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BARCLAYS chief executive Bob Diamond is set to behauled before parliament after the bank was fined290m for its part in a global conspiracy to fix therate at which banks lend to each other.

Diamond will face questions from the TreasurySelect Committee after regulators in Britain andthe US slapped record punishments onBarclays over its attempts to manipulatethe London interbank offered rate(Libor) and its European equivalent,Euribor.The bank must pay 59.5m to the

Financial Services Authority and a fur-ther $360m (231m) to US regulators inthe first major victory for watchdogs overattempts to rig Libor, which underpins tril-lions of dollars of derivatives contracts world-wide and is also widely used as a reference rate forcorporate lending.

Diamond said Barclays had lost sightof its culture and values duringthe affair, which occurred between2005 and 2009, before he was pro-moted to chief executive.

Barclays will also pay fines of$200m to the US CommodityFutures Trading Commission (CFTC)and $160m to the US Department ofJustice. The bank attempted tomanipulate Libor submissions some-times on a daily basis, according tothe CFTC.

Last night Andrew Tyrie,

chairman of theTreasury select

committee, told City A.M.: There has been lying, it isshocking. The banks were acting in concert, so this isnot the end of the story.

Chris Leslie, shadow financial secretary to theTreasury, said: We now need to know how manyemployees were complicit in this process, how manywill be losing their jobs as a result, and whether thisneeds to now go beyond the regulators and into a

criminal investigation.Regulators around the world, including

the EC and Japans Financial ServicesAuthority, are looking into the manipula-tion of Libor. Several banks, includingCitigroup, HSBC, Royal Bank of Scotlandand UBS, have been approached but no

criminal charges have been filed.Yesterday Barclays said Diamond, the chief

executive, as well as finance director ChrisLucas, corporate and investment banking head

Rich Ricci and chief operating officer Jerry delMissier said they would not take a bonus.

Diamond said the fines covered pastactions when its standards fell well short.

When we identified those issues, we tookprompt action to fix them and co-operatedextensively and proactively with the authori-

ties... I am sorry that some people acted in amanner not consistent with our culture andvalues.

Tracey McDermott, acting director ofenforcement and financial crime at the FSA,said: Barclays misconduct was serious,widespread and extended over a number of

years. The integrity of benchmark ref-erence rates such as Libor and

Euribor is of fundamentalimportance to both UKand internationalfinancial markets.

if you know how to keep a secret Ill bring you in on it []were going to push the cash downwards on the imm day []if you breathe a word of this Im not telling you anything else []I know my treasurys firepowerwhich will push the cashdownwards []please keep it to yourself otherwise it wont work

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Date: 14 July 2012

Time: 10.15 15.30

Diamond faces morequestions over Libor

BUSINESS WITH PERSONALITY

LONDON2012

days to go

WHY THERES MORE TO SOCIAL NETWORKING THAN FACEBOOKSee Page 22

HOW CONSUMER DEBT IS STIFLING THE UK RECOVERY See Forum, 18 29www.cityam.com FREEISSUE 1,662 THURSDAY 28 JUNE 2012

BY PETER EDWARDS AND DAVID HELLIER

DIAMOND TO FACE MPSAFTER LIBOR SCANDAL

Certified Distribution

30/04/12 till 27/05/12 is 132,076

If its not too late low 1m and 3m would benice, but please feel free to sayno...Coffees will be coming your way

either way, just to say thank you for yourhelp in the past few weeks.

7 April 2006: Email(Trader C requested low one-month and three-monthUS dollar LIBOR submissions)

Trader C:

Submitter:Donefor you big boy.

If it comes in unchanged Im a dead man

26 October 2006: Email

External Trader:

Trader G:Ill have a chat.

(Barclays submission on that day for three month USdollar LIBOR was half a basis point lower than the daybefore, rather than being unchanged.)

Dude. I owe you big time! Come over one dayafter work and Im opening a bottle of Bollinger.

External Trader:

12 February 2007: Instant MessengerBarclays trader E to various traders at panel banks:

Were all rooting for a high LIBOR tomorrow

26 September 2007: Email

Barclays derivatives Trader:

(The submitter had been made aware by a seniormanager that he should not know what thederivatives traders positions were)

I reckon you should be about four

to five ticks higher.

Submitter:8 October 2008:Phone call

Submitter: [Manager E]s asked me toput it [Barclays Libor submission]lower than it was yesterday to sendthe message that were not in the s**t.

FTSE 100 5,523.92 +76.96 DOW 12,627.01 +92.34 NASDAQ 2,875.32 +21.26 /$ 1.56 unc / 1.25 unc /$ 1.25 unc

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THE EVIDENCE THAT LED TO BARCLAYS DOOR

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[email protected]

Follow me on Twitter: @allisterheath

IN BRIEFKerviel faces five-year sentencen Former Societe Generale trader

Jerome Kerviel should serve five yearsin prison for his role in France'sbiggest-ever rogue trading scandal, astate prosecutor told a Paris courtyesterday. Kerviel is appealing athree-year jail sentence handed downin 2010, as well as an order to repaySocGen 4.9bn (3.9bn) lost by theFrench bank when it closed thetrader's massive risky bets in 2008.

SEC charges Harbingers Falconen US securities regulators yesterdaycharged billionaire hedge fundmanager Philip Falcone and his firmHarbinger Capital Partners with a raftof illegal actions, including marketmanipulation and misappropriatingclient assets. The Securities andExchange Commission also yesterdaycharged Peter Jenson, Harbingers

former chief operating officer, withaiding and abetting themisappropriations scheme. Harbingeralso settled an action alleging unlawfultrading by agreeing to pay a $428,975fine, plus $857,950 in disgorgementand $91,838 in prejudgment interest.

Santander UK rating under reviewn Credit rating agency Moody's lastnight placed its rating for SantanderUK under review for a possibledowngrade. Moodys said its reviewwould focus on the independenceand resilience of the UK banksfranchise and financial strength in theevent that the creditworthiness of theparent is further affected and itsratings lowered.

Hague presses for audit on EU lawWilliam Hague, the foreign secretary,wants to launch a comprehensive audit ofthe impact of European Union law onBritain this summer, an exercise thatcould fuel a Conservative drive torepatriate powers from Brussels.

4,000 firms under tax investigationMore than 4,000 companies are underinvestigation by the tax authorities, seniorofficials and Revenue & Customs revealedas they faced hours of hostile questioning

by MPs over corporate tax avoidance.Jim Harra, director-general of businesstax at the Revenue, said the authoritieswere investigation the tax affairs of justover 4,000 companies, although he wasunable to say how many of these werelarge corporates.

Bo family in London property dealsThe family of the disgraced Chineseleader Bo Xilai bought luxury Londonproperties through a front company withthe help of a French architect.They enlisted the great grandson of theco-founder of retailer Marks & Spencer tohelp sell one of the apartments.

Taxpayer foots bill as RBS stopshospitalityRBS decision to cancel its corporatehospitality at Wimbledon means that thetaxpayer is paying 260,000 to rent anempty room.

Barclay brothers tighten hotels gripThe Barclay brothers scored a majorvictory in their battle for control three topLondon hotels after the Court of Appealconfirmed their right to own the 660mof debt held against the properties.

TNK-BP board to meet next monthBP has regained some control over therunning of Russian joint venture TNK-BP,securing the agreement of its oligarchpartners to meet as a board for the firsttime since December.

T-Mobile USA chief Philipp Hummquits after failed mergerT-Mobile USA chief executive PhilippHumm resigned on Wednesday, sixmonths after a planned merger of thetelecom group with AT&T fell apart.

Fiat to Boost Stake in chryslerItalian auto maker Fiat SpA is expected toincrease its stake in Chrysler Group LLC to61.9 per cent from 58.5 per cent as earlyas next week by purchasing shares heldby a large trust fund that provides healthcare for retired union workers.

Comcast Settles FCC ComplaintComcast agreed to pay $800,000 tosettle a Federal CommunicationsCommission complaint that it didn't offerstand-alone Internet service to consumersas agreed when it acquired NBCUniversal.

WHAT THE OTHER PAPERS SAY THIS MORNING

BANK buyout vehicle NBNK will beshut down after Lloyds finally agreedan outline deal to sell 632 branchesto the Co-operative.

Lord Levenes group said therewere no other assets to target justhours after it updated the market ona new offer for the Project Verdebusiness.

Lloyds yesterday said it hadreached an understanding withthe Co-op for the branches, which itis being forced to offload under EUstate aid rules.

A source said Lloyds and the Co-opare expected to move to Heads ofAgreement in the next few weeks.

Lloyds said the deal would bebased upon it transferring a smallerbalance sheet into the new businessthan previously expected, so therewill be no funding gap in terms ofassets and liabilities.

The Co-op Bank will treble in sizeand will have a seven per centmarket share. The Verde business hasabout five million customers and isexpected to be sold for 1bn to1.5bn, below the initial estimate ofup to 2bn.

The Treasury said: Although thedeal has not been finalised, wewarmly welcome this developmentas a positive step in the process ofdelivering the Lloyds divestment andthe benefits that will have forcompetition and the mutuals sector.

NBNK will close

as Co-op winsLloyds branches

2 NEWS

BY PETER EDWARDS

To contact the newsdesk email [email protected]

WHAT preposterous emails.

