Jul

17.4

17.6

17.0

17.2

17.8

18.0

18.2

18.4 CHF17.9118 Jul

FORUM: Page 19


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UNEMPLOYMENT plummeted in thethree months to May, while employmentgrew healthily, according to datareleased by the Office for NationalStatistics (ONS) yesterday.

Unemployment was down 65,000 or0.2 per cent, and stood at 8.1 per cent,while employment flew up by 181,000,the largest quarterly increase for 22months.Though employment is still 218,000

below its pre-recession peak, the falls inunemployment and economic inactivity which dipped 61,000 to 9.21m areencouraging figures, suggesting realrecovery since late last year. But analysts

warned that the trend may not continueif indicators for June and July, whichhave indicated slowdown, are believed.

Looking ahead, it may be difficult tosustain the downward trend in unem-

Employment hasits best quarter

for 22 monthsBY BEN SOUTHWOOD ployment. Recent activity indicators havebeen sluggish, implying that the privatesector will find it increasingly difficult tocreate jobs, said Nida Ali at Ernst &Youngs Item club.

Meanwhile, John Walker of theFederation of Small Businesses pointed torising long-term unemployment figures,and Brendan Barber of the Trades UnionCongress (TUC) warned that youthemployment had risen.

Nominal pay was up on the quarter, by1.5 per cent for both the public and pri-vate sector, though public sector workerswere paid more on average 480 perweek compared to the 466 per week pri-vate sector workers received.

Public sector workers nevertheless

drove the worst 12 months for labourrelations since the year to January 1991,with 1.47m days lost due to strike action,including 997,000 in November last year.

ECONOMICS: Page 13


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EMPLOYMENT

130,000 to 15.769m

UNEMPLOYMENT

34,000 to 1.480m

EMPLOYMENT

51,000 to 13.584m

UNEMPLOYMENT

32,000 to 1.104m

FULL-TIME EMPLOYMENT

PART-TIME EMPLOYMENT

HOURS WORKED

133,000 to 21.367m

48,000 to 7.987m

Avg. hours: 32 per week

EMPLOYMENT

181,000 to

29.35m

UNEMPLOYMENT

65,000 to2.58m

CLAIMANT COUNTup 6,000 in June

to 1.604m

8M

earnings up 1.5%

to 468earnings up 1.5%

to 466

PRIVATESECTOR

earnings up 1.5%

to 480

PUBLICSECTOR

AVERAGEWEEKLY

Employment rose in the three months to May Source: ONS

25.001999 2005 2012

27.50

29.50

TOTAL EMPLOYMENT SINCE 1999

MILLIONS

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NORDIC banking group Nordea, theregions biggest bank, posted second-quarter operating profits aboveexpectations yesterday but saidslower economic growth in theregion due to Europes debt crisiswas affecting business.

Operating earnings in the secondquarter were 1.1bn, compared withthe 949m reported in the sameperiod a year ago.

Swedish banking groupSwedbank also posted a second-quarter operating profit thatmarginally beat forecasts earlier inthe day.

Nordea profittops forecasts

BY CITY A.M. REPORTER

GETTY

LONDON Stock Exchange group (LSE)yesterday announced revenue growthin line with expectations but admit-ted that it has been hit by sluggishperformance in its core capital mar-kets business.

The group has made a good start tothe new financial year, although mar-ket conditions have remained weakand the summer period is expected tobe quiet, chief executive Xavier Roletsaid.Total group income was up 10 per

cent at 209.5m for the three monthsto the end of June but income from

primary markets dropped by 20 percent as a dearth of floats reducedearnings from admission fees.Trading revenue was also down by

15 per cent as investors executedfewer transactions.

However the exchange operatorsdecision to diversify into data provi-sion and clearing services has beendeemed a success.

London StockExchange hit

by lack of IPOsBY JAMES WATERSON

At the end of last year LSE took totalcontrol of data firm FTSE Group for450m, enabling it to boost informa-tion services revenue by 68 per cent to75.3m. The groups purchase of clear-ing house LCH.Clearnet remains ontrack to complete by the end of 2012.

The performance shows the areasthe LSE has and is moving into doingbetter than the traditional LSE busi-nesses, said Numis analyst JamesHamilton. We believe the LSE is now amore balanced, less cyclical businessthat is better positioned to delivergrowth.

ARE YOU IN FAVOUR OF THEOLYMPIC LANES?Interviews by Jamie Sutherland and Francesca Davie

I think the lanes themselves are a little excessive

one of my friends was fined recently for using one

of them. I think it will be a big nuisance for people who use the

roads to get to work on a daily basis; its difficult enough even

on the Tube these days.

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

SANJAY JAYANSS&C TECHNOLOGIES

I dont drive in London, but I know that these lanes

arent popular with everyone that does. I think they

are a necessity for us to host the Olympics. The roads will be busy,

but I take the Tube, and Ill actually be staying in a hotel over the

Olympic period I think even the Tube will be packed.

STUART ROBBINSMIZUHO

Im not too bothered by them. Ill be working in

London during the period, and Im not going to

change any of my usual travel plans. Some of the posters

around recommend leaving extra hours to make journeys in the

city, but I dont think you need to do that.

TOM DEARSJ BERWIN

BY ELIZABETH FOURNIER

THE VAST majority of Londoners arestill in the dark over how theirroutes around the City will beaffected during the Olympics,according to research released today.

