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BUSINESS WITH PERSONALITY

RBS: we did
not gain from
Libor fixing
RBS did not make any money from
its traders attempts to fix key inter-
bank interest rates, the investment
banks incoming boss claimed yester-
day, meaning the bank took a 390m
fine for wrongdoing that was not
even beneficial at the time.
It came as outgoing head John
Hourican, the only senior executive
to leave over the scandal, apologised
for failing to spot the problem soon-
er, and his replacement Peter Nielsen
said nobody had thought Libor could
be fixed.
Nielsen said that although traders
manipulated Libor submissions to
benefit their own positions, they
often harmed other trades in the
bank and so left no net gain for RBS.
In many cases some of the
requests would have had an effect
that we could not say benefited the
bank, he told MPs and peers on the
Parliamentary Commission on
Banking Standards. They may have
benefited one traders portfolio at
the expense of anothers.
And he said Libor was never seen as
a possible weakness: Senior manage-
ment thought it was a mathematical
impossibility.
Meanwhile RBS chairman Sir
Philip Hampton
defended chief exec
Stephen Hesters pay
package, arguing
Hester is paid mod-
estly relative to
other people
doing these
jobs.
EUROPEAN authorities have unveiled
strict plans to curb the pay of
Londons alternative fund managers,
in a move which could see their
compensation treated in the same
way as that of bankers.
The proposals, laid down by the
European Securities and Markets
Authority (Esma) yesterday, target
the bonuses of senior executives at
hedge funds and private equity funds
to bring pay controls in-line with the
increasingly stringent remuneration
policies of City banks.
Wall Streets colossal hedge fund
industry, worth some $1.6 trillion in
assets, is also set to be hit by the
rules, as Brussels seeks to clamp
down on overseas managers who
market their funds to European
investors. The two policies will add to
worries that control of City rules is
moving inexorably to the EU.
Esma chair Steven Maijoor
yesterday said the guidelines will
help promote prudent risk-taking
but critics say the rules are a bad
fit for the industry.
The UKs Financial Services
Authority will now be tasked with
making the proposals fit with UK
law. It is set to launch a consultation
on the proposals later this month.
The rules will restrict how and
when managers can take their
bonuses to make them more like
bankers bonuses.
Esma says deferred bonuses should
be paid out over a three-to-five year
www.cityam.com FREE
period, with firms encouraged to
consider even longer delays for
members of management.
Its like trying to impose rugby
rules to a football game, hedge fund
adviser Joe Seet, senior partner at
Sigma Partnership said.
If the FSA takes on the entire
guidance then a lot of these guys are
going to move to Singapore.
The pay curbs are in response to a
hotly contested directive laid in July
2011 to regulate alternative funds.
The Alternative Investment Fund
Managers Directive is to be
implemented by 22 July, giving UK
regulators a tight timetable.
The power grab from Brussels
comes as an influential group of
central bankers and regulators
yesterday launched a separate
initiative to make all fund manager
pay dependent on performance. The
Group of 30, which includes former
European Central Bank president
Jean-Claude Trichet and Lord Adair
Turner, has called on state regulators
to propose new guidelines to link
bonuses to a three-year performance
timeframe.
WHY THE LATEST MODEL IS THE BEST YET
BY TIM WALLACE
FTSE 100 6,277.06 +13.13 DOWM13,971.24 -21.73 NASDAQM3,192.00 -1.87 /$ M1.57 -0.01 / M1.17 -0.01 /$ 1.34 unc
BY MICHAEL BOW
BRUSSELS TAKES
AIM AT FUND PAY
THE MIGHTY MINI
ISSUE 1,817 TUESDAY 12 FEBRUARY 2013
HORSEMEAT
SCANDAL
See Page 4 and the Debate, Page 21
See Page 25
Certified Distribution
from 26/11/12 to 30/12/12 is 127,678
IM TOO FRAIL TO CARRY ON POPE RESIGNATION SHOCKS THE WORLD
POPE Benedict XVI
announced yesterday
he will step down as
head of the Catholic
Church at the end of
this month, becoming
the first pontiff to
abdicate from the
role since the 15th
century.
The 85-year-old Pope
told his cardinals that
he no longer had the
mental or physical
strength to fulfil his
papal duties, and that
he would leave the
post on 28 February
after almost eight
years in the Vatican.
His replacement will
be elected by a group
of senior cardinals.
MORE: Page 5

FORUM: Page 21

MORE: Page 3

Stephen Hesters
pay packet was
under scrutiny
allister.heath@cityam.com
Follow me on Twitter: @allisterheath
NASDAQ OMX Group recently
talked with private equity firm
Carlyle Group about taking the
trans-Atlantic exchange operator
private, but the talks broke down
because of price disagreements,
according to people familiar with
the matter.
Carlyle initiated the discussions
around three weeks ago and was in
early stages of due diligence when
differences emerged, ending talks.
Management at Nasdaq feels
that the company is undervalued
compared with its peers, two
separate sources said. Both firms
declined to comment yesterday.
Nasdaq itself has been active on
the acquisition front, most recently
proposing to buy Thomson Reuters
investor relations, public relations
and multimedia services units.
Nasdaq chief executive Bob Greifeld
also recently said he would consider
bidding for Euronext, the operator
of the Paris, Amsterdam, Brussels
and Lisbon stock exchanges, if it
were put up for sale.
Exchanges have been under
pressure due to several years of
declining trading volumes amid
macro-economic uncertainty and
long periods of low market
volatility. However Nasdaq has
placed an emphasis on diversifying
away from transaction-based
revenues.
Nasdaq could
not agree sale
with Carlyle
BY CITY A.M. REPORTER
Money laundering check
to slow down Cyprus cash
CYPRIOT banks will face independ-
ent money-laundering investigations
before getting hold of any Eurozone
bailout funds, the Eurogroup of
finance ministers said yesterday.
We agreed that an independent
assessment conducted by a private
sector firm is required, said Jeroen
Dijsselbloem, at his first meeting
heading up the Eurogroup, after tak-
ing over from Jean-Claude Juncker.
Cypriot leaders agreed to the
demands, which will delay the
17bn (14.5bn) package they say
they need until at least March, the
next time the 17 euro area finance
ministers meet.
Well try to reach a decision in
March, Dijsselbloem promised. But
just a few weeks ago in January the
Dutch career politician said: I dont
think that we will come to a decision
on Cyprus in a short time I also
dont think thats necessary.
The Eurogroup president also
delayed a firm judgement on the
question of a bail-in, where deposi-
tors and investors in Cypruss banks
would foot some of the costs of keep-
ing the institutions alive.
This could go some way to assuag-
ing fears that bailout funds would go
to Russian oligarchs, but Cypriot
finance minister Vassos Shiarly said
the likelihood of the funds going to
EDF seeks state backing on site
EDF Energy has asked the Treasury to
guarantee some of the costs of the new
nuclear reactors it will build in the UK, in
a move likely to spark controversy for a
government that has pledged not to
provide public subsidies for the industry.
The French companys planned
multibillion-pound nuclear power station
at Hinkley Point, Somerset, was one of
the UKs top five infrastructure
projects, and as such could be eligible for
a state-backed guarantee, a person
familiar with the matter said.
Companies hit by Venezuela move
Colgate-Palmolive, the toothpaste and
soap maker, will suffer a one-off $120m
(76.7m) loss as a result of Venezuelas
decision to devalue its currency, the
Bolivar, by 32 per cent, a move which is
also posing a threat to the earnings of
other US and European multinationals.
App allows sending funds abroad
Facebook users will soon be able to send
remittances directly to friends almost
anywhere in the world through a new
online app, Azimo, developed by a UK
start-up company.
Firms leave growth funds on table
The number of companies walking away
from the Regional Growth Fund has
nearly doubled since the autumn, while
100m of undistributed cash has been
diverted into a rescue fund.
Barrister faces jail for evading tax
The crackdown by HM Revenue & Customs
on middle-class tax dodgers received a
boost yesterday with the conviction of
senior barrister Rohan Pershad for failing
to pay more than 600,000 in VAT.
Virgin Media delays bonus payments
Virgin Media, the pay-television business
being bought by US giant Liberty Global, has
invited staff to delay their bonuses so that
they can avoid the top rate of tax. The
company has told senior executives due to
receive a bonus in March that they can
postpone payment until after 6 April, when
the top rate of income tax will fall from 50
per cent to 45 per cent. The move is expected
to save around 150 executives an average of
7,000 each, but to cost the Treasury more
than 1m. Though the move is legal, MPs
condemned Virgin for playing the game.
Novo Nordisk stung by FDA delay
The outlook for Novo Nordisks position in
its most important market, the US, turned
gloomier after the US Food and Drug
Administration said it couldnt yet approve
the companys latest insulin products.
Judge clears Hostess to sell Twinkie
Hostess won permission to place a
selection of its cake and bread assets,
including the Twinkie brand, on the
auction block as the baking firm sells off
its business piece by piece.
EU BANKS may have to implement
new liquidity rules a year earlier
than expected as European
lawmakers try to push forward the
proposals, it emerged yesterday.
Regulators last month decided
to delay the liquidity coverage
ratio (LCR), phasing it in gradually
from 2015 to 2019 on the basis
that a cut off date of 2015 would
be too sharp and could damage
lending to households and
businesses.
But the European Parliament
wants to it be accelerated and
Ireland EU presidents currently
wants to bring the date forward to
2018, according to documents seen
by Bloomberg.
The LCR is a buffer of liquid
assets which banks will hold to
make sure they can survive a 30-
day squeeze on funds.
The idea is to make sure they
can rely on their own resources
before having to turn to central
banks for aid.
But building up this buffer takes
away resources which could be
used for lending, hurting the
economy.
That means there is a balance to
be struck, with the MEPs now
favouring tighter bank regulation
in spite of the fears over lending
economic growth.
EU banks could
face faster rise
in cash buffer
Jeroen Dijsselbloem succeeded Jean-Claude Juncker to head the Eurogroup
2
NEWS
BY TIM WALLACE
BY BEN SOUTHWOOD
To contact the newsdesk email news@cityam.com
I
F you agree to sell something, it is
your responsibility to ensure that
the product or service you deliver
is exactly the one you and your
customer agreed to. That applies to
financial products just as much as to
food. That is why I disagree with
those who believe that the horse
meat contamination row is a storm
in a tea cup, little more than a joke.
The issue is one of trust and of the
sanctity of contracts, both of which
are vital to capitalism.
Those suppliers who decided to
secretly pass off horse meat for beef
conned their customers. They need to
be sued and brought to book. They
did wrong and should not be allowed
to get away with it. They have dam-
aged trust in the modern globalised
food chain, which is a tragedy given
that it has helped make varied and
good quality food available to mil-
EDITORS
LETTER
ALLISTER HEATH
Horse row no laughing matter but NHS scandal even worse
TUESDAY 12 FEBRUARY 2013
lions of people, especially the poor.
Large buyers of meat products such
as supermarkets also need to fur-
ther up their game and routinely
employ DNA tests to prevent this non-
sense from happening again.
But while it is an important story
that needs to be tackled, and no jok-
ing matter, the horse meat row has-
nt killed anybody. It is certainly
ridiculous that the story has a much
greater public profile than the deadly
and still growing scandal engulfing
the NHS. What has happened in
some of Britains hospitals, as
detailed in the shocking Francis
report last week, is a genuine catas-
trophe, the sort of scandal that ought
to be epoch-defining and lead to dras-
tic changes in policies and attitudes.
Thousands of people have died in
vain, often in horrid, inhumane con-
ditions; yet more hospitals are being
dragged into the fray, with 14 hospi-
tals now being investigated.
In fact, this affair is a far greater
scandal than Libor, itself a very seri-
ous matter which will hopefully end
in criminal prosecutions and jail sen-
tences for perpetrators. While a dis-
gusting betrayal of wholesale
customers of financial services and a
major blow to the City, the Libor rig-
ging affair probably had very little
impact on consumers, and didnt
even actually bolster the bottom line
BETTER NEWS FOR ONCE
Britains economy continues to stag-
nate, dragged down by a frightening-
ly long list of problems. But there are
a few signs of (relative) hope. The
economy is probably no longer
shrinking and appears to be on a
slight improving trend. As Global
Insights Howard Archer points out,
the OECDs leading indicator for the
UK edged up to 100.7 in December
from 100.6 in November, 100.5 in
October,100.2 in September, 100.0 in
August, 99.7 in June and a low of 99.2
in early-2012 and late-2011. It had pre-
viously trended down from 101.5 in
early 2011. Other evidence is contra-
dictory, of course, but most doesnt
suggest another savage contraction
in the first quarter. Fingers crossed.
of the likes of RBS (as opposed to that
of some individual traders).
Tragically, the callous incompetence
of some staff within the Mid
Staffordshire NHS trust led to an
atrociously large numbers of deaths.
So the real question remains: why
has nobody been prosecuted for neg-
ligence at the NHS? Why has nobody
resigned? Astonishingly, the chief
executive retains his job. Why are the
Libor and horse meat scandals still
grabbing a disproportionate share of
the national conversation, and
attracting all the venom, while the
mass slaughter in some hospitals is
being met with astonishing cool?
Where is the outrage about rewards
for failure, high pay and the rest at
affected hospitals? Where are the tel-
evised grillings by MPs? There is
something wrong here. This is no
time for double standards.
these depositors had been grossly
exaggerated.
The bail-in is unlikely to happen and
we will not accept it under any circum-
stances, Shiarly added. This came in
response to reports that alleged up to
10bn of the total package might come
from bank stakeholders rather than
external lenders.
Olli Rehn, European Commissioner
for economic and monetary affairs
also firmly repudiated the reports, say-
ing: There are no proposals of the
European Commission along the lines
described in the article.
Still, worries about money-launder-
ing and giving a boost to Russian
money launderers are not the only
stumbling blocks holding back bailout
negotiations.
The Eurogroup is worried that with-
out structural reform the small
Mediterranean state will not be able to
afford to repay the loans almost as
big as the countrys yearly output.
But Cypruss Communist party
rulers have fought against demands
they sell off state assets to put their
finances in a more sustainable posi-
tion for the longer term.
MORE: Page 18

