Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Banks

BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Property

Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Currencies

Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Archive | November, 2016

Influential female banker Terri Dial dies

Posted on 29 February 2012 by

Terri Dial, who started her career as a bank teller before rising to senior roles at Wells Fargo, Lloyds TSB and Citigroup, has died at the age of 62.

Her 27 years at Wells saw Ms Dial move from the bottom rung of the corporate ladder to head the company’s California operation. She was then picked by Lloyds TSB to run the company’s UK consumer banks before Vikram Pandit, chief executive of Citi, chose her to run the company’s North American consumer banking unit.

Nicknamed “the human cyclone” for her rapid ascent and sometimes forceful attitude to business, she was a proponent of adopting quickly some of the technological changes that have shaken up retail banking in the past two decades.

Ms Dial left her Citi position at the start of 2010 in a management shake-up, though she continued to work as an adviser to the bank. Mr Pandit on Wednesday called her “one of the most influential bankers of her generation and, by any measure, one of the most powerful women in our industry”.

UK banks welcome liquidity swap ruling

Posted on 29 February 2012 by

UK banks can use complicated asset trades with insurers to help achieve tough liquidity rules, the UK Financial Services Authority announced, cheering industry groups which had feared the transactions would be banned.

The FSA has been consulting on so-called “liquidity swaps” since July and delayed several deals, including a £1bn seven-year deal between Phoenix and a high street bank and a multiyear trade that Lloyds Banking Group tried to do with its Scottish Widows life assurance arm. On Wednesday, it formally blessed the idea. “We see a role for these transactions on a sensible scale, provided the risks are properly identified and managed by both parties,” Paul Sharma, FSA policy director, wrote in new guidance.

In a liquidity swap, an insurer, pension fund or other asset manager will lend a bank a large portfolio of gilts or other highly liquid bonds typically for between three and 10 years. The loan of these gilts is secured by a larger pool of collateral that can include mortgage-backed bonds, infrastructure debt or other less-liquid assets.

The deals allow the bank to boost its stock of liquid assets, as required by new UK and global banking reforms, while giving the insurer higher returns than those achievable from gilts.

But the transactions carry risks for insurers because they may not have the expertise to manage more complicated assets and they increase the links between banks and insurers during a crisis period. The FSA said in its guidance that it will continue to study the implications for financial stability.

The FSA’s views on these transactions are particularly important because the UK has been a world leader in liquidity regulation. After the run on Northern Rock and the collapse of Lehman Brothers, the City watchdog published standards well in advance of global agreement by the Basel Committee on Banking Supervision. Since the global rules are still being adjusted and will not become mandatory until 2015, the FSA guidelines could well become the worldwide benchmark.

The guidance is substantially friendlier to the transactions than a draft version that was published last July.

“We are quite pleased … It is a big improvement over what they initially came out with. The tone has changed. There is an admission that these liquidity swaps can be a good thing,” said John Breckenridge of the Association of British Insurers.

Barnier moves to allay pension plan fears

Posted on 29 February 2012 by

Strict new capital requirements for insurers will not be flatly applied to all pension schemes, Europe’s top financial regulator will promise on Thursday as he attempts to contain alarm over a planned shake-up of retirement plan rules.

But in a speech to begin a process to review regulation of pension funds, Michel Barnier, Europe’s internal market commissioner, will insist there should be no “silo mentality” to shield the funds entirely from rules applying to other financial sectors.

His attempt to “dispel the hyperbole” comes as a broad coalition of business and industry groups has issued a warning over “dangerous” measures that would stunt growth, hurt future pay-outs to pensioners and kill off all remaining final salary schemes. The rare joint plea for Mr Barnier to reconsider the direction of the reform proposals comes from eight of Europe’s biggest representative groups, including Business Europe, the European Trade Union Confederation and the European Private Equity and Venture Capital Association.

The European Commission is working on a revision of the occupational pension funds directive that will draw on the approach of the Solvency II regime, Europe’s biggest shake-up to date of insurance regulations, which is due to take effect in 2014.

Mr Barnier will dismiss claims that applying these rules across the board will cost European businesses €800bn ($1.1tn) or force the closure of defined benefit schemes, saying that there is “no question of penalising schemes that are working well”.