Seventy-one per cent of Londonersasked said they did not know whenOlympic road restrictions wouldstart and finish, while 73 per centwere clueless as to which roads itwill cover.

The survey, run by YouGov andcommissioned by sat-nav app CoPilotLive, also found that over one in fourLondoners (28 per cent) had not evenheard of the Olympic Route

Network the name given to theartery of roads linking allcompetition venues and other keysites including transport hubs suchas Heathrow Airport.

The M4 motorway officiallybecame part of the network lastMonday, leading to chaos on boththe A4 and A40 feeder roads asmotorists were unsure which partsof the route were already affected.

Citing the problems already seenon the roads as a key reason, 64 percent of respondents said they areconcerned about the trafficdisruption in London during theupcoming Games.

CITYVIEWS

London Stock Exchange Group PLC


1,000

990

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1,030

1,040 p

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INSURERS face a 500m bill to coverflood and storm damage in June,according to figures released

yesterday.The Association of British

Insurers (ABI) says its membersexpect to pay out the equivalent of17m a day after the month beatrainfall records, flooding buildingsand damaging vehicles.

During June alone insurershelped 68,000 customers hit by thefloods and storms, the ABIs Nick

Insurance firms face 500m billafter the wettest June on record

BY JAMES WATERSON Starling said.Yesterday insurer RSA confirmed

that it was expecting a 40m bill forflood damage in June, with anadditional 10m for damage

sustained so far in July. As a resultanalyst Barrie Cornes at PanmureGordon cut the firms full-yearearnings forecast by 14 per cent.

The government is currentlynegotiating a deal with the industryto ensure that affordable floodcover remains available to all. Oneproposal is a flood levy on allhousehold insurance premiums.

Most Londoners still cluelessabout plans for Olympic traffic

BREWER Fuller, Smith and Turneryesterday blamed poor weatherover the summer for a decline inrevenues, having expected a

bumper period over the Diamond

Jubilee and Euro 2012.Sales fell by 1.1 per cent in the15 weeks to 14 July, the companyreported, citing the persistentrain. Chairman Michael Turnerremained optimistic ahead of theOlympics, saying the eyes of the

world will be on London.

Fullers saleswatered down

BY JAMES TITCOMB

IRISH flag carrier Aer Lingus yesterdayurged shareholders to reject atakeover bid from Ryanair, its largerrival, saying the offer is not credible.

Ryanair already owns 30 per cent ofits rival and on Tuesday made an offerthat values Aer Lingus at around694m (544m).

Aer Lingus said any bid is likely tobe blocked by competition regulators.

Consequently there is significantuncertainty that any offer fromRyanair would be capable ofcompletion, the f irm said.

Aer Lingussnubs Ryanair

BY JAMES WATERSON

FORUM: Page 19


The Kings Arms pub in York was one of many properties affected by this summers floods.

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BRITAIN is on course for thewettest July ever, keepingmiserable workers trappedin the office at lunchtime

with nothing to do but eatsandwiches at their desks andworry about how the Olympicsmight affect travel arrangements.

But Virgin Money has taken radi-cal action in an effort to raisemorale, installing a games arcadein its newly-acquired Newcastleheadquarters.Alongside its in-house staff gym,

the Gosforth office now boasts a

pool table, pinball machine andmotor racing arcade games.

This gives staff a place to relaxand unwind during their breaktime, said a spokesman for thefirm, explaining why the room wasopened this week.The installation has prompted a

wave of good feeling among staff I love you @VirginMoney tweetedone gushing member of staff.

But another thought occurred toThe Capitalist. Is this really what peo-ple mean when they talk about casi-no banking?

Got A Story? Email

[email protected]

11cityam.com

Rupert Murdochs News Corporation hasdonated $20m (12.8m) to Motion Picture

& Television Funding (MPTF), the non-profitorganisation charged with providing supportto members of the creative community who fall

on hard times. I n presenting the gift,

Murdoch, whose reputation has beenknocked by the phone-hacking

scandal affecting his UKnewspaper operations,

stood alongside actorMichael Douglas, an MPTFcommittee member,

whose family is a longtime supporter of the

fund.

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The views expres sed in the seminars are thos e of the guest speaker and not thos e of Societe General e or its representati ves. The views expres sed are the guest spea kers

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THEFORUMcityam.com/forum

JOIN THE DEBATE PAGES 18-19

Virgin hints atcasino bankingwith an arcade

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SportswatchspecialintomorrowsCITYA.M.

The head office now boasts a pool table, pinball machine and driving arcade game

Naturally Lord Mayor David Woottonbrought along his own daughter

Sophie to the Fathers, Daughters, Mothers &Sons dinner, at the Mansion House, in aid ofhis new appeal: Fit for the Future.The black tie function, attended by 224guests, was supported by Northern Trust,

HSBC and London Metal Exchange with theaim to engage the next generation withthe philanthropic side to the city.

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IN BRIEFUS housing starts recover in Junen US housing starts jumped to theirspeediest pace for over three years inJune, according to CommerceDepartment data released yesterday.Starts were up 6.9 per cent on themonth, to a seasonally adjusted rate of760,000, the highest rate since thefalse-start recovery in late 2008.Housing continues to be the onesector of the US economy that isoutperforming expectations, saidBarclays economist Michael Gapen.