WHAT THE OTHER PAPERS SAY THIS MORNING
Find your next step at
CITYAMCAREERS.com
GOLDMAN Sachs has promoted
Gregg Lemkau to jointly head its
global mergers and acquisitions
(M&A) team and Gilberto Pozzi to
lead its M&A coverage in Europe, the
Middle East and Africa (EMEA).
Lemkau, head of M&A for EMEA
and Asia Pacific, will work with Gene
Sykes who has been sole head of the
division since Yoel Zaouis departure
last year, a spokeswoman said.
Pozzi, who has been co-head of
Goldmans global consumer retail
group since 2010, will retain
responsibility for many of his clients
in the sector and take on a broader
role across countries and industries
in the EMEA region.
Lemkau, who became partner in
2002, previously held positions as
global co-head of the technology,
media and telecom group and served
as chief operating officer for the
investment banking division.
Pozzi, who made partner in 2008,
will be replaced by FX de Mallmann
who will be co-head of
the consumer retail
group with Kathy
Elsesser. He will also
continue as head of
investment banking
services in EMEA.
Goldman Sachs
names Lemkau
M&A co-chief
BY CITY A.M. REPORTER
RBS bosses yesterday apologised for
the Libor fixing scandal, saying
sorry for failing to spot the crisis
and for being too slow to rectify the
problem once it had been identified.
Chief Stephen Hester told MPs
and peers he is pushing through
major changes at the bank,
refocusing every business unit
around customer service while
restructuring the business.
But the chairman of the bank still
had to defended the chiefs pay
package against sceptical
parliamentarians, arguing it is
modest by industry standards.
Hester receives 1.2m in basic
salary and 400,000 in pension
contributions. He can also get twice
his salary in bonus and 3.5 times in
long term incentives, though he has
not received a bonus since 2010 and
has said he will not take it this year.
I dont think it is hyperbole to
say this is one of the most difficult
jobs in world business, it was the
biggest banking failure in the
world, said Sir Philip Hampton.
These are large sums, but well
RBS bosses say
sorry for the
Libor scandal
BY TIM WALLACE
below the market rate.
Meanwhile outgoing investment
banking boss John Hourican said
that many business leaders talk
about accountability without taking
any action on it.
I am very sorry this happened on
our watch. I accept responsibility for
the failings, Hourican said.
He hopes the departure of such a
senior boss will shock any sceptics at
the bank into changing their ways.
I have told staff they should not
waste my death it is very important
the company and everyone in it
stands up and feels the anger around
this issue, around the industry,
around out company.
The most serious failings were xed in a matter of
weeks, but on different levels the improving of the
Libor process is still going on to this day. Stephen Hester

It just didnt occur to anyone this was a rate that


could be ddled. It turned out there was a cartel of
people across banks who thought they could x it.
Johnny Cameron

The bank was in too many places doing too many


things with too little capital. I would accuse its
predecessor organisations of strategic tourism. John Hourican

Royal Bank of Scotland Group PLC


11 Feb 5Feb 6Feb 7Feb 8Feb
332.5
335.0
327.5
330.0
337.5
340.0
342.5
345.0 p 340.30
11Feb
TUESDAY 12 FEBRUARY 2013
3
NEWS
cityam.com
RBS Stephen Hester, ex-investment head Johnny Cameron and outgoing boss John Hourican
WHAT THE BANKERS SAID
Gregg Lemkau will
be co-head of
global M&A
THE ACCOUNTING watchdog has
opened a probe into former FTSE 100
software firm Autonomys accounts
for the years leading up to its contro-
versial takeover by Hewlett-Packard.
The Financial Reporting Council
said yesterday it will look at
Autonomys reporting between
1 January 2009 and 30 June 2011,
shortly before the $11.1bn (7bn)
offer from HP was revealed.
HP later blamed the firm for an
$8.8bn writedown, claiming that
Autonomys management had inflat-
ed the value of the company.
The US tech giant said in
December that the US
Department of Justice and
the Serious Fraud Office
were examining its claims
of accounting impropriety.
Mike Lynch, founder
and former chief exec-
utive of Autonomy,
has strenuously
denied HPs claims.
A spokesperson for
Autonomys former
management yester-
Watchdog will
probe accounts
for Autonomy
BY MARION DAKERS
day welcomed the FRC investigation,
saying it would be the first independ-
ent third-party scrutiny of HPs
allegations.
As a member of the FTSE 100 the
accounts of Autonomy have previous-
ly been reviewed by the FRC... and no
actions or changes were recommend-
ed or required.
We are fully confident in the finan-
cial reporting of the company and
look forward to the opportunity to
demonstrate this to the FRC.
The FRC did not say whether it was
examining Autonomy, or its auditor
Deloitte, or both. It has opened the
probe after consulting with profes-
sional body the ICAEW, and has the
power to impose fines or ban individu-
als from acting as directors.
Deloitte said yesterday it would co-
operate fully with the investigation,
repeating that it had no
knowledge of any account-
ing improprieties or misrep-
resentations in Autonomys
financial statements.
TESCO was last night forced to
admit that some of its Everyday
Value spaghetti bolognese
contained 60 per cent horse, as the
scandal over the mislabelling of
meat continued to spread.
Environment secretary Owen
Paterson told the House of
Commons that he had ordered all
meat producers and retailers to
commence regular testing of all
beef products, with results
published every three months.
An initial audit of products
currently on the shelves will be
finished this week, with the
Horsemeat scandal spreads to
Tesco Value spaghetti bolognese
BY JAMES WATERSON findings made available on Friday.
Meanwhile the Romanian Prime
Minister angrily rejected claims the
horsemeat came from abattoirs in
his country, as the pan-European
investigation into the apparent
fraud continued. Tescos technical
director Tim Smith said the
affected bolognese, which should
only contain Irish beef, was
withdrawn from sale last week
following concerns about products
supplied by French manufacturer
Comigel. Downing Street yesterday
insisted there was no health risk to
the public and the concern was
over retailer practice and labelling.
DEBATE: Page 21

TUESDAY 12 FEBRUARY 2013
4
NEWS
cityam.com
Owen Paterson told MPs he believed the scandal was a result of criminal activity
ARE YOU WORRIED ABOUT
EATING HORSEMEAT?
Interviews by Amy-Jo Crowley
From a health
perspective, not
in the slightest Ive
voluntarily eaten horse in France. But from an
information perspective, people should be
expected to eat what it says on the packet.
These views are those of the individuals above and
not necessarily those of their company
JON MUNDAY
REES POLLOCK

Its a pretty
dreadful
breach of trust in terms of
people not being aware of where their meat is
sourced. And the concern from a health per-
spective is that horsemeat isnt regulated in
the same way as beef and may contain car-
cinogenic bute.
DAVID THOMSON
RPS GROUP

It doesnt affect
me From what
Ive read there arent any
health implications as a result. So even if I was
to nd out that I had inadvertently eaten horse
meat, it wouldnt be of any concern to me.
NELINA KIME
DWF

CITYVIEWS
Autonomy founder Mike
Lynch has defended the firm
THE POPES closest advisers were left
reeling yesterday after the 85-year-old
pontiff revealed he would step down
from the position in just over two
weeks, blaming age and declining
health for his decision.
In an unexpected speech to senior
cardinals Pope Benedict XVI said: I
have come to the certainty that my
strengths, due to an advanced age, are
no longer suited to an adequate exer-
cise of the Petrine ministry.
Pope Benedicts abdication is the
first since 1415, when Gregory XII
stepped down following a dispute
with a rival claimant to the papacy.
His successor will be chosen by a
group of senior cardinals, who will
meet as soon as the current Pope offi-
cially leaves his post at 8pm on
28 February.
In todays world, subject to so many
rapid changes and shaken by ques-
tions of deep relevance for the life of
faith ... both strength of mind and
body are necessary, he said yesterday.
Catholic shock
as Pope plans
to step down
BY ELIZABETH FOURNIER Strength which in the last few
months, has deteriorated in me to the
extent that I have had to recognise my
incapacity to adequately fulfil the
ministry entrusted to me.
Chief Vatican spokesman Father
Federico Lombardi said no specific ill-
ness had led to the announcement,
and that Pope Benedict did not intend
to influence the decision of the cardi-
nals who will choose his successor.
Several candidates have already
emerged as frontrunners to become
the 266th leader of the Roman
Catholic Church, including Ghanas
Cardinal Peter Turkson, Cardinal
Francis Arinze from Nigeria, Canadas
Cardinal Marc Ouellet, and Italian
Angelo Scola.
Prime Minister David Cameron paid
tribute to the pontiff in the House of
Commons yesterday, saying He will
be missed as a spiritual leader to
millions.
Pope Benedict has worked tirelessly
to strengthen Britains relations with
the Holy See, he added.
Pope Benedict XVI will step down before his 86th birthday in April
THE FORUM: Page 21

5
NEWS
cityam.com
THE VATICAN ON BANKING AND THE ECONOMY
Financiers must rediscover the genuinely
ethical foundation of their activity, so as not to
abuse the sophisticated instruments which can
serve to betray the interests of savers.

The conviction that the economy must be


autonomous, that it must be shielded from
inuences of a moral character, has led man to
abuse the economic process in a thoroughly
destructive way.

The world is sadly marked by hotbeds of


tension and conict caused by growing instances
of inequality between rich and poor, the Pope
said, by the prevalence of a selsh and individu-
alistic mindset which also nds expression in an
unregulated nancial capitalism.

The creation of ethical structures for


currency, nancial and commercial markets is
also fundamental and indispensable. These
must be stabilised and better coordinated and
controlled so as not to prove harmful to the
very poor.

Wherever politics tries to be redemptive,


it is promising too much. Where it wishes to do
the work of God, it becomes not divine, but
demonic.

To function correctly the economy


needs ethics; and not just of any kind but one
that is people-centred.

We are moving toward a dictatorship of


relativism which does not recognise anything
as denitive and has as its highest value ones
own ego and ones own desires.

Corruption and illegality are unfortu-


nately evident in the conduct of the economic
and political class in rich countries, both old
and new, as well as in poor ones.

The economic and nancial crisis which


the world is going through calls everyone, indi-
viduals and peoples, to examine in depth the
principles and the cultural and moral values at
the basis of social coexistence.

MAYOR of London Boris Johnson has


put together a team of economists,
architects and advisers to thrash out
the details of a new hub airport in
the south east of England.
Johnson told the transport select
committee yesterday that the coun-
try needs a solution that gives us a
four runway hub, preferably a 24
hour hub, which is what our com-
petitors are going for and in many
cases already have.
He has appointed advisers includ-
ing WS Atkins, the engineering firm
that worked on the Olympics and the
West Coast Main Line franchise;
architects Zaha Hadid and Pascall &
Watson; professional services giant
Ernst & Young; economic groups
such as Oxford Economics; and law
firm Ashurst.
The team will evaluate around 15
airport proposals and conduct feasi-
bility studies on a handful, which
will be handed to the Davies
Commission to inform its
work on UK air capacity, the
Mayor said yesterday.
While he has not dismissed
Heathrow entirely,
Johnson said yesterday
that expanding
Britains biggest air-
port would cause an
immense amount
of political grief
Boriss experts
to look at new
airport options
BY MARION DAKERS
over noise and environmental
concerns.
He argued that Heathrow would
cease to exist as a major airport if a
new hub in the Thames Estuary goes
ahead, but that the site could be rede-
veloped to readily replace the jobs
that would be lost in west London as
a result.
Im confident that the case for
boldness is increasingly being heard.
One of the game changers has been
the government interest in infra-
structure and the Olympics, he told
the committee.
But he skirted the issue of public
funding for a purpose-built hub,
which he has estimated at around
25bn of the overall 70bn to 80bn
cost. He is said to be scouting for
investors in the Middle East.
Transport minister Patrick
McLoughlin later told the committee
that he is not looking to spend more
money on things already provided by
the private sector, though all
options remain on the table until the
Davies Commission reports in 2015.
McLoughlin sidestepped questions
about whether air passenger duty
will be altered in next months
budget, saying the tax is a
matter for the chancellor,
George Osborne.
TUESDAY 12 FEBRUARY 2013
6
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Crest Nicholson set to provide a
boost to Londons IPO market
ADVISERS to the flotation of house-
builder Crest Nicholson, the most
high profile new issue in the London
market so far this year, last night nar-
rowed the price range to a healthy
210p-220p, roughly at the midpoint
of the pricing range. The original
range was between 195p-230p.
The group, which plans to raise
between 24m-29m of new shares
while allowing existing shareholders
to offload 90m shares, has been
doing extensive marketing over the
past few weeks in London, New York
BY DAVID HELLIER and also in Frankfurt.
At the current price range the com-
pany will be valued at around 550m.
The entire process is being watched
closely by many in the City who are
keen for a successful IPO in the hope
it might stimulate activity in a quiet
market.
Last year there was a dearth of IPOs
in London, with the forced sale of
shares by RBS in the insurance com-
pany Direct Line being the only major
listing of a UK-based company.
The books close on the offer today,
with pricing expected tomorrow.
Stockbroker Peel Hunt is advising
its clients subscribe to the offer, say-
ing the company is likely to come to
market at a discount to the sector,
despite offering a differentiated
business model, attractive operating
profile and genuine expansive
growth. It offers the longest landbank
in the sector.
There will be relief amongst the
institutions that the company has
not tried to price at the top of the
range, given that many in the past
have complained of too many issuers
forgetting to price in a new issuers
discount. Some institutions have
effectively boycotted IPOs.
Boris Johnson has
assembled a high-flying
team of aviation experts
STANDARD & Poors joined Fitch
yesterday by lifting Irelands
sovereign debt rating outlook to
stable, after Dublin struck a bank
debt deal that improved its chances
of exiting its bailout programme by
the end of 2013.
S&Ps move on Irelands BBB-plus
debt, leaves Moodys as the only
major rating agency with a negative
outlook on Irish state bonds.
Dublin struck a deal with the
European Central Bank last week
allowing it to convert promissory
notes into long-term bonds, giving it
longer to repay debts it ran up
rescuing the Irish banking system.
S&P ups rating
for Irish bonds
HEALTH secretary Jeremy Hunt yester-
day called on the City to help solve the
funding crisis in long term care by pro-
viding new savings products, as he con-
firmed care fees would be capped at
75,000 for the elderly from 2017.
People will need to prepare and plan
for social care costs as much as people
prepare for their pension, Hunt told
the House of Commons. They will be
supported by a wider range of financial
products becoming available in the
market.
Hunt said the decision to cap the cost
of long-term care will enable members
of the public to plan long-term finan-
cial decisions so they are capable of
meeting the initial 75,000 costs. He
hopes insurers will now fill the gap in
the market and popularise products to
cover the difference.
Rather than feeling they have to
hoard every penny in case the worst
should happen, or feeling they are pow-
erless and there is no point saving at
all, people will be able to plan and pre-
pare for the future, Hunt explained.
We will work with the care agencies,
with local authorities, charities, care
providers, and with the financial servic-
es industry to develop these plans and
introduce them practically.
Hunt confirmed that the assets
threshold for mean testing, above
which individuals receive no state sup-
Hunt asks City to
provide cover
for old age care
BY JAMES WATERSON
port for their care costs, will rise from
23,250 to 123,000. He claimed this
measure, together with the fees cap,
will mean 100,000 extra people receive
state assistance by 2025.
Hunt also confirmed that fees
incurred while caring for individuals at
home will count towards the cap, with
the hope that this will reduce the bur-
den on residential sites.
There will also be free care given to
those who turn 18 with certain needs, a
lower cap for people of working age who
develop care needs before retirement
age, and a pledge that from 2015 no one
will have to sell their home in their life-
time to pay for residential care.
The 1bn a year cost of the reforms
will be partly funded by freezing inheri-
tance tax allowances for three years
from 2015-16, as well as using some of
the national insurance contributions
associated with the end of contracting
out some pensions.
Labour shadow health secretary Andy
Burnham said the changes would
make the system fairer than it is today
but said it did not go far enough.
Last month Gary Shaughnessy, chief
executive of Zurich's UK life insurance
business, told City A.M. that his company
was keen to be involved in providing
cover for long-term care. He suggested
individuals should be allowed to make a
tax-free withdrawal of 10,000 from
their pension in order to buy insurance
to cover cost up to the 75,000 cap.
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Jeremy Hunt said yesterdays reforms represent a watershed moment for our country
TUESDAY 12 FEBRUARY 2013
8
NEWS
cityam.com
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n Total care costs will be capped at
75,000, with the government paying
anything above this amount. Around 16 per
cent of elderly people are currently
expected to spend more than this amount
on their care.
n The means testing threshold will rise
from 23,250 to 123,000. Anyone with
assets of less than this amount can expect
to receive some assistance from the
government.
n There will be a lower cap on the cost of
care for people of working age who develop
care needs before retirement age.
n Free care will be given to those who turn
18 and have eligible care needs.
n From April 2015 no one will have to sell
their home in their lifetime to pay for
residential care, with those unable to afford
the fees given the right to defer paying
during their lifetime.
n The cost to the Treasury is estimated at
1bn a year by 2020. To fund this there will
be a freeze on the inheritance tax threshold
at 325,000 for individuals until 2018-19.
n The rest of funds will come from extra
headroom created by private and public
sector employer national insurance
contributions associated with the end of
contracting out pensions.
n 100,000 people by 2025 are expected to
directly benefit from these reforms.
HOW WILL CARE COSTS BE AFFECTED?
BY CITY A.M. REPORTER
GLEE & 2012-2013 Fox and its related entities. All rights reserved. The Following 2013 Warner Bros Entertainment Inc
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SOFTWARE group Fidessa, the
biggest supplier of trading software
to the City, yesterday gave an upbeat
forecast for equity markets amid
hopes the decline in the market has
finally bottomed out.
The group, listed on the FTSE 250,
reported flat revenues and a small
dip in pre-tax profits for the year
ending December 2012 yesterday
after facing some of the lowest
trading volumes in almost a decade
last year.
But boss Chris Aspinwall
yesterday said the flood of money
into equities in January pointed to a
reversal of fortunes for equity
markets.
We've seen some good inflows
coming back into the equity
markets, he said. We have got a
better market sentiment coming
into this year than weve had for
probably the last five years.
The global value of equity trading
fell about 20 per cent last year,
according to Fidessa, compounding
the depressed levels seen in 2011.
The business, which had revenues
of 278.6m last year, predicted
similar levels of sales and profits for
the rest of 2013 but an increase in
business numbers afterwards.
Fidessa added about 1m to its
cash balances for the year and paid
a special dividend, taking total
dividend payouts up to 30.2m.
Fidessa boss
predicts future
equity revival
BY MICHAEL BOW
UK DEBT markets have got off to
their worst start to the year since
2008, hinting at a slowdown in
appetite for debt deals from
investors, figures showed yesterday.
Debt market volumes fell to
$27.2bn (17.4bn) for the period
1 January up until yesterday, down
from $67.4bn in the same period last
year, according to the figures from
Dealogic.
The figures are the lowest deal vol-
umes since 2008s sluggish January
statistics of $9.3bn, when investors
were still licking their wounds from
the 2007 financial meltdown.
Overall there have been 65 debt
capital market deals since the start
of the year, compared to 187 last year
and the high water mark of 249 deals
in 2011.
Corporate debt volumes also
plunged 42 per cent versus a year
ago. Despite this fall, they still
accounted for a record high majority
of debt deals.
The debt market downturn comes
despite Virgin Medias pricing of a
$2.7bn corporate bond to tie in with
Bond markets
off to sluggish
start to the year
BY MICHAEL BOW
its acquisition by Liberty Global,
announced last week.
The Virgin deal was the biggest cor-
porate telecoms bond since Intelsat
sold a $5bn in June 2008 and the
biggest corporate acquisition related
bond since January 2012.
Debt investments have been climb-
ing upwards since the financial crisis
with year on year increases since
2009.
Analysts have pointed to a great
rotation out of debt markets into
equity since the start of year as evi-
dence of a debt slowdown. It follows
record high inflows into stocks and
shares, hitting investor appetite for
fixed income.
Fidessa chief executive Chris Aspinwall said equities may be turning a corner
UK DCM Volume
2008 2009 2010 2011 2012 2013
30
10
0 0
10
20
30
40
50
60
20
40
50
60
70 $bn %
Corporate
Other
Corporate %of Total
TUESDAY 12 FEBRUARY 2013
cityam.com
10
NEWS
Fidessa remains a world class company suffering from cyclically
depressed end markets where early signs of improvement are just starting to
appear. Whilst waiting to see if this continues, investors still benet from
a yield underpinned by a robust business model.
ANALYST VIEWS

