Barclays shows what CoCos can and can’t do 30 Jul 2013 The bank is plugging only a fraction of its 13 bln pound capital shortfall using contingent convertibles. That’s because the UK regulator insisted that only very equity-like bonds would help reduce leverage. But in absolute terms this will be a big issue - and a tough sell.
Barclays’ rights issue is worth supporting – just 30 Jul 2013 The UK bank’s shares dipped on news of a 5.8 bln stg rights issue. Investors can gripe that the cash call delays the advent of reasonable returns on equity, but it will bring fatter dividends closer. Supporters of Barclays’ turnaround strategy shouldn’t jump ship now.
BP lacks leverage over share-price discount 30 Jul 2013 Higher taxes, a lower-than-expected contribution from Russian partner Rosneft and mounting Gulf of Mexico spill costs marred the UK major’s latest quarter. As long as BP remains at the mercy of forces outside its direct control, the derisory valuation will be hard to correct.
Barclays learns that capital delays don’t work 29 Jul 2013 The UK bank is set to raise at least 5 bln stg of capital, despite stating in February it would bolster solvency over time. Regulatory caprice over leverage ratios may be to blame. But as Deutsche Bank also learned, time doesn’t create a robust capital plan: equity does.
WPP can sit out this bout of adland M&A 29 Jul 2013 A merged Publicis Omnicom would overtake the UK group as the largest advertiser. That must gall WPP boss Martin Sorrell. But he could poach clients, and charge more in a consolidated market. The benefits of gatecrashing this deal, or finding a consolation prize, look dubious.
Hugo Dixon: EU ripe for single-market push 29 Jul 2013 Deepening the single market would do a lot for the EU’s sagging competitiveness. Vested interests, especially in Germany and France, may be opposed. But a new push would help the euro periphery and could keep Britain in the EU - killing two birds with one stone.
New Anglo American mantra: be boring 26 Jul 2013 The miner’s departed boss Cynthia Carroll was big on vision, but Mark Cutifani, her replacement, wants to improve performance asset by asset. The new strategic plan is appropriately dull. If a more disciplined Anglo makes fewer mistakes, it’ll finally be getting somewhere.
Exploiting the poor will remain a good business 26 Jul 2013 British “payday lenders” gouge feckless borrowers with four-digit interest rates. The new head of the Church of the England wants to take them on with compassionate community banks. Those institutions can do good, but not by being just slightly less rapacious than rivals.
UK’s "operation credit bubble" ripe for rethink 25 Jul 2013 The government’s plan to subsidise high-risk mortgages is bad economics and foolish policy. A nascent economic recovery makes it look redundant. The reasonably strong GDP number provides an opportunity for an almost dignified retreat.
UK bank tsar is inconsistent, not zealous 24 Jul 2013 Business Secretary Vince Cable claims that “capital Taliban” are causing banks to rein in lending. That misses the point. The real problem is that both governments and regulators are creating uncertainty for banks and investors by failing to practice what they preach.
UK audit reform plan is only half cooked 22 Jul 2013 Britain’s anti-trust authority says companies should put audit contracts out to tender at least once every five years. That’s good, but an investor-backed plan for mandatory rotation after fifteen years is also needed to bolster accountancy competition. Brussels should take note.
Kurdish oil clash involves unlikely tough guys 22 Jul 2013 M&G and Capital Group are hardly limelight-hogging activist shareholders. Yet the two have forced four directors onto Gulf Keystone’s board, after a war of words with the Kurdistan-focused oil explorer. UK investors rarely reach for this weapon, but it’s good to know it works.
Hugo Dixon: How to legitimise EU – decentralise 22 Jul 2013 The European Union is facing a crisis of legitimacy. The most extreme, but not only, manifestation is in the UK, where citizens may vote to quit the EU. Reforms are needed to stop Brussels interfering in things best left to nations.
Xstrata 2.0 works if Mick Davis keeps the formula 18 Jul 2013 The entrepreneur behind Xstrata is mulling his next act. If the choice is between a new mining fund or another M&A vehicle, investors should prefer the latter. Davis the CEO has more chance of generating big returns in today’s tougher environment than Davis the fund manager.
Defence fees at Severn Trent are hard to defend 17 Jul 2013 The British water utility paid its advisers 19 mln pounds for help thwarting a takeover. Severn’s board got what it wanted. But the payout looks generous. How much work does a four-week tussle in a regulated sector, with no formal bid, really require?
Carney compromise suggests BoE won’t be so loose 17 Jul 2013 The new UK central bank governor came out a winner from his first MPC meeting - but only by voting with the BoE majority that does not want additional stimulus. Dovish policy guidance may be coming, but a monetary tide probably isn’t. The pound and gilt yields could edge up.
Barclays’ $453 mln power-trade spat looks lose-lose 17 Jul 2013 The UK bank says the final U.S. regulatory judgment that it fiddled power prices is dead wrong. The fine is too large to count as a cost of doing business. Barclays may win in court, but a lengthy trial will keep the focus on the bank’s racy past, not its sober future.
Cash call would help new guard fix G4S 16 Jul 2013 New CEO Ashley Almanza has lots to do at the hapless security firm. Relations with the UK government and investors need fixing. He must also look at the shape of the group, find a CFO, and boost cash generation. Raising equity isn’t a necessity. But it could ease the pressure.
UK inflation shows why Carney mustn’t sink pound 16 Jul 2013 The new governor of the Bank of England may be tempted to push down the currency to push up growth. But with inflation at 2.9 pct, prices are rising much faster than wages. That’s now the chief obstacle to a decent UK recovery. Further devaluation would do more harm than good.
Bankers’ pay numbers could stoke London envy 16 Jul 2013 Almost 85 pct of EU investment bankers earning over 1 mln euros are UK-based. Even though the absolute number fell 6.5 pct in a year, the imbalance underscores London’s undisputed financial dominance. It may also become political dynamite if the UK’s influence in Europe wanes.