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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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Currencies, Equities

Scary movie sequel beckons for eurozone markets

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors. Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German […]

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Dollar rises as markets turn eyes to Opec

European bourses are mirroring a tentative Asia session as the dollar continues to be supported by better US economic data and investors turn their attention to a meeting between Opec members. Sentiment is underpinned by US index futures suggesting the S&P 500 will gain 3 points to 2,207.3 when trading gets under way later in […]

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Categorized | Banks

Goldman puts its faith in Gnodde

Posted on November 21, 2016

Michael Sherwood, who kept Goldman Sachs’ European arm clear of the financial crisis and Libor rigging, has said he is to step down, five months after he was grilled by parliament over the BHS scandal. MPs concluded the bank had exercised “authority without accountability” in advising the store chain’s former owner Sir Philip Green. Having dodged explosive financial bullets, one of the UK’s best-known bankers will leave with what amounts to a slap in the face with a wet fish.

The man universally known as “Woody” says there is no connection between his departure and Goldman’s unpaid advice to Sir Philip on the sale of pensions-burdened BHS to an unqualified bidder for £1. We will take him at his word, though some cynics will assume the link is causal rather than coincidental.

The joke about Goldman, the most admired and resented investment bank in the world, is that its executives often have incredible careers once they leave it. That reflects the low public profiles of officers and their limited tenures. Most move on in their early 50s after less than a decade as a partner.

Mr Sherwood is to step down after a gruelling 22 years with that title partly because he joined the upper echelon at just 29 years old. His promotion was a prescient recognition of early promise. He has overseen the expansion of the European business from a modest start to contributing a quarter of group net profits before tax. His departure will put co-chief executive Richard Gnodde in sole charge of the Emea area.

Mr Sherwood is an expansive ex-debt trader. Mr Gnodde is a reserved mergers and acquisitions guy. The shift is consistent with the emphasis that all banks are putting on capital-light advisory work — despite the recent flurry on trading desks. Until recently, Goldman was a brash parvenu in Europe as it once was on Wall Street. Now it is maturing here, too.

Mr Gnodde is unlikely ever to compare banking to a game of football in which Goldman hangs around the goalmouth hoping the ball will deflect off its head into the net. Or to depute colleagues to work unpaid for an entrepreneur as large and loud as Sir Philip, given the reputational risks.

Assymetric warfare

For telecoms executives of a certain age, “spectrum asymmetry” meant moving their 1980s Sinclair home computers to one side, to plug in a tape recorder and upload 48K of software at a rate of 1,535 bits per second, writes Matthew Vincent. Nowadays, their companies want to transmit gigabytes of data across the airwaves to mobile phones in new bands of 2.3 GHz and 3.4 GHz — several thousand million cycles per second. Not surprisingly, spectrum asymmetry has also taken on a new meaning: one telecoms provider having too much of this high-speed mobile bandwidth.

On Monday, Ofcom deemed BT assymetric as it has 45 per cent of “immediately usable” spectrum, following its takeover of EE. The watchdog has therefore capped how much of this spectrum one operator can buy — ruling BT/EE out of its next auction, and cutting its share to 42 per cent. As one analyst said: “The proposed restraints … show Ofcom is concerned that spectrum asymmetry could harm UK mobile competition.”

Rival operators might reasonably ask why the Competition and Markets Authority waved through the takeover in January. Ofcom must now rebalance the market through auctions — a process that could take as long as loading a phone app from cassette tape.

Mitie vexed with NLW

Increasing labour prices is always a good way to destroy jobs. Mitie is pulling out of domiciliary healthcare partly in response to the National Living Wage. About 3,000 low-paid carers will need to find new employers.

Shareholders are sharing the pain. The outsourcer has recorded a £100m interim loss and trimmed its dividend.

The proximate cause of the withdrawal is a drop in spending on care for patients at home. Prices have fallen 17 per cent over four years. This reflects the imperviousness of state budgeting to the normal rules of supply and demand. The need for the service is rising alongside longevity.

Mitie sees no prospect of returning the division to profit because it cannot flex costs. Outgoing chief executive Ruby McGregor-Smith believes expenses will increase by one-third over three years. The direct impact of the NLW would be worsened by the influence of the apprenticeship levy and pensions auto-enrolment.

Brexit may meanwhile choke off the supply of low-cost immigrant labour. It is piquant that Baroness McGregor-Smith, a Conservative peer, is pulling the plug on a vital service (continued, she says, by other contractors) in response to Tory policies. Ironic too, that the announcement comes on the day Theresa May called for business to work with government for a better society. The iron rule of business is that what you don’t pay for, you don’t get.