We continue with our long term buy thesis, as we believe the third
quarter of 2012 will prove the low watermark for forecasts. The stock is ultimate-
ly more in line with historic norms, whether this turns out to be awarded
the market in full year 2014 or realised by M&A interest.

The outlook is more optimistic than we had expected and also we note
that the staff headcount and average cost employee is lower than expected so
Fidessa is doing a better job in managing its cost base. We [..] still grum-
ble Fidessa shares are too expensive and the halcyon days are long gone.

WHAT NEXT FOR FIDESSA?


By Michael Bow
DAVID TOMS NUMIS

ROGER PHILLIPS MERCHANT SECURITIES

GEORGE OCONNOR PANMURE GORDON


IN BRIEF
HICL in demand as Nav rises
nHICL Infrastructure Company
yesterday announced strong figures
for the last six months after its net
asset value increased close to three
per cent. Shares in the fund now trade
at 6.7 per cent premium to the Nav, a
sign of increasing demand for the
fund. HICL, which invests in roads and
hospitals, said it planned to raise
additional equity by March. The group
has made seven new investments
since September 2012, including a
75m spend on Scottish schools.
RWS Holdings upbeat at AGM
nRWS Holdings, which provides
intellectual property services to FTSE
firms, yesterday predicted another
years of group sales growth for 2013.
Speaking at the businesss annual
meeting, executive chairman Andrew
Brode hailed an encouraging three
months for the business as it looks to
secure its tenth successive year of
growth. The firm bought online patent
filing outfit Inovia in October 2011 and
yesterday said it expected the buy to
help boost results.
GHG looks at debt restructuring
nLenders to General Healthcare
Group are in talks on a restructuring of
its around 2bn debt pile, banking
sources said yesterday, in a process
which threatens to leave them nursing
heavy losses. The company, one of
Britains largest independent
healthcare services providers, was
bought in 2006 by a consortium
comprising Apax Partners, Brockton
Capital, London & Regional Properties
and Netcare, backed by borrowing that
matures later in 2013, bankers say.
BETTER Capital, the private equity
house run by seasoned investor
Jon Moulton, yesterday announced
plans to change its investment
policy so it can invest in
companies outside of the UK.
The firms second fund, Becap
12, currently has two
investments fashion house Jaeger
and double glazing firm Everest
but it wants to change the rules so
it can make more investments
abroad.
The rules were unduly
restrictive, Moulton told City
A.M. yesterday.
Better Capital tees up policy
shift to widen investment net
BY MICHAEL BOW Its designed to give us
increased ability to invest in
multinational deals.
The change, which is set to be
out to investors at a meeting on 28
February, comes as the firm eyes
potential opportunities in Ireland,
following the states decision to
lengthen paying back its Anglo-
Irish banking bail out.
Better announced a tie-up with
the National Pensions Reserve
Fund of Ireland to invest in
distressed businesses last month.
Moulton said Ireland was going
to be a relatively good
opportunity following moves to
lengthen the repayment period.
TUESDAY 12 FEBRUARY 2013
11
NEWS
cityam.com
Better Capital chairman Jon Moulton said the fund rules were unduly restrictive
EXCHANGE group NYSE Euronext
yesterday revealed the growing impor-
tance of its derivatives business as it
announced a 27 per cent year-on-year
rise to 9.5m contracts traded per day
during January.
In contrast its traditional equities
business suffered, with US volumes
falling 14 per cent to 1.6bn shares a
day over the same period.
The improvement in the derivatives
business which suggests a potential
turnaround in trading volumes after
a sluggish end to 2012 was largely
driven by a 64 per cent rise in the pop-
ularity of fixed income products.
This increase explains why upstart
derivatives trading business
IntercontinentalExchange (ICE)
agreed to pay $8.2bn (5bn) at the end
of December to buy NYSE Euronext
and take control of its subsidiary Liffe,
the second-largest futures exchange
in Europe.
Yesterdays figures reveal that the
average daily volume of European
derivatives traded through the full-
service Liffe platform rose a hefty 43.5
per cent on last year, with ICE con-
NYSE Euronext
in derivatives
trading boom
BY JAMES WATERSON
vinced that further growth is on the
way.
Meanwhile NYSE Euronext yesterday
confirmed it is preparing to spin-off
the Paris-based Matif wheat futures
market as part of the forthcoming
takeover deal, which is due to com-
plete in the second half of this year.
ICE has made no secret that it has
limited interest in equities markets
and it is also expected to dispose of
NYSE Euronexts stock exchanges in
France, Portugal, Belgium and the
Netherlands.
Last week NYSE Euronexts results
showed revenue fell 11 per cent to
$562m during the final three months
following a slump in trading volumes.
NYSE Euronext
11 Feb 5Feb 6Feb 7Feb 8Feb
35.50
34.75
35.75
36.00
35.00
35.25
36.25
36.50 $
36.27
11Feb
Home Depot has chosen the
iPhone for its management team
IN BRIEF
Smartphone popularity on rise
nThe popularity of smartphones is
set to soar even further in the next
couple of years, according to the latest
New Media Forecasts released by
Zenith Optimedia. While more than
one in three people (35.5 per cent) in
19 observed advanced markets had a
smartphone last year, it expects this
number to soar to 71.7 per cent by
2015. In the UK around three in four
people will own a smartphone by the
year after next, the forecasts added,
up from just over one in two.
Dell insists it kept options open
nDell had considered many strategic
options before opting to go private, it
said in a regulatory filing revealed
yesterday. The struggling PC maker
struck a deal last week to go private in
a $24.4bn deal. It said it retained a
management consultant to help
assess its strategic position and
concluded that the all-cash deal was
in shareholders best interests. Dell
said the statement was in response to
certain inquiries but did not
elaborate on the nature of the queries.
LOreal to buy back 500m shares
n L'Oreal unveiled plans yesterday to
spend about a third of its net cash, or
500m (428m), on buying back
shares as it reported a small rebound
in fourth-quarter sales. The worlds
biggest cosmetics group said turnover
in the three months to 31 December
reached 5.7bn, up 5.3 per cent on a
like-for-like basis, helped by strong
demand in North America and solid
growth in the Asia-Pacific region.
Like-for-like sales rose 4.6 per cent in
the previous quarter.
SHARES in Blackberry plummeted by
as much as six per cent during early
trading yesterday, after one of the USs
biggest retailers said it was replacing
its employee handsets with Apples
rival iPhone.
A spokesman for DIY-chain Home
Depot said as many as 10,000 of its
management and corporate employ-
ees would switch their Blackberry
models for iPhones in the coming
months, though the rest of its 60,000
store employees would keep their
existing handsets.
We are replacing the cur-
rent base of BlackBerry
technology with iPhone,
but these are not the
mobile devices used in our
stores, Stephen Holmes
said.
Home Depots snub is the
latest blow to the Canadian
firm, which just last month
launched a new range of
smartphones and pinned
its hopes on the success on
BB10 a new operating sys-
tem it hopes will win back
customers from Apples iOS
and Googles Android
systems.
Blackberry falls
as Home Depot
chooses iPhone
BY ELIZABETH FOURNIER
It also rebranded itself under the
Blackberry, dropping the Research in
Motion moniker and renamed its
Toronto-listed shares under the BB
ticker.
BlackBerry declined to comment
directly on Home Depots move yester-
day, but in an email said it is seeing
strong demand for its new Z10.
We have over 2,700 unique business-
es in North America already registered
for our BlackBerry 10 Ready Program,
Amy McDowell, a spokeswoman for
the company, said.
We are confident that BlackBerry is,
and will continue to be, the best solu-
tion for corporations managing
large smartphone deploy-
ments.
BlackBerry unveiled two
new devices a full touch-
screen smartphone dubbed
the Z10 and a more tradition-
al physical keyboard version
named Q10 at a launch
event in New York on
30 January.
Shares, which have gained
39 per cent over the past year,
recovered slightly yesterday to
close at C$15.76.
Insurers confident of growing revenue
THE GLOBAL insurance indus-
try is overwhelmingly confi-
dent of boosting revenues this
year despite seeing little
prospect of a return to econom-
ic growth, according to a PwC
report out today.
The research suggests 90 per
cent of insurance chief execu-
tives expect to see revenues
increase over the next twelve
months, despite just 15 per
cent of the same executives
expecting the economy to
improve over the same period.
The insurance industry is
enjoying a boom period thanks
to fast-growing markets in Asia
and South America. London
has benefited from this
growth, with demand for office
space in the Citys insurance
district helping to drive con-
struction of new skyscrapers
such as the Cheesegrater.
The survey also reveals insur-
ance chief executives believe
the availability of talent as the
biggest threat to their growth,
especially as the focus switches
away from Western Europe.
PwCs Jonathan Howe said:
Trajectories of growth in dif-
ferent parts of the world are
diverging; customers are
demanding more transparent
and accessible products; tech-
nology is revolutionising risk
analysis and customer profil-
ing; and, the speed of change is
putting existing business mod-
els at risk.
The insurers that come out
on top will focus keenly on the
customer and have a superior
capacity for innovation and
reinvention. Theyll be able to
anticipate change and how it
affects them, as well as be nim-
ble enough to quickly capitalise
on emerging opportunities.
PwC interviewed 92 insurance
chief executives from 39 coun-
tries as part of the research.
US pharmacy giant Walgreens and
Alliance Boots are to meet with
investors and analysts in the City
tomorrow to update on the
progress of its merger that will see
the creation the worlds largest
pharmacy group.
The meeting, which will be
followed by a site visit to Boots
headquarters in Nottingham, led
to speculation this weekend that
Walgreens would seek a London
stock market float.
But the US firm, which is listed
on NASDAQ, New York Stock
Exchange and Chicago Stock
Walgreens to raise curtain on
partnership with Alliance Boots
BY KASMIRA JEFFORD
Exchange yesterday ruled out any
imminent plans to float on the
London Stock Exchange.
Walgreens bought a 45 per cent
stake in Alliance Boots last year
for 4.2bn, with an option to buy
the 55 per cent remaining stake in
the next two and a half years.
The pharmacy chain was taken
private by Italian billionaire
Stefano Pessina and private equity
firm KKR, for 12.2bn in 2007.
At the meeting this week the
pair, which are currently running
a joint venture, are expected to
provide details on how they are
achieving $100m-$150m of
synergies from the merger.
TUESDAY 12 FEBRUARY 2013
12
NEWS
cityam.com
B
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B
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* Awarded Most Trusted Mortgage Provider at Moneywise Customer Service Awards in July 2012. Best Buy source: Moneysupermarket 9 & 10 February 2013. first direct credit facilities are subject to status.
Because we want to make sure were doing a good job, we may monitor and/or record our calls. HSBC Bank plc 2013. All Rights Reserved. first direct 40 Wakefield Road, Leeds LS98 1FD. AC20863
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Boots No7 cosmetics are being trialled in some of Walgreens US stores as part of the merger
BY JAMES WATERSON
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Youll need an Ultrafast enabled device. See three.co.uk/network
Scream
if you want to go
THERE are many ways to show
your love to the object of your
affection this Valentines Day.
However, expressing it by
downloading a message for them
on a Barclays personalised debit
card is perhaps not one of them.
There are some things money
Who said money cant buy love
cant buy but a thoughtful,
romantic gift isnt one of them.
Unless of course you are one of
the seven VERY lucky personalised
debit card gift givers who wins the
prize-draw for a stay at The Ritz or
champagne-fuelled hot air balloon
ride, that is.
Nothing says I love you quite like a brand new debit card
THE ANNUAL Property Race Day is
always a highly enjoyable fixture in
the real estate industry calendar, as
700 thoroughbreds from the prop-
erty world descend on Ascot for a
day of racing and networking.
However this year the best will
be saved until last, as 12 brave
real estate runners will be don-
ning skullcaps and grasping
whips, as they hurtle down
the straight mile in a new
charity race.
Unfortunately the amateur race will
take place at the end of the days pro-
ceedings, so our charity riders will
have to abstain from the lunchtime
hospitality on 12 July. But all for
a good cause or several. The
beneficiary charities for 2013 are
Landaid, Well Child, Wherever
the Need and Project Hope.
The Capitalist hears that wannabe
riders from Jones Lang LaSalle,
Knight Frank and Savills have
already jumped in the saddle.
For more information visit
www.thepropertyraceday.co.uk Professional rider Frankie Dettori
THE City of London
loves its ancient
traditions, and Shrove
Tuesday is no exception.
Anybody strolling past
the Guildhalltoday can
expect to be greeted with
the sight of the Citys
elders dressed in chefs
whites and wielding
frying pans for the annual
Pancake Race. Running
lanes have been created
in the historic
GuildhallYard and
members from City livery
companies will be
competing to be the
fastest off the starting
block. The Capitalist hears
it is an all-weather event
so heres hoping the
pancakes, and the running
track, dont get too soggy.
A timely reminder to this
years entrants to watch
their footing and not to
toss too hard.
FOR those who prefer a
warmer venue for their
Shrove Tuesday fill,
Mayfair favourite
Langans Brasserie is
whipping up a simple
breakfast of caramelised
crepe gateau with blood
orange and mint, this
morning. The restaurant is
also looking to find
Londons best pancake
tosser who will be
handsomely rewarded
with a complimentary
dinner for two with wine.
INVESTMENT bank Cantor
Fitzgerald is not wasting any
time after finalising the deal, late
on Friday night, to buy Seymour
Pierce the old City stockbroker
that was part-owned by well-
known football financier Keith
Harris.
Even though the ink had barely
dried on the deal, Seymour
Pierce employees were
already sending out
emails this morning
from their former
email addresses,
opening with the title
of Cantor
Fitzgerald
Research
Flash...
Quick change
at Seymour
Pierce office
Calling all real
estate amateur
Ascot jockeys
14
cityam.com
TUESDAY 12 FEBRUARY 2013
cityam.com/the-capitalist
THECAPITALIST
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Football
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Keith Harris
Heathrow traffic edges higher
as Gatwick slides in the snow
TUESDAY 12 FEBRUARY 2013
15
NEWS
cityam.com
AIRPORT TRAFFIC IN JANUARY
HEATHROW AIRPORT
Passengers in January
0.3% to 5,180,000
DOMESTIC TRAFFIC 5.8%
EUROPEAN TRAFFIC 1.8%
CHINA TRAFFIC 14.1%
BRAZIL TRAFFIC 14.1%
SOUTHAMPTON AIRPORT
Passengers inJanuary
10.6% to 88,200
GATWICK AIRPORT
Passengers in January
0.8% to 2,096,400
UK & CHANNEL ISLANDS TRAFFIC
2.7% to 257,800
EUROPEAN SCHEDULED FLIGHTS
3.4% to 1,059,200
NORTH ATLANTIC FLIGHTS
3.8% to 96,300
GLASGOW AIRPORT
Passengers inJanuary
1.2% to 411,500
PASSENGER traffic at Heathrow
inched up in January, in spite of
cancellations caused by snow
flurries, the airports owner said
yesterday.
Heathrow Limited, owned by
Spanish firm Ferrovial and
formerly known as BAA, said 5.18m
people used the UKs busiest
airport last month, up 0.3 per cent
on a year ago.
Domestic travel fell 5.8 per cent
but European and North American
traffic have soared since the same
period a year ago.
Heathrows load factor, which
measures how full each flight is,
rose 2.1 percentage points to 70 per
cent. Cargo, however, fell 5.3 per
cent on last year to 106,425 metric
tonnes.
The positive figures follow a
record year for Heathrow in 2012.
The airport will outline its
spending plans for the five years to
2019 today, and is expected to
earmark 3bn for upgrade work.
Meanwhile Gatwick, owned by
private equity group Global
Infrastructure Partners, saw a 0.8
per cent decline in passenger
numbers to almost 2.1m
passengers in January.
The airport said tough economic
conditions and wintry weather
both contributed to the slide.
Domestic traffic rose 2.7 per cent
to 257,800 passengers, while non-
US long haul flights gained 6.6 per
cent to 413,300, helped by new
routes to Korea, China and Russia.
European scheduled and charter
flights both declined.
BY MARION DAKERS
BRITISH LAND has snapped up a port-
folio of London properties from
Dutch investment firm Wereldhave
for 183.8m, the property giant con-
firmed yesterday.
The biggest asset in the portfolio is
Ealing Broadway shopping centre in
west London, which is anchored by
retailers including Marks & Spencer
and Primark and attracts 15m visitors
each year. British Land paid 142.5m
for the 300,000 square feet mall,
which it expects to benefit from the
completion of Crossrail in 2018. The
centre will then be just 13 minutes
from Heathrow and 19 minutes from
Liverpool Street.
We believe there are significant
opportunities to grow and develop
the shopping centre as a retail desti-
nation, both as we further improve
BY KASMIRA JEFFORD
the retail mix and increase the leisure
offer and as the area benefits from res-
idential development and the comple-
tion of Crossrail, Charles Maudsley,
head of retail, said.
The portfolio also includes five retail
and office properties in Baker Street,
Chiswick High Road, Putney High
Street, Fulham Road and Great
Portland Street, bought for 41.3m.
British Land Company PLC
11 Feb 5Feb 6Feb 7Feb 8Feb
564
562
568
570
572
574 p 570.50
11Feb
THE CANADIAN government is
set to put one of its London
properties in Mayfair up for sale
as part of a plan to consolidate its
presence in one spot in the
capital.
Macdonald House in Grosvenor
Square has been the High
Commissions headquarters since
the early 1960s, when it was
bought from the US government.
Property experts said the 130,000
square feet site could fetch
around 150m.
In a parliamentary meeting on
Friday the government said it will
refurbish Canada House, the
commissions cultural centre in
Trafalgar Square, and expand it
by buying an adjacent building.
BY KASMIRA JEFFORD
Macdonald House in Grosvenor Square is home to Canadas High Commission
Canada puts Grosvenor Square embassy up for sale
Ferrovial SA
11 Feb 5Feb 6Feb 7Feb 8Feb
11.20
11.10
11.30
11.40
11.50
11.60
11.20
11Feb
British Land in
143m bet on
Ealing shoppers
KOFAX, which provides smart
process applications to businesses,
yesterday reported a drop in revenue
and lowered its earnings forecast for
the year.
Total revenue for the quarter
ending 31 December fell to $63.7m
(40.7m) from $70m in the same
quarter a year earlier.
The companys software licence
revenue for the quarter decreased by
24.8 per cent to $25m. Meanwhile
income from operations for the
quarter fell 38.3 per cent to $3.8m.
Chief executive Reynolds Bish
lowered guidance for the fiscal year
to no to low single digit growth.
Kofax issues a
profit warning
BY JENNY FORSYTH
APPLE has been ordered to appear
before Australias parliament with
fellow technology giants Microsoft
and Adobe Systems to explain why
local consumers pay so much for
their products, despite the strong
Aussie dollar.
Broadening a row between the
worlds most valuable company and
Australian politicians over
corporate taxes paid on Apples
operations, Apple executives were
formally asked yesterday to appear
in front of a parliamentary
committee on 22 March.
Australia calls
up tech giants
BY CITY A.M. REPORTER
MOBILE payments service Monitise
yesterday reported half-year revenue
up 63 per cent on the same period a
year earlier as the number of transac-
tions it processed quadrupled.
The fast-growing company, which
provides mobile payments for Visa
and many UK high street banks, said
its revenue was 27.8m for the six
months to 31 December. It processed
2bn transactions in that time and
reached a total of 20m registered cus-
tomers, compared with 6m at the
same time a year earlier.
Yesterday Monitise announced
plans to expand still further with the
launch of a mobile payments service
for BlackBerry Messenger (BBM),
which will be introduced via a pilot
scheme in Indonesia.
It has also formed a partnership
with e-commerce provider Venda,
aimed at speeding up the introduc-
tion of Monitises Instant Mobile
Checkout service to stores such as Fat
Face, TK Maxx and Wickes.
Despite the increased customer
base , Monitises recent investments
including the acquisition of US com-
BY JENNY FORSYTH
pany Clairmail meant the compa-
nys loss grew from 4.2m to 14.7m.
Monitise reported a total cash bal-
ance of 106.4m at the end of the peri-
od, up from 41.4m the year before,
and said it was on track for full-year
revenue of at least 70m.
Alastair Lukies, Monitise chief execu-
tive officer, said: Monitises overall
performance during the period
reflected the ongoing investment in
scaling the business to meet the
increasing global demand for Mobile
Money and strategic moves taken to
consolidate the groups leadership
position globally.
Shares lifted 1.5 per cent to 34.50p
on the news.
S
ILICON Valley may still hold
sway, but it is good to see two
tech companies with British
links, Blinkx and Monitise,
continuing to perform impressively
on a global stage. Blinkx is a pioneer
in video search, based on technology
conceived at Cambridge University.
Now headquartered in San Francisco
and London, it measures 148m
unique users in the US each month.
Monitise is a British mobile banking
firm with global reach, with 20m
registered customers worldwide.
Such firms can grow at a
rocketing pace as they scale their
offering to a global market from a
small base. Monitise reported six
month figures yesterday for the
second half of 2012, which showed
revenue up 63 per cent from the
first half of the year. Customers
have more than tripled from 6m
the year before. Transactions
quadrupled year-on-year.
Still, high expectations follow
such growth trajectories. These
storming numbers from Monitise
slightly disappointed expectations
on revenue. That, and a group pre-
tax loss of 24.4m, was however
balanced by a boost to gross
margins and a new Indonesian tie-
up with BlackBerry for payments
via its messaging service, helping
drive the price slightly higher.
There is a danger in such success
for London. Monitise has in the past
weighed a Nasdaq listing as its next
step from Aim. Although in
November it said it would apply to
move to Londons main market in
2013, homegrown Facebook game
specialist King.com is considering
floating on the Nasdaq, while the
other tech firm in the news, cable
innovator Virgin Media, had a
primary Nasdaq listing, and its new
owner Liberty Global is Nasdaq-
listed. Now we produce fast-growing
silicon superstars of our own, we
need to avoid a tech listing drain, or
we may get stuck in the old British
trap of building something
amazing that we dont fully exploit.
BLINKING IMPRESSIVE
Blinkx meanwhile already has a
dual Aim-Nasdaq listing. As
Monitise inched upwards, Blinkx
shares roared up by more than a
quarter yesterday as it announced
a strong third quarter. The firm
did well from the US election but
also has clever proprietary
technology in a fast-growing
market and recently made some
smart acquisitions. Aiming at
115m-118m revenue for the year,
it had a healthy pre-tax profit last
financial year: Blinkx is one to
keep an eye on.
BOTTOM
LINE
MARC SIDWELL
Monitise PLC
11 Feb 5Feb 6Feb 7Feb 8Feb
34.20
34.40
34.60
34.80
35.00 p
34.50
11Feb
SHARES in video search engine
company Blinkx soared 25.74 per
cent yesterday after the company
raised its profit forecasts.
The firm gave an upbeat trading
report for the third quarter and
said it now expects full-year
revenue to be between $180m
(114.7m) and $185m.
This is largely due to increased
online advertising on the back of
the US election coverage and the
Olympic Games.
As a result of the guidance,
shares leaped 17.50p to 85.50p.
Blinkx is a spin-off from
BY JENNY FORSYTH
Autonomy, the former FTSE 100
software company, and was
championed by Mike Lynch, who is
still a non-executive director of
the smaller company.
The search engine, which trawls
content from video sites including
YouTube, also said acquisitions of
US advertising firms Burst Media
and Prime Visibility Media Group
(PVMG) had been integrated ahead
of schedule.
It is the second profit upgrade
recently for the Aim-listed firm. In
October Blinkxs shares spiked
when it forecast profit of around
$2.4m (1.5m) over six months,
rather than the expected loss.
TUESDAY 12 FEBRUARY 2013
16
NEWS
cityam.com
Boisdale of Canary Wharf,
cabot place,
canary wharf,
london E14 4QT
EMAIL NOW!
LIVEMUSIC@BOISDALE.CO.UK
QUOTE TOO MUCH FUN
IN THE SUBJECT LINE
winning email to be drawn at
noon on Monday 18th february
wi n two free vi p tickets
including champage, fi ne wi ne & gourmet
di nner on a table next to the stage to see
jools Holland
Host & star in the launch of
the festival of boogie woogie,
stride & blues*
with special guests
axel zwingberger & ben waters
OPENING NIGHT ON
THE 19TH FEBRUARY
TERMS AND CONDITIONS Boisdale is the promoter of this competition and entrants must be over the age of 18 with one entry per reader and must live within the UK. Entrants must
be available on evening of Tuesday 19th February 2012. Prizes are non transferable, no cash alternatives will be offered, the prize is two free VIP tickets including champagne,
fine wine & gourmet dinner on table next to the stage to see Jools Holland.The closing date for the draw is Sunday 17th February 2013 at 11.59pm with the winners drawn
randomly. By entering the competition you agree to receive further information from Boisdale, if you don't wish to receive any further communication please add "No" in your email.
*for more details visit www.boisdale.co.uk
Blinkx charged more for ads during the US presidential election, won by Barack Obama
Blinkx shares boosted by online
ad spending during US election
More mobile
payments lift
Monitise sales
We should be holding on to fast-growing tech firms
IN BRIEF
Balfour Beatty wins uni deal
nInfrastructure group Balfour Beatty said
yesterday it is the preferred bidder for a
45m housing project with Aberystwyth
University. The 32-year concession
contract will involve the design, build and
maintenance of facilities for the university.
The project will provide housing for 1,000
students, as well as communal facilities.
Balfour will invest 10 per cent of the
equity into the project, expected to reach
financial close in the middle of the year.
Sanofi boosts stake in Regeneron
nFrench drugmaker Sanofi is buying
more shares in US biotech company
Regeneron Pharmaceuticals, its partner
in the development of potential
treatments for cholesterol and
rheumatoid arthritis. Sanofi controls 16.7
per cent of Regeneron, or 15.82m shares.
Sanofi said in an email that it has the
right to raise the stake to as much as 30
per cent under its decade-long
partnership with Regeneron.
Novo hit by insulin rejection
nShares in Novo Nordisk tanked 13
per cent yesterday after US regulators
rejected its new long-acting insulin
Tresiba until it conducts extra tests for
potential heart risks, dealing a major
blow to a key product for the Danish
drugmaker. The firm said the Food and
Drug Administrations decision would
make it harder to meet long-term
financial targets as it cannot provide
the data until at least next year.
Pothole insurance claims double
nThe number of insurance claims for
pothole-related damage to cars on
Britains roads more than doubled in
January compared with the same
month last year, according to broker
AA Insurance. The company estimates
1,000 UK cars were seriously
damaged by potholes during the
month and blames deteriorating roads
following a period of heavy rain,
flooding, snow and ice.
BELEAGUERED coal miner Bumi has
won the support of shareholder advi-
sory service Glass Lewis in the run-up
to its boardroom showdown next
week with company co-founder Nat
Rothschild.
The US proxy shareholder advisory
firm has backed the Bumi board
proposal, recommending that share-
holders vote against all but three of
co-founder Nat Rothschilds propos-
als at the general meeting on
21 February.
But the influential body has backed
Rothschild on the removal of three
board members Nalin Rathod, Lord
Renwick and Sony Harsono.
Last month, Rothschild demanded
a meeting to overhaul the board by
removing 12 out of 14 current mem-
bers, and replace it with executives of
his choice, including himself. He has
proposed Australian Wal King as new
Bumi chairman and Brock Gill as
chief executive.
His proposal has garnered support
from several large shareholders,
including Schroders and Taube
Hodson Stonex.
The Bumi board instead has vowed
to move towards a divorce from
shareholder the Bakries and
BY CATHY ADAMS
Indonesian Bumi Resources.
Separately, Liberum Capital yester-
day backed the board in a note,
adding that the company needs to
make a clean separation from Bumi
Resources and to reduce its financial
leverage, both of which can be
achieved under the boards proposal.
Liberum conceded that Rothschild
has assembled a high calibre chair-
man and chief executive, but his pro-
posal would be compromised by the
relationship agreement dispute and
lack of a defined strategy in relation
to the disposal of Bumis Bumi
Resources stake.
The broker added that the current
share price of the miner it closed up
yesterday at 385p is baking in a
high probability of success of the
boards proposal next week.
Refining margins jump at Essar
Energy on increased capacity
INDIA-focused Essar Energy
yesterday reported a jump in
refining margins over the three
months to December, thanks to a
major expansion in refining
capacity at its Vadinar plant.
Refining margins at the Vadinar
refinery jumped 246 per cent over
the quarter to $9.75 (6.21) a barrel,
up from $2.82 over the same
quarter last year, thanks to a major
expansion at the plant to 405,000
barrels a day from 300,000
previously.
Throughput at the refinery, in
the western state of Gujurat, soared
BY CATHY ADAMS
77 per cent to 36.32m barrels.
At Essars UK-based Stanlow
refinery, margins were up 128 per
cent at $5.59 a barrel, from $2.45 a
barrel a year earlier.
The companys oil refining unit,
Essar Oil, said last month that
earnings before interest, tax,
depreciation and amortisation
(Ebitda) grew more than eight times
to 12.42bn Indian rupees (147m)
for the quarter.
Additionally, power generation
almost doubled over the quarter to
2.86bn units, from 1.48bn units a
year earlier, primarily due to three
new projects coming up stream over
the 12 months.
Investors were cheered by FTSE
250-listed Essar Energys update,
and shares rallied 2.34 per cent to
close at 144.3p.
Bumi PLC
11 Feb 5Feb 6Feb 7Feb 8Feb
350
360
370
380
390
400 p
385.10
11Feb
PERRIGO, a US manufacturer of
generic and over-the-counter
drugs, said yesterday it has bought
UK-based Rosemont
Pharmaceuticals for about $283m
(181m) in cash to gain access to
Rosemonts oral liquid
formulations business.
The deal is expected to add eight
cents to Perrigos adjusted
earnings per share for the
remainder of fiscal 2013, Perrigo
said in a statement.
Perrigo had earlier forecast
adjusted earnings of $5.45 to $5.65
per share.
US drug firm Perrigo buys UKs
Rosemont Pharma for $283m
BY CITY A.M. REPORTER
Leeds-based Rosemont
manufactures and supplies over
150 liquid medicines for joint
disease, infections and
gastrointestinal disorders, aimed
specifically at patients that have
trouble swallowing tablets.
In 2006 Close Brothers Private
Equity financed a 93m
management buyout of the firm
from US owner Savient
Pharmaceuticals, but last year it
appointed Rothschild to look for a
buyer for Rosemont.
Perrigo said Rosemont, which
had net sales of more than $60m
in 2012, will become a part of its
prescription drugs business.
TUESDAY 12 FEBRUARY 2013
17
NEWS
cityam.com
Perrigos Joseph Papa said the acquisition was an opportunistic step into the UK
Dan & Emma
16.10.12 at 6.45pm
Lovestruck
here
Now its your turn to
meet someone amazing

