But he will argue that a fairly applied set of rules will be important to encourage more cross-border funds, lower costs for employers and more choice.

“I have no intention of penalising either pension funds or insurance companies,” he will say. “We are going to propose a regulatory framework specifically for pension funds, but this will not be done with a ‘silo mentality’. We must draw on the rules developed in other financial sectors, in particular some useful aspects of Solvency II.”

Critics fear that rigidly applying the tougher rules for the insurance sector to retirement schemes would force employers to build higher reserves by reducing the risk appetite of funds.

“Applying Solvency II-type rules to pension funds will make [them] too expensive for many companies,” said Philippe de Buck of Business Europe.

Private equity and venture capital groups argue the measures will jeopardise an important source of capital for business. Guy Hands, founder and chief investment officer at Terra Firma, said at a private equity conference in Berlin: “I find it extraordinary that . . . if you look at the pension markets, regulators are looking to clamp down on one of the few ways pension funds have got to generate returns.”

Mr Barnier will argue there needs to be “sound calibration of risks” involved in those remaining defined benefit schemes, as well as common prudential tools for pension funds that are underwritten by companies and not subject to the same capital rules.

He is expected to say: “It would probably not be feasible to immediately apply stricter rules to the outstanding liabilities of pension funds. We must therefore find alternative solutions, including appropriate transitional arrangements.”

Ziggo set for IPO as sentiment improves

Posted on 29 February 2012 by

Dutch cable operator Ziggo is to launch an initial public offering on Amsterdam’s Euronext NYSE exchange, in a sign that improving equity markets and reduced anxiety over the eurozone debt crisis are giving owners the confidence to take companies public again.

The size of the potential offering is estimated at up to €800m, which would make it Europe’s largest IPO since Glencore raised $10bn last May, a rare glimmer of hope for the continent’s battered equity capital markets.

In 2011 the global volume of IPOs fell 40 per cent to $177bn, according to Dealogic, as worries of sovereign defaults in the eurozone and a hard landing in China kept markets jumpy. The build-up of frustrated groups eager to go public includes Facebook, Sinochem, Manchester United, Graff Diamonds and Japan Airlines.

Last year saw a record $76bn worth of cancelled new listings, many of them European groups. Société Générale predicted European IPOs would fall more than a quarter this year, to an anaemic €20bn. But the Ziggo listing offers hope that the market’s turnround since December may be breathing life back into the IPO market.

Ziggo is the largest cable operator in the Netherlands, with 56 per cent of household cable connections and revenues of €1.48bn in 2011. It was created after private equity firms Warburg Pincus and Cinven bought up three smaller cable operators in 2006 and fused them.

A person familiar with the owners’ thinking said that market volatility in 2011 had frustrated the desire of Warburg Pincus and Cinven to cash in on their investment, and that recent improvements in confidence had played a role in the decision to go ahead now.

Ziggo chief executive Bernard Dijkhuizen told the that the company had “tremendous growth momentum and large cash flow generation. The logical next step is an IPO.”

Analysts say that the company’s growth prospects are strong. Cable groups have been outcompeting telcos in the Netherlands for the most valuable customers, those ordering “triple play” service of phone, TV and broadband internet.

Mr Dijkhuizen said Ziggo would pay a dividend totalling €220m in 2012, and would adopt a progressive dividend policy of paying at least 50 per cent of free cash flow from 2013 on.

Ziggo had earnings before interest, taxes, depreciation and amortisation of €835m in 2011. Peers such as Telenet and Kabel Deutschland trade at multiples of roughly 9 times ebitda, which would suggest the company’s enterprise value could be some €7.5bn.

Ziggo still carries €3.23bn in net debt, leaving an equity value for the company of well over €4bn. 

It has not announced a timetable for the IPO.

EU groups in push for women in top roles

Posted on 29 February 2012 by

Boardroom

Some of Europe’s biggest companies will on Thursday respond to political pressure by publishing their targets for increasing the number of women in senior corporate roles and launch a database of female board candidates.

The twin initiatives – under the umbrella of the European Round Table of Industrialists – come just days before Viviane Reding, European Union justice commissioner, is set to give her assessment of corporate progress in bringing more women on to boards. Ms Reding had threatened legislation if by this month she judged progress was insufficient and will make a statement on Monday.