What were these tradersthinking? That they wouldget away with it? Barclays

and the entire banking industry havebeen badly damaged by the Libormanipulation scandal and this timeit is entirely a crisis of their own

making. This is not like someprevious rounds of banker-bashing,where lenders were wrongly blamedfor developments that were actuallycaused by central banks cheapmoney or regulators promotion ofsub-prime. No this latest fiasco is alltoo real and unprovoked. Barclaysinability to ensure that some of itsstaff behaved appropriately was amajor failing of its corporate controls.People knowingly broke the rules.Shame on them.The Libor row will have many other

consequences, none of them positive.

EDITORSLETTER

ALLISTER HEATH

Libor manipulation scandal is a disastrous own goal for City

THURSDAY 28 JUNE 2012

Many will ask why there were nocriminal prosecutions in this case, inaddition to the regulatory settlement.Once again, many will believe there isone law for rich rule-breakers andanother law for poor criminals. Thiswill help fuel the feeling that we arenot all in this together and will trig-ger demands for retribution, such ashigher taxes, which would be irrele-vant to the problem at hand and dam-age the economy.The view that all of the worlds eco-

nomic problems came out of London AIGs trades, JP Morgans recentproblems, now Libor will continueto gain ground, propagated by buck-passing Americans. Needless to say,the real problems that actuallycaused the crisis sub-prime lending,the Feds madness, huge East-West

imbalances, intellectual errors,implicit government guarantees were largely invented in America, andAIG and Lehman were US firms. In noway should the Libor scandal bedownplayed but it wasnt a contribu-tor to the recession. But it is true theUK authorities have discredited them-selves over Libor. It beggars belief thatthis sort of behaviour was tolerated the setting of the interbank ratesappeared to have been conductedunder the sort of amateurish club-likerules that were the norm in the early1980s. It is truly astonishing.

pay. Such a reform would be disas-trous banks would become far riski-er and less able to survive recessions.

I have previously defended banks orbankers when they were unfairlyattacked. I will do so again when war-ranted but not today. This is a clear-cut case of an industry shooting itself

in the foot. It is good that Barclays hasapologised and that top execs wontbe taking bonuses. But some otherbanks have undoubtedly also misbe-haved. When they too settle in returnfor massive fines, the industry will behit by further reputational damage.Too many people turned a blind eye

to the wrongdoings of too many oth-ers. The Citys reputation as a trust-worthy marketplace will take years torecover.

The fine will also be damaging toBob Diamond. He wasnt the firmsboss when the scandal happened,though he was a top executive. Hesactually a superb CEO who has builtup a strong investment banking busi-ness almost from scratch. But thisscandal could yet engulf him, espe-

cially when he is hauled in front ofthe House of Commons Treasuryselect committee. It also remains tobe seen what happens if the separateinterest rate swap misselling allega-tions explode in the industrys face.The scandal will make it more diffi-

cult to have a sensible debate on levelsof regulatory capital. This will meanthe economy being further squeezed.It will also make it almost impossiblefor anybody to oppose the latest batchof ridiculous anti-bonus rules fromBrussels, which aim to cap variablecompensation at 100 per cent of base

The new jobs website for London professionalsCITYAMCAREERS.com

QWhat is Libor?

AThe London interbank offered rate(Libor) is set daily for 10 major

currencies and for 15 borrowingperiods, ranging from overnightloans to 12 months. It is set by theBritish Bankers Association, afterspeaking to 16 banks and studyingtheir data on the cost and price oflending to each other, and thencrunched by Thomson Reuters byremoving the outliers at the top andbottom of the range. The processbegins at 7am and the rate is flashedonto traders screens at 11.30am.

QWhat were the findings of the FinancialServices Authority?

A

It said Barclays set artificially low

rates during the financial crisis tomake it appear healthier after seniormanagement concerns overnegative media comment

It also took into account requestsfrom its own interest rate derivativestraders. They gained from shifts inLibor.Barclays also sought to influenceEuribor submissions of other bankswhich contributed to the rate-settingprocess.

QBarclays traders shouted just tell him tokeep it, to put it low and similar

comments. What did it do wrong?

AIt broke so-called Chinese Walls,which were built to avoid a

conflict of interest between the

traders and the submitters whosejob it was to report daily rates. Thetwo sides worked together for yearsto make the rates submitted suit thetraders and the banks purposes.Barclays also gave a misleadingimpression of the cost of bankborrowing and failed to reflect thefinancial stress it faced during thecrisis. In one communication atrader admitted that borrowing costsare actually higher than shown byLibor, saying: The true cost ofmoney is anything from five to 15basis points higher. A basis point isequal to 0.01 percentage point.

QSo has Barclays been referred to the Cityof London Police?

A

No, the trades are not covered by

the Financial Services and MarketsAct while the FSA said there was noevidence of criminal conduct.

QWho else is looking at Libor?

ABarclays will not be prosecuted in

the US but authorities there, aswell as Japans Financial ServicesAuthority and competition bodies inSwitzerland and Canada are lookingat other lenders.Other major global banks, includingCitigroup, HSBC, Royal Bank ofScotland and UBS, have beenapproached by authoritiesinvestigating how Libor is set. Nobank or trader has been criminallycharged in the Libor probes.

QHow much does Libormatter to the markets?A

It was once dubbed the mostimportant number in the world

because it underpins $10 trillion inloans to consumers and companiesand another $350 trillion inderivatives. In the derivativesmarket, Libor is used in the pricingof the interest-rate swaps market,where two parties swap floating- andfixed-rate interest payments.

QWhy does this matter to consumers?

ALibor is used to help calculate theinterest rates on a range of

products, from mortgages, creditcards and loans to complexderivatives. During the crisis peoplelooked at the rate for a measure on

the confidence of the banking sector.

QHas Libor worked well?

ADoubts about the rates arose atthe crisis peak, when Libor

remained relatively low despite thefact that the interbank market it ismeant to represent had dried up,with banks too scared to lend to eachother. Today, vast injections ofliquidity by central banks have alsodistorted Libor.Other rates, such as Eonia and Sonia,are now also used to set the chargeson overnight unsecured lending ineuros and Sterling. But anotherreason why Libor has lost its potencyis the rise of secured interbankfundingWords by Peter Edwards

QAandLibor: the vital number for every banker

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GOOGLE last night unveiled its f irst

own-branded tablet, putting it indirect battle with giants Apple,Amazon and Microsoft.

The Nexus 7, developed withTaiwanese firm Asus, is a seven-inchtablet with a front-facing camerabuilt around Android software.

Google, which is already takingadvance orders for the device, will sellan 8GB version from mid-July at $199(127), pitching it directly againstAmazons Kindle Fire.

At the same I/O developersconference, Google also showed off itsGoogle Glass an eye-glass-computerthat can live-stream events, record,and perform computing

tasks.

Google takeson rivals withNexus 7 tablet

BY KATIE HOPE

GETTY

GLENCORES merger with Xstratawas on the rocks yesterday as thetwo firms scrambled to appeaseirate investors over the share ratioand pay packages linked to the deal.

Mining group Xstrata yesterdayrewrote its bonus rules for top staffto try and soothe shareholder angerat a 173m payday if the deal goesthrough, following a day of crunchtalks between the boards, advisersand investors.

Chief executive Mick Davis and 72other staff will now get their bonus-es entirely in shares, and only ifthey find an extra $300m in cost

savings within two years.But the firms are yet to improve

the offer of 2.8 new shares for everyXstrata share, and Glencore lastnight postponed a meeting sched-

BY MARION DAKERSuled for next month to approve theall-share merger on fears of a share-holder revolt.

Qatar Investment Authority rattledthe firms late on Tuesday by break-ing cover to demand 3.25 shares perXstrata share. Representatives fromthe sovereign wealth fund held talksin London yesterday aimed at keep-ing the merger alive.

Three cheers for the Qataris, crowed oneXstrata shareholder yesterday after the QatarInvestment Authority made a surprisedemand for better terms for its stake in themining group.The Lazard bankers advising the QIA, which

has quietly built up an 11 per cent holding inXstrata over recent months, will spend thecoming days shoring up their position at thecrux of this mining mega-merger.Fighting for a better offer on behalf of the

ADVISERS GLENSTRATA MERGER

LAZARDNICHOLAS SHOTTSPIRO YOUAKIMCHARLIE FOREMAN

SHARES in News Corp continuedto climb yesterday while thecompanys board membersgathered in New York to discussplans to separate its publishingand entertainment divisions.

New Corps shares added 2.5 percent, after jumping more than

eight per cent on Tuesday when itemerged that the conglomerate

could finally be about to respondto investors calls to split off itsless profitable newspaperbusiness.

An official announcement isexpected today, almost exactly oneyear after the phone-hackingscandal at News Corps UKnewspapers hit the fan.

Rupert Murdoch is said to have

appointed Goldman Sachs, JPMorgan and Centerview Partners

to guide his company through thedivision process.

Centerviews Blair Effron and JPMorgans Jimmy Lee advised NewsCorp on its 2007 acquisition ofDow Jones.

It is speculated that Allen & Cowill advise on the deal after one ofits bankers, Stan Shuman, wasspotted having lunch on Tuesday

with News Corps chief operatingofficer Chase Carey.

