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guage, sources told City A.M.When a senior London-based direc-tor with Meddings job title waswarned by a North American col-league in 2006 that its Iran dealingscould cause reputational damage,the exec is said to have replied: Youf***ing Americans. Who are you totell us, the rest of the world, thatwere not going to deal withIranians.
Nick Ziegelasch, equity analyst atKillik & Co, said while a fine was like-ly, the possible revocation of thefirms New York licence would pose amuch more serious threat.
The bank will be impacted by thesheer scale of transactions that itputs through its US clearing system,he said.
THE US arm of Deloitte yesterdaydenied any wrongdoing in itsdealings with Standard Chartered,after the advisory firm was accusedof colluding with its client toconceal billions of dollars intransactions through Iran.
Deloitte Financial AdvisoryServices performed its role asindependent consultant properlyand had no knowledge of any allegedmisconduct by bank employees, itsaid in a statement yesterday,adding: Allegations otherwise areunsupported by the facts.
The damning US report intoStandard Chartereds dealings withIran claimed that Deloitte employeeshid information that would haverevealed the banks contact withIranian entities, agreeing to submit awatered-down draft report as thealternative would be too much andtoo politically sensitive for bothStandard Chartered Bank andDeloitte. It also said the firm passedsensitive information on money-laundering investigations into otherbanks onto Standard Chartered.
BY ELIZABETH FOURNIER
ALMOST a quarter was wiped fromStandard Chartereds market valueyesterday as the global banking gianthit back at US allegations it hadschemed with Iran to hide $250bn(160bn) worth of transactions.
Shares in London dived 16.7 percent after closing down almost 15per cent in Hong Kong, as investorsreacted to claims by the New YorkState Financial Services Departmentthat the bank routed 60,000 secrettransactions to reap hundreds of mil-lions of dollars in fees over nearly adecade.Yesterdays spiralling share price
meant the bank has lost 24 per centof its market capitalisation since theshock announcement just beforeMondays close. The stock had earlier
slumped as low as 10.92, the lowestlevel for three years.Standard Chartered issued a state-
ment early yesterday morning in abid to salvage its reputation, whichhas until this week been untar-nished by the growing number ofscandals engulfing Britains topbanks.
The bank said it does not believethe order issued by the DFS presentsa full and accurate picture of thefacts.The fightback comes after the US
regulator, led by Benjamin Lawsky,threatened to revoke StandardChartereds US banking licence andsummoned executives to New Yorkon 15 August to explain its actions,which took place between 2001 and2010.The report has put intense pressure
on Peter Sands, who was promotedfrom finance director to chief execu-tive in November 2006, as well asfinance chief Richard Meddings,who has been linked with one of themore inflammatory remarks in thereport.
Meddings has told friends privatelythat he doesnt recall using such lan-
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INVESTORSDESERTSTAN CHART STOCK
Deloittes USarm draggedinto scandal
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Follow me on Twitter: @allisterheath
IN BRIEFPfizer settles bribery charge Pfizer has agreed to pay $60.2m
(38.5m) to settle a US governmentprobe of the drugmaker's use of illegalpayments to win business overseas,American government officials saidyesterday. The settlement is part of acrackdown on bribery bymultinationals that has hit several ofthe world's biggest pharmaceuticalfirms. Pfizer became the firstpharmaceutical company to volunteerinformation to the Justice Departmentin 2004, but the case has taken yearsto resolve. Last year, Johnson &Johnson agreed to pay $70m to settleUS charges that it paid bribes andkickbacks to win business in Greece,Iraq, Poland and Romania, the firstsuch settlement by a big drug firm.
Swiss foreign reserves hit record The Swiss central bank held a
record level of foreign reserves in Julyas it held back the Swiss francsstrength against the euro. For thethird month in a row, Switzerlandadded tens of billions to its accounts,with total holdings up from SFr365bn(241bn) in June to SFr406bn. Thenational bank has pegged its currencyat SFr1.20 per euro since Septemberlast year and has promised to continuethis tactic, but with rising interest inthe country, seen as a safe bet byinvestors, the central bank is beingforced to buy more funds each month.The Swedish krona and Australiandollar are believed to have benefitedfrom the bank buying euros andselling them for other currencies. Thebalance sheet has risen 70 per centsince April.
Co-op boss Peter Marksto leave the firm in MayCO-OPERATIVE Group chiefexecutive Peter Marks, who rosefrom the shop floor to lead thesupermarket group, yesterdayannounced he would retire fromthe business next May after sixyears at the helm.
Marks, who led a deal in June tobuy over 600 bank branches fromLloyds Banking Group, said it wastime to hang up my boots after45 years with the firm.
It is understood the Co-op hasappointed executive search firmSam Allen Associates to headhuntpotential candidates to replacehim. Both external and internalcandidates are being considered.
The Co-operative Group, longseen as a staple of the supermarketsector, moved to acquire 632 Lloydsbranches to boost its high streetbanking capability.
Marks said he had wanted to stepdown in the middle of last year butdecided against it to focus ongetting an agreement with Lloyds.
He added his priority over thenext nine months would be gettingthe Lloyds deal signed, sealed anddelivered.
His successor will need to focuson the consolidation of the Co-opsrag tag collection of businesses,which include retail, banking,
Tea market strained as output fallsThe price of tea has jumped to a 2-yearhigh as poor crops in some of the worldsmost important producers strain supplies.Dry conditions, poor rains and frosts havehit tea production in Kenya, the largestexporter of black tea. A bad monsoon hasreduced production prospects in India andSri Lanka, two other major exporters.
Advanced energy plant in TeessideThe worlds largest renewable energyplant, which will use advanced
gasification technology to produceenergy from waste, is to be built nearBillingham in Teesside. Air Products, thedeveloper and operator of the plant,confirmed the $500m project yesterday.
Yields on US junk debt hit new lowsDemand for US junk-rated debt haspropelled yields towards new lows, asinvestors seeking returns in a low-interestrate environment have been attracted bya record number of deals so far thismonth. The Barclays High Yield index hasdropped to 6.63 per cent, just two basispoints shy of its all-time low of 6.61 percent set in May 2011.
Missing monsoon to drive up pricesThe weakest monsoon for years and aworsening drought in India is fuellingfresh concerns about a surge in globalfood prices. Delhi announced last weekthat the country was facing a drought.
Alzheimers treatment hopes hitThe jab, called bapineuzumab, wasabandoned yesterday by the Irishbusiness Elan and its American partners,Pfizer and Johnson & Johnson, after itfailed to slow the march of dementia.
Cameron to push ahead withboundary reformDavid Cameron has pledged to push aheadwith reforms to parliamentary boundarieswithout Nick Clegg's support, setting up abitter clash with the Lib Dems.
Global slump risk falls as worldmoney reboundsThe first green shoots have begun toemerge in money supply data from acrossthe world, raising hopes of a tentativeglobal recovery next year.
Romney attacks Obama over welfarereformEscalating an attack on his rival for theWhite House, Mitt Romney yesterdayaccused President Barack Obama ofgutting welfare's work requirement.
DreamWorks to challenge rivalDisney in ShanghaiDreamWorks's plan to lend its name to a$3.1bn entertainment district in Shanghaipushes the Southern California moviestudio further into the Chinese market.
RATINGS agency Standard &Poors (S&P) revised it outlook onGreece to negative last night andsaid it would need more funds toprevent a default.
S&P, which has a CCC rating onGreek sovereign debt, said thechange reflected the possibilityof a downgrade if Greece missesits targets and thus fails to securethe next tranche of loans from theEU and International MonetaryFund.
It added that it sees the Greekeconomy shrinking by around 11
S&P cuts Greekoutlook further
Co-op chief Peter Marks starting stacking shelves in a supermarket in his native Bradford
2 NEWS
BY JAMES TITCOMB
BY MICHAEL BOW
To contact the newsdesk email [email protected]
REMEMBER sub-prime lending?Fannie Mae and Freddie Macsabsurd backing of mortgagesfor those who couldnt afford to
pay the money back? The USgovernments decision to promotesub-prime lending? The FederalReserves crazy decision to inflate
endless bubbles via excessively loosemonetary policy during the goodtimes, and its destructivecommitment to step in to bail out thestock market every time it dipped?The huge imbalances at the heart ofthe global economy caused byinsufficient US savings and excessiveconsumption, helped by Americascontrol of the worlds reservecurrency, the greenback? Yes, all ofthese daft policies have two things incommon. They were made in the USA and they were some of the keycauses of the financial crisis.