Halifax: People bullish on homes

nPeople in the UK remain optimisticabout UK housing, according to confi-dence data for June published byHalifax. Over a third of respondentsexpected house prices to rise over thecoming year, whereas only 19 per centforecasted a decline. And while the +15index score recorded for June wassomewhat below the +19 recorded inJune, it was nevertheless more thandouble the +7 seen in January.

Eurozone construction fall arrestedn Eurozone production in constructioninched up in the month to May, com-pared to sharp declines in April, accord-

ing to Eurostat data released yesterday.Seasonally adjusted construction outputrose 0.1 per cent in the euro area in May,compared to a 3.7 per cent collapse inApril. The EU as a whole experienced a1.6 per cent increase in constructionproduction in May compared to a 6.9per cent dive in the previous month, theofficial data revealed.

GETTY

THE BANK of England MonetaryPolicy Committee (MPC) approved itsnewest round of quantitative easing(QE) with seven for and two against,according to the minutes of its Julymeeting released yesterday.

It had considered both 50bn and75bn increases in asset purchases,but eventually the governor SirMervyn King tabled only a motion forthe lower amount, on fears the higheramount could push inflation wellabove the two per cent targetit was finally falling toward.

King and the two deputy

governors, Paul Tuckerand Charles Bean, wereamong the seven mem-bers that voted toincrease purchases,while SpencerDale and BenBroadbent dis-sented, worryingthat the falls in

BY BEN SOUTHWOODinflation were temporary.The members unanimously rejected

any change in the Bank Rate, whichstands at 0.5 per cent, again referringto fears that an even lower rate couldpush the supply of deposits down andhave the unintended consequence ofactually constricting credit.

MPC members also referenced theFunding for new Lending Schemerepeatedly, and were hopeful it coulddo a lot of work in loosening tightcredit conditions.The minutes came out the same day

as two official reports on economicconditions: the Treasurys summary ofindependent forecasts, and the Banks

agents summary of business condi-

tions. The agents reported gloom inalmost every area of the economy,

while the Treasury reportshowed forecasts aver-aging virtually flat (0.1per cent) GDP growthfor 2012.

IMF tells ECB to fight debt crisiswith bond buys and rate cutsTHE European Central Bank (ECB)could play a bigger role in fightingthe Eurozone sovereign debt crisisthrough more rate cuts, bondpurchases and further liquidityprovision, the InternationalMonetary Fund (IMF) said in aregular report yesterday on theEurozone.

The IMF also said that theindependent ECB, which is legallyforbidden to finance governments,could be given full lender-of-last-

BY CITY A.M. REPORTER

resort functions, to help break thevicious circle of highly indebtedgovernments borrowing from bankswhich in turn become vulnerabledue to the risk associated with thebonds. These could include policiesto support demand in the short runand fend off downside risks toinflation, as well as measures toensure that monetary transmission,currently impaired by financialstress in some countries, the IMFsaid.

The IMF said the ECB couldfurther lower borrowing costs,

which are currently at a record lowof 0.75 percent, because theeconomy was weak and inflationrisks small.

The bank could try quantitativeeasing (QE) with sizable sovereignbond purchases, preannounced overa given period of time, the IMF said.Buying a representative portfolio oflong-term government bonds -- forexample, defined equitably acrossthe euro area by GDP weights --would also provide a measure ofadded stability to stressed sovereignmarkets, it added.

Sir Mervyn King votedfor 50bn more QE

FEDERAL Reserve chairman BenBernanke yesterday shrugged offinflationary concerns in the US,

warning against a prematurereversal of the Feds ultra-dovishmonetary policies.

Bernanke said he was confidentthat America would avoid a doubledip recession, but signalled that theFeds accommodative stance is hereto stay for a while yet.

Responding to concerns thatloose policy erodes savings,

Bernanke backs easy monetarystance to stimulate US recovery

BY JULIAN HARRIS Bernanke said: If we raise ratesprematurely and cause theeconomy to go into recession, thatis not going to be the environment

where people can make a good

return on their retirement fundsor other investments.

*Meanwhile, economic growth inthe US cooled in June and early Julyand hiring grew at a tepid pace, theFederal Reserve said yesterday in itslatest Beige Book summary ofnational activity.

The tone of the report was moredownbeat than Junes assessment.

BRITISH businesses opposeincreased UK integration in the EU,according to the results of a pollreleased today by the BritishChambers of Commerce (BCC).

In a poll of some 2,000businesses, 85 per cent came outagainst further EU involvement,

but only 12 per cent wish to leavethe EU altogether.

Nearly half wanted a re-negotiated and looser relationship

with the union, and just nine percent thought a more extensive rolein the supranational body was a

good idea for the UK.

UK firms oppose increased EUintegration but want to stay in

BY BEN SOUTHWOOD Nearly four decades afterBritain joined the EuropeanCommunity, it is astonishing thatBritish firms seem to feel that the

balance of advantage of EUmembership is lessening, said BCCdirector general John Longworth.

Businesses are pragmatic: theywant to be part of a Europeansingle market, but only if it deliversreal and open access for British

goods and services, he added.Businesses mostly think a

referendum is a medium-termissue, and ought to be resolved inthe next five years. Forty per centof respondents thought a decisionshould be taken in the next year.