BY LAUREN DAVIDSON

BOTTOMLINE

MARC SIDWELL

Mick Davis will take his retention bonus in shares to try and calm investor anger

THURSDAY 28 JUNE 20123NEWScityam.com

"#-B"B*""B#B!)'B""(&("!"(B(#!#&+B!B7A21$!B(B)B&(&-@'B?&'B"B&'@

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GERMAN Chancellor Angela Merkeljoined French President FrancoisHollande for dinner in Paris lastnight, in a bid to patch up relationsahead of todays crunch EU summitover the future of the Eurozone.

Merkel has appeared at loggerheadswith some Eurozone leaders, includ-ing Hollande, who are more keen tointroduce debt sharing measures tomitigate the growing crisis.

German MPs from Merkels coali-tion had been assured this weekthat their leader would preventthe formation of eurobonds oneform of debt sharing for as longas she lives.

But last night Merkel andHollande put on a show offriendship for the cam-eras. I say we needmore Europe and Ithink we are in agree-ment there, Merkelsaid.

We need a Europethat functions effec-tively, markets arelooking for this, anda Europe where

Merkel acts out

charm offensivewith HollandeBY JULIAN HARRIS

countries help each other.Hollande added to the cordial tone

by highlighting that both he andMerkel are seeking deeper monetaryunion in Europe.

Nonetheless, earlier in the day theGerman chancellor had againseemed stubborn over the proposals,when addressing parliament inBerlin.

I fear that at the summit we willtalk too much about all these ideasfor joint liability and too little about

improved controls and structur-al measures, Merkel said,

insisting that she will notlumber German taxpayers

with an even greater burdenof responsibility for the

euros troubled mem-ber states.

But EU economicand monetary affairscommissioner OlliRehn yesterday saidthat short-term res-cue measures wouldbe necessary.

IN BRIEFMonte dei Paschi details aid plann Banca Monte dei Paschi di Siena laidout a painful restructuring plan yesterday,a day after the worlds oldest bank wasforced to take state aid, and said it wouldbe looking to new investors in seeking toraise up to 1bn in new equity capital overthe next five years. Under the plan theItalian lender said it aims to slash its loanbook, close 400 branches and cut 4,600jobs, and also estimated it would sell1.5bn of new bonds to the Italiantreasury, against a maximum of 2bnapproved by the government on Tuesday.

Second Greek minister resignsn The chairman of Greece's privatisationagency, Ioannis Koukiadis, resigned forstrictly personal reasons, a statementby the agency said yesterday. Ioannis

Koukiadis, a professor of law atThessaloniki's Aristotelio University, hadbeen appointed to head the HellenicRepublic Asset Development Fund in July2011.

EU regulators clear Bankia state aidnSpanish lender Bankia gainedtemporary approval yesterday for its statebailout, but Spanish authorities will needto present a restructuring plan within sixmonths to offset this support, theEuropean Commission said. The EUexecutive said the state aid included aconversion of existing state-ownedpreference shares of 4.465bn intoequity and a liquidity guaranteeamounting to 19bn in favour of theSpanish BFA group and its Bankia unit,but does not cover a request for a further19bn capital injection.

Angela Merkel will resistmore debt sharing moves

ITALYS six-month borrowing costsneared three per cent at auction

yesterday, their highest sinceDecember, piling pressure on the

government as it pushes for steps

to ease market tensions at an EUsummit starting today.Italy sold 9bn of six-month bills

at an average 2.96 per cent yield, upfrom 2.10 per cent it paid only amonth ago. The Treasury faces atougher market test today when itoffers up to 5.5bn in five- and 10-

year debt.On Tuesday, Spain paid 3.24 per

cent to sell six-month bills. Madridis seen at risk of having to ask for

Italian debt costs keep risingahead of crucial EU summit

BY CITY A.M. REPORTERmore aid after formally requestinga European rescue for its banks this

week. But doubts are also growingon Italys ability to keep funding its1.95 trillion debt, which makes itthe worlds fourth-largest sovereigndebtor.

Yesterdays sale was covered 1.6times, in line with a month ago,with demand helped by 9.9bn ofmaturing bills. Domestic appetitehas so far allowed the Treasury tocomplete 56 per cent of its 445bnannual funding plan.

With its benchmark 10-yearyields above six per cent, Italy iscalling for the Eurozones rescuefunds to be used to ease pressureon its bonds.

THURSDAY 28 JUNE 20124 EUROZONE CRISIS cityam.com

10

The history of Europes 10-year bond yields

30

28

26

24

22

20

18

16

14

12

8

6

4

2

0

Mar2012

May2011

Jul2010

Sep2009

Nov2008

Jan2008

Mar2007

May2006

Jul2005

Sep2004

Nov2003

Jan2003

Mar2002

May2001

Jul2000

Sep1999

Nov1998

Jan1998

Mar1997

May1995

Jul1995

Sep1994

Nov1993

Jan1993

%Long-terminterestrateforconvergencepurposes

Euro introduced

Source: World Economics

Lehman collapse

Greek bailout

Irish bailout

Portuguese bailoutGreece Portugal Ireland Italy

Spain France UKGermany

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GETTY

THE EUROZONE is set for years of stag-nation and slow growth, according toErnst & Young research published thismorning.

Even the best case scenario is mildrecession in 2012, depicted by theEurozone shrinking 0.6 per cent, witha weak recovery of 0.4 per cent in2013, according to the latest forecastfrom the accountancy firm.

By 2014, it expects Eurozone growthof 1.7 per cent, with two per centgrowth in 2015 and 2016.

Its forecast is based on the assump-tion that Greece will proceed with

austerity, while Spain and Italy willavoid further significant financialcrises.The forecast also warns that the

high levels of youth unemploymentin Spain and Greece could threatenthe stability of their societies.

Consumer spending is predicted tostagnate or fall in much of theEurozone in 2012, though France andGermany will achieve small increasesof 0.2 per cent and 0.9 per cent,according to the report.

By 2013 consumer spending is

Slow growth tohaunt Eurozone

for next 2 yearsBY BEN SOUTHWOOD expected to regain momentum in thecore, but fall further in the periphery,only bottoming out by 2014, it pre-dicts.

One way in which Ernst & Youngthinks it may be possible to achievereal growth is through a trade strategyfocused on emerging markets though recent data suggests the possi-bility of a Chinese slowdown.

Marie Diron, senior economic advis-er at Ernst & Young, predicts that afailure to save Greece would under-mine market confidence, lead to fur-ther capital flight from Spain, Italyand Portugal, and a collapse of the sin-gle currency, with devastating eco-nomic and social impacts.

Mark Otty, Ernst & Youngs manag-ing partner for Europe, contends that,any kind of recovery is dependent onEurozone political leaders seizing theinitiative over the next few weeks they cannot kick the can down theroad.

Meanwhile, Ernst & Youngs ThusDiron argues that the time for debateis over -- the EU needs action.

He says that sustained stability willrequire a deep and prolonged restruc-turing, curtailing the availability ofcredit for some time.

Economic data offers a glimmerof hope for Germany and ItalyECONOMIC data published yesterdayoffered a glimmer of hope for the

embattled Eurozone countries.Germany, Europes largesteconomy, saw its consumer priceinflation ease by more thanexpected reflecting a sharp drop inoil prices, while Italy said confidenceamong its businesses had improvedunexpectedly in June.

The only downbeat note camefrom Spain which suffered its 23rdconsecutive month of falling retailsales, according to official data.

BY KATIE HOPEGermanys consumer price

inflation eased to 1.7 per cent year-on-year in June, from 1.9 per cent inMay, according to preliminary data

released yesterday by the FederalStatistics Office.The easing in inflation should give

a boost to consumers, whosespending is expected to be theGerman economys saving grace thisyear as the crisis starts to hit home.

Analysts said the reduction wouldalso give the European Central Bankmore scope to loosen policy as theEurozone debt crisis worsens.

Meanwhile, in Italy the seasonally

adjusted confidence index for themanufacturing sector improved to88.9 in June from 86.6 in May, datafrom the statistical office Istat

showed yesterday. The compositebusiness climate index was almoststeady at 75.4 during the monthcompared to 75.5 in May.

In Spain, however the moodremained downbeat with retail salesdown 4.9 per cent year-on-year in Mayon a seasonally adjusted basis, datafrom the National Statistics Instituteshowed.

This follows a revised fall of 10 percent in April.

BOTH Spain and Cyprus had theirbailout requests formally acceptedby Eurozone finance ministersyesterday.

In a statement, the Eurogroupestimated that Spain, whichofficially asked for access to the100bn (80bn) offered by Brusselsto shore up its debt-laden bankson Monday, would need between51bn and 62bn. It said it wouldprovide an additional safetymargin on top of this, but

insisted that the final amountwould be well within the 100bn

Europes finance ministers detailrescue plan for Spain and Cyprus

BY KATIE HOPE limit originally set.The Eurogroup emphasised that

Spain would be fully liable forthe assistance provided to its

banks, and said the country wouldbe expected to honor its reformand deficit target commitments.

In a separate statement, theEurogroup accepted Cypruss aidrequest which is expected to total10bn. It said it would receive thecash, once an assesment of itsneeds was complete.

Cyprus will have to commit tobudget cuts and reforms, as well as

strengthen its financial sector inexchange for the aid.