EDITORSLETTER
ALLISTER HEATH
Most countries are responsible for the crisis not just the UK
WEDNESDAY 8 AUGUST 2012
Of course, most other countries alsomade terrible mistakes. The BaselAccords, which imposed ludicrouslyinadequate capital standards, andwhich stipulated that far fewerreserves needed to be set aside againstCDOs than against actual mortgages,were an international disaster, aswere many other accounting ruleswhich helped exacerbate the crisis.The Bank of England made many ofthe Feds errors; the UKs implicitguarantees for banks helped wreak
immense havoc. Eurozone bankswere disastrously mismanaged.
It is undoubtedly also the case thatmany absurd investment decisionswere taken in the London offices ofglobal banks but plenty were alsomade in Frankfurt and in Wall Street.Yes, AIGs London office was a disaster
zone, as was Lehmans but thesewere US firms, ultimately supervisedby US regulators, and the dud prod-ucts against which they insured or inwhich they invested were oftenAmerican. The ludicrous historicalrevisionism which is now seeingmany US commentators pin theblame for all the worlds problems onLondon is a gross exaggeration, ashameless instance of buck-passing.Dont get me wrong: UK monetaryand regulatory policies were a disas-trous joke but that was true of mostcountries. Libor is a disgrace, of
tors. It is disturbing that merely hav-ing a regulator acting almost like apolitician, in typically aggressivestyle, rather than as an objective refer-ee make allegations against a for-eign firm can slash its share price by aquarter in a matter of hours.
Britain needs to treat white collar
crime as harshly as it treats otherkinds of criminal actions. But theredoes seem to be an attempt in someUS circles to use recent scandals as anexcuse to try and engage in neo-pro-tectionist economic warfare. Weshould see this for what it is, clean upour own house, but remember, asNew York does with Wall Street, thata thriving, healthy and honestLondon-based financial servicesindustry is the UKs national interest.
course, but Britain hardly has amonopoly on financial fraud anddont tell me that only British bankshave ever engaged in money launder-ing. To repeat: this is not to deny theimmensity of Britains problems, or tocondone fraud. Quite the contrary:the UK needs to launch a crackdown
on white-collar crime. Anybody guiltyof breaking the law or of attemptingto con or defraud people should beseverely punished. We should followthe American lead in that respect.
But one other principal that is beingforgotten here is that individuals andfirms should be treated as innocentuntil proven guilty. There is a hugedifference between the case ofBarclays, which admitted to the Liborwrong-doing and which settled withregulators, and Standard Chartered,which contests most of the allega-tions made by the New York regula-
travel and funeral services.The business has gone through
massive change and grownenormously its time now to reallyintegrate those businesses, Markssaid.
Strategically, we need to buildscale to compete.
Asked about who should replacehim, Marks who will step down atthe firms next annual meeting said: This is a decision for the boardand I want to respect their authority.They will make the decision butwhat it needs is someone who is a
strategic business person.He added: I have always planned
to target 63 as the time to hang upmy boots and Im 63 this October. Ivegot mixed feelings about it, but Imready for it.
Its been quite tough over the lastsix years and it takes a lot out ofyou Im ready for a rest.
Marks said he would not divorcehimself from the business worldcompletely, and was consideringnon-executive roles or chairmanshipof a business in future on a part-timebasis.
The new jobs website for London professionalsCITYAMCAREERS.com
WHAT THE OTHER PAPERS SAY THIS MORNING
EMI recorded an increase in salesyesterday and narrowed its pre-tax losses to 349m for the year to
April as it wrote down the valueof that were sold on to Universaland Sony.
In an internal email chiefexecutive Roger Faxon said theresults showed an incrediblystrong performance against the
backdrop of a challenging state ofthe music market.
Revenues rose two per cent to1.47bn.
EMI records lossdue to buyoutsBY JAMES TITCOMB
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PROMINENT City figures raised con-cerns yesterday that US authoritiesare increasingly targeting the Britishbanking sector following damningallegations that Standard Charteredlaundered billions of dollars.The UK-listed firm is the second
bank in two months to face US criti-cism for lax money laundering con-trols, after HSBC was accused offailing to scrutinise money beingrouted from countries includingMexico and Iran.Writing in todays City A.M, John
Mann MP, a member of the Treasuryselect committee, describes anincreasing mantra in New York andWashington to expose wrondoing atBritish banks.While nobody can excuse HSBC for
alleged drugs money laundering orStandard Chartered for any Iraniansanctions busting, he says marketmanipulation, insider dealing andmoney laundering are historicallymore the culture and mindset of
City fears over
US pressure onBritish banks
BY KASMIRA JEFFORDAmerican banks than any other in theworld.
Tom Stocken, a partner at law firmPinsent Masons, also warned: We willsee further clashes between US regula-tors and European businesses due tothe extremely wide jurisdiction givento regulators by US laws.
With plenty of emails headingthrough US servers, and as most inter-national business is conducted in USdollars and all US dollar transactionsmust be cleared through the New Yorkbanking system US regulators haveplenty of scope to act.
Standard Chartered, led by Peter Sands, has been ordered to answer for Iran transactions
How Standard Chartered has outperformed
2007 2008 2009 2010 2011 2012020
40
8060
120
100
160
StandardChartered
Shareprice-rebasedto100*
LloydsHSBC
RBSBarclays
140
The revelation...comes as something of a shock to us, not least because atthe companys results presentation last week, management stood up and proudlyhighlighted how the group had avoided such scandals. Surely this investiga-tion... ought to have been considered when making these comments?
ANALYST VIEWS
There is some irony that a few days after describing its approach asboring at its interims, Standard Chartered should become embroiled in yetanother potential banking scandal. The allegations serve to add morerisk to an already beleaguered sector.
Our opinion of the [allegations] ... suggests [it ]is more likely to incur afine, and should be able to fulfill the conditions necessary to avoid the potential-ly more serious threat of losing its banking licence. These a llegationsshould be seen in the context of [the banks] aggregate risk profile.
WHAT WAS YOURREACTION TO THE
ALLEGATIONS?By Kasmira JeffordGARETH GREENWOOD SHORE CAPITAL
RICHARD HUNTER HARGREAVES LANSDOWN
GARETH HUNT CANACCORD GENUITY
THE FORUM: Page 14
WEDNESDAY 8 AUGUST 20123NEWScityam.com
BENJAMIN Lawsky is no stranger to politics,serving as chief of staff to New Yorks gover-nor Andrew Cuomo before taking the top jobat the states newly formed Department ofFinancial Services last October. His activitysince has led to whispers that he may have aneye on higher office. The 42-year-old tookhas gone after several large foreclosure prac-tices and insurers, thought beyond the briefof the state regulator.When Lawsky announced he was taking on
Standard Chartered this week, he hit head-lines by calling the bank a rogue institu-tion. The timing of the allegations tookmany by surprise not least StandardChartered, which claimed they came in themiddle of a review it was conducting with anumber of US authorities.The case marks a new-found assertivenessfor a state regulator. Historically, investiga-tions of foreign banks fell to federal bodies.But perhaps it should not come as such a sur-
prise: Lawskys job description on the depart-ments website includes keeping New Yorkon the cutting edge as the financial capital ofthe world.The weeks developments have led commen-tators to compare Lawsky to ambitious NewYork prosecutors Rudy Giuliani and EliotSpitzer, who parachuted into politics afterdoing battle with the banks. As a prosecutor,Giuliani took on insider traders, before serv-ing eight years as mayor, and entering the
early stages of the 2008 presidential race.Spitzer won several large settlements fromWall Street firms following the collapse of thedot.com bubble before becoming New Yorksgovernor in 2007, resigning the post after aprostitution scandal.With both presidential candidates talkingtough on Iran, a successful prosecution ofStandard Chartered wouldnt harm Lawskyspolitical prospects.
by James Titcomb
PROFILE: THE MAN THEYRE CALLING THE NEW ELIOT SPITZER
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SHAWBROOK, the fast-growing bank
that services businesses unable toaccess funding from major lenders,today announced that it hit break-even after trading for less than ayear.
We are now making a smallprofit on a monthly basis, interimchief executive Philip George toldCity A.M. Its good, solid organicgrowth with plenty of demand forall of our lending products.
Shawbrook is one of a number ofnew banks, including Metro Bankand Aldermore, that have sprungup since the credit crunch, seekingto fill the funding gap left by biggerinstitutions which are scraping torepair balance sheets.
The SME [small and mediumenterprise] market is our biggestopportunity and is our biggestdemand. These are prime customerswho would have sailed to any other
major bank a few years ago but forreasons with capital restraints theyare having trouble, Georgeexplained.
Shawbrook now has total assets of850m a four-fold increase sinceits launch in October 2011 and hasbuilt a base of 18,000 loancustomers and 18,500 savers. Butthis still pales in comparison to themajor players in the sector.
