PRESS DIGEST – Financial Times – March 19

Financial Times

GUIDELINES AGREED ON BANK RESCUES

The Basel committee on banking supervision has agreed on the
broad outlines of how governments should avoid another round of
taxpayer-backed bailouts of financial institutions thought to be
“too big to fail”. The committee said governments needed to make
contingency plans for the failure of individual banks and
insurers, to minimise contagion and to make regulators more able
to intervene early in impending crises. However, in a 44-page
document, the group fell short of suggesting the creation of a
global insolvency regime. Committee chairman Nout Wellink said
the proposals made “meaningful progress toward addressing
systemic risk” in the financial sector.

DARLING TO USE HIGHER REVENUES TO CUT DEBT

Alistair Darling will use a higher-than-expected tax take to
cut projected borrowing by five to 10 billion pounds in next
week’s Budget, focusing on debt reduction in a bid to steady
public finances. Official data showed that tax receipts did not
decrease as much as anticipated in December, with the government
on course to be 170 billion pounds in debt by the end of the
year compared to a pre-Budget report prediction of 177.4 billion
pounds. Bond markets welcomed the forecast-beating public
finance figures.

OFT BANK FEES PROBE LIKELY TO ALARM THE CITY

Philip Collins, chairman of the Office of Fair Trading, has
signalled that investment banks are facing an imminent probe
into the fees they charge clients, in comments likely to worry
the financial services sector. Addressing a meeting of the
Future of Banking Commission, Collins said issues surrounding
the sector’s fees would be considered “in the coming months”.
Liberal Democrat Treasury spokesman Vince Cable had earlier
expressed concerns about “high profit margins” at investment
banks, adding that banks were “racking up enormous fees”. The
OFT later said it was “keen to find out more about competition
in investment banking services”.

CONSERVATIVES PLAN ELECTRICITY CARBON TAX

David Cameron will say on Friday that a Conservative
government would impose a carbon tax on electricity generation
to encourage investment in nuclear power and renewables. The
proposals, which could form part of an energy bill in the
Tories’ first legislative programme if they win the general
election, are likely to win favour with energy companies
dissatisfied with the European Union’s emissions trading scheme.
The Tories also plan to put a floor under the price of carbon
for electricity generators, a proposal welcomed by Vincent de
Rivaz, UK chief executive of French energy giant EDF (EDF.PA: ).

UNILEVER SHAKE-UP HITS TOP EXECUTIVE

Consumer products firm Unilever (ULVR.L: ) has announced the
departure of one of its senior nine executives, in a move
signalling a top-level management shake-up. Vindi Banga will be
stepping down as head of food, home and personal care, paving
the way for the president of the Americas for Unilever, Mike
Polk, to take over Banga’s role. The management reshuffle will
see David Lewis, head of Unilever UK and Ireland, join the board
as head of the Americas. Banga has shrugged off any idea of a
fall-out with the relatively new CEO, Paul Polman, by saying “I
think very highly of him and I think he’s a very capable CEO.”

RBS LINKS NEW TOUGHER PAY SCHEMES TO BANK’S PROFITS

Royal Bank of Scotland (RBS.L: ) has revealed details of a new
stringent pay reward scheme for its senior executives, as part
of efforts to introduce a more balanced pay structure at the
state-backed bank. The new incentive plan was developed after
extensive talks with UK Financial Investments, which manages the
government’s stakes in banks. Under the agreed scheme,
remuneration at RBS will be linked to the bank’s profits and its
share price, and will see the maximum share award under the
long-term incentives for senior executives scaled back from 450
to 400 per cent of salary. The plan could see RBS pay chief
executive Stephen Hester as much as 4.9 million pounds.

SAVILLS PLAYS DOWN RECOVERY TALK FOR 2010

Property adviser Savills (SVS.L: ) has forecast a flat
performance in 2010 despite delivering strong results for the
second half of 2009. Savills produced a pre-tax profit of 13.5
million pounds after experiencing significant second-half
improvement in the London residential and Asia-Pacific
businesses, which mitigated weaker performance in Europe and the
US. But chief executive Jeremy Helsby remained cautious,
predicting Britain could suffer “total inertia” in advance of
the general election and suggested China’s performance “might
not be as strong as last year.” The company also announced that
it would be shutting down its defined benefit pension scheme.

CROZIER IN 620,000 POUND WELCOME FROM ITV

Investors have expressed unease at the 620,000 pound “golden
hello” offered to ITV’s (ITV.L: ) incoming chief executive Adam
Crozier. Executive pay was a key issue in the contentious
succession process, after investors forced Michael Grade to step
down a year early, and one investor described the welcome
package as “out of place”. Crozier, who joins the struggling
broadcaster on April 26, will receive 200,000 pounds in cash and
420,000 pounds in shares, in addition to a salary and benefits
package of 860,000 pounds a year. The broadcaster’s annual
report also revealed that Michael Grade, who up until December
31 held the role of executive chairman, was awarded a bonus of
1.16 million pounds for reaching cost cutting, balance sheet and
cash-conversion targets.

PRU CHIEF TURNS DOWN BOARD ROLE AT SOCGEN .

Prudential’s (PRU.L: ) chief executive Tidjane Thiam has
turned down an offer to join the board of French investment bank
Societe Generale (SOGN.PA: ), after investor’s protested about him
considering the role while attempting to secure the insurer’s
takeover of AIA, the Asian business of AIG. The 35.5 billion
dollar deal would require a 21 billion-dollar-equivalent rights
issue and news of Thiam’s decision to turn down the offer came
as Pru executives met with investors to secure their backing.
Some are understood to be concerned about the sheer size of the
rights issue, while others have expressed concern about the
level of execution risk in integrating the two businesses.

TULLET PREBON WINS BGC STAFF POACHING CASE

Interdealer brokerage Tullet Prebon (TLPR.L: ) has won a
poaching conspiracy claim in the High Court, after the judge
ruled that rival BGC and two of its top executives conspired to
induce breach of contract. The ruling is expected to have
repercussions for the entire industry and analysts have said
that the ultra-competitive hiring practices of the industry,
which relies on a small pool of individuals, could be forced to
change. BGC’s president Shaun Lynn and managing director Terry
Verrier were both criticised by the judge, who noted that
Verrier felt “considerable animosity” towards Tullet boss Terry
Smith.

Investment Analysis

PRESS DIGEST – Financial Times – March 19