Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Archive | November, 2016

Moody upgrades Greece’s debt rating

Posted on 30 November 2013 by

General Economy As Greek GDP Figures Released©Bloomberg

Moody’s, the international rating agency, has upgraded Greece by two notches, reflecting good progress with fiscal consolidation despite continued recession and fragile political stability.

The upgrade from Caa3 to single C with a stable rating still leaves Greek sovereign bonds deep in junk territory, but supports the coalition government’s forecast of a primary budget surplus this year before debt repayments, rising to 1.5 per cent of output in 2014.

    “Moody’s expects that the government will achieve (and possibly outperform) its target of a primary balance in 2013, and record a surplus in 2014 in accordance with the adjustment programme,” the agency said.

    A senior finance ministry official said on Friday that on the basis of 10-month revenue figures, Greece could achieve a primary surplus of close to €1bn this year.

    An improved medium-term outlook and lower interest payments following last year’s restructuring of privately held Greek debt also contributed to the upgrade, Moody’s said.

    The economy is bottoming out but will shrink by another 0.5 per cent in 2014 before growing by 1.0 per cent in 2015, it said. The EU and the Greek government both forecast an earlier recovery with growth of around 0.5 per cent next year after six straight years of recession.

    The finance ministry official said the “troika” of bailout monitors from the commission, the International Monetary Fund and the European Central Bank had postponed a planned visit to Athens until after December 9 because of continuing differences over “two or three structural reforms and a few small fiscal issues.”

    The government still hopes to wrap up a deal that would unlock another €1bn of bailout aid before the end of the year but must first overcome strong political opposition to the troika’s insistence on reforms of the real estate sector, which threaten to split the governing coalition of the centre-right New Democracy party and the PanHellenic Socialist Movement (Pasok).

    The socialists have rejected the troika’s proposal to lift a ban on home foreclosures that has encouraged “strategic” defaults on mortgages by solvent borrowers and blocked the possibility of a housing market recovery.

    Resistance by New Democracy lawmakers to a new unified real estate tax that will include agricultural land for the first time has already forced the finance ministry to reduce the amount to be paid by farmers, leaving a €400m gap in next year’s budget to be covered by additional spending cuts.

    Talks with the troika have dragged while the government seeks concessions that would ensure it can push both reforms through parliament. The coalition has seen its majority shrink to just four seats following a series of defections by lawmakers opposed to reform.

    IPOs set to resume in China

    Posted on 30 November 2013 by

    China is to lift its year-long freeze on stock market listings and introduce new rules for initial public offerings.

    The China Securities Regulatory Commission (CSRC) on Saturday published guidelines for reforming the country’s scandal-plagued IPO system, vowing to give market forces more clout and to reduce the role of the government.

      The CSRC said it expected IPOs would be able to resume in January, some 14 months after the last company floated shares in China.

      Along with allowing time for reforms to be implemented, the suspension of equity listings was widely seen as a tactic by regulators to support China’s beleaguered stock markets, which have been among the worst-performing in the world over the past three years. But the benefit has been minimal, with the Shanghai Composite, the country’s main index, rising just five per cent since the freeze began.

      Analysts have long predicted the resumption of listings would weigh on share prices. “This is a signal that the IPO floodgate may be opened soon,” said a senior executive in a Chinese brokerage.

      In an effort to allay fears about a sudden rush of new listings, the regulator said that of the 760 companies waiting to go public, only about 50 would actually be ready by January and that it would need a year to finish its checks on the others.

      The revamping of the IPO process has been one of the test cases for China’s new leaders’ commitment to allow the market to play the “decisive role” in the economy they have promised.

      As laid out on Saturday, the reforms fall short of the market-determined IPO registration system that is common in more developed financial systems, but they should help limit the government’s influence over the pricing of share offers and also boost transparency.

      The regulator said it would still conduct strict checks to ensure that information provided by IPO candidates is full and accurate before permitting them to list, but beyond that it vowed that assessments of risks and valuation would be up to investors themselves.