Thirty-one companies have so far agreed to sign up to one or both ERT initiatives. They include Siemens, Total, Telefónica, BASF and Philips. Twenty-three of them will on Thursday publish their targets and timetable for increasing the percentage of executive or non-executive women.

STMicroelectronics’ president and chief executive Carlo Bozotti, who heads the ERT working group handling the initiatives, said that the organisation would have pressed ahead with its plans irrespective of the European commissioner’s imminent progress assessment.

“It’s not just a statement: it’s practical things that we’re doing here,” he said. ST, a Franco-Italian semiconductor company, aims to increase the number of women in management from 10 per cent now to 15 per cent in three years.

Ms Reding last year urged European companies to sign a voluntary “Women on the Board Pledge for Europe”, committing themselves to reach a target of 30 per cent for female board members by 2015 and 40 per cent by 2020. Only 24 have signed, none of them from among the 31 companies backing the ERT plans.

The ERT said that it preferred company-specific targets to a “one-size-fits-all” approach. Mr Bozotti pointed out that it was particularly challenging for industrial companies to improve the number of women in the executive “talent pipeline”. He said that the voluntary commitment would be reviewed annually at ERT level.

Nearly 20 ERT members will also work with three executive search firms – Egon Zehnder, Russell Reynolds and Spencer Stuart – to deepen the pool of potential female board members. Chief executives and chairmen will recommend women for inclusion in a new database, from which the headhunters will recommend candidates for board positions.

Vittorio Colao, chief executive of Vodafone, the telecoms group, said: “If each of us comes up with three to five names, suddenly we’re providing the system with a long list of hard-working, incredibly competent women [for board roles] … But we also need to enlarge the pipeline behind the board.”

Voluntary initiatives to increase the number of women in senior corporate ranks have proliferated in the past two years. In Europe, this has happened in parallel with threats to impose quotas.

Rothschild’s Attara to liquidate operations

Posted on 29 February 2012 by

Nathaniel "Nat" Philip Vic Rothschild, founder of Vallar Plc, poses in this undated photo provided to the media on Monday, Nov. 22, 2010. Nathaniel Rothschild, a member of the Rothschild lineage that helped bankroll Britain's war against Napoleonic France, is leading a deal that will create the biggest exporter of coal to China.

Nat Rothschild pledged to clean up corporate governance at Bumi

Attara Capital, the hedge fund co-chaired and founded by Nat Rothschild and the successor to the now-defunct activist fund Atticus Capital, is to liquidate its operations.

Attara, which is run by David Slager, a former Atticus partner, is shutting as a result of adverse trading conditions and difficulty raising new money from investors, people close to the fund told the Financial Times.

New York-based Attara did not respond to requests for comment.

The firm was co-founded by Mr Slager and Mr Rothschild to take over the running of Atticus’s $1.2bn European fund in 2009 after Timothy Barakett, founder of Atticus, decided to liquidate the hedge fund manager’s other operations.

Mr Rothschild was also previously the co-chairman of Atticus – named after Atticus Finch, the lawyer in the novel To Kill a Mockingbird. At its peak in 2007, Atticus managed assets of close to $20bn and was renowned for earning its investors high returns, as well as for its involvement in high-profile boardroom battles.

Alongside the UK’s The Children’s Investment Fund, run by Chris Hohn, Atticus earned particular notoriety in Germany after it opposed Deutsche Börse’s bid for the London Stock Exchange in 2005.

Atticus suffered heavily in 2008, however, as global stock markets plummeted. The firm’s asset base shrank as investors pulled funds from hedge funds. By the time of its closure in 2009, it had about $3bn in its main funds, which it returned to clients.

According to a regulatory filing with the Securities and Exchange Commission from late June last year, Attara had assets of more than $1.2bn on behalf of fewer than 10 clients. As of November, the amount managed by the firm’s main fund had dwindled to just over $700m, according to an investor.

The closure of the fund manager highlights the extent to which 2011 was one of the hedge fund industry’s hardest years on record, and its only losing year since 2008.

The average equity-focused hedge fund manager suffered losses of 8.29 per cent last year, according to Hedge Fund Research. Many managers were wrongfooted by overly optimistic assumptions about US growth and eurozone recovery.

