Posts tagged "Royal Bank"

2800 Clinton Cards employees set to lose jobs as closures announced

Decision to close 350 stores taken because retailer’s 784 store estate is ‘untenable’, say administrators

About 2800 shop workers are set to lose their jobs after the administrators of Clinton Cards announced plans to shut its Birthdays chain.

The retailer’s 784 store estate was “untenable”, said administrators Zolfo Cooper, who will start the process of closing 350 outlets on Monday. The stores employ approximately 2800 full-time and part-time staff.

“Given the sheer size of the Clinton Cards retail estate and the overall performance, we were left with no alternative to today’s difficult decision,” said Zolfo Cooper’s Peter Saville. The cull would “preserve value” in the underlying business and make it more attractive to potential buyers, he said.

Last week Clinton’s was pushed into administration when its largest supplier, American Greetings, bought up its £35m debt from Barclays and taxpayer-backed Royal Bank of Scotland then called in the loans.

MPs consider RBS and Lloyds options

Committee will take evidence from experts including investment banks and institutional investors on what to do with stakes

An influential committee of MPs will on Tuesday hold a hearing into the potential sale of the taxpayers’ stakes in Royal Bank of Scotland and Lloyds Banking Group, as fears grow that the public could be left with a multibillion-pound loss on the shares.

The Treasury select committee will take evidence from City experts, including investment banks and institutional investors, as it attempts to establish that all options for the future of the two banks are being considered by the government.

The two banks were bailed out by taxpayers in 2008 with £65bn of public money but are now worth half that, and MPs have been told by Stephen Hester, the chief executive of RBS, that investors regard putting money into banks as “dumb”.

The select committee is holding its evidence session as debate rages across Whitehall about what do with the stakes. Officials from UK Financial Investments, which takes care of the taxpayer stakes, have conceded that selling some of the shares at a loss is a possibility.

There is speculation that a 29% stake in RBS could be sold for 35p a share to investors in Abu Dhabi. Shares were bought by taxpayers at 50p.

While some argue that the government should wait for the price to rise, the Liberal Democrats have also offered two plans.

The business secretary Vince Cable has called for RBS to be turned in to a business lending bank while the party leader, Nick Clegg, backs a plan drawn up by City firm Portman Capital to hand out shares in the bailed out banks free to the 45 million people on the electoral roll.

Andrew Tyrie, the Conservative MP who chairs the select committee and advocates running RBS commercially, said he wanted to be certain all options were considered before any sell-off went ahead.

Tyrie said: “We want to make sure all of the options are considered and the long-term interests of the consumer, as well as those of the taxpayer, are high up on the government’s agenda. The committee has repeatedly called for greater competition in retail banking. The structure of the market needs to be considered as well as the revenue.”

One of the analysts appearing on Tuesday, Manus Costello, managing partner of banks research at Autonomous, recently wrote an article with the former City minister Lord Myners calling for the government to “remove the shackles of quasi-nationalisation as soon as possible”.

But leading investors – who would be asked to buy the shares – are likely to argue that they do not want to buy more bank shares because of uncertainty over regulation and anxiety about further losses that could be suffered from loans granted ahead of the 2008 banking crisis. One leading shareholder said RBS and Lloyds had made provisions equivalent to 6% and 9% of their loans during the crisis but comparison with previous financial crises showed more would be needed. For instance, after the Latin American debt crisis, the figure was 10.5%.

Neither bank is paying a dividend even though the prohibition on payments imposed on RBS and Lloyds by the EU in return for state aid has now been lifted.

Next month’s white paper on the implementation of the recommendation of the independent commission on banking to ringfence high street from “casino” investment banks may have an influence on share prices in the sector.

Lord Oakeshott, the former Liberal Democrat Treasury spokesman, is urging the government not to rush ahead with a share sale.

“We didn’t buy RBS to make a quick buck and there is no rush to lock in a large loss. The government must set a new long-term strategy to make RBS lend to bolster small business and growth. The strategy must come before the tactics”.

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RBS boss John Hourican makes £4.76m from share sale

Loss-making bank states in annual report that John Hourican got pay package of £7.5m last year despite thousands of job cuts

John Hourican, the investment banking boss of state-owned Royal Bank of Scotland, has pocketed £4.76m after exercising his share options.