      “What needs to be emphasised is that this . . . cannot be understood as meaning that the regulator will have no oversight,” the CSRC said in a statement. “It does not mean that IPOs won’t be audited or that junk stocks can be easily issued. Rather, it means that the auditing system will be reformed.”

      In the past, companies in China have been able to issue shares with minimal or inaccurate information disclosures, reaping huge price gains as retail investors are lured in to buy stocks. To increase transparency, the regulator said companies would have to publish more extensive financial records and make them publicly available earlier in the listing process.

      It also said it would make securities firms more accountable for the listings they underwrite. For example, should any company suffer a more than 50 per cent loss in profits in the first year after it goes public, the regulator will have the right to suspend the sponsor’s underwriting license.

      In another announcement on Saturday, the securities regulator said it would start a long-expected trial permitting companies to issue preferred shares, which will allow them to raise more equity without immediately diluting existing investors.

      Runaway stocks approach rally’s end point

      Posted on 30 November 2013 by

      Two weeks ago, Jack Lew, US Treasury Secretary, was in Asia making the rounds in Singapore, Tokyo and Beijing. Those who attended meetings with Mr Lew assumed he was coming to apologise for the way the debate in Washington on extending the debt ceiling was handled in the previous month and to offer reassurance that the next time the matter comes up, it will be handled more smoothly.

      For those investors who are judged on their performance in dollar terms – such as the Chinese sovereign wealth fund – and those in non US dollar terms – such as the Singaporeans – since the dollar is the world’s reserve currency, such issues matter enormously. But listeners who expected an apology or an explanation were mistaken.

        Instead, Mr Lew instructed his audiences that Asia needed to get its act together and improve its own governance. He further alienated attendees at one session in Singapore by refusing to address the concerns of local bankers about extraterritoriality as the US unilaterally imposes rules on foreign banks with any presence in the US at all.

        But today none of that matters. The consensus is that, despite the cavalier treatment of investors in Treasury securities, whether foreign or domestic, and despite official behaviour that is unworthy of a nation whose currency is the universal safe haven and store of value, the US dollar will be strong next year and the US market will be the biggest game in global markets. This past week the Nasdaq Composite rose above 4,000, a level not seen in 13 years, not since the euphoria of the tech bubble. As everything financial rallies to pre-crisis levels, it is no longer 2007 again – it is better than that.

        More sober observers may well wonder why that should be the case.

        At this odd moment in time, the US markets are the beneficiaries of two contradictory trends: one is today’s reality and the other is tomorrow’s expectation.

        Neither of them has anything to do with economic fundamentals, unfortunately. The bullish reality today is that the Fed is still supplying massive liquidity to the markets, driving asset prices ever higher. Moreover, incoming chairman Janet Yellen is even more committed to quantitative easing than the current occupant of the seat Ben Bernanke.

        At the same time, though, the same market pundits who were sure that the Fed would tighten policy and taper asset purchases back in September are predicting that the Fed will now do so early next year on the back of some positive economic signs – including the recent stronger-than-expected payrolls report.

        The anticipated move away from QE is, ironically, also supportive since that expected tapering will mean a stronger dollar and an expectation of improved fundamentals ,and, finally, perhaps corporate spending on plant and equipment.

        So the market is going up for both reasons. Price/earnings multiples have gone from 14 times at the end of last year to almost 17 times – (2007 again).

        “Multiple expansion is driving stock market performance to a far greater degree than earnings, while earnings themselves are being driven to a remarkable extent by share buybacks,” notes CLSA analyst Christopher Woods.

        Those share buybacks amounted to some $218bn in the first half of the year, and keep rising, as do dividend payouts. Capex, of course, remains as subdued as ever. But never mind because, for the moment, that is what keeps the Fed with its foot on the monetary accelerator.

        Analysts like Mr Wood are now beginning to query what can go wrong and bring the stock market down, beyond the sort of geopolitical shock that is always a possibility. His answer is the continuing threat of deflation.

        As the disconnect between the rising prices of financial assets and the real economy continues, is it possible that even the most aggressive easing has limits? And does the fact that the more sceptical analysts are beginning to pose the question mean that this point is in sight?