The Fed chief testified in Washington DC to the House financial services committee

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IN BRIEFAEA admits shares are worthlessn Climate-change technology firmAEA yesterday warned itsshareholders that they would be leftwith little or no value, after it failedto find a long-term solution to its debtproblems. The firm, which is based inOxfordshire, said it is looking at allstrategic options to realise valuebut said an offer for its shares whichplunged 82 per cent yesterday isunlikely. The firm has 34.3m in netdebt, exacerbated by a further165.5m in pension liabilities. Itsshares are currently trading at just 4p.

Allied lowers production estimaten Allied Gold Mining yesterdayreduced its full year production guid-ance to between 160,000 and 165,000ounces down from 180,000 ouncespreviously. The reduction followsunscheduled maintenance at bothSimberi and Gold Ridge. The companyproduced a total of 31,447 ounces inthe three months to the end of June. Inthe six months to June, it achieved 36per cent of the gold production targetthat it had forecasted.

Fresnillo in record gold output

nMexican precious metals producerFresnillo said yesterday that it was ontrack to meet silver and gold outputtargets for this year, helped by theramping up of production at its newSaucito mine. Quarterly gold produc-tion was positive, jumping 15.4 per centto 127,003 ounces to reach a recordlevel for the quarter.

RUSSIAN miner Nordgold, the coun-trys third-largest gold producer, willbid for the 25 per cent of High RiverGold Mines it does not already own,in a deal valuing the Canadian-listedproducer at $1.2bn (769m).

Nordgold, controlled by billionaireAlexei Mordashov and chaired byPhilip Baum (pictured right), wasspun off from Mordashov-ownedSeverstal earlier this year and listedits global depositary receipts (GDRs)in London as part of efforts to pur-sue an ambitious expansion strategy.

Unusually for major Russian goldminers more accustomed to explor-

ing and developing resources closerto home, Nordgold has bet heavilyon Africa, with assets in Guinea andBurkina Faso.

Successfully buying out minorityshareholders in High River will giveNordgold full control of the produc-er in which the miner bought astake in 2008. High River has becomethe cornerstone of Nordgolds

Nordgold bidsto buy up stock

in High RiverBY HARRY BANKS resources and production, withmines and exploration projects inRussia and Burkina Faso. High Riverexploration assets include Bissa inBurkina Faso and a 50 per cent inter-est in Prognoz in Russia, one of thelargest high-grade primary silverdeposits in the world. Nordgold isoffering 0.285 Nordgold globaldepositary receipts for each HighRiver share held, or C$1.40 in cash.The paper offer, which could boost

the stocks limited London liquidity,represents a 17.2 per cent premiumbased on closing prices on 17 July.

Peter Bacchus joined Jefferies from MorganStanley, where he was a managing director

and global head of metals and mininginvestment banking.Nordgold, spun out of Russias second-largest steel-maker Severstal, was one ofthe first new clients won by the JefferiesHoare Govett investment banking team ofwhich Bacchus was a leading light.On his team on the High River Gold bid areSusanna Liu and Dan Vijcic.

The executive has also previously served asa managing director at Citigroup where hewas head of Asia-Pacific industrials invest-ment banking and co-head of global metalsand mining investment banking based inSydney, Jakarta and London.Bacchus started his career as a charteredaccountant at Price Waterhouse after a peri-od with the Foreign and Commonwealthoffice in the US. He received his MA fromCambridge University.Jefferies, a global securities and investmentbanking firm, has served companies andinvestors for nearly 50 years.Troika Dialog is joint financial adviser on thedeal.Bacchus and his team have an office inCanada and are expanding operations inChina.

ADVISERS JEFFERIES

PETER BACCHUSCO HEAD OF EUROPEANINVESTMENTBANKING

Severn Trent customers see billsrise despite reducing water useWATER company Severn Trent saidyesterday that it had raisedcustomers bills despite customersusing less water.

Customer bills increased by 5.2per cent from 1 April the utilitycompany said in its trading update.

Consumption across ourmeasured income base hasdeclined year-on-year in the period,in line with our expectations, itsaid yesterday.

The company said that operating

BY JOHN DUNNE

costs are set to rise due to anexpected increase in inflation.However, it expects to offset thesewith improvements in efficiency.

Net capital expenditure isexpected to be around 590m in thefull year including an estimated15m related to private drains andsewers. Meanwhile it said it isclosely monitoring the level ofunemployment as it directly affectswater bill payments.

We continue to forecast a baddebt level around 2.2 per cent ofturnover for the full year, although

we continue to monitor futuredevelopments closely, especiallyunemployment levels, it said.

Severn expects low single-digitrevenue growth in the full year.

Last month Severn Trentannounced it had signed a jointventure with infrastructure expertCostain to provide completebusiness water and waste watermanagement services to highvolume commercial and industrialwater users in the UK.

Severn Trents interim results willbe published in November.

Philip Baum, who spent 31 years at Anglo American joined Nordgold as chairman in 2010

Nord Gold


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TULLOW Oil yesterday reportedthat its latest exploration welloffshore Ghana found traces of oiland gas.

The Wawa-1 exploration well inthe Deepwater Tano licence wasdrilled to a final depth of 3,322metres.