Investor body
gives backing
to Bumi ahead
of board battle
BLUE CHIP engineer Rolls-Royce
has won an engine support
contract with the US Air Force,
worth $97.3m (61.9m).
The contract, which runs until
January 2014, involves the firm
providing logistics, engineering
services, programme management
support, spare parts and technical
data support to the US Air Forces
C-130J fleet.
We are proud that the US Air
Force has again chosen Rolls-Royce
to deliver our innovative and cost
effective MissionCare support,
Paul Craig, president of Rolls-
Royce defence customer services,
said yesterday.
Rolls-Royce, which services the
Roll-Royce nets 62m fleet
support deal with US Air Force
BY AMY-JO CROWLEY
aircraft at its defence operations
centre in Indianapolis, said it had
sustained more than 90 per cent of
the C-130J fleet over the past six
years.
The contract win comes ahead
of Rolls-Royces full-year results
this Thursday. Morgan Stanley
expects earnings of 1.9bn, on
revenues of 15.3bn over the year,
as Rolls acquisition of Tognum
gives a boost to the results.
Rolls-Royce, which secured
major deals last year including a
contract with Singapore Airlines
to power 25 Airbus aircraft, last
week netted an order for its Trent
XWB engines worth $1.1bn at list
prices.
Shares in the company fell 0.87
per cent yesterday to 967.5p.
Essar Energy PLC
11 Feb 5Feb 6Feb 7Feb 8Feb
140
142
138
144
146
148
150 p
144.30
11Feb
TOUGHER rules are needed to make
sure mortgage insurers are up to the
job of protecting banks, the Basel
Committee on Banking Supervision
said yesterday, calling for closer
supervision of the insurers.
The group called for insurers to
build up bigger capital buffers
against potential losses as well as
extra reserves to keep them safe in
economic downturns.
Mortgage insurance is meant to
protect lenders by transferring risk
to insurers, who can cover them
against tail risks.
But in severe downturns, the Basel
Committee fears insurers cannot
cope as they are set up currently.
In the worst cases, failure of a
mortgage insurer may occur leading
to resolution of the insurer, whereby
some of the most extreme tail risk
may revert to the lender at the very
time that the insurance would be
most needed, potentially creating
systemic risk, warned the
consultation document.
This problem is exacerbated by the
highest loan to value mortgages
being those most frequently insured,
the committee argued.
As well as tougher capital rules,
the consultation wants to monitor
sales incentives at the insurers.
Regulators fear
loan insurance
may be at risk
BY TIM WALLACE
THE HOUSING market switched up a
gear as 2013 began, several sets of data
have revealed.
Credit costs for a range of mortgage
types plunged yet again, according to
Bank of England data, suggesting that
the government and Bank s Funding
for Lending Scheme (FLS) has driven
funds back into the housing market.
The average two-year fixed rate
mortgage with a 75 per cent loan to
value (LTV) ratio dived to 3.1 per cent
in the first month of the year, from
3.35 per cent in December, and 3.69
when FLS began in August.
And the average rate on a similar 90
per cent LTV offering plummeted
even further, from 5.33 per cent in
December to 4.73 per cent in
January having been as high as 5.93
per cent at the schemes inception
back in August.
Separate data out this morning put
mortgage approvals at a four-year
high during the same month.
Mortgage approvals rocketed up 17
Credit scheme
eats away rates
on mortgages
BY BEN SOUTHWOOD per cent between the last month of
2012 and the first month of this year,
according to Esurvs mortgage moni-
tor. This put them at 65,184 during
January the strongest month since
February 2008, when the effects of the
crunch were yet to kick in.
And these funds were finding their
way to the subprime end of the mar-
ket, Esurv said, with LTVs of 85 per
cent or above shooting up 30 per cent
in just a month.
Another set of numbers, this time
from the Royal Institution of
Chartered Surveyors (RICS) also point-
ed to a strengthening housing market.
Respondents to a RICS survey were
exactly evenly split on the direction of
prices during the three months to
December a boost from the nine per
cent margin in favour of falls seen last
month.
Prime London property did particu-
larly well, according to a fourth
release, this time from London Central
Portfolio, with a 14.1 per cent jump in
average prime central London prices,
bringing them to 1.359,739.
Fallon demands banks publish
local personal loan data weekly
BANKS are being urged to publish
mortgage lending and consumer
credit decisions by region,
according to a letter from business
minister Michael Fallon, made
public yesterday.
He is following the lead from
business secretary Vince Cable
who last week called on banks to
publish small business lending
levels by constituency on a weekly
basis.
The hope is the extra
transparency will either embarrass
banks into lending more or to
allow politicians to apply more
leverage in negotiations.
We are sure that as part of your
results you will be eager to show
BY TIM WALLACE not just the return your institution
offers its shareholders and
employees but also the utility the
banking sector can provide to
society and the economy more
broadly, Fallon wrote.
A commitment to publish your
institutions lending by local area
will no doubt support this case.
The major banks are thought to
be considering their response to
the request.
The banking industry is
committed to transparency and is
actively working on the
publication of data on business
borrowing for 120 postcode areas,
said the British Bankers
Association.
The industry is constructively
discussing with government what
further information would assist
policy formation.
Banks have come under fire
from politicians for reducing
lending since the financial crisis.
They are in a tough position as
they try to cut down on the type of
risky lending which led to the
credit crunch, at the same time as
new regulations force them to set
aside more resources instead of
lending.
Political schemes including
Project Merlin tried to push banks
to lend more, but missed industry
targets.
The latest is the Funding for
Lending Scheme which gives cheap
funds to banks to lend on, thought
so far business lending is still on
the decline.
L
A
U
R
A