Upstart bankShawbrook hitsprofitability
BY JAMES WATERSON
A FORMER Lloyds Banking Groupanti-fraud chief yesterday admittedcheating the bank of2.5m in what prosecu-tors called a hugebreach of trust againsther employer.Jessica Harper, who
served as the state-backed firms interimhead of fraud and secu-rity for digital bank-ing, faces a lengthyjail sentence af terpleading guilty tofraud and money
laundering atS o u t h w a r k Crown Court insouth London.
Harper, 50,s u b m i t t e dfalse invoicesto claim atotal of 2 , 4 6 3 , 7 5 0between late
Former Lloydssecurity chief
admits to fraudBY HARRY BANKS
2007 and December last year, thecourt heard.The court was told Harper had
spent some of the money on proper-ty in France, but had given back
300,000 and would be able torepay a further 700,000 from
the imminent sale of her home.She was released on bail and
will be sentenced at a laterdate.
Jessica Harper has today beenconvicted of the type of
crime the bank employedher to combat ... she hasadmitted to a hugebreach of trust against
her former employer,
the CrownProsecution Servicesaid.
Lloyds said itcould not com-ment while thecourt process con-tinued.
Jessica Harper haspleaded guilty
MANCHESTER United remains ontrack for a Friday listing in New
York, with the clubs initial publicoffering (IPO) appearing to have
inspired sufficient demand to sellthe new 16.7m class A shares.
The shares, different from thoseheld by the owners, will carry onlyone tenth of the voting rights and
will not yield dividends a movethat led some analysts to question
whether the IPO would get off theground.
Yet despite having to scrap itsplans for an IPO in Singapore
Manchester Utd to kick off IPOafter winning enough support
BY CITY A.M. REPORTER earlier in the year, the club is nowexpected to fetch the targeted $16-$20 price in New York, according toBloomberg, while other reports saythat the roadshow has progressed
better than expected.
The Glazers hope the float willcounter debt repayments. The club
was left shouldering nearly 800min debt after the Glazers 2005takeover. The family will alsoreceive funds from the share sales,passing on a portion to seniorUnited staffers. Angry fans havesent more than 1m emails ofcomplaint to the clubs sponsorsand banks.
INSURER Legal & General (L&G) isconsidering a number of smalltakeovers to accelerate growth, itsnew chief executive said yesterday,as the firm unveiled a strong set ofhalf-year results.
You'll probably see some bolt-onacquisitions the balance sheet is
very strong and there are lots ofassets for sale, said Nigel Wilson,
who took over last month.Well retain our strategic and
financial discipline, but there willbe a lot more opportunities to
Legal & General considerstakeovers to boost growth
BY JAMES WATERSON accelerate our growth throughbolt-on acquisitions.
Operating profit for the first halfof 2012 increased five per cent to518m, ahead of expectations. Thisenabled the board to increase theinterim dividend by 18 per cent to1.96p per share.
However analyst Kevin Ryan atInvestec sounded a cautious noteand retained his sellrecommendation: We continue tosee Legal & General as strategicallychallenged, with just 12 per cent ofoperating profit coming fromoutside the UK.
MUNICH Re, the worlds largestreinsurance company, yesterdayannounced a consolidated profit of812m (644m) for the threemonths to the end of June, puttingthe firm on course to beat its year-end targets.
Chief executive Nikolaus vonBomhard said he regarded theresults as a notableaccomplishment given the state ofthe Eurozone.
With the profit for the firsthalf-year, we have achieved well
Munich Re beats expectationsand targets profits of 2.5bn
BY JAMES WATERSON over half our target of around2.5bn, so we are well on track toslightly surpass the originallyenvisaged profit for the year, headded.
Gross premiums hit 12.6bn, anincrease of 5.5 per cent, while thefirms bottom line was boosted byan absence of major claims.
However the German f irm mustset aside 160m for claimsresulting from crop damage in theUS after this summers droughtsand also warned of the potentialfor big payouts following thisyears hurricane season.
KNIGHT Capital shares showed signsof improvement yesterday, as theembattled market maker began toregain some of the share volume lostafter software glitch caused a hugetrading loss last week.
Meanwhile, NYSE Euronext saidyesterday Knight would resume itsresponsibilities as a designatedmarket maker on the New YorkStock Exchange next Monday.
On Monday, Knight secured a$400m (256m) rescue from aconsortium of investors thatallowed it to keep its doors open.
Knight Capitalshares higher
BY CITY A.M. REPORTER
WEDNESDAY 8 AUGUST 20125NEWScityam.com
The Glazers: Avram (above) and Malcolm (right)
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INTERCONTINENTAL Hotels, theworlds biggest hotelier, yesterdaypromised to return $1bn (640bn) toinvestors after profits jumped by sixper cent in the first half of the year.
Shares rose more than seven percent after the owner of the HolidayInn and Crowne Plaza brandsannounced a special dividend in thefourth quarter, at a cost of $500m,along with a $500m share buyback inthe same three months.
It plans to use proceeds from thelooming disposal of its New YorkBarclay hotel, which analysts expect
to fetch around $300m, to fund thecapital return. The group said saletalks are ongoing.
InterContinental also revealed plansto put its flagship London Park Lanehotel on the market in the secondhalf of next year, as it pursues its strat-egy of selling assets in return for man-agement contracts.The news came as the company
reported a six per cent rise in operat-ing profit to $286m, slightly ahead ofanalyst forecasts.
Hotel group toreturn $1bn to
shareholdersBY KASMIRA JEFFORD Growth in global revenue per avail-
able room rose 6.5 per cent, fuelled bystrong growth in the Americas andGreater China.
InterContinental came under firelast week, after the Office of FairTrading accused the hotelier of collud-ing with two major online travelagents to restrict discounts on rooms.Tom Singer, chief financial officer,
said the OFT has misunderstoodhow business is conducted online.
We have extremely strong adviceconfirming our view that we haventbroken any UK competition laws, hesaid.
Xstrata puts cuts over GlencoreMINER Xstrata is pushing on withplans to slash unit costs by $390m(249m) this year despite thedistraction of Glencores long-running attempts to merge, it saidyesterday.
The mining giant, whichreported a 42 per cent drop inoperating profit to $2.45bn, cutunit costs in real terms by $105min the first half of the year, as itbattled a cyclical slowdown incommodity prices.
It now expects to slash about
BY MICHAEL BOW $970m from its expenses this year,cutting $390m from unit costs.
These savings are intended tooffset $580m of cost increasesresulting from creaking mininginfrastructure.
Chief executive Mick Davis calledthe savings credible.
He said cuts were achieveddespite the proposed merger withGlencore, which posed a potentialrisk of distraction.
A deal between the two iscurrently up in the air after aprominent Xstrata investor, QatarHoldings, demanded better terms.
Standard Banks Peter Daveycalled yesterdays profits, asurprisingly strong result.
InterContinentals asset salesshow off an intelligent strategy
INTERCONTINENTALs decision toreturn 1bn to shareholders is asmart one. By selling off assets topay its investors a special
dividend, the hotel group is givingthem exactly what they want proofthat the firms balance sheet is beingmanaged efficiently, combined witha hefty chunk of cash for theirloyalty.Though hotels are an obvious vic-
tim of an economic slowdown par-
ticularly susceptible to the plight ofthe so-called squeezed middle thereare plenty of long-term positives onInterContinentals side.The groups portfolio of well-known
brands means it will remain the go-tochoice for established customers, andan increasing pool of retirement agetravellers to target in both its devel-oped and emerging markets gives itexposure to all the right places.
In announcing the two-stage pay-out, the firm has also distracted
attention from the Office of FairTradings recent allegations that
InterContinental along with travelwebsites Booking.com and Expedia broke competition law by signingdeals restricting the discountsoffered on hotel rooms.
Investors were certainly mollified sending shares up more than six percent yesterday after hearing of theirwindfall.
If InterContinental sticks to itsasset-light balance sheet and keepshanding out cash, investors areunlikely to change their minds soon.
BOTTOMLINE
ELIZABETH FOURNIER
Intercontinental has put its New York Barclay hotel on the block
InterContinental Hotels Group PLC
1 Aug 3 Aug 6 Aug 7 Aug2 Aug
1,600
1,650
1,700
1,750
1,800 p 1,725.007 Aug
Xstrata PLC
1 Aug 3 Aug 6 Aug 7 Aug2 Aug
840
860
880
900
920 p 896.907 Aug
BRITAINS largest bakery chainGreggs yesterday blamed recordlevels of rainfall after like-for-likesales for the first half of 2012 fell2.4 per cent.