RBS, which is 82%-owned by the taxpayer, after a state bailout during the 2008 credit crisis, said in a regulatory filing on Wednesday that Hourican had sold 17.6m shares at a price of about 27p a share.

The loss-making bank stated in its annual report last month that Hourican, who heads its GBM (Global Banking & Markets) division, which has had to slash thousands of jobs, got a pay package of around £7.5m last year.

RBS has cut 34,000 jobs since the 2008 crisis and its GBM division has sold off or shut down much of its equities operations in order to focus more on its stronger fixed income and foreign exchange businesses. Earlier this year, RBS chief executive Stephen Hester and chairman Philip Hampton had to give up their bonuses following a public outcry over the planned payments.

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Co-op signals delays ahead of Lloyds branch deadline

• Co-op bank must reach agreement with Lloyds by Friday
• Profits fall 5.8% to £373km
• Chief executive: ‘toughest economic backdrop for 40 years’
• Co-op bank waiting for permanent boss
• Analysts think Lloyds may float branches instead

Co-operative Group warned on Thursday of “some very material regulatory issues” before it can proceed with its formal bid for 632 branches being sold by Lloyds Banking Group.

As the group announced profits had fallen 5.8% across its operations which unite banking, grocery, pharmacies and funeral care, Peter Marks, chief executive, said the results should be “set against the toughest economic backdrop I have seen in more than 40 years in business”.

The banking arm – where profits were flat at £201m – has been granted “preferred bidder status” for the Lloyds branches and was supposed to have reached a “heads of agreement” with Lloyds by tomorrow under the original timetable. But, Lloyds admitted last week that an agreement was still to be reached and the bailed out bank delayed an announcement until the second quarter of the year.

Marks said that a decision on whether to proceed would be taken in “weeks rather than months” and admitted that “I can’t predict whether we’ll get to the end on this”.

He declined to detail precisely what the regulatory issues were, but took issue with any suggestion of “governance” concerned at the group level where board members are “ordinary” individuals, including a plasterer, a nurse and a Methodist minister. The banking arm is being run by acting chief executive Barry Tootell and Marks said there was a permanent appointee “waiting in the wings” who could be named if the bid were to proceed.

Marks stressed that the bank was conducting proper “due diligence” before making a binding offer and wanted to avoid the humiliation of Royal Bank of Scotland which needed a taxpayer bailout after buying ABN Amro at the height of the credit crunch in 2007 without conducting proper due diligence.

“What is not in question is our ability to run a bank,” said Marks

If Co-op can submit an offer it would transform its existing 345 branch network and give it a 7% share of the current account market. This would make the enlarged Co-op a major competitor to the “big four” banks – Lloyds, Royal Bank of Scotland, HSBC and Barclays. Lloyds has to sell the branches by November 2013 to meet EU state aid rules and is still treating Co-op as a preferred bidder.

“Our current bid is non-binding and we would only proceed if we could reach an agreement that was in the interests of our members and other stakeholders. Any transaction would be subject to regulatory approval,” the group said.

Gary Greenwood, analyst at Shore Capital, said that Lloyds might need to embark on a stock market flotation of the branches instead. “We think it is increasingly possible that this deal could fall through and that Lloyds will need to pursue a more costly IPO,” said Greenwood. “In the Co-op’s results statement we note comments from the Co-op group CEO, Peter Marks, that the deal is ‘complex and that there can be no certainty it will reach a final agreement’. We also note that the Co-op Bank’s core tier 1 ratio remains relatively weak compared to other mutuals, at 9.6% (other large mutuals are in the 12%-14% range), which is unchanged from the level at the interim stage,” said Greenwood.

A fall in profits across the Co-op group forced a cut in the dividend to members to 1.75p per point from 2p a year ago. Profits before tax and payments to members were down 5.8% to £373m while operating profits were flat at £585m.

The food business, which has expanded rapidly since the acquisition of Somerfield business, was knocked by a “increasingly tough market” reporting a fall in operating profit to £309m, down £389m.

Like-for-like sales in the food sales were down 2.1%, but an improvement on the 3.6% fall in the first half of the year.

Marks cited “aggressive” promotional offers for the decline in sales.