Tullow is operator of theDeepwater Tano licence with a49.95 per cent stake. It ispartnered by Kosmos Energy with18 per cent, Anadarko Petroleum

with 18 per cent, Sabre with 4.05per cent and the Ghana NationalPetroleum Corp which has a 10

Tullow given lift after Ghanaexploration reveals oil and gas

BY JOHN DUNNEper cent interest.

Exploration director AngusMcCoss said: Wawa-1 was the firstof three important remainingexploration wells to be drilled inthe second half of 2012, to closeout the exploration phase of theDeepwater Tano Licence.

We look forward the drilling ofOkure and Sapele in the secondhalf of 2012.

The boost came after the FTSE100 explorer said on Monday thatit was forced to give up drilling atits Jaguar well in Guyana oversafety concerns. Its partners inthat interest include Canada-basedCGX Energy and Spains Repsol.


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IN BRIEFShareholders bruise Bookern Almost a quarter of investors inBritain's biggest cash and carrywholesaler Booker refused to back thefirms remuneration report yesterday.Booker said it will reflect on its paystructures after the AGM rebellion.Meanwhile the company said it was oncourse to make profit expectations forthe 2012-13 year as it revealed thatsales rose 1.7 per cent in the quarter.

Sluggish demand hits EricssonnMobile network equipment makerEricssons profits plummeted in thesecond quarter of the year, the firmrevealed yesterday. Net profits fell 64per cent to 1.2bn Swedish krona(110m) as operators cut back onnetwork upgrades and demand inChina stuttered.

Puma warns on 2012 profitn German sportswear maker Pumawarned on 2012 profit yesterday,saying first-half net profit dropped 13per cent. In an unscheduledstatement, Puma said it now expectedsales in 2012 to rise by around three toseven per cent, compared to aprevious forecast for an increase ofalmost 10 per cent.

Ebiquity is back in the blackn Advertising analytics firm Ebiquityhas reported a pre-tax profit for theyear to 30 April of 2.64m comparedto a 1.78m loss in 2011. S ales were52.92m, 20 per cent up on last year.Chief executive Michael Greenlees saidhe anticipates more growth asEbiquity expands internationally.

LAND SECURITIES, the UKs largestlandlord, has been hit by a fall in vis-itors to its shopping centres in thethree months to July, which the com-pany blamed on ongoing uncertaineconomic news.The company reported yesterday

that footfall in its shopping malls fellby 2.8 per cent on the same periodlast year, and that 3.2 per cent of itsproperties overall are vacant, up fromthree per cent earlier in the year.While the number of empty shops

remained the same as the previousquarter, there was an increase invacant offices in London, from 2.5

per cent of total spaces to 2.9 percent.

Land Securities has been hit byhigh-street retailers Game, La Senzaand Clintons entering administra-tion, but said it was not overly con-cerned about the number of emptystores. Chief executive Rob Noel toldinvestors yesterday that the interestand intent is there and that whilethe market is challenging, weremain confident in our position.

Shares in Land Securities, Britains

Land Securitiesvacancies up as

woes continueBY JAMES TITCOMB biggest listed property company,have risen steadily this year, but fellslightly yesterday.The firm said that it was still sign-

ing up tenants, pointing out it hadmade lettings worth 9.3m duringthe last quarter, but that the nationseconomic woes meant deals were tak-ing longer to complete.

We remain confident that thedevelopment pipeline offers excep-tional opportunity to deliver growth,Noel said.The company added that it had

rented out about 19 per cent of itsWalkie Talkie tower on 20 FenchurchStreet, which is due to be completedin April 2014.

Chief executive Rob Noel said Land Securities is confident about future growth

Land Securities Group PLC


770

765

775

780

785

790 p 775.0018 Jul

Land Securities always does d evelopments well, or at least that is whatwe have been told by them. This statement is going to need to hold true over thecoming two years as developments come to fruition, at a time when thefirst signs of weakness are starting to appear. Hold.

ANALYST VIEWS

Our key concern remains falling retail property values, in particular forshopping centres and shops, however fears that we may see a further pick up inretail voids has been mitigated by todays statement. Land Secs relativelydefensiveportfolio remains attractive in the current environment. Buy.

Land Securities currently trades at a dividend yield of 3.9 per cent, an

attractive rating given the groups strong exposure to London, which continuesto outperform the rest of the UK commercial property sector. Its strongfinances allow it to take advantage of future opportunities. Buy.

WHAT DOES TODAYSSTATEMENT MEAN FORLAND SECURITIES?Interviews by James Titcomb

ALAN CARTER INVESTEC

ALISON WATSON LIBERUM CAPITAL

JONATHAN JACKSON KILLIK AND CO.


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17

IN BRIEFEthel Austin in administrationn Clothing chain Ethel Austincollapsed into administration for thefourth time in four years yesterday.Duff & Phelps, acting asadministrator, said redundancies andclosures at its 48 stores cannot beruled out for the 78-year-oldLiverpool-based firm. It added that itwould urgently review the firmsfinancial position.

Homeserve rockets on M&A talkn Shares in Homeserve surged 12 percent to 187p yesterday on talk oftakeover interest from private equityfirms. The company, which isembroiled in an FSA probe, said in astatement that it was not, and had notbeen, engaged in any discussionswhich could lead to a possible offerfor the company. But it did not denyreports that it had rebuffedapproaches from the likes of Cinven,KKR and Apax.