        The real incomes of most of the population have not risen at all. And if the only beneficiaries of QE are the very wealthiest, can their spending be enough to support the real economy? In a world where demand will probably be weaker tomorrow than it is today, can asset prices rise indefinitely?

        Every day they rise suggests perhaps that the end point is nearer.

        Spain on track but India GDP disappoints

        Posted on 30 November 2013 by

        Producer prices fell in France and Italy, while Spain registered a current account surplus of €3bn ($4.1bn) in September, putting the country on track for its first annual profit in decades.

        Europe

        UK

        According to the GfK Consumer Confidence Index, UK consumers were less optimistic in November than in the previous month, with the index dropping one point to -12. Consumers’ opinion about the country’s general economic situation in the past 12 months has grown gloomier, while expectations for the next 12 months increased slightly. Consumers were less in the mood to make major purchases in November than in September.

          France

          Household consumption of goods decreased 0.2 per cent in October compared with the previous month, after having decreased by 0.1 per cent in September. The decline in October was influenced by a 4.9 per cent decrease in expenditure on energy products. However, household expenditure on durables rose 0.8 per cent month on month.

          Industrial producer prices declined 0.2 per cent in October month on month, after increasing 0.3 per cent in September. Prices for refined petroleum dipped 0.8 per cent, after three months of rises. Following two months of stability, import prices of industrial products fell 0.3 per cent – affecting all products, except textiles and apparel, which went up 0.8 per cent due to the new winter collections.

          Turkey

          According to provisional data, foreign trade deficit increased by 31.8 per cent in October year on year, reaching $7,375m. While exports decreased 8.2 per cent to $12,105m, imports went up 3.7 per cent to $19,480m.

          Sweden

          GDP increased 0.3 per cent in the third quarter compared with the third quarter last year. While household consumption expenditure increased 2.1 per cent non-adjusted, production of goods dropped 2.1 per cent. Seasonally adjusted, GDP increased 0.1 per cent from September to October.

          Exports of goods went down 2.9 per cent in volume in the third quarter year on year – mainly due to a decline of 23 per cent in exports of mineral fuels, with the exports of petroleum products going down 21 per cent. Meanwhile, imports of goods decreased 2.6 per cent year on year, with the dominating sector in imports – machinery and transport equipment – decreasing 0.5 per cent.

          Italy

          Producer price index decreased 1 per cent from September to October with respect to the previous month. In the domestic market, the index decreased 1.3 per cent and 0.2 per cent on the non-domestic market. Year on year, the index decreased 2.2 per cent, with both domestic and non domestic markets going down, by 2.7 per cent and 0.8 per cent, respectively.

          In the third quarter, the number of unemployed people rose 14.6 per cent year on year, with the unemployment rate reaching 11.3 per cent of the population. The situation is particularly critical in the south and on the Italian islands, where 18.5 per cent of the population is unemployed.

          Spain

          Having emerged from a two-year recession in the third quarter, Spain registered a current account surplus of €3bn ($4.1bn) in September, putting the country on track for its first annual profits in decades. A year ago, Spain recorded a €15.7bn current account deficit. The year-on-year change was mostly due to a €15.5bn
          fall in the trade deficit, with Spaniards buying fewer imported goods and domestic companies searching for new markets abroad.

          Asia

          Thailand

          Current account registered a surplus of $376m in October, after a deficit of $530m in September. Year on year, exports dropped 0.5 per cent year, much less than the 6.3 per cent decline registered in September. Imports went down 4.6 per cent year on year in October and 6.1 per cent in September.

          Taiwan

          In the third quarter, GDP expanded 1.66 per cent year on year. The country has cut its 2013 full-year growth forecast for the second time in three months, from 2.31 per cent to 1.74 per cent. In a statement, the government attributed the downward revision to uncertainties arising from the restructuring of the Chinese economy and the US Federal Reserve’s exit from its quantitative easing programme. Thailand has also cut its growth forecast this week.