THURSDAY 28 JUNE 20125EUROZONE CRISIScityam.com

Eurogroup head Jean-Claude Juncker said Spain would be fully liable for its banks aid

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THE COALITION is facing a bloodybattle with backbench ConservativeMPs and the Labour party followingyesterdays publication of plans toreform the House of Lords.

Lib Dem leader Nick Clegg is thedriving force behind the bill, whichwould replace the current mix of 826hereditary and life peers with achamber of around 450 members,most of whom would be elected.

But Conservative rebels said thereforms would threaten the superior-ity of the lower chamber.

Ministerial aide Conor Burns saidhe is willing to resign his post inorder to vote against the governmenton the issue.

If I lose my job for something thatwas a mainstream view within theconservative party within the lastparliament, which serving cabinetministers held as their view, sobe it, he said.

Tory MP Eleanor Laingechoed his view: There is noreasonable question towhich 450 extra politiciansis the answer.

Coalition faces

rebellion overLords reformBY JAMES WATERSON

Labour said it supports the bill butwill join Tory rebels to vote against amotion that would accelerate its pas-sage through parliament. The partyclaims the government has failed toprovide enough time to debate thelegislation and may seek a nationalreferendum on the issue.

However, Prime Minister DavidCameron called Labours positionhopeless and said he was confidentthat the bill would progress with thebacking of cross-party support.

We have been discussing this issuefor 100 years, and itreally is time tomake progress.However, if those

who support Lordsreform do not getout there and backit, it will not hap-

pen.The government

aims to havethe bill onthe statutebook by early2013, aheadof the firstHouse ofLords elec-tion in 2015.

THE last day ofthe Queen'svisit to NorthernIreland wasmarked by ahistorichandshake.Her Majesty andformer IRAcommanderMartin

McGuinnessshook hands forthe first time.The meetingcame 33 yearsafter theQueens cousinLouisMountbattendied in an IRAbomb blast.

QUEEN AND MCGUINNESS SHAKE HANDS

Nick Clegg said MPs shouldget on with this


Wall Street initiates coverage ofFacebook with low expectationsFACEBOOK was greeted half-hearted-

ly yesterday when Wall Street ana-lysts initiated coverage of theoverhyped stock 40 days after itsNasdaq debut.

Morgan Stanley, the leadinvestment bank on Facebooksflotation, rated the social networksstock as overweight, even thoughthe shares are currently trading at13 per cent below their IPO price.

The bank, whose investment armguided Facebook to its $38 per

BY LAUREN DAVIDSONshare float price, gave the stock a12-month price target of $38,implying little hope that the shares

have much to gain.Our base case scenario assumesthat Facebooks revenue growthmoderates as it takes a measuredapproach to increasing mobile adload while engagement increasinglyshifts to mobile devices, MorganStanley wrote in a note.

JP Morgan, the second bank onthe deal, also initiated coveragewith an overweight rating,although it held more hope for

growth than Morgan Stanley, givingFacebook a price target of $45.

Goldman Sachs, however,

recommended that investors buyFacebook shares, as did a handful ofother analysts including Nomura,Topeka Capital and Needham & Co.

The naysayers included BMOCapital and Sanford Bernstein,which both rated the stock asunderperform and gave it a pricetarget of $25.

Facebooks shares, which hadclimbed over the past few days, sank2.63 per cent to $32.23 yesterday.

QWhy is reform of the House of Lords soimportant to Nick Clegg?

AThe Lib Dem leader is keen toshow his party has benefited from

the coalition government.Democratising the upper chamber isa totemic issue for Lib Dems and itcould be Cleggs lasting legacy.

QWhat could the make-up of the newHouse of Lords look like?

AThere would be 450 members, ofwhich 360 will be elected. A non-

party committee would appoint theremaining 90 peers and all memberswould serve a single 15-year term. In

addition, 12 Church of Englandbishops would retain their positions.

QHow would House ofLords elections work?

AVotes would occur on the sameday as elections to the Commons.

90 peers would be elected at eachelection cycle using the party listsystem a form of proportionalrepresentation. The Lords would usethe same regional constituenciesused by the European Parliament.

QDoes an elected upper house threaten thesupremacy of the House of Commons?

AThe Bill says it would not alter thecurrent relationship between the

Houses. But many MPs fear a new

class of politician with a 15-yearmandate would create conflict.

QAandWhat next for the House of Lords?

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8 NEWS cityam.com

Relatively upbeat pre-close statement given recently weakening macroenvironment, re-iterating guidance for full year growth in revenue and earningsper share of over 10 per cent with good revenues and cost control offset-ting some minor increase in loan loss provisions.

ANALYST VIEWS

Standard Chartered remains a very strong bank with good liquidity,strong capital ratios, no exposure to European sovereign issuers and no materialstructured credit book. Were we to see another macro-driven, risk-offperiod in markets, the bank would be likely to outperform.

The company has confirmed double digit income growth is expected in

a number of regions, including Europe, the Americas and, crucially, China. Thecompanys reputation for delivering consistent growth has resulted in ashare price which for some investors is full enough.

WHAT DO YOU THINK OFSTANCHARTS UPDATE?

By Marion Dakers

CORMAC LEECH LIBERUM CAPITAL

GARETH HUNT CANACCORD GENUITY

RICHARD HUNTER HARGREAVES LANSDOWN

STANDARD Chartered said yesterdayit expects pre-tax profit in the firsthalf of this year to grow by less than10 per cent, slowing from previousyears as growth in Asia eases andlocal currencies weaken against thedollar.

Income growth in January to Junewas also expected to slow to below 10per cent, it said in a filing to theHong Kong bourse.

Local currency weakness is expect-ed to drag group income by over twoper cent, with the Indian rupee beingthe major contributor, StandardChartered said in the statement.

Standard Chartered conducts mostof its business in local currencies butreports its earnings in dollars. Assuch, weakening Asian currencieswould mean it needed more Indianrupees or Singapore dollars to get thesame amount of US currency.

Staff numbers are largely flat at the

Growth slow asStanChart is hitby weak dollar

BY HARRY BANKS end of May from the end of 2011,Standard Chartered said. The bankemployed about 85,000 people at theend of last year, it said in March.The filing did not provide any exact

numbers as Standard Chartered onlyissues half-year and full-year earningsreports. Profits in India, once thebanks biggest market, continued tobe weak, while growth in the Asianfinancial hubs of Singapore and HongKong also slowed.

Standard Chartered PLC

27 Jun21 Jun 22 Jun 25 Jun 26 Jun

1,380

1,400

1,340

1,360

1,420

1,440 p

1,371.5027 Jun

PRUDENTIAL chief executive Tidjane Thiam will become chairman of the Association o fBritish Insurers next month, taking over from Legal & General boss Tim Breedon. Thiam,who has led Prudential for almost three years, yesterday said the industry needs tosupport its customers in a time of unprecedented austerity.

INSURANCE BODY HIRES MAN FROM THE PRU

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MORE businesses must support headteachers to develop staff leadership

skills if they are to produce theworkforce of the future, the businesscharity Business in the Communitytold a conference hosted by GoldmanSachs yesterday.

Goldman Sachs International co-CEOMichael Sherwood said his bank waspleased to offer its support as a nation-al champion of the charitys BusinessClass initiative, which brings businessand schools together.

We recognise the importance ofdeveloping a skills system able torespond to the needs of individuals,communities and a dynamic andchanging economy, he said. I knowI speak on behalf of everyone involved

when I say that we take ourresponsibility for making

Business Class a resound-ing and ongoing suc-cess very seriously.

Schools needbusiness help,says charity

BY DAVID HELLIER

PLANS to make investment platformsmore transparent are set to costinvestment firms millions, thoughcompanies said yesterday they are pre-pared for the upheaval.The Financial Services Authority

(FSA) wants to ban providers from pay-ing to have their products includedon platforms, meaning investorswould pay fees directly.

The rules would mean the end ofcash rebates for investors, but the FSAsaid they will encourage competition.

Investors are increasingly usingplatforms as a convenient one stop

shop for their investments, but at themoment many investors have no ideawhat they are paying for this service,said FSA director of conduct policySheila Nicoll. The watchdog has

Fund platformshit by FSA plan

to ban rebatesBY MARION DAKERS opened a consultation and hopes to

bring in new rules at the end of 2013.Deloitte said in a report commis-

sioned by the FSA that each firm inthe 229bn platform industry willneed to spend between 0.2m and20m to implement the changes.

But while firms had lobbied the FSAto soften its plan to ban cash rebates,the industry claimed to be ready forthe crackdown yesterday.

Hargreaves Lansdown, operator ofone of the biggest platforms, said itwas already making plans for a nopayments to platforms outcome.

Charlotte Hill, head of financial reg-ulation and compliance at law firm

Stephenson Harwood, added: Therewas a feeling in the market that thiswas coming. Rebates will comethrough additional investmentsrather than cash.

Commerzbank exits shippingfinance and property lendingCOMMERZBANK, Germanyssecond largest lender, is to pullout of shipping finance andcommercial property lending asstricter liquidity requirementsforce it to cut back on capitalintensive activities, it hasrevealed.

The bank, which has twice beenbailed out by German taxpayers,said the decision marks the firststep in a rigorous review of allits businesses, with more detailsto be announced later this year.

Shipping and property weretwo of the worst hit sectors duringthe crisis, forcing Commerzbankto scale back the size of itslending and reduce its exposure.