Attara has not been alone in struggling to gain traction. Atwater Capital, another fund that was also spun out of Atticus when the firm closed, last month told its investors it was shutting down.

Rambourg’s Verrazzano aims for $1bn

Posted on 29 February 2012 by

Verrazzano Capital, the hedge fund manager set up in Paris last year by the former Gartmore star Guillaume Rambourg, is set to launch its first funds on Thursday.

Mr Rambourg has raised day-one commitments of $500m for the vehicles, making Verrazzano one of the largest hedge fund launches in Europe and even worldwide since the financial crisis struck.

Follow-on commitments of $250m more from investors are expected in coming months and many believe Verrazzano will comfortably exceed assets of $1bn under management by the end of the year. Among Mr Rambourg’s investors is Roger Guy, his erstwhile partner at Gartmore.

Though already well-known in hedge fund circles, Mr Rambourg shot to wider prominence in 2010 when Gartmore’s management suspended him for alleged breaches of internal trading rules – triggering a plunge in the firm’s share price and ultimately leading to its downfall as an independent listed company.

Both Gartmore’s investigation and a subsequent external inquiry by the FSA, which froze Mr Rambourg out of the city for 12 months, concluded there was no evidence of wrongdoing. Mr Rambourg and Mr Guy had previously carved a reputation at Gartmore as two of Europe’s most successful hedge fund managers.

Verrazzano, Mr Rambourg’s new venture, has, as a result, been anticipated by investors as one of the most significant European launches in years.

The firm, which will focus on trading European equities from its base off the Champs-Élysées, takes its name from the starting point of the New York Marathon – the Verrazano-Narrows bridge which connects Staten Island and Brooklyn.

In spite of plans for the French government to introduce a tax on transactions in French shares, and much hostility in some quarters to financial services, Mr Rambourg is understood to be pleased with having chosen Paris as a base for his new venture.

Before becoming managing director of the International Monetary Fund, Christine Lagarde, as France’s finance minister, led a move to encourage more asset management start-ups in Paris, launching a seeding platform for emerging managers.

About $400m of external investors’ money is currently split between the main opportunities fund and a smaller, higher risk, focused fund.

Initial investors will pay reduced fees of 1 per cent of their investment and 15 per cent of their profits annually for the lifetime of their holdings in the funds. Verrazzano will charge standard fees of 1.5 per cent and 20 per cent for all new investors.

A prototype version of the funds, which Mr Rambourg has been running to build a track record for the past few months, has already performed strongly.

Terra Firma seeks €1bn from sovereign fund

Posted on 29 February 2012 by

Guy Hands

Terra Firma Capital Partners has dropped plans to start fundraising this spring. The private equity group, run by British financier Guy Hands, is seeking instead to collect about €1bn from a single sovereign wealth fund to keep doing deals.

The group, which made headlines with its failed investment in music group EMI, is delaying the start of its next fundraising effort for at least another few months, people familiar with its plans said.

They added that Mr Hands wants to wait for further recovery of Terra Firma’s third fund portfolio before asking investors to commit fresh capital.

The fund, a €5.4bn vehicle that was raised at the height of the buy-out boom five years ago and suffered £1.75bn in losses from the EMI deal, increased its value by 16 per cent last year.

But it is still far from breaking even, being worth 40 per cent of initial cost last year. The group is targeting an increase in value to 60 per cent this year and wants to bring the fund back to par by 2015.

The move to delay the fundraising of up to €3bn, due to begin this spring, underlined how some private equity groups have been forced to scale down.

It emerged in February that UK mid-market group Duke Street had dropped attempts to raise an £850m fund amid a lacklustre performance of its previous fund. Only a few weeks later, larger UK buy-out firm BC Partners announced it had successfully collected €6.5bn in fresh capital.

Several large investors have warned that Terra Firma might struggle with a protracted multiyear fundraising effort. “The longer they wait, the better,” one industry executive said.

Terra Firma declined to comment. When asked at a conference in Berlin about the group’s ability to raise a fund, the 52-year-old founder said: “I am 100 per cent confident.”

The buy-out group’s third fund, which includes investments such as CPC, an Australian beef producer, and Awas, one of the largest global aircraft leasing companies, has about €500m left for new deals.