L
E
A
N
/
C
I
T
Y
A
.
M
.
INSURANCE contracts could
become transferable between
providers in the event of a major
insurer going bust, top regulator
Andrew Bailey argued yesterday,
calling for the watchdog to be given
more powers over resolution.
Insurers do not face the same
risk of a run that banks do, because
customers cannot simply move to
another firm.
Instead, customers take out
specific products.
That means insurers are more
protected in normal times their
customers cannot leave at a
Insurance deals may become
mobile in case of firms failure
BY TIM WALLACE
moments notice but poses
problems when a provider fails.
Work is under way to determine
whether insurance would benefit
from a special resolution regime
that overrides normal insolvency
rules in order to enhance the
ability to ensure continuity of
critical contacts through, say, the
transfer to business to another
firm, said the head of the new
Prudential Regulation Authority.
The policyholder protection
objective for insurance points to
the need for a resolution regime
for insurers, but the important
issue is to be clear on what sort of
regime.
TUESDAY 12 FEBRUARY 2013
18
NEWS
cityam.com
Regulator Andrew Bailey is mulling making insurance contracts portable if a firm collapses
SIGNS from the UK economy
suggest that it will recover mildly
over 2013, according to the
Organisation for Economic Co-
operation and Development
(OECD).
The OECDs latest composite
leading indicator (CLI), predicting
economic conditions six months
from last December again
increased, but this time by only
0.09 points.
This follows on the heels of
stronger injections for each of the
past five months, and pushed the
UK further above its long-term
average of 100 to 100.7, with the
OECD again describing the
situation as one of firming growth.
However, the organisation did
say that indicator signs were
slightly weaker compared to last
OECD indicator points to firmer
UK economy in middle of 2013
BY BEN SOUTHWOOD
months comparison.
But while British GDP growth
may pale in comparison to the
rapid rates enjoyed in emerging
economies, its CLI trounced
Brazils, Chinas, Indias and
Russias which range from 97.7 to
99.6. Three out of four of have
fallen more than one per cent over
the past year.
By contrast the UKs CLI has
grown 1.55 per cent over the year,
beating out not just emerging
economies but also all of the
worlds seven major mature
economies, as well as the OECD
average, 0.25.
Howard Archer at IHS Global
Insight said the evidence pointed to
a fragile recovery from the 0.3 per
cent hit to GDP suffered in the
fourth quarter. A UK upturn is just
about intact, but it is struggling to
gain traction, Archer said.
UBS
The banks global asset
management division has
appointed Gavin Lewis business
development director. Lewis
has over 11 years experience in
the investment industry. He
joins from Russell Investments,
where he was responsible for
relationship management.
MN
The fiduciary management firm has announced three
new appointments. Christy Jesudasan joins as senior
account manager after 14 years at Mercer. Algie Ko has
been appointed investment strategist, and was most
recently an investment solutions specialist at Natixis
Global Associates. Jeannot Huijnen joins as a
compliance, legal and risk officer from GAM, where he
was a compliance officer.
Lloyds Bank
The commercial banking division at Lloyds has
appointed John Bugeja as head of trade sales. Bugeja
has over 30 years experience in international trade and
has held a number of leadership positions in transaction
banking with HSBC, NatWest, RBS and Barclays.
Goodwin Procter
The law firm has announced that Paul Lyons will join as
a partner in its London office. Lyons has over 15 years
industry experience, and will be primarily focused on
real estate debt finance. He was most recently a partner
at Travers Smith.
Thurleigh
Jeremy Charles will join the investment management
firm as a portfolio manager. Charles, who has over 20
years experience, was most recently at Scottish
Widows. He has also held roles at Aviva and Royal Dutch
Shell Pension Funds.
Oriel Securities
The stockbroking and advisory firm has announced the
appointment of Paul Howard as vice chairman,
corporate. Howard, who qualified as a chartered
accountant at Arther Anderson, joins from JP Morgan
Cazenove, where he was deputy head of research.
Withers
Philip Barth will join the law firm to help establish its
European and Asian immigration practice. Barth joins
from Pennington Solicitors, where he advised
individuals and businesses on investment in and
migration to the UK.
WHOS SWITCHING JOBS Edited by Annabel Palmer
+44 (0)20 7092 0053
morganmckinley.com
SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
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TUESDAY 12 FEBRUARY 2013
19
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LONDONREPORT
B
RITAINS FTSE 100 was lifted
yesterday by strength in energy
stocks and food retailers, but
the index was still struggling to
break through the four-and-a-half
year highs hit at the start of February.
Londons blue chip index gained
13.13 points, or 0.2 per cent at
6,277.06, holding within the 70-point
range of the last five days and below
the psychologically important 6,300
level.
We have had such a strong run it
is healthy to pause for breath and I
am still in the camp that this is just a
pause before we move on a bit fur-
ther, James Burns, fund manager at
Smith & Williamson, said.
If you look at the last ten days or
so the market tries to drop off a bit
and within a day it has rebounded,
so it seems as though theres money
waiting to get in and people do not
want to wait for a five percent drop
because it is not getting there, he
said.
Energy shares finished the day
strongly with heavyweight Royal
Dutch Shell rising one per cent after
BP backed a move by the firm to
head off a liquidity crunch in the
Brent crude market.
Consumer staples such as food
retailers added 4.5 points to the FTSE
100 with Tesco up 1.5 per cent after
Exane BNP Paribas upgraded the
firm to neutral from under-
weight on valuation grounds, and
saying that downside risks have also
been reduced.
Online grocer Ocado jumped 7.5
per cent, extending recent gains fol-
lowing its trading update last week
and on rehashed talk of a large retail-
er without online presence possibly
making a bid for the company.
There has been talk doing the
rounds for a while that someone like
Morrisons (without an online pres-
ence) potentially bidding for Ocado,
but the positive update last week has
forced many bearish houses to turn
more positive on the stock, a
London-based trader said.
Wm Morrison shares rose 2.4 per
cent. Ocado, meanwhile, remains
heavily shorted, with 77.5 per cent of
lendable shares out on loan as of
7 February the highest utilisation
rate for any FTSE 250 company,
according to Markit data.
Financials a broad based sector
including banks, insurers and asset
managers added 5.6 points to the
FTSE 100.
Barclays rose one per cent after it
was reported the bank was seeking
to cut spending by 2bn a tenth of
its annual cost base ahead of
results out today.
Among the insurers Admiral Old
Mutual and Prudential and
Resolution rose as much as 1.7 per
cent after BofA Merrill Lynch said it
remained relatively bullish on the
UK names.
FTSE pauses for
breath beneath
the 6,300 mark
CITY
YOUR ONE-
STOP SHOP
BROKER VIEWS AND
MARKET REPORTS
FTSE
11 Feb 5 Feb 6 Feb 7 Feb 8 Feb
6,225
6,250
6,275
6,300
6,325
6,277.06
11 Feb
DASHBOARD
US markets are
quiet after six
weeks of gains
U
S stocks ended a quiet session
with slight moves yesterday as
investors found few reasons to
keep pushing shares higher
following a six-week advance,
though the longer-term trend was
still viewed as positive.
The benchmark index is up more
6.4 per cent in 2013, putting both the
S&P 500 and Dow industrials near
multi-year highs. The S&P is less than
4 per cent from its all-time intraday
high of 1,576.09, hit in October 2007.
This is still a market that looks ter-
rific, but when youre up for six
weeks in a row, everyone is going to
want to take a pause going into the
seventh week even if there is no bad
news out there, said Eric Kuby, chief
investment officer at North Star
Investment Management in Chicago.
Volume was light, with about
4.812bn shares changing hands on
the New York Stock Exchange, the
Nasdaq and NYSE, well below the
daily average so far this year of about
6.48bn shares.
Wall Street was modestly lower
throughout the session but regained
some ground in the final hour of
trading as Google rebounded off ear-
lier losses. Shares of the Internet
search giant dipped 0.4 per cent to
$782.42, recovering from earlier
declines of one per cent after the
company said in a filing that former
chief executive Eric Schmidt is selling
roughly 42 per cent of his stake.
Also in the tech space, Apple rose
one per cent to $479.93 after the New
York Times reported the iPhone
maker was designing a device similar
to a wristwatch.
The Dow Jones industrial average
was down 21.81 points, or 0.16 per
cent, at 13,971.16. The Standard &
Poors 500 Index was down 0.92
points, or 0.06 per cent, at 1,517.01.
The Nasdaq Composite Index was
down 1.87 points, or 0.06 per cent, at
3,192.00.
BESTof theBROKERS NEW YORK
REPORT
GALLIFORD TRY
Panmure Gordon has raised its target price for Galliford Try from 770p to 800p and
maintained a hold rating on the stock. The housebuilder and construction firm is
set to report half-year results this month. Panmure said it expects these will show
stable year-on-year sales rates. The broker said as a result it is upgrading forecasts
in anticipation of what it expects will be a stable to positive Spring selling season.
Galliford Try
5Feb 6Feb 7Feb 8Feb 11Feb
p 870
860
850
830
820
840
847.50
11 Feb
SUPERGROUP
Espirito Santo yesterday upped its target price for Supergroup from 300p to 585p
after the retailer posted upbeat results for the Christmas trading period last week.
But the broker said it still has reservations about the sustainability of SuperGroups
profits and that the group may need to spend more on infrastructure to support
rapid growth in the UK and overseas. Espirito has kept its sell rating as a result.
SuperGroup PLC
5Feb 6Feb 7Feb 8Feb 11Feb
p 750
725
700
650
625
675
718.00
11 Feb
RWS HOLDINGS
N+1 Singer has downgraded RWS Holdings from buy to hold following its strong
share price performance and kept its target price of 600p. The broker said the
intellectual property support that 2013 is set to be a strong year for the group. N+1
Singer said the medium term outlook remains attractive and it also continues to
believe the group could be an attractive acquisition target.
RWS Holdings PLC
5Feb 6Feb 7Feb 8Feb 11Feb
p 650
640
630
610
620
635.00
11 Feb
To appear in Best of the Brokers, email your research to notes@cityam.com
A
T THE Treasury Select
Committee last week, the
incoming Bank of England
governor Mark Carney re-
iterated his desire for a more
flexible inflation targeting regime
for the UK. The Bank of Englands
current remit is to keep consumer
price index inflation at 2 per cent,
within a band of 1 percentage point
each way. But many have interpreted
Carneys call as a willingness to
target forecasts of inflation over a
longer period, as a means of keeping
interest rates low.
Now, I dont know whether Ive
woken up in a parallel universe, but
isnt that exactly what the current
Monetary Policy Committee has
been doing already?
Y
ESTERDAY, RBSs chief
executive Stephen Hester
appeared before the
Parliamentary Commission on
Banking Standards, just days
after his banks 390m fine for
involvement in Libor manipulation. In
the face of scandals like these, the
political debate about structural
banking reform has intensified. Last
week, George Osborne committed to
forcibly breaking up banks if they do
not ringfence risky investment arms
from their safe retail divisions.
But this debate is based on a mis-
nomer. In an article in City A.M. last
week, Frances Coppola looked at one
aspect of bank safety whether safe
retail deposits supported high-risk
derivatives trading on the international
capital markets. She correctly pointed
out that retail banks have long been
dependent on capital markets to fund
ordinary lending. At the time of the
financial crisis, the average loan-to-
deposit ratio in UK banks was 137 per
cent, meaning 37 per cent of retail
lending was not funded by deposits. It
was not investment banks taking risks.
cityam.com/forum
Rabobank analysis
showed that almost 63
per cent of deposits are
for 12 months or less
THEFORUM
Twitter: @cityamforum on the web: cityam.com/forum or by email: theforum@cityam.com
Agree? Disagree? Got a sharp comment?
The Forumwants you to join the debate.
Top responses will be reprinted in The Forum.