          India

          GDP grew 4.8 per cent from the second to the third quarter – the fourth successive quarter of economic expansion below 5 per cent. However, the growth was slightly higher than the 4.4 per cent registered in the second quarter, partly due to an expansion in farm output.

          Americas

          Canada

          GDP expanded 0.7 per cent in the third quarter, following 0.4 per cent growth in the previous quarter. Both household final consumption expenditure and business gross fixed capital formation rose 0.6 per cent. After three quarters of growth, exports fell 0.5 per cent, with exports of goods and services declining 0.5 per cent and 0.4 per cent, respectively. Month on month, GDP grew for 0.3 per cent in September, a third consecutive monthly increase.

          Africa

          South Africa

          In October, the trade deficit went up to 12.4bn ($1.2bn), after a 11.9bn deficit in September. The deficit was, though, smaller than economists expected due to a rebound in car exports following the end of a four-week strike by workers in the vehicle-manufacturing and auto-component industries.

          RBS seduced by UK’s property obsession

          Posted on 30 November 2013 by

          Let’s all stick pins into Derek Sach. He is the man in charge of Royal Bank of Scotland’s hit squad, the Global Restructuring Group, and it seems that, just as in the movies, he has almost single-handedly blown up the great swaths of British business that were his targets.

          To read two reports this week, you’d think Mr Sach’s bonus depends on destroying as many viable companies as he can, before flogging the rubble at silly prices to his mates in other parts of the bank. Well, maybe. The behaviour of big banks never ceases to surprise, and seldom on the upside, but this is a bit much.

            We have not seen all the gory details of the Tomlinson report into the treatment RBS meted out to small businesses, but even the author must be surprised at the traction it’s got, considering he commissioned himself to write it. However, many of the cases that we have seen have a common theme.

            They are essentially about property, the great British obsession. The developers/speculators from whom Mr Sach’s men pulled the rug had borrowed heavily from RBS in the good times. Had they continued to roll, the borrowers would have got stinking rich, while the bank would get its money back – a high-stakes version of heads I win, tails you lose.

            This hardly excuses the more extreme brutality of Mr Sach’s hitmen, but both borrower and lender might have investigated beyond the mark-to-market value of the property before taking the plunge. Merely looking at the asset backing of a venture is lazy banking. A loan may be under water, but if the business plan still stands up, an intelligent lender will not pull the plug, or cause death by a thousand cuts with fees and charges.

            Looking may be what GRG actually did. The other report, from Andrew Large, found that only one in 10 businesses that went to the boot camp subsequently went bust. Unfortunately for Mr Sach, they are the loudest decile.

            Rentiers at the ready

            The days may be short, but it is still autumn at the Treasury, and next week George Osborne will make a statement to prove it. Please don’t call it a Budget (we will, we will). This is supposed to be about spending, but no recent chancellor has resisted the chance of a headline-grabbing tax initiative.

            Few tax increases are popular, but an outfit called the Intergenerational Foundation may have found one. It argues that removing tax breaks from buy-to-let landlords would yield £5bn, and judging from the invective that followed Norma Cohen’s report of the report, the Foundation may be on to something.

            The rentier benefits from tax relief on the mortgage, dilapidation allowances and – if the owner times his residence moves right – freedom from capital gains tax on disposal. The Foundation argues convincingly that buy-to-let has helped push up property prices, particularly in London, and has done little to stimulate new building.

            Well, the clue is in the name, and since everyone else has a lobby group, we shouldn’t argue about one for the young. There is nothing inherently wrong with buy-to-let, but subsidies for the rentier class are another transfer of wealth from the young to the old. That looks wrong today – and £5bn is a useful extra sum for George Osborne to play with.

            The right priority

            Robin Leigh-Pemberton, who died this week, was a very odd choice for governor of the Bank of England in 1983. But after Kit McMahon had described Nigel Lawson’s Medium Term Financial Strategy as hokum, and Jeremy Morse spoke out about being bullied into subsidising the financing of UK exports, the two front runners effectively ruled themselves out.