The move marks a U-turn ondecisions outlined by the bank inMarch to merge the two sectorsinto a joint real-estate and ship-

BY KASMIRA JEFFORD finance division.Commerzbanks Eurohypo was

one of the biggest commercialproperty lenders in the years up tothe financial crisis but the unitsEuropean government bondholdings have since saddledCommerzbank with losses amidthe sovereign-debt crisis.

The bank had initially beenordered by the EuropeanCommission to sell Eurohypo by2014 as a pre-condition forapproving an 18bn bailout in thefinancial crisis. But volatile marketconditions and a crisis in realestate financing leftCommerzbank unable to find abuyer for the loss-making lender.

The agreement was revised inMarch to wind down Eurohypoinstead while retaining a smallerreal estate lending business, whichwould have5bn a year to lend infour countries; Germany, the UK,

Poland and France.Separately, Commerzbank said

yesterday it would sell 128.3m ofnew shares in order to pay staffbonuses worth more than150m.

Around 60 per cent of theemployees have decided theywould not keep the shares butwould instead sell themimmediately to institutionalinvestors, with Commerzbankitself and Deutsche Bank AGacting as bookrunners.

VIRGIN Money made a 44.16munderlying pre-tax profit in the

year leading up to its purchase ofNorthern Rock while the bailed-out building society lost 110.9m.

Virgin, which spent 747mbuying Northern Rock from thegovernment in November, saidprofits rose 41 per cent in 2011,

with its credit card venture withBank of America a significantdriver of profitability.

The firms mortgage portfoliofell slightly to 17.9m as it

restricted lending ahead of theNorthern Rock acquisition.

BY MARION DAKERS Meanwhile, Newcastle-basedNorthern Rock increased mortgagelending almost 17 per cent to4.9bn, as its losses narrowed from188.3m in 2010 to 110.9m.Excluding asset sales andrestructuring costs, the firmannounced statutory losses of18m.

Virgin said that since the mergerand subsequent advertisingcampaign, the enlarged group hasattracted 400,000 new customers,taking its total beyond 4m. Thisacquisition represents animportant and exciting moment in

the history of both companies,Virgin said in a statement.

Hargreaves Lansdown, led by Ian Gorham, said it is preparing for the overhaul

COMMERZBANK AG


1.42

1.44

1.38

1.40

1.36

1.34

1.46

1.48

1.3627 Jun

Goldmans Sherwoodwants to help teachers

Virgin Money profits rose aheadof its Northern Rock acquisition

FINANCIAL adviser andbroker FinnCap said yesterdayit had increased market sharein the past 12 months, butsaw profits before tax (PBT)fall from last year.

The firms PBT, excluding ashare-based payment charge,fell to 0.2m from 1.7m in2011, on revenues of 9.1m.

FinnCap also said it is nowthe fifth largest adviser bynumber of clients on the LSE,and has the second largest

number of AIM-listed firms.In total it advises 98 clients.

FinnCap upsmarket share

BY CITY A.M. REPORTER


Keeping the Lights On The Roleof Gas in the Energy Mix

Thursday 12 July 2012 | 8.00am - 10.00amThe Royal Bank of Scotland, 280 Bishopsgate, London, EC2M 4RB

The UK's energy strategy is under intense pressure to adapt to

current circumstances to renew and replace infrastructure in an

economic downturn.

Listen to experts from industry | Network | Learn | Debate | Enjoy

Book your place now at

www.oilandgasuk.co.uk/events

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and

QWhats an investmentplatform?

AIts a one stop shop for anindividual to hold their pension,shares and other investments in

one place. Customers can invest throughadvised or execution-only platforms.

QSounds straightforward enough.Whats the FSAs problem?

A

The watchdog wants platforms to

stop taking money from productproviders, in exchange for offering

their particular ISAs, funds or otherproducts. The FSA would ratherinvestors pay directly for services they

want, rather thanindirectly throughless-than-transparentcommission dealsthat can put thecustomers interests atodds with the provider.

QIs this bad news for platformowners?

A

They certainly put on a brave faceyesterday. The likes of Hargreaves

Lansdown said it only makes smallsums of money from this rebatemechanism. But Deloitte thinks fundsupermarkets make 75 per cent ofrevenues from such arrangements.

QAandQuick guide to the platform crackdown

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Niall Ferguson givesLondon a roughride

Niall Ferguson warns onLondons possible fall

Got A Story? Email

[email protected]

10 cityam.com

cityam.com/the-capitalistTHECAPITALIST

A further piece of good news forteam Tchenguiz, after the familys

legal eagles at Stephenson Harwoodwon litigation team of the year at thisweeks The Lawyer Awards. Just daysafter the Serious Fraud Office droppedits investigation into Vincent Tchenguiz,

the property moguls lawyers picked upthe industry gong for its part in endingthe probe, and ongoing work linked tothe Icelandic bank Kaupthing.Litigation partner Sean Jeffrey, who ledthe lawyers fighting the SFO, picked upthe award on the night on behalf of the

team, which also includes seniorassociate Richard Garcia, lead lawyer onthe Kaupthing claims.Other big winners on the night includedRobert Jay QC, the fastidious face of theLeveson Inquiry, who took home thebarrister of the year prize.

THURSDAY 28 JUNE 2012

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The historian who wrote a bookentitled The Ascent of Moneyyesterday warned that Londonfaces a fairly rapid descent from

its platform as the worlds leadingfinancial centre unless it quicklyimproves its infrastructure.

Niall Ferguson, the well-knownhistory professor at HarvardUniversity, said that infra-structure improvements,such as public transport,and in particular airportexpansion, needed to hap-pen within the next 10years if London was to com-

pete with Chinas flourish-ing economy.

He was speaking at anevent with a panel including

Jeremy Quin, managing director atDeutsche Bank, Mark Field, the MP forCities of London & Westminster, andWitold Balaban, the global head offinancial institutions at Latham &Watkins and others at the Corinthia

Hotel.China, especially HongKong, is as good as

London if not better,Ferguson said. Idread arriving atHeathrow but I dolook forward to arriv-ing in Beijing.Although China has

seen a slowdown in itseconomy recently,Ferguson expects thisonly to last a short time.He said that Manhattan,once the worlds financial

centre, was now moreor less a tourist

attraction.By staging the

Olympics andthe Queens100th anniver-

sary, London has become the city tovisit in 2012.

During the Games about 300,000people will be expected to travel to theOlympic Park every day during peaktimes.

London businesses and financial serv-ices will be challenged by the Games,which will show how well or badlyLondons infrastructure is prepared forfurther challenges, Ferguson believes.

Ferguson quipped that the decisionover which city will become the worldsnew financial centre will depend onjust one thing the fashion taste of theworlds chief executives women.

The event was organised by Latham& Watkins, one of the leading globallaw companies.

CITY HITS THE RIGHT NOTE WITH 50 GOLD PIANOS

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BY KASMIRA JEFFORD Thames at Thurrock in Essex.The purchase of this large site

adjoining our existing ownerships re-enforces our confidence in the areaand demonstrates our continued com-mitment to the wider Canada Waterregeneration and Rotherhithe, MikeRayner, development director atBritish Land said.

David Dutton, a DMGT directorresponsible for its property portfolio,said it was changes in technologythat had led it to switch to a newplant. The company announced inFebruary last year that it would investup to 50m in the new site over a fouryear period.

Balfour Beatty wins 175m dealfor science park in Hong KongCONSTRUCTION giant BalfourBeatty yesterday said that its Hong

Kong-based business, GammonConstruction, has been awarded acontract to build a major sciencepark.

The HK$2.18bn (175m) contract,will see the development of anarea of 105,000 square metres inwhich the latest green constructiontechnologies and sustainablebuilding design will be on show.

Work on the Hong Kong projectwill begin later this month and is

BY JOHN DUNNEdue for completion by December2013.

The project will aim to achievethe Leadership in Energy and

Environmental Design (LEED)platinum standard a green ratingsystem that is recognised globally,and presently the highest level ofcertification available. There areonly three other buildings in HongKong which are certified platinumstandard.

Chief executive Ian Tyler said:We are delighted that Gammonhas been awarded this high-profilecontract. Along with other state-of-

the-art infrastructure projects thatGammon has undertaken in HongKong, including the Tamar Complexwhich we completed recently for

the Hong Kong government, theaward of the new science park atPak Shek Kok demonstrates ourcredentials in green building.

Sustainability is at the heart ofBalfour Beattys operations and wecontinue to grow as the choiceprovider of innovative andsustainable infrastructuresolutions, helping to reducecustomers emissions and energycosts around the world.

C&C UPBEAT DESPITE WEAK CIDER SALES

British Land Company PLC


502.5

505.0

497.5

500.0

495.0

507.5

510.0 p 508.5027 Jun

CREST NICHOLSON, thehousebuilder, said it saw thenumber of sale completions surge

by 33 per cent in the first half ofthe year as the housing marketshowed signs of recovery.

The company, which operates inthe south east, south west and themidlands, returned to a profit of16m in the six months to 30 April,up from a 21.5m loss in the sameperiod last year.

Stephen Stone, chief executive,said despite tough economic times,the group had experienced good

customer demand for high qualityhomes in London and the south.