THURSDAY 19 JULY 2012cityam.com

LONDON REPORT

Good earningsnews gives liftto Wall Street

THE S&P 500 touched itshighest level since early Mayyesterday as corporate profitsfrom bellwethers Intel and

Honeywell defied fears of acollapse in earnings.The Dow Jones industrial average

gained 103.16 points, or 0.81 percent, to 12,908.70. The Standard &Poors 500 Index rose 9.11 points,or 0.67 per cent, to 1,372.78. TheNasdaq Composite Index added32.56 points, or 1.12 per cent, to2,942.60.

Chipmaker Intel reduced itsgrowth forecast due to macroeco-nomic concerns late on Tuesday,but gross margins were healthyand the stock rose 3.3 per cent.Intel boosted technology sharesand helped the market to rise for asecond day.

The theme coming out in earn-ings is companies are coming inshort in revenue but still beat onearnings. Analysts have movedtheir targets [lower] and companiesstill are lean and mean and areable to generate profit, said KimForrest, senior equity research ana-lyst at Fort Pitt Capital Group.

Companies remain cautiousabout a slowing economy, feedingthe markets hopes for furtherstimulus from the Federal Reserve.

Honeywells profits topped con-sensus views in what it called atough macroeconomic environ-ment, and its 6.7 per cent advancemade it a top gainer on the S&Pindustrial sector.

Financials underperformed thebroad S&P 500, with the sector slip-ping 0.6 per cent. Bank of Americalost 4.9 per cent after it posted a

decline in revenue.

B

RITAINS benchmark shareindex closed at its highest level

in nearly two weeks yesterday,as hopes of fresh central bankstimulus measures lifted equitymarkets, although traders said theoverall weak economic outlook wouldlimit any future gains.The blue-chip FTSE 100 ended up

56.68 points, or one per cent, at5,685.77 points its best closing levelsince finishing at 5,692.63 points on 5July, and recovering from two consecu-tive days of slight losses.

Expectations that central banks suchas the US Federal Reserve or Bank ofEngland might inject fresh liquidity via a process known as quantitativeeasing (QE) to fight the weak globaleconomy, lifted the FTSE and otherglobal equity markets.

Minutes from a 4-5 July meeting ofthe Bank of Englands Monetary PolicyCommittee showed that its policymak-ers had discussed a possible interest

rate cut and larger asset purchases.However, many traders remained cau-

tious, with worries over the weak econ-omy highlighted by data showing a big-

ger-than-forecast rise in t he UK joblessclaimant count in June.The FTSE rally was mainly driven by

gains in heavyweight defensive stocks,such as British American Tobacco andsupermarket group Tesco, oftenfavoured in times of economic uncer-tainty for their stable profits and highdividends again indicating a lack ofconviction in the broader rally.

Hargreaves Lansdown topped theFTSE 100 leaderboard, up by around 4.2per cent.

Stocks edge upwards on renewedhope for more quantitative easing

BESTof the BROKERSCSR PLC

12 Jul 13 Jul 17 Jul 18 Jul16 Jul

p320

300

280

260

240

220

284.5018 Jul

CSRUBS has upgraded thechipmaker from neutralto buy with a targetprice of 310p after it soldits handset business toSamsung. UBS says themove cements CSRsposition as a nicheplatform player.

DASHBOARDCITY NEW YORKREPORT

YOUR ONE-STOP SHOP FOR JOB MOVES,BROKER VIEWS AND MARKET REPORTS

FTSE

12Jul 13Jul 16Jul 17Jul 18Jul

5,700

5,680

5,660

5,640

5,620

5,600

5,685.7718 Jul

Sage Group PLC

12Jul 13Jul 17Jul 18Jul16Jul

p286

284

282

280

278

276

274

281.1018 Jul

Coup PLage GrS

12Jul 13Jul 17Jul 18Jul16Jul

p286

284

822

280

782

762

742

18 Jul1281.

18Jul

18 Jul10

SAGEMerchant Securities hasdowngraded the softwaregroup from buy tohold with a target priceof 280p after an investorday and a disappointingmanagement update. Thebroker says Sage is nowunderperforming in 2012.

Optos PLC

12 Jul 13 Jul 17 Jul 18 Jul16 Jul

p194

190

192

188

186

184

182

180

180.2518 Jul

OPTOSN+1 Brewin has movedthe medical technologyfirm from hold toreduce with a targetprice of 172p, saying asubdued third quarterleaves little room for

enthusiasm and much toprove.

Baroda PioneerThe asset management firm hasappointed Jaideep Bhattacharyaas its managing director. He joinsfrom UTI Mutual Fund, where hewas previously group presidentand chief marketing officer.Bhattacharya has also held seniorroles at ICICI, the Indian bank.

VTB CapitalPeter Stonor has been appointed global head ofinfrastructure and transport for VTB Capital, the investment

banking division of VTB, the Russian bank. He was most

recently managing director of RBS Global Banking &Markets, and he has also held senior roles at Macquarie andABN Amro Corporate Finance.

DLA PiperAdam Cooke has been appointed partner in the law firmsintellectual property and technology practice. He joins fromHogan Lovells, where he was a London-based partner.Cooke has over 20 years experience as a litigator, andfocuses on multi-jurisdictional patent litigation.