            Gordon Richardson had been governor for a decade. He was so cross at not being asked to continue that he gave little help to his successor, whose mixture of effortless charm and ability to delegate overcame his ignorance of the mechanics of central banking. Lord Kingsdown, as he later became, considered that being made Lord Lieutenant of Kent mattered more to him than being governor of the Bank – which may also help explain why he was rather good at it.

            November 29 highlights

            Posted on 30 November 2013 by

            Buy: Mitchells and Butlers (MAB)

            mitchells & butler ICN

            If economic recovery spreads to the regions from London and the Southeast – which currently generate 45 per cent of sales – then M&B will be well placed to benefit and the shares are modestly rated on a price/earnings ratio of 11.6, writes Julian Hofmann.

              A mix of stable operating revenues and reduced interest charges kept adjusted operating profits ticking up by 5.1 per cent for the year. The pub company cut capital investment by £19m, too, but it looks like a Christmas season that falls in the optimal midweek slot is the key to building short-term momentum.

              M&B’s estate is increasingly weighted towards food and like-for-like food sales increased by 0.8 per cent, reflecting price increases rather than volume growth.

              “Wet” sales continued their long-term downward trend with a 0.2 per cent drop, although excellent weather in the second half helped moderate the fall.

              Deutsche Bank forecasts adjusted pre-tax profit of £191m for 2014, giving adjusted earnings per share of 35.8p, up from £184m and 34.7p this time.

              ——————————————-

              Sell: SAB Miller (SAB)

              SABMiller Brand

              SABMiller seems well-placed to benefit from global consumption growth, although earnings growth will be held back by currency weakness and rising raw material costs, writes Julia Bradshaw. Yet the shares are highly rated given the risks.

              Declines in the South African rand, Colombian peso and Peruvian nuevo sol held back growth for beverage giant SABMiller, which makes about four-fifths of its profits in emerging markets.

              The maker of Grolsch and Peroni saw decent progress across all markets apart from Europe and North America, where lager volumes fell, leaving underlying lager volumes just 1 per cent higher.

              The picture in emerging markets was much rosier. Profit in Latin America grew by 10 per cent to $972m, helped by favourable pricing, higher volumes and a good performance from premium brands. Thirst for beer continued in Africa, where profit was up 16 per cent to $408m, while Asia Pacific also had another good year, with profits 12 per cent higher at $540m.

              Broker Numis Securities expects pre-tax profit of $5.1bn for the full year, giving earnings per share of 244¢ (up from $4.7bn and 237¢ in 2013).

              ——————————————-

              Hold: Compass (CPG)

              The eponymous offerings at Burger and Lobster©Thomas Bowles

              The eponymous offerings at Burger and Lobster

              Profit margins are improving and there is a huge pipeline of business, but a forward price/earnings ratio in excess of 18 – near a 10-year high – looks up with events, writes Lee Wild.

              Feeding hungry Americans, and a growing appetite for its services in emerging markets, helped boost organic revenue at catering heavyweight Compass by over 4 per cent last year. Operating profit before hefty write-downs and restructuring costs rose 8 per cent to £1.27bn, and a larger than expected £500m share buy-back for 2014 pushed the shares to a record high.

              That’s the reward for getting the operating profit margin above 7 per cent for the first time. North America, which now accounts for over 46 per cent of sales, grew organic revenue by 8 per cent, while emerging markets grew 7 per cent.

              Even in Europe and Japan, operating margins grew by 60 basis points as cost-cutting offset another fall in like-for-like volumes.

              Broker Numis Securities expects adjusted pre-tax profit of £1.26bn in 2014, giving adjusted earnings per share of 51.9p (from £1.19bn/47.7p in 2013).

              ——————————————-

              Sector focus: tech is back with a bang

              London’s so-called Tech City has been getting a lot of favourable press recently, writes Matthew Allan. There’s a real buzz around the epicentre in gritty Shoreditch, reminiscent perhaps of the heady optimism that fuelled the dotcom bubble in the late 1990s.

              But is the current surge in merger and acquisition activity, number of initial public offerings (IPOs) and rocketing share prices a sign of future growth, or a warning cry that the sector is beginning to overheat?