Crest Nicholsonhome sales upBY KASMIRA JEFFORD

PROPERTY TYCOON Gerald Ronsonsinvestment club has been given thego-ahead to redevelop a 12-storeyMarylebone office building into aresidential scheme.

Ronson Capital Partners (RCP), aninvitation-only fund for wealthyinvestors set up by Ronson in 2009,intends to redevelop InternationalHouse on Chiltern Street, whichcurrently offers 80,000 square feet ofoffice space, into a residential block.

Westminster Council said it hasgranted planning permission for thescheme, paving the way for the RCPs

debut project, acquired last year for63m from Lloyds Banking group.

Ronson winsplan approvalBY KASMIRA JEFFORD

THURSDAY 28 JUNE 201212 NEWS cityam.com

DMGT sells itsprint works site

to British Land

GETTY

IRISH cider-makerC&C said yesterday itexpects operatingprofit to increase bybetween one and six

per cent this yearafter a strong firstquarter across itsother portfolioshelped offset weakcider sales. C&C,which sells ciderunder the Magners,Bulmers andGaymers brands,said volumes rose5.4 per cent inIreland and 21.6 percent in the UK in thethree months to 31May. It expects full-year operating profitof 112-118m.

THE DAILY MAIL & General Trust(DMGT) said yesterday it has sold itsprinting works site at LondonsCanada Water to British Land for anundisclosed sum.Analysts estimate the Daily Mail

owner to have pocketed around 12mto 14m for the site.The deal will see British Land

acquire the newspaper groups free-hold and leasehold interest in the14.5-acre site, called HarmsworthQuays, adding to its existing invest-ment in the area.The company has not yet deter-

mined plans for the site, but is weigh-ing up various options.

In January, British Land announcedplans for a 34m refurbishment and100,000 square feet extension atSurrey Quays shopping centre that itjointly owns with Tesco.

This includes improvements to pub-lic spaces and transport connections.

British Land will not take control ofHarmsworth Quays until late 2013 fol-lowing DMGTs relocation to a newdevelopment further along the

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LAW firm Baker & McKenzieyesterday promoted 63 lawyers to

its global partnership, includingthree members of its Londonoffice.

Banking and finance lawyerLynn Rosell Rowley and corporatelawyers Emily Carlisle (picturedright) and Nick O'Donnell will

become partners at the firm from1 July, boosting the total numberof equity partners at its NewBridge Street offices to 86.

Forty-four per cent of the

promotions were made in thefirms Asia Pacific practices,

where 28 partners were elected,with 20 across its Europe, Middle

East and Africa offices, nine inNorth America and six in LatinAmerica.

Bakers global M&A group sawmost promotions with 12 lawyersmaking partner, followed by tax,

with nine, and dispute resolution,with eight.

Carlisle, who is currently onmaternity leave, and Rosell Rowleyare two of the firms 21 newfemale partners.

TOTAL UK M&A deal valueincreased by 22 per cent duringthe last quarter, according toresearch released yesterday.

Data from the Ernst & YoungM&A Tracker also suggests thatthere were 101 UK M&Atransactions completed between

April and June this year a 13per cent increase on the firstquarter.

However deal volumes are stilldepressed in relative terms withthe UK registering its secondlowest number of M&Atransactions since the start of2010, according to the figurescompiled by Cass BusinessSchool.

The market uncertaintycreated by the Eurozone crisishas led to many, who may have

been considering M&A, to adopta wait and see approach, said

Jon Hughes, UK & Irelandtransaction advisory servicesleader at Ernst & Young.

Buyers and sellers alike arebeing far more cautious and forsome they are of the view that ifthey dont have to sell they willsit on the asset until the

landscape across Europe has

stabilised.On the positive side, there

was an increase in average dealvalue quarter on quarter, withdeal size reaching $285m(183m), so while the quantity ofdeals being done is beingrestrained by marketuncertainty, buyers appear

willing to push through largerdeals.

International M&A dealvolume and the value of theseannounced deals rose by 10 percent and 18 per cent respectivelyin the second quarter.

But the Eurozone M&Amarket declined again as bid

volume fell 17 per cent. This islargely a result of a drop indomestic activity as the level ofcross-border Eurozone activityincreased signif icantly.

BY JAMES WATERSON

WHAT DO YOU THINK OF THEDECISION TO DROP THE FUEL TAX?Interviews by Lisa Moravec and Polly Young

Obviously it is good for drivers but the ques-tion is where is the money coming from. It

would help people to have confidence in the governmentif it said more about why it has made decisions.

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

MICHAELPERISSINOTTOMIZUHO

I think George Osbornes decision is probablya good idea with the state of the economy at

the moment. These government decisions, I believe, arebeing made for the right reasons.

TIM DAVIESCALYPSO TECHNOLOGY

I think not raising the fuel tax is a positivedecision. In regard to the U-turns the govern-

ment has been making I think there are bigger issues atthe moment, especially in the Eurozone.

MT KRANTZCAPITA

CITYVIEWS

UK: MARC M&A Value Tracker Index

21019017015013011090

50

1030

70

Q110

100

Q210

151

Q310

200

Q410

134

Q111

144

Q311

147

Q112

108

Q212

132

Q211

70

Q411

90


UK M&A value

jumps by 20pcbut stays low

Bakers promotes 63to global partnership

BY ELIZABETH FOURNIER

THE CHIEF executive of JerseyFinance acknowledged yesterday

that the crown dependencysgovernment is drawing up plans tosplit with Britain in extremis.However, he denied that the mood ofthe crown dependency was turningtowards such drastic action, sayingthere is no drive for independence.

Geoff Cook, whose organisationpromotes the low-tax Channelislands financial sector, said that heunderstood ministers were scenarioplanning for a variety of outcomes,

including extreme cases.The assistant chief minister of the

States of Jersey Philip Bailhachesuggested to the Guardian on

Tuesday that the islands interestscould lie in independence.Cook however pointed to the

negative consequences for both sidesof such a step, calling Jersey asymbiont of the City. He also hitback at criticisms of Jerseys role intax avoidance. Cook said: Werepretty vanilla in what we do, addingif the government of the day wishesto change emphasis, it needs tochange the law.

Jersey ready but notwilling to go it alone

MARC SIDWELL

Emily Carlisle will be a corporate partner

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IN BRIEFUltra Electronics goes cybern Ultra Electronics, the defence,

transport and energy technologycompany, announced yesterday it hassnapped up Barron McCann Technologyand Payments companies for 12m.Known as BeMac, the two businesses,which provide cyber security services tofinancial and military agencies as well asthe UK government, will be absorbedinto Ultras existing operations.

Whitefox to appeal Tate & Lyle casen British group Whitefox Technologies isto appeal against a US court ruling madeagainst it in a dispute with Tate & Lylewhich an analyst said could win theLondon-based sweeteners and starchcompany over 10m. The trial before theSupreme Court of the State of New Yorkrelated to equipment and technologiessupplied by Whitefox that Tate claimedwere not fit for purpose.

Porsche plaintiffs suffer setbackn Investors suing Porsche over itsbotched 2008 takeover of Volkswagensuffered a setback to claims for more than4bn (3.2bn) of damages as Germancourt hearings yesterday exposed initialcases as sketchy. Swiss investment com-pany My Capital-MC and a German pri-vate investor are seeking compensationfor 4.7m of losses from short-selling VWshares in a bet that the price would fall.

Northgate reintroduces dividendn Van rental company Northgate report-ed an 11 per cent increase in full-year prof-it as higher hire rates and a rise in usedvehicle sales boosted its UK segment. TheBritish company said underlying pretaxprofit rose to 59.7m for the year ended30 April from 53.8m last year.

Northgates board recommended the re-introduction of a dividend at 3p per sharefor the current year.

SONYS top executives got a rap on theknuckles yesterday as the Japanesecompany declined to pay them bonus-es after the company sank to a recordloss last year.

Neither former chief executive SirHoward Stringer nor current bossKazuo Hirai were awarded a cashbonus for the year to 31 March, dur-ing which Sony fell to a 3.5bn loss,the company said yesterday in a regu-latory filing.Announcing the bonus cuts earlier

this month, the technology giant saidthe move will save it 1.86bn.

Stringer, who led the company for15 years, saw his pay package halvedto Y449.5m (3.62m), including asalary reduction of six per cent toY277m.

The Welshman was replaced inApril by Kazuo Hirai, whose basicsalary was upped by 29 per cent toY88m.

However, Hirais total compensationincluding salary, stock options andbenefits came to Y115.6m just threequarters of his pay package the yearbefore.

Speaking yesterday at Sonys annualgeneral meeting, at which Stringerwas confirmed as chairman of Sonysboard of directors, shareholders ques-

No bonuses fortop Sony execsafter mega loss

BY LAUREN DAVIDSON tioned why the man who took thecompany to an unprecedented fourthconsecutive year in the red was still anemployee of the company.

Hirai said he needed the advice andsupport of Stringer, adding: Sonysbusiness is in a very severe state. I amfully aware of this and I promise tochange Sony and revive the company.

He outlined measures to restore thebusiness and said he aims to bringback the sense of wonder Sonysproducts used to give its users.

Sony, which was at the forefront oftechnology innovation when itlaunched the Walkman portable cas-sette player in the 1970s, has lost halfits market value in the last year.