“2011 was a time of severe challenge for the UK economy and for our millions of customers and members. Consumers have been assailed by rising costs, credit squeeze and uncertainty about the future to an extent unparalleled in recent times. Against this background, I believe that this is a creditable performance. We have delivered profitability in-line with expectations, while maintaining our financial strength and resilience,” Marks said.

He stressed that the group would continue on its three-year £2bn investment programme, despite the economic backdrop.

“Our ownership model means that we can take a long-term view and we are as driven, determined and ambitious as ever to modernise our business. We will not allow the current economic downturn to knock us off the course we have set,” said Marks.

“Looking ahead, I do not expect to see any significant recovery in the UK economy during 2012, with little hope of an improvement in disposable income for our customers. If anything, it is quite possible that things will get worse before they get better,” said Marks.

The specialist businesses – which include funeral care and pharmacies – enjoyed the largest rise in profits to £99m from £90m.

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Royal Bank of Scotland: keep it public | Editorial

A fire sale is wrong for taxpayers, small businesses and the British economy

The advent of spring has evidently tempted some British politicians to try out a favourite sport: kite-flying. The past few days have seen a steady stream of stories about the future of Royal Bank of Scotland, the bank that was once the biggest in the world and is now 83% owned by British taxpayers. There have been a string of pieces, on the BBC and across the papers, suggesting that the British government is in “serious” talks to sell off a sizable chunk of the RBS to Abu Dhabi.

The Treasury has done some dutiful hosing down of the more excited speculation – but it is notable that the Conservative backbencher Matthew Hancock, formerly chief of staff to George Osborne, and a reliable signatory to party press releases, has popped up to defend a hypothetical sale. With fortuitous timing, Vince Cable has been issuing calls for RBS to be turned into a fully state-owned and -operated bank. Just three months after Richard Branson put up his first Virgin flag on a branch of Northern Rock, after the rushed sale of that mortgage lender, whether RBS remains in state hands, and on what terms, is up for debate.

This is not the place to enter into a he-said, she-said measuring up of what will happen to one of the government’s biggest assets, into which taxpayers have poured £45bn. Treasury officials have been talking about selling a stake in RBS to a sovereign wealth fund in Asia or the Middle East since Alistair Darling was chancellor. George Osborne is also clear that he wants RBS to go back into private hands; the Whitehall assumption has long been that one of the swiftest ways to achieve that is to get in a big foreign buyer. And last year’s bargain-basement sale of Northern Rock to Mr Branson indicates that ministers are not even bothered about making a big loss, as long as it rids them of one more headache. Mr Osborne might not use the same terms as Stephen Hester, but his position is not that far from the RBS chief executive, who declared earlier this month (again, the timing is striking): “The faster the government starts selling its stake, the better for everyone.“

Nothing is amiss with that last sentence, apart from the fact that it is completely wrong. It is wrong for taxpayers, who will surely stand to lose substantial amounts in any such fire sale. It is wrong for small businesses, as ministers and voters will lose whatever grip they had on directing lending to hard-pressed companies that are facing bankruptcy or big losses thanks to the harsh financing terms extended by high-street banks. And finally, it is wrong for the British economy, which is struggling to emerge from a severe recession caused by banks running wild.

The only people who might get some advantage out of the sort of sale suggested this week is the Conservative part of the coalition. It is not hard to imagine the flourish with which Mr Osborne would announce a deal, as evidence that he is getting on with sorting out Labour’s legacy and the country’s finances. But any such boost would surely be very short-lived, once taxpayers realised how much they were out of pocket. The government bought RBS shares at an average price of 50p. They are now around 28p, so a sale at these levels would mean a £20bn loss. It would have been better had Gordon Brown not paid RBS shareholders anything for stock that was then arguably worthless, but we are where we are. Any attempt to do a deal now will lead to a cut-price sale, and rub more salt in taxpayers’ wounds.

As Mr Cable says, there is a strong case for keeping RBS in public hands and directing it to regenerate Britain’s wrecked economy. A fully privatised finance sector would not help with that, as evidenced by bankers’ behaviour during the boom. At the height of the bubble in 2007, about two-thirds of all bank lending went either into property or to other banks. Labour frontbenchers have sketched out plans for a state investment bank, but has got nowhere near the detail. But rather than invent a lender from scratch, it would make far more sense to use RBS. In this case, the best investment would be a long-term one.