20
TUESDAY 12 FEBRUARY 2013
PIOTR KONWICKI
Retail banks arent safe: Politicians
fool themselves to think otherwise
Its important to take this argument
further, and discuss the myth that
retail lending and retail banking by
implication is safe at all. As former
vice president of New Yorks Fed Ernest
Patrikis said in 1996, dont focus on
derivatives. One of the most dangerous
activities of banking is lending.
Why is lending so risky? Simple analy-
sis of a banks function as a financial
intermediary provides part of the
answer. The social role of banks is to
transfer a surplus of liquidity (from
savers) to potential investors. This sur-
plus is deposited with banks. From an
accounting point of view, a deposit is a
liability money that the bank must
pay back on request.
If we look at the typical period of
these deposits, however, we immediate-
ly notice how short-term they tend to
be. Analysis by Rabobank in 2012
showed that almost 63 per cent of retail
banking deposits were for a period of
12 months or less. And deposits have
become increasingly difficult to find.
According to the Bank of England,
between 1969 and 2009, retail deposits
(the vast majority short-term) became a
smaller percentage of UK retail banks
total liabilities declining from 88 per
cent to less than 40 per cent.
These liabilities are then used to
finance lending (such as mortgages).
Loans are part of a banks assets, for the
purpose of accounting. And the major-
ity of these loans are mid or long-term.
This simple juxtaposition shows that
banks have always faced the funda-
mental problem of matching short-
term liabilities with long-term assets.
No regulation can ever solve this dilem-
ma. If anything, regulation increases a
retail banks propensity to take risks.
It all started with well-meaning
deposit insurance schemes, aimed at
protecting small depositors from losses
caused by the failure of their bank. But
this regulation had two unintended
consequences: it lowered the incentive
for depositors to discriminate against
weaker banks (interest rates became
the main factor attracting depositors),
and increased banks willingness to
take risky investment decisions. The
first country to introduce the national
deposit guarantee was the US in 1933,
and President Franklin Roosevelt was
one its strongest opponents. He saw
deposit insurance as undesirable spe-
cial interest legislation.
Research by Gayle DeLong and
Anthony Saunders of Stern Business
School, based on a study of 60 financial
institutions, shows Roosevelts reserva-
tions were justified. Banks and trusts
became more risky after the introduc-
tion of deposit insurance. The regula-
tion removed depositors incentives to
monitor and discipline banks.
Analysis of the number of US retail
bank failures between 1934 and 2012
confirms this. There were only two
years in which no bank failed 2005
and 2006. There has never been anoth-
er two year period since 1934 with no
retail bank failures. And although the
1950s and 1960s saw relative stability,
this was an aberration. It reflected the
fact that deposit insurance was limited
and the macroeconomic background
was unusually stable.
There is no such thing as a safe bank,
despite the efforts of politicians to por-
tray retail banks as such. Maybe it is a
failure of us academics to convey this
message strongly enough in our teach-
ing. It is easy to forget Friedrich Hayeks
famous words: The curious task of eco-
nomics is to demonstrate to men how
little they really know about what they
imagine they can design.
Dr Piotr Konwicki is principal finance lec-
turer at BPP Business School, and a former
senior investment banker at Lazard Freres
and Deutsche Bank.
The evidence seems to suggest so.
Over the last four years, inflation has
been outside of its desired range
(above 3 per cent) in 13 of 24
quarters. Its been above the 2 per
cent central target for 22 of those
quarters. Economist Andrew Lilico
has shown that, since the inflation
target breached the 3 per cent
barrier in March 2007, the price level
has risen 8.4 per cent above the level
it would have been if the 2 per cent
target had been met. Whats more,
in a statement after last weeks
meeting, the Monetary Policy
Committee admitted that inflation
would probably be above target for
much of the next two years as well.
The Banks get-out-of-jail card has
been that it is targeting forecast
inflation. And this is the
justification it continues to use for
ultra-loose monetary policy. One-
time factors are cited. There are
underlying deflationary pressures,
so we are told. And it would be silly
to adjust monetary policy when the
forecasts say we will naturally fall
back to target anyway.
This would be a credible get-out if
the Bank had a good forecasting
record. And it did up until 2007.
But since then its forecasts have
been consistently wrong. And not
just consistently wrong, but
consistently wrong in
underestimating inflation.
Since the third quarter of 2007,
the Bank has, on average, forecast
that inflation one year ahead would
be 2.2 per cent. The average outturn
has been 3.3 per cent, meaning the
Bank has tended to underestimate
inflation by 1.1 percentage points.
For two years ahead, the average
forecast was 1.6 per cent, while the
outturn was 3.3 per cent (a huge 1.7
percentage point average error).
These outcomes and their
implications are not politically
neutral. Inflation favours the
indebted sectors of the economy, like
the banks and the government,
while punishing savers and those
whose nominal earnings arent
increasing. Weve had four years of
the Bank maintaining a policy
which has coincided with much
more inflation, and much less real
growth, than expected.
Carney has said he wants to
debate our inflation targeting
regime. My questions to him would
be: do we have one? And how much
more of the same outcomes will it
take before the Bank sees the limits
and potential damage of monetary
activism?
Ryan Bourne is head of economic
research at the Centre for Policy Studies.
FRONTLINE
ECONOMICS
RYAN BOURNE
Runaway inflation makes Mark Carneys flexible target largely redundant
In association with
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21
TUESDAY 12 FEBRUARY 2013
Inheritance tax
[Re: Stealth hike in inheritance tax not
the answer to care crisis]
It is hugely disappointing that the
promised increase in the inheritance tax
threshold to 1m seems to have been
abandoned. Inheritance tax is particularly
pernicious, and it destroys the countrys
capital stock for use in current
government consumption spending. An
inheritance is often the seedcorn of small
businesses many people would never
want to borrow from a bank. So allowing
families to keep more of their inheritance
should be at the core of Conservative
policy.
John Hill
You are right that taxpayers should not be
in the business of subsidising the wealthy
in their twilight years. Plenty of people
should be able to afford insurance products
that would protect them in that situation.
In that respect, hiking taxes to pay for this
initiative is a bad thing. However, if we are
going to have taxes, then inheritance tax
strikes me as a fair option, the argument
being that your money is no good to you
when youre dead. If I were running the
country, the first thing I would do is abolish
employers national insurance contribu-
tions. Creating jobs is a good thing, so it
seems crazy to tax it. If that had to be paid
for by putting up taxes elsewhere, then
inheritance tax might well be at the top of
my list.
Adam Jacobs
T
HOSE who study Pope
Benedict, who announced his
retirement yesterday, have
been impressed by his
humanity and by his
understanding of human nature.
Statements he has made on the
economy, written in his own hand,
reflect that.
The Pope, for example, did not see
the problems that led to the financial
crisis as solvable by government regu-
lation. Instead, he saw an ethical crisis
that needed a call to virtue. As he said
in Caritas in veritate: Economy and
finance, as instruments, can be used
badly when those at the helm are
motivated by purely selfish ends. But
it is mans darkened reason that pro-
duces these consequences, not the
instrument per se. In other words,
credit derivative swaps are not evil,
but those who abuse them might be.
He had a similarly wise understand-
ing of the problems facing the wel-
fare state. As he stated elsewhere:
There will always be suffering which
cries out for consolation and help.
The state which would provide every-
thing, absorbing everything into
itself, would ultimately become a
mere bureaucracy, incapable of guar-
anteeing the very thing that the suf-
fering person needs: namely, loving
personal concern. We do not need a
state which regulates and controls
everything. Solidarity as a virtue is
far superior to an intrusive welfare
state.
Indeed, though the Church often
makes strong statements criticising
peoples actions within a market
economy, the foundational principles
of its social teaching are strongly wel-
coming of a free and virtuous econo-
my, and very suspicious of the
centralisation of power.
Family and civil society come before
the state and the state is there only to
serve. As was stated in the earliest
Has the reaction to the discovery of horse
meat in beef products been proportionate?
YES
The scandal of horse meat in beef burgers, lasagnes and other
beef products has grown and grown. And it may not be a simple
labelling error. We could be looking at criminal adulteration of
food on an industrial scale. If checks cannot identify what is going
into our food, we cannot be confident that there is no risk to public
health from the banned horse medicine bute. Ministers have
warned of more bad news to come. But while the government is
right to be outraged, it should have ordered rigorous testing and a
police investigation weeks ago. The public must have confidence
that the food it buys is properly labelled, legal and safe to eat
whether bought from a supermarket or a school canteen. If our
food safety system cannot tell us if our food is fit for consumption,
then it is not fit for purpose.
Mary Creagh is Labour MP for Wakefield and shadow secretary of
state for environment, food and rural affairs.
Mary Creagh
NO
Jason Smith
Consumers being misled about whats contained within food
products is nothing particularly new. Think of Snoek, a fish invented
by the wartime food minister Lord Woolton, which was probably
eel. Or his Woolton Pie, a meat pie containing rolled oats. Horse
burgers labelled as beef are different from strategies designed to
cope with wartime scarcity, but misinformation about food is as rife
today as ever. Remember when bacon was linked to bladder cancer,
or canned fish associated with premature birth? These were both
scares that disappeared as quickly as they made headlines. And
while environment secretary Owen Paterson has called for legal
action against meat suppliers for fraud, and Labour has said that the
criminal gangs behind this saga should be dealt with quickly, there
is no evidence that any member of the public has faced any risk to
their health.
Jason Smith works at the Institute of Ideas.
Pope Benedict saw
why the capitalist
system is virtuous
modern social encyclical: If one man
hires out to another his strength or
skill, he therefore not only expressly
intends to acquire a right to the remu-
neration, but also to the disposal of
such remuneration as he pleases.
Thus, if he lives sparingly, saves
money, and, for greater security
invests his savings in land, the land is
only his wages under another form.
Socialists, by endeavouring to transfer
the possessions of individuals to the
community, strike at the interests of
every wage-earner. This is the so-
called workers encyclical which did
impose moral obligations on employ-
ers, but spoke little of regulation.
It is to be hoped that Pope Benedicts
successor will promote articulately
the foundational principles of the
Churchs social teaching. This keeps
the Church above day-to-day politics
because, once the requirements for
justice exist, society is best lifted out
of its mire by the practice of virtues
and not the writing of regulations.
Not all in the Vatican see it that way.
This can be seen in analysis of some of
Pope Benedicts writings in which the
Vaticans Justice and Peace
Commission sometimes takes a hand.
That commission often has a keen
understanding of human imperfec-
tion in the market economy, while
assuming that regulators, and those
in charge of state welfare, are made of
finer clay.
Philip Booth is professor of insurance and
risk management at Cass Business School,
and editorial and programmes director at
the Institute of Economic Affairs.
PHILIP BOOTH
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A JIFFY
13 minutes from Canary Wharf. visit cityjet.com
Im impressed by the Popes humility. Very
few people at that level of power would
have his depth of self-abnegation.
@patrickmadrid
In quitting, the Pope is saying Popes
shouldnt serve until death. Is that the most
radical reform to the Papacy hes made?
@AndrewLilico
The cap on care costs a sensible move, but
Londoners will be hit harder than most due
to higher care costs and house prices.
@nickfaith82
Inheritance tax is another U-turn for the
Tories. But it was central to their manifesto
many voted for them on that basis.
@MotoClark
BEST OF TWITTER
LETTERSto the editor
WE WANT TO HEAR YOUR VIEWS
E: theforum@cityam.com | Comment: cityam.com/forum | @cityamforum
TUESDAY 12 FEBRUARY 2013
23
cityam.com
F
OR a long time, oil prices have
been dominated by supply
shocks, as one major oil producer
after another has gone through a
period of unrest. But while the Middle
Eastern oil producers are still a long
way from an oasis of calm, it is now
expected demand-side improvements,
rather than supply worries, that are
driving prices higher.
CHINESE HOLIDAY
Brent crude oil prices hit a nine-month
high on Friday, reaching $119 a barrel.
They were given a big boost by a jump
in Chinese oil imports in January,
which reached their third highest level
on record. Brent dropped a notch yes-
terday on thin trading, and with many
Asian markets shut for Chinese New
Year, this light trading is likely to con-
tinue for the rest of the week.
But in the short term, there may be
some moderate support for prices
from the US, should retail sales and
industrial production data show any
improvement in American macroeco-
nomic conditions.
DIFFERENT DRIVERS
We have, of course, seen similar
January surges for the last two years.
However the causes of these previous
rallies were very different. In 2011, it
was Libya and the beginning of the
Arab Spring that drove up prices, as
political upheaval swept across the
Middle East. In 2012, it was worries
about Iran the worlds fourth largest
oil producer that sent prices north-
wards. But this years surge has not
been driven by these supply worries.
Traders looking for the price to follow
a similar pattern, based on those for-
mer fundamentals, would be mistak-
en.
OPTIMISM-FUELLED
As Goldman Sachs pointed out in a
recent note, renewed optimism has
Oil prices ride a wave of
recent global optimism
TRADING MANAGEMENT WEALTH
above which we will start to see some
demand destruction, particularly
from Europe. But these claims tend to
be made whenever the oil price reach-
es a new high that ends in a 0, and
do not play out in the real world. We
live in an industrial, heavily oil-
dependent economy, and oil is not a
substitution good in any real sense. At
most, any demand destruction will
occur at the margins.
It is too soon to say whether this oil
price bullishness will play out in the
coming months. But while upside has
not been driven by supply shocks so far
this year, as we have seen before, it
only takes a small amount of violence
in a major oil-producing country to
send the oil price rocketing.
mostly been based on momentum and
forward-looking sentiment surveys
than hard data. And if current high
prices are to remain supported, there
needs to be some improvement in this
data to follow it up.
To support this view, Goldman
points to a comparison between oil
and copper. Both are heavily driven by
economic growth. But while copper
has shown some recent gains, it has
been significantly outpaced by oil.
Goldman highlights this as the differ-
ence between optimism driving oil,
and the need for positive hard data to
get copper up and running.
DEMAND DESTRUCTION
Some have cited $120 a barrel as a level
BANK RINGFENCES
WILL SOLVE LITTLE
DAVID BUIK
VIEWFROM THE CITY
I
AM enormously proud to
have survived 50 years in the
City of London. Over the last
week, however, there has been
little news involving banks to be
remotely glad about.
We heard some mea-culpa
testimony to the Parliamentary
Commission on Banking
Standards from Lloyds Banking
Groups chief executive Antonio
Horta-Osorio last Monday. On
Tuesday, we saw another
obsequious effort to the same
august gathering from Barclays
chairman Sir David Walker. He
was accompanied by Barclayss
chief executive Antony Jenkins,
who is totally committed to
obliterating Bob Diamonds
legacy without trace. The level of
remorse for miss-selling of
payment protection insurance
(PPI) by Barclayss banking
division, and its role in Libor
manipulation, was hardly
contrition personified, however.
On Wednesday, HSBCs
Douglas Flint and Stuart Gulliver
robustly informed the acerbic
members of Andrew Tyries
committee that the worlds
local bank had provided plenty
of evidence that it stamped on
those involved in money
laundering, for which HSBC had
been fined $1.5bn (956m).
RBSs 390m fine for Libor
transgressions, involving mainly
the pricing of the Swiss franc
and yen swaps was certainly
material, considering the
taxpayer owns 82 per cent of the
bank. Yesterday, RBSs chief
executive Stephen Hester met the
Banking Commission against a
background of regulatory fines
and rumours that the he was
being allocated a bonus of
780,000. Barclays will also be
posting its results today, which
may include a bonus distribution
of 1.5bn lower than last year,
but still a controversial amount.
But what dispirits me most is
the lack of understanding by
regulators, the Vickers Banking
Commission, and politicians as to
why the banking crisis happened,
as well as an irrational
appropriation of blame for these
misdemeanours. PPI and Libor
were the responsibility of retail
and corporate banking, not
investment banking. The issue of
Libor was admittedly in part
down to the trading rooms,
though the pricing of loans is the
domain of corporate banking.
If the regulators and the
government think ring-fencing
retail banking from investment
banking is a deterrent against
reckless behaviour, they delude
themselves. In the UK, the credit
crisis was triggered by poor
credit assessment and injudicious
loans against property and
mortgages, as well as allowing
balance sheets to grow by
gargantuan proportions. Tighter
regulation and greater capital
requirements for banks in the
future will suffice.
Shocks to the supply chain have been avoided, says Craig Drake
Markets are not quite a tranquil oasis, but have avoided turbulence
Chief Market Strategist, Cantor Index
THE TIPSTER
WOOING INVESTORS IN RIO
T
HE honeymoon is over for Rio
Tintos newly-appointed chief
executive Sam Walsh. Investors
seem to be out of love with the
mining giant, which reports
earnings on Thursday. Since 2009, Rio
has traded at a 30 per cent discount to
its net present value, according to some
analysts. But details of a cost-cutting
plan could still woo over investors. GFT
Markets quotes a price of 3,643p-
3,652p.
Traders dont expect any major
surprises from Tullow Oil when it
reports its full year results tomorrow. But
after its credibility was recently dented
by huge balance sheet write downs, the
oil and gas companys management will
need to outline its 2013 strategy in some
detail to win back investors hearts. IG
quotes a price of 1,168.8p-1,171.2p.
YOGESH CHANDARANA
An increasing proportion of Japans ageing population is in need of state support
US arent as rosy now as they appeared
prior to the financial crisis. Should the
economy rebound, it is likely that
immigration will do the same. It is an
age-old truth, of course, that people
follow growth. But in todays world, it
can also work the other way around:
that growth follows people.
How so? Consider that the total out-
put and size of todays economies are
determined by productivity that is,
units of output per worker or work-
hour. How nice it would be if produc-
tivity rates were expected to climb
rapidly, generating ever-more output
and wealth for the same amount of
total work. But the opposite is seen in
the West today, as productivity rates
have generally been in decline.
The combination of an ageing popu-
lation, falling productivity and weaker
growth has spurred a cottage industry