Investec Asset FinanceMark Booth has been appointed to the asset finance team in

Investecs lease financing business. He most recently

worked for Lombard, where he variously held the positionsof regional vendor manager and director of asset finance.

Catalyst DevelopmentThe capital markets technology consultancy has appointedSandy McFadzean to its clearing team. He joins fromDeloitte, where he was a consulting manager in its capitalmarkets practice. He has also held roles at Morgan Stanley.

Vedanta ResourcesThe resources group has appointed Geoffrey Green to itsboard as a non-executive director. He has been a partner atAshurst, the law firm, since 1983, and has previously served

as senior partner and chairman at the same firm.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

CITY MOVES

To appear in CITYMOVES please email your career updates and pictures to [email protected]

in association with

Credit card company AmericanExpress said yesterday itssecond-quarter profit rosemarginally as card-memberspending growth moderated.

The company earned $1.34bn,slightly up on the $1.33bn earn-ings it reported a year ago.

Total revenue, netof interest expense,

was $7.96bn, up five percent.

Spending on its cards grew

at a slower pace as overall USconsumer confidence fell due toa weak economic recovery.

American Express growth levels off

GREENHILL last night posted asecond-quarter profit thatmissed analysts estimates asits advisory revenue nearlyhalved.

The firm earned $2.2m com-pared with $21.5m last year.

Shares of the company fell

three per cent inafter-hours trade.

The investment banksaid revenues fell sevenper cent to $130m, which it

blamed partly on a globalslump in mergers and acquisi-tions activity.

Greenhills advisory revenues slump

US BANCORP yesterdayreported a higher-than-expectedquarterly net income of$1.41bn, up 15 per cent on a

year ago, as total loans grew and

the fifth-largest US commercialbank set aside less money tocover soured loans.

Mortgage bankingrevenue more thandoubled to $490m froma year earlier.The firm said fees income

had grown and that it hadmade progress onstrengthening its balance sheet.

US Bancorp reports earnings jump

HONEYWELL Internationalposted an 11.7 per cent rise inquarterly profit yesterday,topping Wall Street forecasts, asstrong US demand for building-control systems and specialtychemicals offset weakness in

Europe.The firm earned$905m in the quarter, inspite of weaker-than-expected revenues, and itraised the low end of itsforecasts for the year.

Honeywell beats Wall Street forecasts

US corporate results round-upNEWS

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PRESIDENT Barack Obamascampaign has expertlycontrolled the electionsnarrative over the course ofthis week: probing Mitt

Romneys tenure at Bain Capital andhis reticence to release his pre-2010tax returns. Its sublime politics, atactful devil you know distractionfrom the countrys economic woes.

The Democratic offensive has gonefrom the tenuous to the grosslyabsurd, shaping a picture of Romneyas not just unpatriotic, butdownright corrupt. Fact checkers atthe Washington Post have been keptbusy, repeatedly slapping down theObama campaigns accusations.However, the political rewards to be

reaped from character assassination

THE government has announcedmore schemes to stimulateinvestment. We can now addCredit Enhancement andExport Finance Guarantees to

previous measures like Funding forLending, Credit Easing and theNational Loans Guarantee Scheme.Against the backdrop of a further

growth forecast downgrade from theInternational Monetary Fund, theneed to be seen to do somethingseems irresistible for the coalition.

Since infrastructure is seen as a verygood thing across the political spec-trum, the Treasury team presumablyfelt they had nothing to lose byannouncing the Credit Enhancementscheme to help unlock 40bn forinfrastructure projects. Besides, theschemes will not be directly funded,but will entail guarantees againstdownside risks on a project-by-projectbasis. What could possibly go wrong?

For all intents and purposes, guaran-tees are just a means of piling poten-tial liabilities for infrastructureprojects off-balance sheet. Think of thePrivate Finance Initiative or the

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Political paralysis is

stymying a ready andwaiting private sector

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.

18THURSDAY 19 JULY 2012

RYAN BOURNE

We need supply-side reforms notmore off-balance sheet spending

National Loans Guarantee Scheme.Last week, the Office for BudgetResponsibilitys Fiscal SustainabilityReport showed us what this really

means whereas the official publicdebt in 2010/11 was 905bn (60.5 percent), the overall net liability for thesame year was 1,195bn 77.2 per centof GDP, or over 150 per cent once youinclude the interventions made dur-ing the financial crisis.The announcement of these schemes

represents a shift away from Plan A,and is indicative of muddled govern-ment thinking and a failure to get thepublic finances under control. Realpublic expenditure fell just 2.2 percent between 2009/10 and 2011/12. Butcurrent expenditure actuallyincreased by 2.4 per cent meaning it

has been cuts to the investment budg-et on the spending side, along with taxhikes, which have reduced the deficitby a quarter so far. So we now have theprospect of the government, havingcut the investment budget, guarantee-ing the very same investments off-bal-ance sheet.

Rather than dreaming up innovativeways of concealing new governmentdebt, the governments focus shouldbe solely on raising our medium-termgrowth rate: taking measures to

enhance productivity and improve ourcompetitiveness. And yes, part of thisrequires reducing the size of the stateby genuinely cutting spending.