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Game appoints administrators but PwC pins hopes on sell-off

Administrator hopeful that buyer can be found for chain that has nearly 6,000 UK staff and 600 UK stores

The video-game specialist Game said it was shutting almost half its UK stores with the loss of more than 2,000 high-street jobs after administrators took control of the stricken chain.

The retailer had warned last week that administration was on the cards after it failed to agree a rescue deal with its lenders, led by the state-controlled Royal Bank of Scotland, who are owed £60m. This morning PwC was officially appointed as the administrator and its restructuring experts acted quickly, telling staff that 277 of its 610 UK stores would close by the end of this week, resulting in 2,104 redundancies.

PwC’s Mike Jervis said: “The recent job losses are regrettable but will place the company in a stronger position while we explore opportunities to conclude a sale. Our priority is to continue trading the business as normal while we continue to pursue a sale.”

Jervis said he was hopeful of finding a buyer for the Basingstoke-based company, with a number of parties interested in buying all or part of the group, which has a total of 1,300 stores including its operations in international markets such as Spain, France and Australia. Before its collapse, Game had about 5,500 staff in UK stores and its head office.

Game owes money to a group of banks that includes RBS, Barclays, HSBC and La Caixa and a “lender-led” rescue is one of the options being discussed. Banking insiders said a sale of the business was preferable but that a debt-for-equity swap was one of the scenarios being discussed.

Its US rival Gamestop is also thought to be interested in some of Game’s international stores, while the turnaround specialists OpCapita, which tabled an earlier bid, and Hilco are also looking at the business.

PwC said the 333 stores not being closed, which employ 2,814 people, would continue to trade as normal. The Game website has been suspended, as has the Game reward and gift card scheme, and staff can no longer give refunds. The changes have resulted in angry exchanges in some stores, with upset customers and staff taking to Twitter and industry blogs as news of store closures leaked into the public domain. One employee told the trade website MCV: “I have had a mixture of supportive people … and just idiots who think shouting at me and my staff who have narrowly avoided being jobless for at least the short term will solve their problem.”

The crisis at Game was set in train earlier this year when worried lenders reduced the retailer’s borrowing facilities. That meant the management team, led by the chief executive, Ian Shepherd, had to ask suppliers for help. However, major industry players such as Electronic Arts and Nintendo refused to support the chain, leaving the retailer with no stock of new titles such as Mass Effect 3 and Mario Party 9.

Last week Game’s shares were suspended from the London Stock Exchange, its investors having previously been warned that their investment was worthless. The retailer’s failure is expected to leave landlords and suppliers out of pocket. Its £21m quarterly rent bill fell due at the weekend, while suppliers are owed £40m. PwC is expected to honour the £12m wage bill that is due later this week.

In a statement, Game said PwC was called in after discussions with its lenders and third parties reached a dead-end: “This decision is taken after careful consideration and ceaseless interrogation of every possible alternative.”

Shepherd has also stepped down, explaining to staff that with the administrator now in place, having two people trying to run the business was “confusing and a waste of money”.

The high street continues to be hit hard by the slowdown in spending triggered by the credit crunch. Higher food and fuel prices mean Britons have been forced to cut spending on non-essentials with the resulting decline in sales putting severe pressure on retailers, particularly chains such as Game which have large store networks around the country. Game joins a growing list of retail casualties, following hot on the heels of last month’s breakup of the value fashion group Peacocks, which resulted in more than 3,000 job losses. One in seven shops now lies empty, according to the latest figures from the Local Data Company.

Just as HMV, the last national music and DVD chain on the high street, has been hit by rising internet sales, downloads and competition from supermarkets, Game also suffered as gamers cut out the middle man. The industry trade body UKIE estimates that nearly £680m was spent on game downloads last year.

“Game has faced serious cashflow and profit issues over the recent past,” said Jervis. High fixed costs and an ambitious international rollout had added to the firm’s problems. But he was optimistic that there was still a place for Game on the high street: “We believe there is room for a specialist game retailer in the territories in which it operates, including its biggest one, the UK. As a result, we are hopeful that a going-concern sale of the business is achievable.”