              Already this year, the Aim technology index has risen by nearly half and has almost doubled in the past two years. It recently breached a level last seen at the back end of the internet boom, in December 2001. Nor are the gains confined to tiddlers; the FTSE 350 technology index is up four-fold since the darkest days of the financial crisis at the end of 2008.

              Recent takeover bids for Andor Technology, a high-tech camera maker, and Delcam, which develops advanced software for the manufacturing industry, suggest better times ahead. Andor’s suitor, Oxford Instruments, has made an indicative offer of 500p per share in cash. Sales are recovering and Andor has negotiated hard, yet Oxford clearly sees value in the business even at these levels.

              Delcam, meanwhile, is being bought by US-based rival Autodesk for £172.5m in cash, a deserved premium as record demand for its software translates into soaring revenue and profit.

              There has been an abundance of smaller M&A activity among London-listed tech stocks during these past few months, too, most recently at managed service provider Redcentric, which said this week it will pay £65m for peer InTechnology. The deal, classified as a reverse takeover, will be funded largely by institutional money.

              Tech Hub

              FT Tech Hub

              Latest FT news and views from the world of technology

              It is the IPO market, however, that has really captured the imagination of investors this year as companies and speculators alike capitalise on the robust capital market environment. Shares in microblogging site Twitter soared as much as 70 per cent on their first day of trading after the loss-making company raised $1.8bn (£1.1bn) this month. And more than a few eyebrows were raised when Evan Spiegel, the 23-year-old founder of photo messaging app firm Snapchat, turned down a $3bn offer from Facebook.

              London, however, is popular, too. Servelec, a provider of software and services to the healthcare and power industries, is set to complete the largest fundraising for a UK-listed software company since 2000 when its shares list on the main market on December 2. A heavily oversubscribed IPO – also billed as the largest UK tech IPO by market value since March 2010 – will raise £122m.

              Servelec isn’t an isolated example, either. Another 18 technology companies have tapped the London market so far this year, double the number in 2012 and 2011. “The market is improving such a lot now, there is a completely different appetite for raising money,” notes Sam Smith, chief executive of broker finnCap. “The small-cap environment is definitely seen as less risky than it has been for a long while. There’s so much interest in initial public offerings… it’s now a viable option for a lot of businesses.”

              It certainly helps that shares in many of the tech floats have rocketed following their debut. In 2013 alone, you would have made an average gain of nearly 17 per cent had you invested in all 18 tech IPOs on their first day of trading, based on exclusive research from Investors Chronicle and S&P Capital IQ.

              Capital requirements eased for UK banks

              Posted on 30 November 2013 by

              The Bank of England’s regulatory arm backed away from tough capital demands for bank-specific risks on Friday as it set out the detailed implementation of new EU rules.

              Share prices of UK banks rose after the Prudential Regulation Authority said lenders’ of so-called Pillar 2A capital requirements will not have to be met entirely with the highest quality capital. Regulators tailor secret Pillar 2A requirements to cover each bank’s individual risks – including those associated with pension liabilities.

                The move comes after banks urged the PRA not to pile on excessively onerous capital demands as it brings in EU-wide rules aimed at improving the resilience of the banking sector by implementing the new global Basel III standards. The PRA’s original proposals, published in August, prompted ferocious lobbying from the banks and building societies.

                Shares in Barclays, which had been identified as heavily affected by the proposed reforms, rose 2.3 per cent as some analysts argued the regulator’s decision was not as tough as they had expected.

                The PRA said in a new paper that it would impose the same mix of capital in Pillar 2A as for banks’ Pillar 1 requirements. That means UK banks will have to hold at least 56 per cent of their supplementary requirements in top-quality Common Equity Tier 1 (CET1) capital – not all of it.

                Simon Hills, an executive director at the British Bankers’ Association, said: “The PRA have recognised that some of the risks they cover in Pillar 2A – notably pension risk – do not need to be covered by CET1 capital. This is helpful and makes sense, because this sort of risk only needs to be covered by gone concern capital – which is used to cover a situation when a bank goes into resolution.”