The group pushed ahead with 33store openings during the period,pushing total sales 4.5 per centhigher to 350m in the six monthsto 30 June.
Pre-tax profit fell 4.5 per cent to16.5m.
BROADCASTER Global Radio hasreported a 27.7m pre-tax loss due toa 63m payout to investors in theyear to March, but market-beatingadvertising revenues boostedturnover during the same period.
The owner of stations Heart andClassic said underlying earningsincreased 12.5 per cent to 56.6m,while revenues rose to 209.4m.Global Radios directors took a payhit, down from 5.6m to 4.3m.
Greggs blamesrain for its fall
Global Radio inred after payoff
BY KASMIRA JEFFORD BY JAMES TITCOMB
CITY A.M. AWARDS: Page 11
WEDNESDAY 8 AUGUST 20127NEWScityam.com
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THE CHURCH of England has soldits stake in News Corporation overconcerns about the governance ofRupert Murdochs empire.The Church opted to divest of its
1.9m stake after learning ofMurdochs plans to retain thechairmanship.
The church had called forindependent leadership after thephone hacking scandal. It was notsatisfied that News Corp hadshown sufficient commitment toimplement necessary corporate
governance reform.
Church share inNews Corp sold
BY JAMES TITCOMB
THREADNEEDLE Investmentsyesterday captured $800m (510m) of
fresh assets after striking a deal tomanage portfolios for South Africanfund manager Stanlib.
Stanlib, which itself manages$44bn, will transfer its global andemerging market equity portfoliosfrom UK fund manager Origin AssetManagement over to Threadneedleunder a segregated mandate.
Threadneedle head of globalequities William Davies and head ofAsia Pacific equities VanessaDonegan will lead the team.
Threadneedlepicks up work
BY MICHAEL BOW
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G E T T Y
BRITAINS latest slump may not be assevere as first feared, according to afresh set of economic data.While initial estimates showed a
0.7 per cent contraction in output inthe second quarter, industrial figuresreleased yesterday exceeded expecta-tions -- suggesting that the dismalGDP measure could be revisedupwards.
Industrial production sank by 2.5per cent between May and June, withmanufacturing falling by 2.9 percent. The Office for NationalStatistics (ONS) had previously fore-casted a sharper fall, of 3.5 per cent.
The estimated impact on GDP aris-ing from this [new] data is anupwards revision of approximately
0.07 percentage points, the ONS said.And the UKs economic output
Data eases UKrecession woes
BY JULIAN HARRISbounced back in July, a leadingWestminster think tank reported yes-terday.The National Institute of Economic
and Social Research (NIESR) said thatGDP declined by 0.2 per cent in thethree months to July, as last monthsoutput offset the contraction record-ed in June.
NIESR estimate that GDP bouncedback in July to level one per centabove quarter two, former Bank ofEngland rate-setter Andrew Sentancesaid. Even without further growth inAugust and September, this implies abig quarter three rebound.
The Queens Jubilee distorted out-put figures for quarter two, which inturn is likely to flatter the quarterthree bounce, NIESR economistSimon Kirby told City A.M. Its diffi-cult to get a clear picture right now.
Once available, well look at the twoquarters combined, Kirby said.
Hope rises for ECB help as outlook worsensTHE PLIGHT of the Eurozone wasconfirmed by a raft of weakeconomic data yesterday, yetinvestors continue to hope that theEuropean Central Bank (ECB) willcome to the rescue of the embattled
single currency.Most continental equity marketsfinished higher last night, on hopesits purchase of bonds issued bytroubled member states Italy andSpain.
The day started badly for Italywith news that its economy shrankby 0.7 per cent in the secondquarter, marking a full year ofcontraction that has wiped 2.5 percent from the countrys GDP.
BY JULIAN HARRIS Meanwhile, industrial productiondropped by 1.4 per cent from May toJune, separate figures revealed.
Spains outlook was also hit bynews that the number of companiesoperating within its borders fell by1.6 per cent to 3.2m in 2011, a five-year low.
Germany, the Eurozoneseconomic powerhouse is sharing thepain. Factory orders fell 1.7 per centin June, twice as steep a drop aseconomists had expected. Ordersfrom eurozone countries plunged bynearly five per cent.
It would appear that investors aretaking the view that the worse thedata is the more likely it is the ECBwill intervene in bond markets,concluded analyst Michael Hewson
of CMC Markets last night,explaining the resilience of equitymarkets.
Despite expectations of assistancefrom the ECB, the president of theEurogroup a group of Eurozone
finance ministers was coy whenasked if he could rule out Greeceleaving the single currency.
It would be manageable but thatdoes not mean it is desirable, Jean-Claude Juncker said.
Chancellor George Osborne could be buoyed by better GDP data in the third quarter
Economic growth since 1999
2000 2002 2004 2008 20102006 2012
105
110
100
115
120
125
130
135 RealGDP-rebasedto100
U.S.
UKFrance
Japan
Italy
Germany
TOURISTS spending in the UK onVisa cards spiked in the first weekof the Olympic Games, thecompany reported yesterday.
International visitors shelledout 457m on these shoresthrough their Visa debit or creditcards, up eight per cent from thesame week last year.
Visa is a sponsor of the
Olympics, with some outlets onlyaccepting Visa or cash payments.
Games tourismboost for Visa
BY CITY A.M. REPORTER
US consumer credit posted itsweakest growth in eight months inJune as Americans reduced creditcard debt, a potentially negativesign for an economy that has
struggled to create jobs.Consumer credit grew by$6.46bn (4.13bn) in June, theFederal Reserve said yesterday, in areading that was far beloweconomists forecasts.
The Fed also said credit climbedslightly less during May thanoriginally thought.
In June, revolving credit, whichincludes credit cards, shrank byaround $3.7bn.
Growth in UScredit wanes
BY CITY A.M. REPORTER
WEDNESDAY 8 AUGUST 20128 NEWS cityam.com
THE HOSPITALITY and leisureindustry continues to suffer fromeconomic slump and the squeeze onUK consumers, said PwC.
Across the country, 332 hospitalityand leisure companies becameinsolvent in the second quarter of2012, worse than many other sectors.London alone has seen 432restaurant insolvencies since quarter
three 2010, said a report issued bythe consultancy yesterday.
PwC: Leisuresector hit hard
BY CITY A.M. REPORTER
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Meggitt lifted
by plane ordersBY HARRY BANKS
IN BRIEFBBA hit by fall in de-icing demand Aircraft services firm BBA Aviationyesterday posted a 15 per cent fall ininterim profits, due to lower de-icingrevenue. Underlying pretax profit fell to$71.7m (45.8m) from $84.6m in 2011.
Mondi warns of Europe weakness South African paper maker Mondi
revealed a 21 per cent drop in first-half
earnings yesterday and warned of weakdemand in Europe. Underlyingoperating profit fell to 269m (214m)from 354m last year.
MGM losses smaller than forecast MGM Resorts International unveiled asmaller-than-expected quarterly lossyesterday as its revenues fromoperations rose in both its casinos and
hotels.
SHARES in Ho ng Kong-listed Esprit soared by 28 per cent yesterday as investors cheered theappointment of an executive from rival Inditex. Struggling Esprit has lured Jose ManuelMartnez Gutirrez most recently group director of distribution and operations at theSpanish retail giant as its new chief executive, effective from the end of September.
INVESTORS CHEER AS ESPIRIT HIRES INDITEX MAN
Meggitt PLC
1 Aug 3 Aug2 Aug 6 Aug 7 Aug
385
390
395
400
410
405
p 405.107 Aug
AUSTERITY is paying off forPremier Foods. The debt ladenowner of iconic British food brands-- from Hovis bread to Mr Kiplingconfectionery -- is on track to axe
40bn in costs in 2012, allowing itto reach its savings target a yearearly.Premier also boasted strong first-
half sales across many of its keyproducts, boosting trading profit
by three per cent to 72.2m.However, revenues from ongoing
businesses slipped 2.3 per cent to852.3m.
Sales of the groups core PowerBrands improved by two per cent to
Premier Foods to hit cost savingtarget early after strong sales
BY CITY A.M. REPORTER418.9m, owing to strongperformances by Loyd Grossman,Batchelors and Mr Kipling.
However, rising wheat pricesfollowing severe drought in key
growing countries could dampenmargins in Premiers bread
business, which accounts forapproximately a third of total sales.Profit from the bread business fell
by 1.7 per cent to 253.1m in thefirst half of the year.
Across our portfolio we aremanaging commodity fluctuations
very well. The only area which isproving to be an exception area is
wheat. It is the only area where weare looking to pass on prices, saidchief executive Mike Clark.