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Direct Line to appoint Biggs as flotation nears

Insurance company took another step towards a stock market flotation by lining up Mike Biggs for chairman

Direct Line, the insurance arm of Royal Bank of Scotland, took another step towards a stock market flotation yesterday by preparing to appoint Mike Biggs as chairman. Biggs, a former finance director of Aviva, is in the final stages of agreeing to join the insurance operation, which must be sold off under the terms imposed by the EU in return for the £45bn taxpayer bailout. RBS intends to float the business rather than embark on a trade sale of brands, which also include Churchill, Privilege and the Green Flag breakdown service. The flotation is likely to propel the business, which was expanded under the previous management regime, into the FTSE 100.

FTSE recovers some ground after earlier falls, but National Grid drops following downgrade

Steady start on Wall Street helps UK market, but utility company hit by downbeat Merrill Lynch note

Leading shares have stabilised somewhat thanks to a steady start on Wall Street.

The Dow Jones Industrial average is down just 6 points or so at the moment, with Apple’s long awaited announcement of a renewed dividend payout and a cautiously optimistic US housebuilding report both helping. The NAHB housing index was steady at 28 in March, well above the depressed levels seen last year.

So after its earlier falls, the FTSE 100 is down just 4.52 points at 5961.06.

Among the decliners, National Grid is down 11.5p at 632.5p after analysts at Bank of America/Merrill Lynch cut their recommendation from buy to neutral in a downbeat note on European utilities. The bank said the continuing regulatory review, while encouraging for the company so far, will bring uncertainty until the final outcome in December.

The market’s revival comes as banking and mining shares both recovered from earlier declines, with Royal Bank of Scotland now up 0.85p at 28.99p.

Germany’s Bild set to take a haircut on Greek bonds

Newspaper bought €10,000 of Greek debt at a heavily discounted price of €4,815 – it would be worth €3,000 under a debt restructuring

Germany’s biggest selling newspaper, Bild, has said “nein” to the Greek debt swap – three months after buying €10,000 (£8,350) of Greek government bonds.

“The Greek debt writedown is coming to private (small) investors. Also to Bild,” the tabloid said. “But we say ‘NO’.”

Bild argues that the proposed deal “on its own will not help Greece back on its feet”. “A debt writedown without Greece’s exit from the eurozone does not address the question how the Greek economy can ever pick up again and create new jobs,” it said.

The newspaper, which has 12 million readers in Germany, bought €10,000 of Greek debt at a heavily discounted price of €4,815 in the secondary bond market in December. The bonds mature on 20 March, and Bild was expecting to pocket the full nominal value of €10,000.

But under an agreement between Athens and its main creditors, bondholders are being asked to take a writedown, or “haircut,” of at least 70%. The restructuring is set to reduce Greece’s debt burden by more than €100bn and is crucial to prevent a messy default, which would send shockwaves through financial markets.

The value of Bild’s bonds will be slashed to just €3,000 under the deal. Even with the huge discount it got when it paid for the bonds, the newspaper will still suffer a 38% loss on its holdings.

The bond swap has been accepted by a long list of European banks, including Deutsche Bank, Commerzbank, HSBC, Royal Bank of Scotland, Crédit Agricole and Société Générale. Athens has passed legislation to force reluctant bondholders to participate if two thirds agree to the deal.

Banks, insurers and investment funds holding debt issued under Greek law must decide by 8pm GMT on Thursday, while those who hold Greek bonds issued under foreign law have until 11 April to make up their minds.

Bild dismissed the debt swap as a “sham”, arguing that many of the economic scenarios on which the deal was based were “unrealistic”. It also noted that after the snap Greek election in April, the country’s new government may not stick to the drastic reforms required under the terms of the new bailout package.

Last week Bild urged the Bundestag, Germany’s lower house of parliament, to reject the second bailout for Greece that is tied to the debt restructuring.

The paper did add a PS: “If Bild should after all make a profit with the bonds it will be donated to a good cause.”