                The PRA dismissed calls from some lenders that they should not have to hold any CET1 capital against pension risk.

                Analysts at Exane BNP Paribas said the PRA’s announcement meant banks could face an equity tier one requirement of between 12 and 13 per cent but that further information was still needed.

                The PRA has not yet finalised all the aspects of its rules, which implement a European directive called CRDIV.

                Among its other decisions, the regulator said it would phase out the double-counting of capital held between subsidiaries in a banking group by 2019.

                “These decisions will enhance the stability of the financial sector and strengthen the capital regime in the UK,” the PRA said.

                Alwaleed’s finance chief to quit

                Posted on 29 November 2013 by

                Kingdom Holding, Saudi billionaire Prince Alwaleed bin Talal’s investment vehicle, will lose another high-profile executive, marking the second such departure in recent months.

                Shadi Sadeek Sanbar, chief financial officer at Kingdom Holding, plans to leave the company at the end of the year, people familiar with the situation said. His departure comes after the resignation in June of Ahmed Reda Halawani, the company’s director of private equity.

                  Kingdom has been in the spotlight this year after Prince Alwaleed became embroiled in a public dispute with Forbes magazine over a detailed investigation into his wealth.

                  The dispute with Forbes emerged ahead of an article which said the value of Prince Alwaleed’s stake in Kingdom was much lower than its share price suggested. Kingdom responded with a firm rejection, and described allegations of share-price manipulation as “completely unsupported and biased”.

                  Mr Sanbar’s deputy, Mohammed Fahmy Soliman, may be promoted as part of the transition and Mr Sanbar will remain an adviser to the Prince, the people said. Mr Soliman is already more involved in meetings with bankers, they added.

                  Mr Sanbar became Kingdom’s chief financial officer in 2007 and has acted as a special adviser to Prince Alwaleed since 2005. People familiar with the company saidthat working there was demanding, with long hours to match the packed schedule of Prince Alwaleed.

                  A person familiar with Mr Sanbar said: “He wanted to leave for some time and I am not sure it will have a significant impact on the company.” He added that Mr Sanbar planned to retire and to spend more time with his family.

                  Kingdom Holding did not respond to a request for comment. Bloomberg first reported the move on Friday.

                  An accounting professional, Mr Sanbar started his working life at the Los Angeles office of Arthur Andersen in the 1970s after studying in the US. He worked at the firm for decades, and stayed on after its integration with Ernst & Young.

                  Co-op Bank secures restructuring support

                  Posted on 29 November 2013 by

                  The Co-operative Bank’s retail bondholders have voted almost unanimously in favour of a rescue restructuring, enabling the lender to push ahead with plans to fill a £1.5bn capital hole by the end of the year.

                  Results from an early participation vote, which closed on Friday, showed that more than the required two-thirds of investors submitted their forms. Of those that did, 99.91 per cent supported the recapitalisation, the Co-op said.

                    The result will be welcome news for the Co-op, which has had a rocky few weeks since it announced the restructuring deal with bondholders on November 4.

                    The bank was thrown into crisis shortly after, as its former chairman, Reverend Paul Flowers was filmed allegedly trying to buy illegal drugs. The Co-op has admitted that the events have damaged its reputation and contributed to a loss of current account customers in recent weeks.

                    In a statement released on Friday night, the Co-op said the bank and its parent group were “delighted at the overwhelming levels of support for the liability management exercise at this critical juncture . . . We are now highly confident that our £1.5bn recapitalisation plan for The Co-operative Bank can be achieved.”

                    The bank is being forced to raise the fresh capital after being hit by large losses on bad debts, and charges relating to mis-sold payment protection insurance and a mishandled IT upgrade.

                    The outcome of the vote will also be a relief for a group that represented holders of the Co-op Bank’s lower tier two bonds, LT2, and its advisers – Moelis, the investment bank, and Shearman & Sterling, the law firm – which together led the bank recapitalisation talks with the Co-op.

                    The LT2 group consisted of several hedge funds, which built a blocking stake in the lower tier two bonds and used it to negotiate a better deal for creditors than the Co-op had proposed. Aurelius – the biggest hedge fund in the consortium, and one that was central to the recapitalisation talks – sold almost its entire holding days after the plan was announced.