My pick: Short Aussie-dollar and sterling-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few days
Amid weaker economic data coming out of Europe and the
Asia-Pacific regions, both the Aussie and sterling have
weakened, and the dollar has gained strength. US treasury
yields have subsequently climbed, and the spread between
two-year and 10-year treasury yields has widened; this has
given support to the dollar. On the other hand, euro-dollar
weakness may present opportunities to take long positions on
the currency pair, at prices between $1.3280 and $1.3300.
ANALYST PICKS
Obamas path to popular prosperity
B
ARACK Obama, in his State
of the Union address
tonight, is expected to lay
out an ambitious agenda for
his final term in office. For now,
staving off a growth-killing
sequester or government
shutdown next month is the main
preoccupation of markets. But
over the longer term, the
Presidents push for immigration
reform may prove just as
important.
Over the decades ahead, the situ-
ation the developed world general-
ly faces has neatly been summed
up by RBS as less people, more
problems. Demographics in the
US arent quite as unfavourable as
in Japan or Europe, but population
growth is nevertheless slowing.
The latest census projections put
the US population at 334m in 2020
down from the 341m estimate
four years ago, and just 20m above
the population count as of last
year. And the bulk of the down-
grade, as RBS notes, is owed not to
slower population growth but to
lower immigration estimates.
The reasons for this are partly
economic; growth prospects in the
STRATEGIST
ILYA SPIVAK
My pick: Short euro-Swedish krona
Expertise: Global macro
Average time frame of trades: 1 week to 6 months
I expect the Swedish Riksbank to keep rates on hold in 2013,
and the European Central Bank to begin easing as recession
lingers. Therefore, I went short on euro-krona in December. As
Januarys correction faltered and prices turned lower, I added
to the position last week at Kr8.6410, with a target price
between Kr8.4994 and Kr8.5054. To manage risk, I have set a
stop-loss that will be triggered on a daily close above
Kr8.6942.
CHIEF STRATEGIST
JOHN KICKLIGHTER
My pick: Short dollar-yen and euro-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week
Last weeks short position on euro-New Zealand dollar worked
well as volatility returned, hitting euro and sterling currency
crosses. But this is not yet a systemic move. I am keeping an
eye on US equity indices, to see if they fall under a wave of risk
aversion. If this fire is lit, I may go short on dollar-yen below
92. I would also consider going short on euro-dollar below
$1.3250. However, if risk on sentiment dominates, going long
New Zealand dollar-dollar above $0.85 would be appealing.
TUESDAY 12 FEBRUARY 2013
MANAGEMENT WEALTH
cityam.com
of books worried about the Great
Stagnation and End of Growth.
On top of that, ageing populations
ultimately need more support from
the state in the form of healthcare
and pensions than they can con-
tribute in taxation. A large and pro-
ductive younger workforce,
therefore, is required to generate
enough growth and revenue to keep
the system solvent. And yet the USs
ratio of prime working-age adults to
those aged 65 and older in 2020 was
just revised down to 3.46 from 3.57
in the censuss earlier projections.
By 2050, it is seen as falling to nearly
2.6.
The economics, in other words, are
increasingly pro-immigration even
if the politics waver. Its still no easy
sell to an electorate fearful of others
taking their jobs in this era of high-
er unemployment. But currency
wars can only go so far. If the
President wants to win over a reluc-
tant public, he would do well to
start framing his path to citizen-
ship for immigrants as part of
Americas broader path to prosperi-
ty.
Kelly Evans is a CNBC anchor. You can
follow her on Twitter @Kelly_Evans
TRADING
24
CURRENCY STRATEGIST
CHRIS VECCHIO
CNBC
COMMENT
KELLY EVANS
The US immigration debate has implications for financial markets
B
ACK WHEN most cars could
still be relied upon to
regularly break down, racing
and rally car constructor
John Cooper invented the original
pocket rocket. He race-tuned the
astonishing BMC Mini to create the
Mini Cooper. It earned iconic status
by dominating saloon car and rally
racing in the 1960s. It won the
Monte Carlo rally three times.
BMWS latest John Cooper Works
GP is certainly a rocket, even if the
modern Mini is too big to be pock-
et. It is the fastest production Mini
that BMW has built and, since only
2,000 JCW GPs will be made, I sug-
gest you move quickly if you want
one.
Speed is what the 2013 JCW GP
excels at. With an official 0-62mph
figure of 6.3 seconds, I expected it to
be fast. However, the performance
time improvement on the regular
JCW doesnt look very impressive at
only 0.2 seconds faster than the
standard version. So why would any-
one pay an additional 6,000 for the
GP?
Firstly, its been created for bona
fide Mini aficionados, and at
28,790 a pop, pretty wealthy ones
at that think Mini geeks and boys
toys collectors. Its a decent enough
purchase, too, if the residual price
for the first generation GP model
from 2006 is anything to go by.
Secondly, this is the best Mini yet.
The company has taken the original
JCW model and turned it up to 11.
There are no rear seats, just a nice,
shiny red strut brace that sits
behind the front. And though it has
the same 1.6-litre, four-cylinder tur-
bocharged engine as the JCW, it gets
a power hike by 7bhp to 218bhp. It
also has upgraded suspension, bet-
ter tyres and brakes and aerodynam-
ic improvements that do more than
make it look cool.
Inside it has GP badging, Recaro
sports seats with red stitching and a
leather dash and steering wheel. Its
a smart new take on a familiar
design. I was driving the car along
the sweeping coast road and
through the Serra De Sintra moun-
tains to the west of Lisbon. The
weather was perfect; cold, dry and
sunny. Winding our way up and
down the narrow, twisting forest
roads was enchanting. The GPs
straight-line speed is quick but its
the handling that impresses most.
The ride is softened by race-spec sus-
pension with front and rear struts
and inverted front shock absorber
pistons. The coilover suspension
reduces the ride height by 20mm
compared to the regular JCW and
this model has undergone modifica-
tions to the rear diffuser and engine
undershield. It also has a carbon
fibre reinforced rear spoiler that
reduces lift by 90 per cent. It turns
sharply and the steering is respon-
sive. Surprisingly, it isnt as tooth-rat-
tling as I had anticipated. In fact,
most of the time, it was comfort-
able not too jarring at all. Its
worth mentioning, however, that on
our pothole-ridden British roads, the
experience may be different.
Combine all of this with a three-
stage stability control system, and
this is one exceptionally grippy Mini
(although during our drive through
slippery woodland roads, the JCW
GP occasionally struggled to trans-
mit all of its power to the road when
you accelerated hard out of bends).
This Mini is all about the corners. It
may be pricey and aimed at hard-
core Mini fans only but driving it
was a worthwhile reminder of why
so many people adore this car. The
GP is a proper racing mini in the
vein of the original. I suspect John
Cooper would be proud.
Mini aficionados and
collectors are expected
to snap up the brands
new limited edition
model, despite the
hefty price tag
The new Mini might be the best yet
While the exterior may look similar to past models, the new John Cooper Works GP is in a league of its own
25
TUESDAY 12 FEBRUARY 2013
LIFE&STYLE
cityam.com
MOTORING
RIVALS WORTH CONSIDERING
BY RYAN BORROFF
The BMW M1235i, from 29,995
At this price the bigger and more practical, rear-wheel drive BMW M135i
might be worth considering. There's a 3.0-litre turbocharged six-
cylinder engine pushing out 316bhp from under its understated bonnet.
It can accelerate from zero to 62mph in just 4.8 seconds and is a far
better everyday driver than past models. And it becomes a complete
belter when you're in the mood for it.
BY RYAN BORROFF
Clio Renaultsport 200 Turbo, from 18,000
The forthcoming Clio Renaultsport 200 Turbo has a completely new 1.6-litre
turbocharged engine coupled with an EDC dual clutch six-speed
transmission and steering column-mounted paddle gear changes. At first
glance its a docile daily driver, but put it in race mode and it becomes a
very different beast, changing the engine, gearbox, ESC, steering feel and
throttle response. Gear changes can be made in just 150 milliseconds.
Vauxhall VXR Nburgring, from 22,295
A car named after the worlds most famous test circuit better be good.
Vauxhalls VXR Nrburgring model is that and more. Its 202bhp 1.6 litre
turbocharged engine can push the car from 0-60mph in just 6.5 seconds
and on to a top speed of 143mph. Developed on the Nrburgring
Nordschleife, it handles corners very well thanks to its Bilstein-developed
chassis and performance Brembo disc brakes.
THE VERDICT:
DESIGN hhhhi
PERFORMANCE hhhhi
PRACTICALITY hhhii
VALUE FOR MONEY hhhii
THE FACTS:
MINI COOPER WORKS GP
PRICE: 27,790
0-62MPH: 6.3 secs
TOP SPEED: 150mph
CO2 G/KM: 165g/km
MPG COMBINED: 39.8mpg
26
TV & GAMES
cityam.com
T
E
R
R
E
S
T
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BBC1
SKY SPORTS 1
7pmSporting Greats 8pm
International Twenty20 Cricket
10pmRevista De La Liga 11pm
Special Report 11.30pmPremier
League Review12.30amUEFA
Champions League Goals 1.30am
Revista De La Liga 2.30amUEFA
Champions League Goals 3.30am
Premier League Review4.30am
Footballs Greatest Managers
5am-6amRevista De La Liga
SKY SPORTS 2
7pmLive UEFA Champions
League 10.15pmSuper League
Backchat 10.45pmInternational
Twenty20 Cricket 12.45amPoker
1.45amSuper League Backchat
2.15amGolfing World 2.45am
Football Gold 3amPool 4am
Poker 5am-6amSailing
SKY SPORTS 3
7pmBasketball 9pmSailing
10pmPoker 11pmBasketball
1amSailing 2amInternational
Twenty20 Cricket 4amSports
5amSuper League Backchat
5.30am-6amThrillseekers
BRITISH EUROSPORT
7pmLive Snooker: The Welsh
Open 10pmSnooker: The Welsh
Open 11.30pmGT Academy: Race
to Dubai 11.45pm-12.15am
Cycling
ESPN
7pmESPN Kicks: Scottish
Football 7.15pmLive FA Cup
Football 9.45pmESPN Kicks:
Bundesliga 10pmESPN Kicks:
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Kicks: Premier League 10.30pm
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Press Pass 11.30pmNASCAR
Now12amPlanet Speed
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3amUFC: The Ultimate Fighter
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7pmCriminal Minds 8pmBones
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Motorway Patrol
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Year of Making Love 9pmSun,
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E4
7pmHollyoaks 7.30pmHow I
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Big Bang Theory 9pmDerren
Brown: Apocalypse 10pmThe
Cleveland Show10.30pmThe
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Happens in Kavos 12.05amThe
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HISTORY
7pmStorage Wars 7.30pmPawn
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DISCOVERY
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5.30am-6amMeerkat Manor
DISCOVERY HOME &
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7pmPortland Babies 8pmJon
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A&E 3amJon and Kate Plus 8
4amBaby ER 5am-6amNanny
School
SKY1
8pmA League of Their Own 9pm
Stella 10pmFILMThe
Bodyguard 1992. 12.25amRoad
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Armed and Dangerous: Ultimate
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BBC2 ITV CHANNEL4 CHANNEL5
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6pmBBC News
6.30pmBBC London News
7pmThe One Show
7.30pmEastEnders: BBC News
8pmHolby City
9pmDeath in Paradise
10pmBBC News
10.25pmRegional News;
National Lottery Update
10.35pmThe Hunt for Britains
Metal Thieves
11.25pmFILMThe Hand That
Rocks the Cradle: Thriller,
starring Rebecca De Mornay
and Julianne Moore. 1992.
1.10amWeatherview1.15am-6am
BBC News
6pmEggheads
6.30pmFlog It! Trade Secrets
7.30pmGreat British Menu
8pmCHOICE Alex Polizzi: The
Fixer
9pmThe Railway: Keeping
Britain on Track
10pmThe Sarah Millican
Television Programme
10.30pmNewsnight: Weather
11.20pmHappy Birthday
Abraham Lincoln: A Culture
Show Special
12.20amSign Zone: Britains
Hidden Heritage
1.20amClose 4am-6amBBC
Learning Zone
6pmITV News London
6.30pmITV News
7pmCHOICE Emmerdale:
Gabby is caught drinking
alcohol in school.
7.30pmLive UEFA Champions
League: Celtic v Juventus
(Kick-off 7.45pm).
10pmITV News at Ten
10.30pmITV News London
10.35pmMourinho
11.35pmUEFA Champions
League Highlights
12.30amJackpot247
3amLoose Women 3.45amITV
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Jeremy Kyle Show
6pmThe Simpsons
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3amSailing: Americas Cup
Discovered 3.25amInside Natures
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6pmHome and Away 6.30pm5
News at 6.30 7pmMonkey Life
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Crimes: The First 72 Hours
1.15amSuperCasino 4amHouse
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Challenge 5.10amWildlife SOS
5.35am-6amWildlife SOS
Fill the grid so that each
block adds up to the total
in the box above or to the
left of it.
You can only use the
digits1-9 and you must not
use the same digit twice in
a block. The same digit may
occur more than once in a
row or column, but it must
be in a separate block.
COFFEE BREAK
Using only the letters in the Wordwheel, you have
ten minutes to nd as many words as possible,
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters
or more, all must contain the central letter and
letters can only be used once in every word. There
is at least one nine-letter word in the wheel.
Place the numbers from 1 to 9 in each empty cell so that
each row, each column and each 3x3 block contains all the
numbers from 1 to 9 to solve this tricky Sudoku puzzle.
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk
KAKURO
QUICK CROSSWORD
LAST ISSUES
SOLUTIONS
KAKURO
WORDWHEEL
SUDOKU
SUDOKU
QUICK CROSSWORD
WORDWHEEL
1 2 3 4 5 6
7
8 9
10
11 12 13
14
15 16
17
18 19 20
21 22
23 17 12
22 8
4 3 6
19 28
39
10 9 7
29
12 16
24 8 9
10 38
11 12 7
13
4
13
25
29
13
13
15
35
15
17
22
8
9
42
12
8
6
10
21
27
5
21
ACROSS
1 Turn red with
embarrassment (5)
4 Largest city in
Nebraska, USA (5)
8 Sean ___, US lm
actor and director (4)
9 In short supply (6)
10 Mature female deer (3)
11 Military hat with a at
circular top and a peak (4)
13 Very dark, black (4)
14 Setting down (7)
15 Genuine (4)
16 Give up, relinquish (4)
17 Nothing (3)
18 Bureau (6)
19 Compulsion (4)
21 Fit out (5)
22 Beautiful young
woman (5)
DOWN
2 Be prostrate (3)
3 Ornamental
timepiece seen
in a garden (7)
5 Bring about (7)
6 Gas used chiey
in welding (9)
7 Fictitious
name (9)
8 Impassive
expression that
hides ones true
feelings (5,4)
12 Flat
highland(7)
13 Consider
as part of
something (7)
20 Mousse (3)
A
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M
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B E N D S C L A S S
R E H H M L
A V O C A D O P E A
W L P H V
L A T T E S T O V E
I R
T A M P A S W A R M
U P W P I
B R A F O R W A R D
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BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5
TUESDAY 12 FEBRUARY 2013
ALEX POLIZZI: THE FIXER
BBC2, 8PM
The entrepreneur helps more
struggling family firms, beginning with
an east London shop specialising in
fabric that is run by three brothers.
EMMERDALE
ITV, 7PM
Gabby is caught drinking alcohol in
school, Ali is shocked when Rachel
admits she has feelings for Sam and
Priya moves in with David.
DALLAS
CHANNEL5, 11PM
Fresh evidence emerges about
Tommys disappearance and
Christopher seizes the opportunity to
try to connect Pamela to the crime.
TVPICK
Results
ONE of Germanys most bailed-out
banks turned down the chance to
make hundreds of millions of
pounds in profits by buying a 10 per
cent stake in Formula One at a bar-
gain price of 63.3m ($100m), accord-
ing to recently released legal filings.
The purchase would have yielded a
profit of more than 500m for
German bank BayernLB and can-
celled out losses it had already made
on an involvement with F1. It would
have also helped the bank to repay
some of the 8.6bn in state aid it
received in 2008 when it ran into
trouble during the recession.
BayernLB owned 46.7 per cent of
F1s parent company SLEC until 2005
when it sold the stake to current
owner, private equity firm CVC. On
19 September 2005 CVC made a writ-
ten offer to BayernLB for the banks
shares and the 25 per cent stake then
owned by Bambino, the family trust
of F1 boss Bernie Ecclestone.
Its offer letter said: I am pleased
to set out below a proposed offer
under which a new company
German banks
500m blunder
over F1 shares
(Newco) formed by CVC Capital
Partners Limited will... buy the whole
of your interests in Formula One...
The proposed offer for your com-
bined holdings of 71.65 per cent of
SLEC is $1.5bn... As a condition of this
offer Bambino or the Ecclestone fam-
ily will reinvest at completion $100m
into the share capital of Newco for a
10 per cent stake... BayernLB may also
invest $100m at completion in Newco
for a 10 per cent stake.
F1 was at risk of collapsing in 2005
due to a pay dispute with the teams
so BayernLB decided not to reinvest,
but had it done so it would have
made a profit of 506.2m.
Over the past year CVC has sold a
total of 28.3 per cent of F1, the most
recent buyer being US investment
fund Waddell & Reed in June. It paid
316.4m ($500m) for a seven per cent
stake, which gave F1 an enterprise
value of 5.7bn, taking into account
its 1.2bn of debt.
The offer letter was lodged at the
end of January as evidence in a law-
suit brought against CVC, BayernLB
and Ecclestone in the New York
Supreme Court by Bluewaters
Communications.
IN BRIEF
Wright banking on big score
n CRICKET: England all-rounder Luke
Wright is desperate to win back a
place in the one-day side by shining in
todays second Twenty20 international
against New Zealand. Wright hit 42 off
20 balls in Saturdays 40-run win.
County court case thrown out
n FOOTBALL: Notts County say they
will seek legal advice as they look to
claim damages against HMRC after a
winding-up petition over late payment
of a tax bill was thrown out of court.
Mears quits over heart problems
n RUGBY UNION: England hooker Lee
Mears has been forced to retire from
rugby with immediate effect, aged 33,
following the discovery of an
abnormality in a routine cardiac
screening by his club Bath.
Celtics debt shrinks with cup run
n FOOTBALL: Celtic take on Juventus in
a Champions League last-16, first leg tie
tonight amid news the clubs net bank
debt has fallen from more than 7m to
130,000 in 12 months.
GOLF
COMMENT
SAM TORRANCE
Sterne (below) has
seen fellow South
Africans such as
Schwartzel win
Majors
I
F YOU ever needed an example
of the importance of form, look
no further than the winners of
the big tournaments on both the
European and PGA Tours at the
weekend.
South African Richard Sterne
followed his runner-up spot at the
Dubai Desert Classic a week earlier
by storming to a fantastic seven-
shot victory in the Johannesburg
Open on Sunday.
Sternes success is particularly
remarkable because he missed
almost all of the 2010 and 2011
seasons with a back injury.
HUNGER
Its testament to the 31-year-olds
mental strength, because it must
have been incredibly frustrating
watching compatriots such as
Trevor Immelman, Charl
Schwartzel and Louis Oosthuizen
do so well in his absence.
However, that can act as a huge
inspiration for a young player. If
you see players who you grew up
with, and beat, winning Majors it
only increases your hunger to go
out and match them.
Over in California, meanwhile,
Brandt Snedeker continued his
extraordinary form with a two-
shot victory at the AT&T Pebble
Beach National Pro-Am.
It followed consecutive runner-
up spots, to Phil Mickelson at the
Phoenix Open and Tiger Woods at
the Farmers Insurance Open, and
was his fifth top-three finish in his
last eight outings.
FIDDLY
Im not a huge fan of Snedekers
fiddly, fast, edgy playing style, but
his form has been fantastic and he
carried on in exactly that vein.
The week had started with
promising signs for Scotlands
Russell Knox, who shared the lead
after the first round, and
although he ended tied for
28th, he looks to be another
name to watch in 2013.
Sam Torrance OBE is a multiple
Ryder Cup-winning golfer and media
commentator. Follow him on Twitter
@torrancesam
TUESDAY 12 FEBRUARY 2013
Ronaldo is a bully. He bullies the weakest
defender. He decides his position based on
who is the weak link