Cable reveals cabinet unease over recovery

Business secretary warns that the government lacks a ‘compelling vision’ beyond tackling Britain’s record fiscal deficit

Cabinet unease over the slow pace of economic recovery burst into the open on Tuesday with the leaking of a letter by business secretary, Vince Cable, in which he warned that the government lacks a “compelling vision” beyond tackling Britain’s record fiscal deficit.

To the irritation of chancellor, George Osborne, who warned that Britain should prepare for an austerity budget on 21 March, the business secretary told the prime minister in his letter that the government cannot rely on markets alone to revive the economy.

Contents of the letter, sent to the prime minister and Nick Clegg on 8 February, were first leaked to the FT on 12 February. But the full version of the highly sensitive letter, in which Cable called on No 10 to accept that the Royal Bank of Scotland will have to be broken up, was published on Tuesday afternoon by the BBC.

In the most sensitive section, Cable wrote: “I sense … that there is still something important missing: a compelling vision of where the country is heading beyond sorting out the fiscal mess; and a clear and confident message abut how we will earn our living in future … We can be more strategic and the economic backdrop will increase demands that we are ambitious.”

Cable highlighted Lib Dem unease over a central plank of the chancellor’s economic strategy – that the private sector will pick up the slack as the public sector shrinks – as he warned that there are limits to what markets can achieve. “Market forces are insufficient for creating the long term industrial capabilities we need. Despite the biggest devaluation since the war, improvement in the UK’s trade balance has been disappointing. The Labour boom and bust hollowed out the supply chains on which exporters and inward investors depend.

“And while controversy rages over bankers’ bonuses, the much bigger problem is the lack of confidence businesses have in their ability to find affordable financing for future investment. All in all, we must law out a strategic vision for where our future industrial capabilities should lie, and how to deliver it.”

The letter was leaked hours after the business secretary said the Lib Dems were prepared to drop their opposition to scrapping the 50p top rate of tax if a tax on wealth, with a “mansion tax” on properties with more than £2m their preferred option. Cable told Radio 4′s Today programme: “If the 50p rate were to go – and I and my colleagues are not ideologically wedded to the 50p tax rate – if that were to go, it should be replaced by taxation of wealth, because the wealthy people of the country have got to pay their share, particularly at a time of economic difficulty. How exactly that is configured is a detailed matter for negotiation, but that principle must be upheld, and the mansion tax is actually a very economically sensible way of doing it. But there are different ways of approaching it.”

The intervention by Cable caused some irritation in the Treasury which is bracing itself for a tough round of negotiations before the budget in the “quad”, the coterie of the cabinet’s most senior ministers. This group comprises of the prime minister, the chancellor, the deputy prime minister Nick Clegg and Danny Alexander, Osborne’s number two at the Treasury.

Osborne is more open to the idea of a tax on wealth than the prime minister who is highly suspicious of increasing tax on property. The chancellor believes that the best bet is close down loopholes on stamp duty which allow millionaires to register new properties in the name of overseas companies. This means they pay 0.5% in stamp duty on properties worth more than £1m rather than the standard 5%.

Osborne warned on Tuesday that there would be no “unfunded giveaways” in the budget.

In a speech to the annual dinner of the EEF manufacturers’ organisation, he said: “By facing difficult decisions head on, we have won the credibility which will allow us to constrain inflationary pressure, support long term low interest rates and provided the stability that creates the space for private sector investment. I have a budget in two weeks’ time, I can tell you: we are not going to put that credibility and stability and low interest rates at risk.

“The days of unfunded giveaways are over – and they’re not coming back in this budget. Everything has to be paid for.”

Osborne risked a row with his coalition partners by calling on Britain’s industrialists to campaign in favour of one of the recommendations in the controversial Beecroft report on employment law.

The venture capitalist argued in his report, commissioned by the Downing Street policy guru Steve Hilton, in favour of “compensated no fault-dismissal” for small businesses. The Lib Dems, who were wary of the Beecroft report, agreed to a consultation.

Osborne said: “Plenty of trade unions and others will be submitting their evidence for why we shouldn’t do this. If you think we should, and it will increase employment, then don’t wait for someone else to send in the evidence. Send it in yourself.”

The negotiations on the budget, in which the Treasury is expected to meet its forecast for a £127bn deficit in 2011-12 with a few billion pounds to spare, have highlighted divisions between the coalition partners and among the Tories.