OPERATING earnings at E.ON couldrise by more than 50 per cent toaround 6.7bn (5.3bn) in the firsthalf, Germanys largest utilityannounced in an unscheduled
statement ahead of its interimreport on 13 August.Last years earnings were hit by
Germanys decision to phase outnuclear power by 2022.
A settlement with RussiasGazprom over long-term supplycontracts will provide a 1bn boostto the bottom line. The deal couldalso lead to lower future prices,boosting earnings for quarters tocome, the firm added.
E.ON profit upon settlement
BY CITY A.M. REPORTER
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HEINEKENS $6bn (3.8bn) bid to
take full control of Tiger Beermaker Asia Pacific Breweries facesa challenge from a group led byThai billionaire CharoenSirivadhanabhakdi, which haslodged a higher bid to increase itsstake in APB.
Kindest Place Groups, a vehicle
Heinekens offer for Tiger Beerfaces Thai billionaire challenge
BY CITY A.M. REPORTER owned by Charoens son-in-law,yesterday made an unsolicitedoffer of S$55 a share to buy
Singapore conglomerate Fraserand Neaves (F&N) direct 7.3 percent stake in APB, F&N said in acorporate filing.
The move comes afterSingapores F&N agreed to sell itsstake in APB to Heineken forS$5.1bn, or S$50 a share.
BRITISH aircraft parts supplierMeggitt posted a 15 per cent rise infirst-half profits yesterday, led bystrong demand for new more fuel-efficient planes and a robust per-formance from its military business.The company, which supplies flight
displays and wheels to aerospaceleaders Airbus and Boeing, reportedan underlying pretax profit of168.5m. Sales rose 19 per cent to776m.The FTSE 100 group increased its
interim dividend by 12.5 per cent to3.6p per share and expressed opti-mism over its prospects, despiteuncertain defence markets.
Airbus and Boeing have strongorder books and look well set for thenext three or four years, which isobviously good for us, said Meggittchief executive Terry Twigger.
We have no problems meetingthat demand but the military out-look will be murky until the US pres-idential elections are done.
Suppliers to the civil aerospace sec-tor have been well supported byorder book growth at Airbus andBoeing. The firms expect deliveriesin 2012 to far exceed the number ofaircraft shipped last year.The worlds top two aircraft manu-
facturers are ramping up output andexpect to deliver 1,100 planes thisyear, due to growing demand fromairlines for new fuel-efficient planes.
Meggitts rivals GKN and Senior lastmonth posted strong profit growth,boosted by an uplift in orders at theiraerospace businesses.
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IT WAS the victory that saw GreatBritain break its all-time record of 20golds in a single Olympic Games, buttrack cyclist Laura Trotts omniumtriumph yesterday must have beencelebrated with particular gusto atSamsung Towers.The electronics giant has spent
megabucks on its associationwith London 2012, splashing
out for the privilege ofbeing one of just 11 toppartners and recruiting astellar cast of ambassadors.
Unfortunately forSamsung, its associationhas not brought the best ofluck to its roster of stars.David Beckham was over-looked for the mens football
Poor receptionfor some of theSamsung stars
team despite looking a cert, while theother man whose image fills thehuge facade of its Stratford store,Phillips Idowu, yesterday failed tomake the triple jump final, followinga troubled build-up to the Games.
Victoria Pendleton, another of thefirms favourites, saw her hopes ofthree gold medals dashed by not onebut two relegations, while Zara
Phillips might have claimedgold rather than silver for theeventing team, but for thepenalty on her final run.
Its not quite the curse ofGillette, whose campaign featur-ing Tiger Woods, Thierry Henryand Roger Federer precededdebacles of varying severity forthe trio, but enough to renderTrotts success, Samsungs sec-ond Team GB gold, even moresweet.
Triple jumper Phillips Idowuphoned in his medal attempt
HE MIGHT have achieved morefirsts this year than an Oxbridgecollege, but Bradley Wiggins is notthe Team GB star tipped to benefitmost from the Games. A study byScottish Widows predictsheptathlete Jessica Ennis will gainmost from sponsorship andendorsements of any British gold
winners, with Wiggo second. AndyMurray is placed third followinghis emotional triumph at
Wimbledon, with promising boxerAnthony Joshua fourth and teenagediver Tom Daley fifth.
Jess Ennis is ontrack for riches
Got A Story? Email
10 cityam.com
cityam.com/the-capitalistTHECAPITALISTWEDNESDAY 8 AUGUST 2012
ATLONDON2012
LONDON 2012 IMAGE OF THE DAY
CHINESE hurdlingfavourite Liu Xianghops down thetrack after falling inthe first round ofthe men's 110mhurdles yesterday.The athlete, whoalso struggled with
fitness during the2008 BeijingGames, insisted oncompleting thecourse, stoppingonly to kiss thefinal hurdle. He wastaken off the trackin a wheelchair,applauded by the80,000-strongcrowd.
Throughout theOlympics, City
A.M. will bepublishing itsOlympic Imageof the Day. If youhave a shot youthink ourreaders will like,please [email protected]
Introducing the Awards sponsors
CITY A.M. AWARDS 2012
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The Color CompanyThe Color Company iscentral Londons leadingdigital print company,with centres located inthe heart of the SquareMile, Canary Wharf,Soho, Aldwych, central Victoria and a 24 hourcentre in Mayfair. It consistently supportsmany City A.M. readers with their projects,both large and small, and is supporting theCity A.M. Awards for the third straight year.We feel that Investment Bank of the Yearfits well with our business as we are oftencalled upon to supply printed documents tosupport these businesses and appreciate thespeed and accuracy required by us to ensure
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TV PRESENTERS are supposed tobe unflappable and prepared to
react to any eventuality to ensuresmooth coverage, yet the BBCs JakeHumphrey displayed a discernible
unease at the Velodrome yesterday.Thats because the entertainment inthe arena isnt limited to the track.Part of the fun is watching thecameras pan to couples in the crowd,who are then obliged to smooch onthe big screen. But when directorspicked out Humphrey in the gantrywith cyclist Mark Cavendish, on punditduties for the broadcaster, he declinedto join in, prompting jeers from the6,000-strong audience.
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Diageo
The drinks giant has enjoyed an excellent year,boasting growth in emerging markets andinvesting in several new projects, including a1bn plan to increase whisky production inScotland.Brands including Smirnoff, Guinness, Baileys andJohnnie Walker posted double-digit sales growthin Latin America, Africa and Asia, thanks toincreasing demand for premium spirits amongmiddle class drinkers. These results, coupled witha strong recovery in America, countered difficultconditions in Europe.The company has made several bold acquisitionsincluding the 300m purchase of Brazilianproducer Ypica, which makes the countrys mostpopular spirit cachaa.Chief executive Paul Walsh (right) has led thecompany since 2000, making him one of theFTSE 100s longest-serving CEOs. Walshsdetermined focus on Diageos core business hasproduced excellent returns; Diageos shares havejumped by 28 per cent over the past year.
Following a six per cent sales rise over the firstquarter of the year, Diageo is now among the 10biggest companies in the FTSE 100 index.
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WEDNESDAY 8 AUGUST 201211CITY A.M. AWARDS 2012 SHORTLISTcityam.com
OUR final shortlist for the third annualCity A.M. awards is a big one theBusiness of the Year. For this category wehave looked for strong share price
performance aligned to important strategicdevelopments. We have chosen four establishedcompanies, along with one rising star in OphirEnergy.
Ophir has been one of the few successfullyfloated companies in the London market in alean period for IPOs, remaining well above itsoffer price. Investors were happy to scoop upshares in a secondary placing earlier this year.
InterContinental Hotels has enjoyed a solid2012, during which it launched two newbrands. And its powerful portfolio of assetsrecently drew the attention of US activistinvestor Nelson Peltz, who has become thegroups fifth largest shareholder, sparking talkof possible takeover interest.
Intertek may be one of the unheraldedsuccess stories of the past decade, with its shareprice rising by more than seven-fold sinceflotation in 2002. Drinks giant Diageo hasperformed impressively in share price termsfollowing a steady global expansion, whileRolls-Royce has proven that there are still
manufacturing groups in the UK that can fightit out with the best of them.
All five companies have well exceededanalysts expectations during the year.