SPORT
cityam.com/sport
cityam.com
BY JOSH RICHARDS
IRELAND prop Cian Healy could miss
the rest of the RBS Six Nations cham-
pionships after being cited for a
stamp on opponent Dan Cole during
Sundays 12-6 defeat to England in
Dublin.
In a bruising encounter, which
also saw Ireland winger Simon Zebo
suffer a broken foot, an injury set to
rule him out of action for 10 weeks,
Coles ankle was trodden on after
an Irish maul collapsed.
Healy is due to appear before an
independent Six Nations
disciplinary committee tomorrow
and faces a possible nine-week ban
if found guilty.
Healy facing
Six Nations ban
BY JOSH RICHARDS
Sternes comeback inspired by success of contemporaries
@cityam_sport
27
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BAGGIES MAKE GERRARD PAY THE PENALTY
ENGLAND captain Steven Gerrard missed a penalty as Liverpool slipped to a shock 2-0
defeat at home to West Brom last night. Defender Gareth McAuley and forward Romelu
Lukaku both struck in the final nine minutes to earn the Baggies a first win of 2013 and
lift them into eighth in the Premier League, one place above Liverpool.
BORUSSIA Dortmund boss Jurgen
Klopp has ruled out becoming the
next permanent manager at Chelsea.
Dortmund occupy second place
in the Bundesliga table and Klopp
intends to see out his contract at
the Westfalenstadion until 2016.
Its a big honour, said the 45-
year-old. But in this moment Im
not on the market.
Rafa Benitez, interim manager at
Stamford Bridge, is expected to
leave in the summer having
struggled to win over Blues fans
since his appointment in November.
EXCLUSIVE
BY CHRISTIAN SYLT
Gary Neville on Cristiano Ronaldo
Klopp refuses
Chelsea move
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