Stringer was the target of muchshareholder angst at the meeting inTokyo and said he deeply regrets thecompanys mega losses.

TalkTalk tops telco complaints tableTALKTALK is again the mostcomplained about telecomsprovider, according to datapublished yesterday by Ofcom.

The regulator said it is sentover 300 grumbles a day abouttelecoms services, which itpublishes in a bid to promotecompetition and assist

customers in choosing theright provider.

In the first quarter of 2012,TalkTalk generated over threetimes more complaints, onaverage, than its fixed linetelephony rivals Sky, BT Retailand Virgin Media.

The communicationswatchdog said most of theseproblems centred around linefaults and other service issues.

But TalkTalk might find

solace in the fact thatcomplaints about its service

are steadily decreasing.Ofcom also said mobile

operator 3 prompted moregrievances than its rivalsOrange, T-Mobile, Vodafoneand Virgin Mobile, while O2generated the fewest.

Publishing data about thepay TV sector for the f irsttime, Ofcom revealed morecustomers grumbled about BT

Vision than Sky and VirginMedia.

BY LAUREN DAVIDSON Fixed line complaints per 1,000 customers, January to March 2012

Sky BT Retail TalkTalk Virgin Media

APPLE has triumphed in the latestround of patent battles with itsarchrival Samsung after a US judge

yesterday backed the iPad makersrequest to halt sales of the GalaxyTab 10.1 device.

Although Samsung has a rightto compete, it does not have aright to compete unfairly, byflooding the market withinfringing products, US district

judge Lucy Koh said in San Jose,California.

The injunction, which does notapply to Samsungs latest tabletoffering, will come into effect

when Apple posts a $2.6m (1.67m)

Samsung banned from sellingGalaxy Tab 10.1 device in the US

BY LAUREN DAVIDSON bond to compensate Samsung ifthe ban turns out to have beenungrounded.

The trial is scheduled to beginon 30 July.

Koh had initially refused togrant Apple this injunction, butwas instructed to reconsider by afederal appeals court.

Samsung said, Apple sought apreliminary injunction of theGalaxy Tab 10.1, based on a singledesign patent that addressed justone aspect of the products overalldesign. Should Apple continue to

make legal claims based on such ageneric design patent, designinnovation and progress in theindustry could be restricted.

A JUDGE jailed a German bankerfor more than eight years

yesterday for taking $44m (28.2m)in bribes during the sale ofFormula One in a case that

centred on a payment from BernieEcclestone, the motor sportscommercial chief.

Presiding judge Peter Nollconvicted BayernLBs former chiefrisk officer Gerhard Gribkowskyof tax evasion, bribery and breachof fiduciary trust in a court inMunich.

Noll described the billionaireEcclestone as the driving force

behind the payments but saidGribkowsky, in turn, had shownhigh criminal energy.

Gribkowsky was arrested in

German banker jailed for overeight years in F1 bribery case

BY CITY A.M. REPORTERJanuary 2011 over the sale ofBayernLBs 48 per cent stake inFormula One to UK investor CVC,

which Formula One chiefEcclestone was keen to see as anew shareholder.

Gribkowsky told the court

earlier this month that he receivedthe money and a job offer as partof a secret agreement withEcclestone in 2005.

Ecclestone has been subject toan investigation by Germanprosecutors but no charges have

been filed against the 81-year-oldBriton. He denies wrongdoing andhas said he was the victim ofcoercion by Gribkowsky.

They based their decisions onwhat he told them. I told them thetruth, Ecclestone said when askedabout the verdict.


Apple has successfully placed an injunction on sales of the Samsung tablet

Microsofts multi-million fine isupheld by Europe General CourtMICROSOFT yesterday lost its appealagainst an EU decision penalising it

for defying an antitrust ruling,bringing nearer to an end a decade-long battle with the EuropeanCommission over the US softwaregroups business practices.

However, judges at the GeneralCourt Europes second-highest reduced the fine by 4.3 per cent to860m (688.9m) from the 899mimposed in 2008 which amountedto just over two per cent ofMicrosofts revenue for the fiscalyear ended 30 June 2008.

The Commission imposed thepenalty a record at the time four

BY HARRY BANKSyears ago after Microsoft defied anantitrust decision issued four yearspreviously by delaying the provisionof information to make business

easier for its rivals.At the time, the EU regulator saidMicrosoft had not complied with itsorder for 488 days.

The General Court essentiallyupholds the Commissions decisionimposing a periodic penaltypayment on Microsoft for failing toallow its competitors access tointeroperability information onreasonable terms, the court said ina statement yesterday.

But it cut the fine to take accountof the fact that the Commission hadpermitted Microsoft to apply, until

17 September 2007, restrictionsconcerning the distribution of opensource products.

Microsoft expressed

disappointment at the verdict butdid not say if it would appeal to theEU Court of Justice, Europes highest.

Although the General Courtslightly reduced the fine, we aredisappointed with the courtsruling, the company said in astatement.

EU competition commissionerJoaquin Almunia welcomed thecourt ruling, saying: The judgmentconfirms that the imposition of suchpenalty payments remains animportant tool at the Commissionsdisposal.

Sony Corp


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IN BRIEFNew subsidies for young workersn Firms that take on young workers in20 areas with high levels ofunemployment will receive improvedwage subsidies, deputy primeminister Nick Clegg announced

yesterday. Employers who take on 18-24 year olds classed as long-termunemployed from these regions willnow receive 2,275 per person aftersix months while in the rest of thecountry this benefit only becomesavailable after nine months. All theapplicable areas are in Wales,Scotland or the north of England.

Norwegian strike lifts oil pricesn An oil workers strike in Norway, theworlds eighth largest oil exporter, haspropped up Brent crude, pushing theprice to nearly $94 a barrel inyesterdays trading. The labourminister, Hanne Bjurstroem, yesterdaysaid that the government was far fromintervening in the dispute. Thegovernment has the authority to stepin to force a settlement because thesector accounts for a fifth of theNordic nation's gross domesticproduct and nearly half of its exports.

Brazil unveils stimulus measuresn Brazil unveiled a new round ofstimulus measures yesterday,pledging to boost governmentpurchases and lower subsidisedlending rates for companies in anotherbid to revive its economy. It is hopedthe new measures, which call forgovernment purchases to rise by6.6bn reais this year, will shield Brazilfrom the global economic slowdown.

GETTY

HIGH STREET sales shot up in the yearto June as a boost from the QueensJubilee celebrations confounded theEurozone crisis, according to a CBIsurvey published yesterday.

Some 58 per cent of retailers report-ed increased sales volumes, asopposed to just 17 per cent statingreductions.

In previous surveys retailers hadonly expected the balance of positiveover negative responses to be at 25 percent, so 41 per cent was a welcomesurprise, and showed the broadestgrowth since December 2010.Judith McKenna, chair of the CBI

panel and chief operating officer ofAsda pointed to the benefits of theJubilee, saying it provided a much-needed boost to our high streets.Yet McKenna warned: Sales were

below par for this time of year weakconsumer confidence and uncertain-ty are putting a brake on spendingacross the whole retail sector.

Blerina Urici at Barclays Capitalstressed that this one-off increase

Jubilee helped

lift retail sales,survey showsBY BEN SOUTHWOOD

does not change the underlying weak-ness in the sector we expect a sharpreversal in the balance next month.

Grocers reported an 85 per cent bal-ance of positive over negative, whileclothing stores saw a 69 per cent bal-ance footwear retailers reported afigure of 96 per cent, the highest onrecord.

On the other hand, motor tradersfaced a third consecutive negative bal-ance, this time at minus five per cent,but expected growth in July, whilehardware shops, chemists and special-ist food and drink shops also saw nega-tive reports outweigh positives.

Real wages stagnant despitesteady private sector pay risesPRIVATE sector nominal wagesgrew steadily over the last fewmonths, according to researchpublished today by Incomes DataServices (IDS).

The median pay deal in the threemonths to May 2012 was three percent in the private sector, but just2.5 per cent in the economyoverall, as some pay freezes in thepublic and voluntary sectors tooktheir toll.

Since retail prices increased 3.1per cent and consumer prices

increased 2.8 per cent in the yearto May, the headline figures seems

BY BEN SOUTHWOOD to show that real wages weredecreasing only slightly.

However, the weighted average taking into account the number ofemployees covered by each paydeal was far lower, at just a 0.6per cent rise. This suggests manyworkers have seen significantdeclines in their purchasingpower of up to 2.5 per cent.

Private sector manufacturers sawthree per cent median increases,whereas the median for privatesector services was 2.6 per cent. Inthe manufacturing sub-sector forchemicals and pharma, the median

award was up 3.4 per cent.Similarly, bigger firms -- those with

over 5,000 employees, tended toaward smaller increases, with themedian award at 2.5 per cent,compared to a median of three percent for firms with fewer staff.

Distribution of pay settlements - Mar to May 2012

Payfreeze 0.1-1.99% 2.0-2.99% 3.0-3.99% 4.0%+

40

35

30

25

20

15

10

5

0

%ofpaysettlements

20%

7%

27%

36%

10%

Source:IDS

BRITAINS costly and complexplanning system is stifling smallfirms and stunting economic

growth, the Federation of SmallBusinesses (FSB) said yesterday.