Investors might not believe in the recovery

Posted on 29 February 2012 by

Markets used to watch for the twitching eyebrows of the governor of the Bank of England. The hold of the US Federal Reserve over investors is even more awe-inspiring.

On Wednesday the European Central Bank lent more than half a trillion euros to the region’s financiers. Then Ben Bernanke, Fed chairman, quite literally said nothing – failing to mention more quantitative easing in testimony to the US Congress – and it turned out the ECB barely mattered to global asset prices.

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The dollar jumped, equities gave up all their gains for the day, Treasury bond yields rose and gold and silver plunged. Investors abandoned hopes of a perfect outcome: improving economic growth combined with more monetary easing. The world can have a stronger US economy or a flood of dollars, but not both.

The market reaction seems excessive. Anyone who has listened to the Fed must have expected an improved economy would mean QE3 would at least be delayed. If the recovery once again turns sour, QE3 will surely be back.

Yet the way markets moved is informative. Investors care more about the odds of more money being printed than they do about a stronger economy.

This might simply be down to a reliance on ever-cheaper money to inflate asset prices.

Equally plausible is that investors do not really believe in the recovery, and so are relying on more easy money to keep the economy ticking over. After all, growth forecasts remain subdued and profit predictions, while falling less quickly, are still coming down. Across the Atlantic, almost everyone believes another Greek crisis has merely been deferred. Spain and Italy are far from fixed, and Portugal continues to teeter.

We may be back to a time, as in mid-2010, when weak US economic data had the opposite effect one might expect. Worse than expected figures could prompt a rise in equities, and fall in the dollar, by putting QE3 back into play.

Fannie Mae to ask Treasury for $4.6bn more

Posted on 29 February 2012 by

Fannie Mae, the US government-controlled mortgage financier, will ask taxpayers for another $4.6bn after recording a $2.4bn loss last quarter, the company has said.

The latest appeal brings its total request from the US Treasury to $116bn, of which $20bn is due back to taxpayers in the form of a dividend as part of its government rescue.

The company, which together with its corporate cousin Freddie Mac backs nearly half of all outstanding US home loans, lost $16.9bn last year, a 20 per cent rise from 2010.

Fannie Mae blamed the deterioration last quarter on credit losses sustained on loans originated before 2009 and on its interest rate derivatives. The company was betting that interest rates would not fall.

The mortgage financier’s losses will probably put more pressure on the company and on its regulator, the Federal Housing Finance Agency. Fannie Mae, Freddie Mac and the FHFA are in the middle of a broader debate centred on just how much support the US government should provide to America’s property market.

Democrats, including the Obama administration, want the FHFA to allow for Fannie and Freddie to reduce borrowers’ mortgage principal, a type of mortgage restructuring both have thus far refused to do. Republicans fear that principal reduction modifications will deepen Fannie Mae’s losses, hurting its main owner, US taxpayers.

About one in five US homeowners with a mortgage owe more on their housing debt than their properties are worth.

In depth

Freddie and Fannie

headquarters of mortgage lender Freddie Mac

The role of the state-backed US mortgage originators has come under the microscope

By reducing principal, some policymakers and legislators reckon that delinquency rates will tumble and home seizures will decrease, leading to an eventual rise in home prices.

Fannie Mae blamed its losses in part on deteriorating property prices. Loans in negative equity had a serious delinquency rate of 14 per cent, the company disclosed in its annual report filed with securities regulators, versus an overall serious delinquency rate of about 3.9 per cent.

The mortgage company owns or guarantees nearly $2.8tn of home loans, making it the largest provider of mortgage credit in the US. Fannie Mae does not originate loans; rather, it purchases and guarantees them for inclusion in securities for sale to investors.

Fannie Mae and Freddie Mac were taken over by the US government in 2008. The Obama administration has said it wants to wind down the companies, yet it has not put forward a plan to do so.

Executives at Fannie Mae have complained that key employees are hard to keep because of the companies’ uncertain future, hobbling their ability to turn consistent profits. Freddie Mac reports earnings later this week.

Separately, Fannie Mae disclosed that it decided to amend its contract with its largest partner, Bank of America, and will no longer buy traditional home purchase loans from the lender in an escalation of a dispute over compensation for soured mortgages. BofA had previously indicated that it was the party that moved to alter the contract.