HEADLINE SPONSOR
InterContinental HotelsNot only has InterContinental Hotels deliveredstrong returns for investors witness a six percent rise in the price yesterday, after a stronginterim report it has also aggressively pursuedinnovative new business lines.The hotels group, led by chief executive RichardSolomons (pictured, right), launched EVENhotels in the US in February the first hotelbrand designed for health-conscious travellersseeking a wellness experience at a mainstreamprice. Further afield, InterContinental introducedHUALUXE Hotels & Resorts in China in March,launching the first international hotel branddesigned specifically for the Chinese traveller.Analysts highlight the attraction of the groupsportfolio, particularly its growth and leadershipposition in the fast growing Chinese market,prompting speculation of a possible bid fromthe Marriott Group.In May, the US activist investor Nelson Peltzbought a 4.27 per cent stake, increasing thepossibility that the group might be seen as anattractive takeover target.That possibility alone should provide a platformfor the shares.
Ophir EnergyThe oil and gas exploration companys growth hasbeen stellar since its IPO in June last year, withshares more than doubling since its flotation.
Chief executive Nicholas Cooper (right) hasoverseen a number of promising ventures in eastAfrica, which are believed to be the continents lastuntapped energy sources, and has experiencedsuccess this year with two major gas discoveriesoff the coast of Tanzania, raising hopes that thecountry will become an important source ofenergy.Ophir, founded in 2004, raised 240m with lastyears float, and has continued to grow, making itone of the few successful new listings in achallenging economic environment. The extrafunds pouring into the business have financedOphirs ambitious drilling operations in eightAfrican countries, as well as last Octobers 118mtakeover of rival exploration firm DominionPetroleum.Ophir, backed by Lakshmi Mittal, one of the worldsrichest men, joined the FTSE 250 just two monthsafter its IPO and has already become one of thebiggest firms in the index based o n marketcapitalisation.
IntertekSolutions provider Intertek has witnessedtremendous growth since its float 10 years agoand now sits comfortably within the FTSE 100.Intertek helps customers across a range ofindustries improve their products andprocesses around the world, increasing theircompetitive advantage and supporting theirinnovations, global supply chains and trade.Customers include very well known brandssuch as Tesco, Shell, Walmart, Honeywell,AstraZeneca and Rolls Royce. The group, ledby Wolfhart Hauser (right), joined the FTSE100 in March 2009.Focusing on clients needs across supplychains, Intertek has developed its businesswithin an industry with high barriers to entryand has consistently delivered margins in themid-teens and average annual like-for-likeorganic revenue growth of nine per cent perannum since flotation.For the year ended 31 December, Intertekdelivered strong revenue growth of 27 percent and an operating margin of 16 per cent.Says Numis: We remain fans of the structuralgrowth and high returns model.
Rolls-RoyceThe aero engine maker posted a profit of over1bn in 2011, a record for the firm following itsjoint takeover of Germa n engine company
Tognum with Daimler.The investment in Tognum, Rolls-Royceslargest ever purchase, has boosted thecompanys position in the marine sector. Itrecently signed a contract in excess of 1bn todeliver reactor cores for the governmentsnuclear-powered submarine fleet.Rolls-Royce puts its success down to a long-term strategy that has set the stage for adoubling of revenues over the past decade.Chief executive John Rishton (right), whojoined the company la st year from retailerAhold, has vowed to invest further in Rolls-Royces future.Rishtons firm is poised to continue to poststrong profits, with a 62.2bn order book lastyear and a number of lucrative new contracts,which have allowed Rolls-Royce to increasedividends by nine per cent to 17.5p per share.The companys continually improving figureshave prompted a more than 50 per cent rise inits share price since last year.
Last years winner was Warren Easts ARM
BUSINESS WITH PERSONALITYBUSINESS OF THE YEAR
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12WEDNESDAY 8 AUGUST 2012 cityam.com
LONDON REPORT
RBSJohn Owen has been appointed
chief executive of the banksinternational banking business.He assumes the positionfollowing Scott Bartonsdecision to leave RBS at the endof August. Owen joined thebank in 2011, and has alsopreviously held seniormanagement roles at CreditSuisse, UBS and Bank of America.
Katten Muchin RosenmanThe law firm has announced the appointment of SanjayMehta as partner and tax attorney. He joins fromStephenson Harwood, where his practice focused onboth contentious and transactional tax matters. Mehta isKattens fifth new attorney hire in the past six months.
CouttsBen Hunt has been appointed managing director, head of
derivative products at the wealth division of RBS. Hejoins from Barclays Wealth, where he was most recentlyco-head of structured products. Hunt has over 12 yearsexperience in the banking industry, and also served ashead of development and head of investment productdevelopment at Barclays Wealth.
Charles StanleyThe stockbroker has announced three new hires to itsasset management department. Edward Rust joins fromBrewin Dolphin as senior investment manager, effective8 October. Additionally, Tom Scarborough and RichardUzupris both join as investment managers from BarclaysWealth.
MITIEThe strategic outsourcing company has a ppointed Mark
Orpin as head of retail in its asset management business.He most recently worked at Asda as its head of energymanagement. Orpin is a qualified accountant and hasalso previously spent seven years in the oil and gasindustry.
Global Financial Markets AssociationThe financial markets trade association has appointedDavid Ngai as managing director for Asia-Pacific in itsglobal FX division. He most recently worked forMacquarie, where he was managing director and grouphead of compliance for China and Hong Kong.
Sackers & PartnersThe pensions focused law firm has promoted NaomiBrown, Nigel Cayless and Ralph McClelland to theposition of associate. They all began working at Sackers& Partners in 2006 and advise on a broad range ofpension issues.
WHOS SWITCHING JOBS Edited by Tom Welsh
+44 (0)20 7092 0053morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
S&P hits 1,400on optimismover Europe
US stocks rose for a thirdstraight day yesterday, pushingthe S&P above 1,400 for thefirst time since early May, on
growing optimism the EuropeanCentral Bank (ECB) would act soonto contain the Eurozones debtcrisis.
Trading was light, which coulddistort the level of optimism
investors truly have that Europe willfollow through with adequatemeasures. ECB president MarioDraghi boosted hopes last weekwhen he spoke of restoring calm tothe Eurozones troubled bondmarkets.
Since then, good news fromGreece and declines in borrowingcosts for Spain and Italy from peaksabove seven per cent have keptsentiment positive. The relativecalm allowed the S&P to breakthrough the psychologicallyimportant 1,400 level after tryingunsuccessfully in the last twosessions.
Yesterdays advance was led bystocks in cyclical sectors like energy,materials and consumerdiscretionary, while defensivesectors like telecoms and utilitiesedged lower.
The Dow Jones industrial averagerose 51.09 points, or 0.39 per cent,at 13,168.60. The Standard & Poors500 Index was up 7.12 points, or 0.51per cent, at 1,401.35. The NasdaqComposite Index was up 25.95points, or 0.87 per cent, at 3,015.86.
Despite worries over theeconomies of Europe and theUnited States, investors have pushedthe S&P 500 up more than 11 percent so far this year. Yield-hungryinvestors have kept buying stocks asUS and German government bondprices soar and yields hit historiclows.
If the ECB expands its balancesheet, it will keep pushing thesebond yields lower, which can helpthese countries finance their debt,giving markets a bit of reprieve,said Joseph Tanious, global market
strategist at JP Morgan Funds. Itslikely we wont get anything officialfor a few weeks, and until theninvestors are likely to be skittish.
Summer holidays have added tolight trading volume, which hascontributed to volatility. Equitiescut their gains just before the closeyesterday, mirroring Mondays late-day action.
About 62 per cent of stocks on theNew York Stock Exchange closedhigher while 61 per cent of Nasdaq-listed stocks finished up.
Banking shares rose 0.5 per cent,lifted by Morgan Stanley, which wasup 2.5 per cent, while watch andfashion accessory maker Fossilsoared 32 per cent after it forecastgrowth in Asia and Europe.
About 6.39bn shares traded onthe New York Stock Exchange, theAmerican Stock Exchange and
Nasdaq, below last years dailyaverage of 7.84bn.
BRITAINS FTSE 100 climbed to itshighest close in four monthsyesterday, with heavyweightminers and energy stocks rallying
on expectations of global economicstimulus and outweighing a steep selloff in Standard Chartered.
The banks shares plunged 16.4 percent in their biggest one-day sell off infour years after New Yorks top bankregulator threatened to strip thelender of its state banking license,saying it hid $250bn (159.8bn) intransactions tied to Iran, in violation ofUS law.
The stock single handedly slicedaround 19 points off t he FTSE 100,pushing the UK blue chip index tounderperform its rallying Europeanpeers and setting up the UK bankingsector for its worst performance sinceECB president Mario Draghi gave riskassets a broad boost two weeks agowith a pledged to act to stem theEurozone crisis.