Nearly seven in 10 (69 per cent) ofsmall businesses are forced to waitlonger than the intendedmaximum of eight weeks for localauthorities to decide on mostplanning applications, the FSB said.

A mere 30 per cent ofapplications are decided upon

within the allocated timeframe, theFSBs survey revealed.

Slow planning decisions thwartgrowth, small firms complain

BY JULIAN HARRIS Most small firms only want tomake minor changes to their

business that would enable them toexpand and diversify, stimulatingmuch needed growth in theeconomy, said John Walker,chairman of the FSB.

Small businesses are alreadyover-burdened, especially in thesedifficult times. Providing a fast-track for small business planningapplications would make theprocess cheaper and easier.

Many of the applications forplanning permission merely involvealtering the use of a building, the

group said.

SENIOR Federal Reserve officialCharles Evans, one of the UScentral banks strongest advocatesfor further monetary policy easing,said yesterday he is flummoxed bythe Feds timidity in the face ofhigh unemployment and relativelylow inflation.

At its policy-setting meeting lastweek, Fed officials sharply slashedtheir GDP forecasts for 2012 and2013 and marked down the outlookfor inflation.

Those changes to the US centralbanks summary of economicprojections, or SEP, suggestprogress on its twin goals of full

employment and stable prices isslowing if not stalled.

Chicago dove Evans urges the

Fed to fire up the printing pressBY CITY A.M. REPORTER Instead of reacting with a new

round of bond buying to boostjobs, the Fed took the much moremodest step of adding six monthsto an existing program, known asOperation Twist, that is aimed atlowering long-term interest rates.

"I think if you look at ourprojections and the SEPs, its hardto understand why we wouldnt be

willing to do more because theinflation outlook is lower than ourobjective, said Evans, the presidentof Chicagos Federal Reserve Bank.

With unemployment at thecompletely unacceptable level of8.2 per cent and inflation predictedto decline, the Fed should beramping up even more its already

significant level of accommodation,Evans said.

THURSDAY 28 JUNE 201215ECONOMICScityam.com

The FSBs John Walker wants a fast-track system for planning decisions

Retail sales sprung back in June

Jun 12Apr 12Feb 12Dec 11Oct 11Aug 11Jun 11

70%60%50%40%30%20%10%0%

-10%-20%-30%

NegativeResponses

Balance

PositiveResponses

First dip in net mortgage lendingsince counting began, say banksNET MORTGAGE lending fell in Mayfor the first time since the British

Banking Association (BBA) beganmeasuring the figure in 1997, thefinancial sector industry group saidyesterday.

With capital repaymentsoutpacing stable gross lending, netmortgage lending dipped by 73mfrom April.

And mortgage approvals fell 3.4per cent in the year to May. Thisrepresented a fall of 5.8 per cent

BY BEN SOUTHWOODcompared to April, from 32,103 to30,238.

Consumer credit also edged downby 0.3bn the same rate that it fell

in April with repayment ofoverdrafts outweighing slightincreases in credit card debt.

In industry, only hotels andrestaurants grew their borrowing,whereas debt in property,construction, manufacturing andretail firms shrunk.

Re-mortgaging fell by 9.6 percent, while other secured lendingdropped 5.1 per cent.

Howard Archer, an economist atIHS Global Insight believes the dataindicates that underlying housingmarket activity remains weak

following the limited boostprovided by the stamp duty holidaythat ended in March.

Archer warns that house pricesare likely to drift around three percent lower over the second half of2012. There is significant dangerthat house prices could fall evenmore due to the problems in theEurozone centred on Greece andSpain, he added.

BETTER than expected Americaneconomic data pushed up stocks onmajor world markets yesterday.

Contracts to purchase previously-owned US homes rose 5.9 per cent

in May, matching the two-year highseen in March, fueling optimismthat the hitherto housing market is

beginning to recover.Data showing better-than-

expected demand for long-lastingUS manufactured goods in May alsoprovided support, although

worries about slowing globalgrowth offset some of the positivesentiment, traders said.

Positive US housing and factorydata provides boost to equities

BY CITY A.M. REPORTERNonetheless, the Dow Jones in

New York went up,with the DowJones eventually closing up 0.7 percent at 12,627.01. Markets

worldwide also responsed to thebullish news for the worlds largesteconomy. The FTSEurofirst 300

closed up 1.29 per cent, while inLondon the FTSE broke a foursession losing streak to close up 1.4per cent. The MSCI world equityindex rose 0.8 per cent, though wasstill down nearly 0.5 per cent forthe week so far, as investors remainconcerned over the Eurozone crisis.

US oil prices briefly returned toabove $80 per barrel for the firsttime in nearly a week.

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IN BRIEFTepco to receive 8bn injectionn Tokyo Electric Power (Tepco)shareholders voted yesterday toapprove the Japanese governments 1trillion yen (8bn) capital injection, toavert the collapse of the utility in theaftermath of the Fukushima nuclearcrisis. The capital injection will handcontrol of Tepco to the government. Itbrings total state support for thecompany to 3.5 trillion yen since thereactor meltdowns at the FukushimaDaiichi plant, which were triggered bylast year's earthquake and tsunami.

Xtract suspends share tradingShares in Xtract Energy were suspend-ed yesterday. The company said it hadreceived cash demands from Noreco,the operator of its Danish Luna well, inrelation to cost overruns on the drillingof the well. The company said in a mar-ket statement that its financial futurewas uncertain. It said: We are explor-ing various potential short term fund-ing options designed to provide accessto immediate working capital in orderto continue trading.

Italians clarify drilling rulesMediterranean Oil & Gas said yesterday

it would pursue plans for a concessionin the Central Adriatic after the Italiangovernment clarified rules on offshoredrilling. Italy put in place offshoredrilling restrictions in 2010 as a defen-sive measure after BPs Gulf of Mexicospill. Changes to these rules now meanrestrictions on offshore exploration andproduction activities will apply to activ-ities up to 12 miles offshore the Italiancoastline.

BRITISH chemicals maker Yule Cattosaw its share price plunge yesterdayafter it announced that it expects itsbusiness to be hurt by a volatile euroand weakening demand in Asia.Yule Catto shares plummeted by

21.4 per cent making them one ofthe biggest percentage losers on theLondon Stock Exchange.The news undermines the groups

central investment case, N+1 Brewinanalyst James Tetley said and down-graded the stock to reduce fromadd following the results.

(It) calls into question its productdifferentiation and market position-

ing, he added.Yule Catto said in March that it

expected sales from emerging mar-kets to offset low growth in devel-oped markets.

However, weak demand for synthet-ic rubber component nitrile in theemerging markets and recent capaci-ty additions have pressured prices,the company said. It expects demandto remain weak until the next year.

This will substantially lower oper-ating profit in our Asia business seg-

BY JOHN DUNNE ment, the company said.Nitrile is a speciality chemical

which is used in the manufacturingof latex a very fine quality of rub-ber. Yule Catto whose chemicals areused by the adhesive, textile, paperand pharmaceutical industries alsosaid that it expected fluctuations inthe euro to cut operating profit byabout 5m.

However, the company still forecastgrowth in its underlying full-year pre-tax profit.Yule Cattos fundamentals

remained intact and it could contin-ue to generate significant returns inthe long term, Barclays CapitalsGunther Zechmann said in a note.

Yule Catto & Co PLC

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GLOBAL distribution andoutsourcing company Bunzl said

yesterday it had bought Service

Paper Company in the UnitedStates while separately issuing anupbeat trading statement.

Service Paper distributesdisposable supplies to the grocery,food service, food processor andindustrial packaging sectorsthroughout the Pacific Northwest.

Revenues of the businessacquired for the year ended 31December 2011 was $61m (39.1m)and the gross assets purchased areestimated to be worth $18m.

Bunzl acquires US distributionfirm as revenues head upwards

BY JOHN DUNNE Chief executive Michael Roneysaid: Service Paper is an excellent

business with a reputation forproviding high levels of customerservice which will complement

and expand our existing businessin the region.

Meanwhile the firm said it hadseen revenue grow by aroundseven per cent over the past sixmonths. It attributed much of therise to recent acquisitions.

It added that its margins hadalso improved thanks to itspurchases of other companies.

Bunzl has bought five businessesin the last year worth a total of130m.


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Bunzl chief executive Michael Roney said Service Paper would expand its US footprint

Yule Catto hitby weakening

demand in Asia

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17THURSDAY 28 JUNE 2012

LONDON REPORT

LDCThe private equity house has

announced that Keith Holdt hasbeen appointed as investordirector in its value enhancementgroup. He joins from Swiss PostSolutions, where he was head ofglobal business development andsales. Holdt previously spenteight years with IBM.

Lloyds Banking GroupAndrew Bester has been appointed chief executive,wholesale at Lloyds. He was formerly chief operating officerof consumer banking at Standard Chartered Bank. Besterhas held a variety of senior management roles at StandardChartered, and previously worked as group finance directorof Xchanging, and in the investment banking division atDeutsche Bank.

BurberryJenna Littler has been appointed vice president, PR and

corporate relations, at the fashion house. She joinedBurberry in 2010 from McKinsey, the managementconsultancy, and has since established the corporaterelations function within Burberrys marketing andcommunications team.

MenziesThe accountancy firm has appointed Julie Adams as seniorpartner. She replaces Mike Sands, who steps down from theposition

CITYAM 2012-06-28

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