                    The Co-op and the LT2 group had some concerns that they may not receive sufficient numbers of votes from retail investors to approve the recapitalisation. Many of the retail investors are pensioners in their 80s and 90s.

                    If the bank had failed to secure support from investors, its recapitalisation plan would have collapsed and it would likely have been put in to a “resolution process” run by regulators.

                    The final deadline for votes is December 6 and the Co-op will announce the full result midway through next month.

                    Blackwell has keen sense for details

                    Posted on 29 November 2013 by

                    Lord Norman Blackwell is a boardroom veteran who is seen as down to earth with a low-key style

                    Lord Norman Blackwell is a boardroom veteran who is seen as down to earth with a low-key style

                    When he stepped down as a senior independent director at Standard Life last year, Lord Blackwell declined the invitation to give a speech at his leaving dinner. Instead he asked the board to find him a piano.

                    The assembled directors at Edinburgh’s swish Prestonfield hotel – plus a coterie of passing guests who crowded around the doorway – were treated to a mini-recital of Schubert and Chopin.

                    “It was concert pianist quality,” says Standard Life’s longtime chairman, Gerry Grimstone. “Norman really is the archetypal renaissance man.”

                      It is just as well. Lord Blackwell, 61, is set next week to be reborn as the next chairman of Lloyds Banking Group, taking on the highest profile role of his career, as Britain’s biggest high-street bank prepares to return to full private sector ownership, after the humiliating part-nationalisation of 2008.

                      The appointment, revealed by the Financial Times on Thursday, is expected to be rubber-stamped by the board on Monday, paving the way for Lord Blackwell to take over the Lloyds’ chairmanship from incumbent Sir Win Bischoff early next year.

                      On paper at least, the former banker cum government adviser cum career non-executive, is the perfect choice. Lord Blackwell’s early career flip-flopped between stints advising government and McKinsey, the consultancy, before he moved to NatWest bank, where he became head of strategy to then chief executive Derek Wanless. Since 2000, he has held a succession of company directorships, and chairs construction business Interserve.

                      Those who have worked with Lord Blackwell admit he has been an understated figure for much of his career.

                      “He is low-key to the point of being boring in some people’s eyes,” says one former colleague. But most praise his style and his substance. “He’s old-fashioned in the best kind of way,” says Mr Grimstone – a trait that will mesh with the image Lloyds seeks to exude: a traditional lender that has spurned some of the racier investment banking strategies undertaken by many rivals.

                      Despite being a life peer, associates say Lord Blackwell – married with five grown-up children – is very down-to-earth, living with his family in an unremarkable Victorian villa in Epsom.

                      All those who have worked with him praise twin skills in the prospective Lloyds chairman – a keen intellect and a great diligence.

                      “He’s assiduous in keeping up to date with changes in rules and regulations,” says one former colleague at KPMG. “He comes to all our seminars on international accounting standards.”

                      Lord Blackwell’s style will contrast with the ebullient ways of the outgoing Sir Win. But he is expected nonetheless to gel well with António Horta-Osório, chief executive.

                      “He will be quite a good foil to António,” says one adviser. “He might be understated but he is such a detail man that he won’t be fobbed off. He will be a serious challenger to the bank’s executives.”

                      That prospective dynamic is understood to have played a vital role in Lord Blackwell’s selection for the job ahead of other candidates, including rival board member David Roberts.

                      “Some people thought David still had CEO ambitions and would have rivalled António rather than complementing him,” says one person involved in the process.

                      Capping Lord Blackwell’s suitability for the job, in the board’s eyes, was his deep political connections. Though he has not been directly involved in government since heading former prime minister John Major’s policy unit in the mid-1990s, he remains close to the current leadership and sits on the board of the Centre for Policy Studies think-tank.

                      Lloyds remains 33 per cent government owned, and liaising with the Treasury, as that stake is sold to private sector investors over the next couple of years, may be the most crucial part of Lord Blackwell’s job.