It is so oversold that people aresaying its a good time to buy, but I amsaying fundamentally not. There is still
a tail risk that the licence could betaken off. Even if that doesnt happenyou still suffer from lots ofreputational damage, so the downsiderisk is so high. Thats why I will be aseller, said Chirantan Barua, senioranalyst at Sanford Bernstein.
Broader implications are [that]there is no clean bank in the UK andthe UK regulatory system will be underscrutiny. You have the last of theMohicans and if theyve gone, thiswhole sector is tainted.
The Standard Chartered news comesfresh on the heels the Libor interestrate rigging scandal, which hasembroiled Barclays and RBS amongothers.
The FTSE 100 underperformed a rallyof 1.6 per cent in Eurozone blue chips.But the UK benchmark still added32.47 points, or 0.6 per cent, to reach5,841.24, its highest close in four
months.Standard Chartered aside, investor
sentiment remained relatively upbeat,with gainers on the FTSE outstrippingfallers by more than two to one asinvestors remained upbeat about theprospects of fresh stimulus from theECB and possibly also the US FederalReserve.
Hopes of brighter economic outlookboosted prices of oil and metals,sending positive wave throughBritains heavyweight energy andmining sectors.
Steel firm Evraz topped theleaderboard, gaining 10.3 per cent inyesterdays session. ENRC,AngloAmerican and Polymetaljoined thefirm in the top five gainers of the day,gaining between 4.3 and 5.9 per cent.
Xstrata, which posted better thanexpected first-half results, closed up 1.6per cent.
Miners are going up, people arelooking at the States now saying we aregoing to get out of recession, saidTrevor Coote, head of equity sales atAlexander David Securities.
I think weve got a bit of an Olympicstealth rally coming up ... In t he last 10
days weve had eight up-days so I amquite bullish. Id like to see us to 6,000,but I am not sure well get there in astraight line.
A smaller than expected fall in UKmanufacturing output in June and acrop of corporate reports also helpedboost sentiment. InterContinentalHotels, the worlds biggest hotelier,added 6.4 per cent after promising toreturn $1bn to investors.
FTSE shrugs off Standard Charteredslump to reach a four-month high
BESTof the BROKERSF&C Asset Management PLC
1 Aug 2 Aug 3 Aug 6 Aug 7 Aug
89.00
88.50
87.50
86.50
87.00
88.00
86.00
85.50
p 88.257 Aug
F&C ASSET MANAGEMENTSinger Capital Markets rates the asset manager buy with a targetprice of 110p. The broker has cut its earnings estimates by four percent for the next year to reflect weakness in the euro, as 40 per cent ofits net revenue is euro denominated. However, Singer is confident thefirm will find further cost savings, and thinks F&Cs share priceundervalues the company.
FTSE
1 Aug 2 Aug 3 Aug 6 Aug 7 Aug
5,850
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5,841.247 Aug
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DIAGEOInvestec rates the drinks group buy with a target price of 19 ahead ofthe firms preliminary results on 23 August. The broker has lowered its
forecasts by one per cent to account for currency movements, but is stillexpecting to see double-digit earnings growth this year. Overall,Investec sees the firm as well-positioned to weather the globalslowdown.
Playtech Ltd
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375
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365
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PLAYTECHNumis rates the gaming software firm sell with a 150p target price,after quarterly results yesterday. Despite a forecast-beating set of figuresfrom Playtech, including an 82 per cent rise in gross income to 88.1m,the broker remains concerned about the number and direction of recent
strategy changes at the firm. Numis thinks it will keep its cautious stanceuntil there is news of Playtechs stake in William Hill Online.
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IT NOW seems like a distantmemory, as London has againfilled up with shoppers, touristsand people celebrating TeamGBs historic gold medal haul.
But last week, the city wasnotoriously labelled a ghost town,despite official predictions that thecapital would be heaving. No doubt,Transport for London had used itshugely complicated and expensivetransport network model to deducethat the system would be undermassive strain.
But a deceptively simple game,devised in the 1990s about a bar inSanta Fe, sheds light on whatactually happened.
Santa Fe is a US city teeming with
high-powered researchers, who
STANDARD Chartered, one ofthe few British banks hithertoleft untainted by allegations ofmisconduct, saw its share pricenosedive yesterday, after
accusations by a New York regulatorthat it had violated sanctions againstIran. Im now left more convincedthan ever that US politicians andregulators have a hidden objective inexposing the wrong-doings of UKbanks.
There are parallels with the Libor
rate fixing scandal. It was clear, when Isat on the Treasury Select Committeeand questioned Bob Diamond, MarcusAgius and others, that Barclays had alot to answer for. But, throughout, itwas also obvious that Barclays wasmerely one of many banks involved. Itwas left exposed and, at first, solelyheld to account for Libor rate fixing.Some cynics are already speculatingthat it was hung out to dry to protectthe governments investments in RBSand Lloyds.
But now, over 20 banks are underinvestigation and face potential classaction in the US courts, with a majori-
Spread betTrade today atwww.cityindex.co.uk/dailyfact
U.S. Crude Oil has rallied from a low of $77.28 and gained 20%
the last 6 weeks. However U.S. Crude Oil may face a hurdle as i
approaches its 100-day moving average at around the $94 level
FACT OF
THE DAY
cityam.com/forum
Theres a US election
approaching, and thecross-party momentumis to blame the British
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.
14WEDNESDAY 8 AUGUST 2012
JOHN MANN
Standard Chartered is the victim ofUS warfare against British banking
ty of these being US financial institu-tions.
So why is there an increasing mantrain Washington and New York that this
is a London and a British problem?Nobody can excuse HSBC for alleged
drugs money laundering or StandardChartered for alleged Iranian sanc-tions busting. My voice has been asloud as any on these problems. Butwhere is the publicity on the courtaction in Indonesia over US banksinvolvement in money laundering, orthe headlines about Mexican drug car-tel money going through US banks?The negative publicity about a
London problem is entirely out ofcontext especially when you look atthe full range of current and recentbank irregularities and indiscretions.
The US body that co-ordinatesresponses to these matters is thePresidents working group on finan-cial markets. It is chaired by TimGeithner, the US treasury secretary.Mary Shapiro, head of the Securitiesand Exchange Commission, sitsamong its quartet of members. It isShapiro who is determining who isinvestigated, what secret deals aredone to close down action, and thepublicity that surrounds all of this.Their work is being supplemented by
the Republican-led House Committeeon Financial Services. But the realpolitical powerhouse of US politicalinvestigations is the Senate PermanentCommittee on Investigations, chairedby Democratic senator Carl Levin. Thisis a sub-committee of the HomelandSecurity Committee, where Levin haspresided for a number of his 34 yearsin the Senate. In US politics, Levin is amajor heavyweight figure.
Levin, under the banner of home-land security, has led the way in tack-ling any overseas activity deemeddetrimental to US security interests.No American politician could resist
this portfolio, but its fundamentalweakness is that it does what is says onthe tin: Iran is a threat, Indonesia isnot.Therefore, there is no serious investi-
gation into money laundering in cen-tral America, Asia or Mubaraks Egypt,and an inbuilt bias into highlightingoverseas banks while defending
American interests.Geithner and Shapiro are leading
Presidential political appointments,and they fully understand this way ofdoing business. Geithner is, of course,the US equivalent of George Osborne,based directly inside the Presidentscabinet. The fact that there is aPresidential election on the horizon is
no coincidence, with cross-partymomentum in Washington seeking toblame the British.
Our response in the UK should notbe to deny the alleged activities ofHSBC, Standard Chartered or Barclays.Indeed, quite the opposite. But marketmanipulation, insider dealing andmoney laundering are historically afar greater problem in Americanbanks than their British rivals. Ourweakness is our impotence in chal-lenging US banking behaviour, and
repeatedly failing to effectively regu-late our own.Time is running out, as Washington
makes its play for New York to usurpLondons position in global finance.The previously unthinkable Britishpolitical logic should now emerge asthe key to Londons salvation.Agreement over European Union regu-lation of financial markets may nowprove to be the best way forward, andthe only effective antidote toAmerican self-interest.
John Mann is Labour MP for Bassetlawand a member of the Treasury SelectCommittee.
proliferate widely in the state of NewMexico. Of a Thursday evening, manyof them enjoyed gathering in the ElFarol bar. The problem was thatthere were lots of researchers andthe bar was rather small. If it got toocrowded, each scientist would havepreferred to stay at home. But, if itwas too empty, it was no fun to go
for a drink after work.
Brian Arthur is a highly originalBritish economist who has beenbased in the US for many years. Herealised that the decision of whetherto go to the bar or not could be setout as a problem in game theory. Youneed to form a strategy whichmaximises your chances of being atEl Farol when it is not too full, nottoo empty, but just right.