Good infrastructure is, of course,necessary for growth. And thats whythe government should allow the pri-vate sector to undertake genuinely eco-nomic projects.

Most obvious here is a third runwayat Heathrow, essential to maintaininga competitive hub in the UK. The pri-vate sector is ready and waiting todeliver, but political paralysis is likelyto kick the can down the road until2015 at the earliest, meaning lost trade

and export opportunities. Likewise,the success of private sector roadbuilding and maintenance around theworld shows a state monopoly of theroad network is neither necessary nordesirable.Though tempered by strict criteria,

the governments plan will insteadprovide public guarantees to projects

which private investors currently con-sider too risky. We have been herebefore see the states failed interven-tion in British Leyland in 1974. For thisreason, they could well be economical-ly damaging. The risk is that unwant-ed, inefficient infrastructure will thenfeed through to increases in damagingtaxation for all of us, and higher billsfor consumers undermining anytemporary employment boost. Youonly have to look at the decision to

build HS2 (the planned high-speed rail-way), to subsidise wind-farms but nonew nuclear plants, or the empty air-port terminals in Spain, to see thatgovernmental approaches to infra-structure investment are not alwayseconomically rigorous.

If the government really wants toimprove the risk/reward ratio, thenrather than underwriting question-able projects, it should look to the sup-ply-side. Undo the planning laws andregulations which make good eco-

nomic infrastructure projects unvi-able. Shape the tax system toacknowledge the role of risk-taking,and dont penalise success. Stop pick-ing winners in energy infrastructure,instead set a framework that allowsthe most economic infrastructure out-comes given energy cost and environ-mental ambitions.A radical liberal agenda would have

far more beneficial long-term out-comes than attempts to cajole fundsinto taking part in risky projects, withtaxpayers taking the downside hit.Ryan Bourne is head of economic research

at the Centre for Policy Studies.

are often too lucrative to ignore especially when the accused repeatsthe falsehood. Governor ScottWalker, who recently won a hotlycontested recall election inWisconsin, advised Romney tonever fight a battle on your heels.

But in the face of the Obamaonslaught comes an opportunity. At

Bain, Romney overhauled or

provided seed funding to Americanbrands that have boomed and enjoyglobal name recognition. Thats afact. And one that, unless embraced,will be further obfuscated to theRepublicans detriment. Romneydoesnt just have to defend his ownwealth and success, but the veryconcept of economic aspirationitself. Obamas utterance that ifyouve been successful, you didn'tget there on your own certainlyhelps. Its indicative of a Presidentwith no experience in the privatesector or understanding of jobcreation. The same can be said of hisattacks on Bain Capital: ignorance.Thats not just a mere accusation the unemployment numbers say so.

And yet the Obamas decision to

double down on his attacks onRomney may only go so far. LikeRomney in the Republicanprimaries, the Presidents personalapproval among the electorate maysuffer if his only recourse over thenext few months is to bombard hisopponent with smears. Alreadyconcerns are mounting thatObamas ongoing offensive and taxthe rich populism may be off-putting to suburban voters. Whatsmore, the Obama campaign can onlyexploit its financial advantage for solong as its expending resourcesraised during the primary process.Obama has vastly outraised andoutspent his opponent, saturatingthe airwaves; but equilibrium in the

media wars will be restored in late

August when Romney can spendresources designated for theelection. Its how he does it thatmatters.

Initial polling suggests that thelatest attacks on Romneys recordhave had little or no impact thus far.But its still early the race remainsdeadlocked. The attacks will notabate, but pressure may also start tomount on Romney fromconservatives to make the case abouthis successful business career. Whoknows with the Presidentscampaign playing fast and loosewith the truth, the electorate mightfinally appreciate some candour.

Ewan Watt is a Washington DC-basedconsultant. You can follow him on Twitter

on @ewancwatt

THE WHITEHOUSE RACE

EWAN WATT

Romney needs to fight Obamas slurs against his successful business career

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General enquires: 020 8267 4043 | [email protected] | Awards night: Wednesday 17 October.

19

In praise of Mervyn[Re: Somebody needs to guard the City ofLondons guardians, yesterday]To me the story comes across a littledifferently. The recent facts on Libor point toregulators knowing that the rate wasrigged, but doing nothing or at leastnothing in a timely fashion. But Mervyn Kingsucceeded where our current generation ofpoliticians has failed. He managed to tuneinto public perception of what wasnecessary regarding the leadership ofBarclays and, by weight of influence and notcoercion, effected the resignation of BobDiamond. He borders on being the last manstanding fit to regulate the banking sector.Needless to say, politicians now want hispower stripped away.

Kevin Wales

Compact cities[Re: Londons homes are still horriblyexpensive for first time buyers, Monday]Given current pressures on housing inLondon, why do we build so few high-riseapartment buildings? Its a feasiblealternative to the political impossibility ofexpanding sprawl out onto the Green Belt.

Alan Durrant

[Re: Ignore the IMF: Forecasts have ahistory of being unreliable, yesterday]Its tempting to follow Paul Ormerods pleato ignore IMF forecasts. But is the Britisheconomy doing well? Yes, some businesssurveys contradict official GDP figures. Butthey only question the degree of poorperformance, not its substance.

Hannah Fielder

AS ATHLETES make theirfinal preparations for theOlympics,

cityam 2012-07-19

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