It turns out that it is incrediblydifficult to work out what the beststrategy should be. Swiss scientistsDamien Challet and Yi-Cheng Zhangdeveloped the problem into the so-called minority game. Literallythousands of high-powered mathspapers have been written on this. Butno strictly rational way of playing
the game has been devised.
These endeavours have not beenuseless. We do know some thingsabout the game. One of the mostimportant is that, if everyonedetermines the same strategy,regardless of what it is, it isguaranteed to fail. If you think thebar will be empty, you will go butso will everyone else. And vice versa,if you think it will be full.
The effect of all the Transport forLondon publicity, and mayoralannouncements on the Tube, was toget lots of players the shoppers,workers and tourists who go intocentral London pursuing the samestrategy. In other words, theybelieved the city would be heaving,and decided not to go in.
This was certainly reinforced by
social network effects. Decisionswere not taken in isolation, butfollowed discussions with workcolleagues, friends and neighbours.This made it even more likely thatpeople would arrive at the samedecision.
The lesson for policymakers isthat, in a networked world, less canbe more. Massive bureaucraticmodelling, or elaborately plannedpublic campaigns, are not the onlysolutions to strategic dilemmas. Infact, they can be counter-productive.A little smart theory can prove muchmore effective.
Paul Ormerod is an economist atVolterra Partners and the author of
Positive Linking: How Networks Can
Revolutionise the World (Faber and Faber).
AGAINSTTHE GRAIN
PAUL ORMEROD
The Santa Fe bar with a useful lesson for Londons Olympic organisers
In association with
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Regulatory favours[Re: Another banking scandal was the lastthing the City needed, yesterday]Im glad Allister Heath has addressed thisissue: all regulators, American or otherwise,are not necessarily acting with justice andfairness. We need to question their mo tives.I dont know the specifics behind theallegations made against StandardChartered Bank. But we have to ask whethersome regulators are unfairly singling outparticular institutions and causing damageby pinning crimes on them.
Alan Sokare
The US is hypocritical to label this a Britishproblem. Recent news shows that bankingmisdemeanours dont stop at the Atlantic.Terry Chambers
Political mavericks[Re: As Louise Mensch steps down frompolitics, should we regret the loss ofmaverick MPs?, yesterday]The problem with this question is that itassumes that Louise Mensch is a maverick.She can certainly get media attention, andshe is well-known for publicly admitting heryouthful drug use. But these are not unusualcharacteristics in a politician. Her views areconventional, and it is only her beauty thatis remarkable in politics. Yes, we shouldregret not having more elected oddballs people who can challenge the status quoand passionately argue for somethingdifferent. But I dont see how Menschsflight to New York will make Westminsterany less grey.Tanya Wolfson
IT IS American regulators thatBritish multinationals mustreally fear. By alleging thatStandard Chartered Bank is arogue institution, the New
York State Department of FinancialServices has dunked the banks shareprice and caused it untoldreputational damage. Theinvestigation into breaches of theIranian sanctions regime may bealmost complete. But Standard
Chartereds fight to clear its namehas only just begun, with theregulator also investigating itsactivities in Libya, Myanmar andSudan.
There have been US sanctionsagainst Iran since the Shahs over-throw in 1979. But StandardChartered is alleged to have fallenfoul of specific rules that restrictedtransactions involving Iranian finan-cial institutions, accusations that itstrenuously denies. Breaching theserules was, and is, a crime in the US.
The bank is alleged to have abusedU-turn transactions which movemoney from non-Iranian foreignbanks, via the USA, to other non-Iranian foreign banks to systemati-cally make forbidden moneytransfers. It was able to do this byremoving information required byclearing banks by a process known aswire-stripping. Significantly, inNovember 2008, the US TreasuryDepartment revoked all authorisa-tion for U-turn transactions becauseit suspected Iran of using its banks tofinance nuclear weapons and missileprogrammes. These allegations main-ly pre-date this complete ban and thebank, in any case, says that 99.9 percent of its U-turn transactions com-plied with US law.
As a bank incorporated in the EU,Standard Chartered is also subject tothe UK and EU equivalent of US sanc-tions. A breach of any one of this
TOP TWEETSThe Standard Chartered case highlights thedangers, for UK firms, in the current trend forUS extra-territorial overreach.@tony_gee
This Standard Chartered case is terrible. Itwas the only bank that was expanding andhiring. The industry seems cursed.@AnganaJacob
Coalition politics would mean grown-uppolitics, the experts said. Does anyonebelieve that now?@DouglasCarswell
Love Louise Mensch or hate her, we shouldbe concerned that being an MP seemsdeeply incompatible with family life.@alrightPET
After Lib Dem-Tory splits on constitutionalreform, will this coalition last until 2015?
YESIn spite of deep-seated disputes over constitutional reform, the coali-
tion will hold steady. The deepening threat to our economy from theEurozone makes it ever more important that the coalition stays unitedaround its central economic purpose. Public borrowing remains stub-bornly high, but deficit reduction is a mantra that unites all coalitionministers and efforts to tame the nations finances will no doubt beredoubled this autumn. On public sector reform, especially schooleducation and welfare reorganisation, there is a substantial prize to bewon and the spoils divided equally between Conservatives andLiberal Democrats. Aside from that, David Cameron will know that, inspite of this streak of defiance from his coalition partners, the LiberalDemocrats are languishing in the polls and will be as reluctant as he isto precipitate an early General Election.Mark Field is Conservative MP for the Cities of London andWestminster.
Mark Field
NODonal Blaney
Nick Cleggs tantrum over the failure of Lord reform has brought
relations between the Lib Dems and Conservatives to a new low.Having once said that redrawing constituency boundaries was notin any way linked to Lords reform because the coalitionagreement made it clear that it was linked to the AV referendumbill, which Tories held their noses and voted for now Clegg saysthat tit for tat is appropriate. For a man trying to persuade votersthat coalitions are the best way to govern, he is doing a poor job.Tory MPs can sense defeat at the next election. The economy isstruggling under high taxes and excessive regulation. Germany isrefusing to bail out weaker Eurozone nations. David Cameron andGeorge Osborne have lost the Midas touch. The only chance for aConservative victory is for the party govern as a minoritygovernment as it should have from day one.Donal Blaney is chief executive of the Young Britons Foundation.
RAPIDresponses UK bankers could
face US prison forsanctions busting
complicated web of restrictions canlead to direct criminal liability forcompanies, and senior individuals
could face up to seven years in prison.Today the regulatory landscape iseven more severe. The FinancialRestrictions (Iran) Order, which cameinto force in November 2011, directsUK financial institutions to cease allbusiness with banks incorporated inIran and all their branches and sub-sidiaries. A system of licenses is usedto grant authorisation for specifictransactions by the Treasury. Thismove mirrored the US ban in 2008.
The power of US regulators isdemonstrated by the fact that indi-viduals can face up to 20 years inprison for breaching Iranian transac-tion regulations. A policy of coopera-tion usually assists businesses whoare under investigation.
Standard Chartered has stated thatit initiated the review and haveengaged with the regulator. So far, sogood. But, instead of a negotiated set-tlement and order, StandardChartered has had its reputationbesmirched and been summoned toappear before the regulator toexplain itself.
And, as if this werent worryingenough for the bank, it can be surethat, with strong US-UK cooperationon financial crime, UK regulatorswill now also begin to take an inter-est in their affairs.
Alex Odell is a barrister at Peters &Peters Solicitors. He co-wrote this articlewith David McCluskey, a partner in busi-ness crime at Peters & Peters.
WEDNESDAY 8 AUGUST 2012
ALEX ODELL
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Audis A6 Allroad model haslong been something of theunsung hero in its ever-expanding model range. Is it
an oddity? Well, its certainly unique.An estate car with four-level heightadjustable suspension and quattroall-wheel-drive A6 Allroad appealsto people that want a rugged car butfor whom an SUV just doesnt cut it.
In reality the A6 Allroad ticks somany boxes and suits such a varietyof lifestyles that many people consid-er it the automotive Swiss Armyknife. But driving the latest versionwith the brand new 3.0-litre TDI V6biturbo diesel engine which pro-duces 313bhp and is mated to an
eight-speed tiptronic transmission makes it clear that this latest Allroadis even better. The engine is quick-wit-ted, responds quickly and coupledwith that famous quattro systemmakes for a car that is surprisinglysporting on the road. But its not justquick. Its agile and stick-to-the-roadgrippy which makes for a very sur-prising car. If you thought that thiswas just a stuffy estate car for poshpeople, you are quite wrong. It feelsyoung, lean and absolutely modern.
Its also about as pr