“A third bail-out for Greece cannot be ruled out” a senior European Central Bank official said, as the country’s troika of lenders prepared to rubber-stamp its €130bn (£109bn) second financial rescue. Greece concluded a complex debt restructuring with private sector creditors on Friday, leading to the declaration of a “credit event” that will trigger about €3.5bn of credit default insurance payouts. There were doubts over the exact impact of the credit default swaps, as Austria said it would need to inject up to €1bn into a state-owned bank as a result. Even as ECB policymaker Ewald Nowotny hailed Greece’s debt restructuring a “clear success”, he today admitted a third aid package was a possibility.
Britain’s leading banks are facing new allegations of mis-selling complex financial products to hundreds of small businesses despite them having little knowledge of what they were buying, a Sunday Telegraph investigation has revealed. All of the UK’s major banks, including Barclays and HSBC, as well as taxpayer-backed lenders Lloyds Banking Group and Royal Bank of Scotland, are facing legal action which could lead to billions of pounds of damages for small and medium-sized businesses. The businesses claim the banks profited at their expense from pushing them to take out highly complex interest rate derivatives. Many of the claimants spoken to by The Sunday Telegraph said they were not aware of the significant costs attached to the products that were supposed to protect loans from upward movements in interest rates.
Glencore made what is believed to be a £3.5bn approach for Canadian grain giant Viterra in an attempt to bolster its agricultural business in North America. The approach by the commodities and mining giant triggered Viterra’s statement to the Toronto Stock Exchange on Friday that it had received an unsolicited expression of interest from third parties. In a sign that he intends to press ahead with Glencore’s expansion strategy despite being in the midst of a £53bn merger with Xstrata, chief executive Ivan Glasenberg is understood to want to bolt Viterra on to its growing grain business.
Prudential is attempting to push into Brazil for the first time as it looks set to this week surpass the £2bn operating profit mark. The Anglo-Asian insurer is believed to be working on detailed plans to open a general insurance business into the Latin American nation as part of its expansion plans. But the plans come amid concerns over pending European regulation, and question marks over its London domicile. It’s believed that chief executive Tidjane Thiam, has had discussions with the Brazilian government over the possibility of relaxing current legislation which prevents an insurer from controlling its own sales force.
Although America’s strengthening economy is better able to weather higher fuel costs, election-year politics is bound to bring pressure to “act” against high petrol prices. One misguided response would be a temporary cut in the petrol tax in an economy that already taxes fuel too lightly. (Far better to use the next price fall as an opportunity to raise the tax.) A more dangerous idea would be prematurely to release supplies from the country’s strategic oil reserves to dampen prices. Barack Obama did that last summer; the president will doubtless be tempted to do so again if petrol prices rise much further. At a time when there is a risk of a genuinely big supply disruption, from Iran, that would be reckless. The odds of averting a 2012 oil shock depend disproportionately on America keeping its cool, both at home and abroad.
“Some Apple fans fret that if the company decides to pay regular dividends, it could end up regretting it. “Apple needs to watch out for dividend addicts,” says Aswath Damodaran, a finance professor at New York University who owns Apple stock. Such shareholders, he adds, will be obsessed with extracting as much cash as possible from Apple rather than with its mission of making mind-blowing products. Perhaps. But the point of shares is that they confer ownership. They are valuable only because shareholders expect a share of profits. Apple may have trouble finding a good use for its cash, but its shareholders will not.
Reports that middle earners will have their retirement incomes slashed if the Chancellor proceeds with an assault on pensions, industry experts and business leaders warn today. They say that curbing tax breaks would “catastrophically undermine” trust in a pension system already in crisis and could hit up to four million people, stripping tens of thousands of pounds from their pension pots by retirement. In a letter to George Osborne, the country’s biggest pension companies, business organisations and retirement advisers urge the Chancellor to resist calls to launch a multibillion-pound raid on the pension perks of middle-income and wealthy savers. The letter warns that even moderate earners could suffer a £50,000 hit to their pension funds, if measures to scrap tax relief for people who pay income tax at the higher rates of 40% and 50% go ahead.
The Green Investment Bank must rethink its strategy of not investing in early-stage marine renewable energy devices if the industry is to hit government targets, a senior figure in the sector will warn this week. Maria McCaffery, chief executive of trade body Renewables UK, will use her organisation’s wave and tidal conference in Edinburgh on Thursday to issue the warning to the newly launched bank. Business Secretary Vince Cable announced last week that the £3 billion GIB would be based in Edinburgh, with a transactions team in London, after a competition among 32 sites to host the government-backed lender. But McCaffery said the GIB’s decision not to invest in proving if wave and tidal prototypes are viable – and instead only investing in later-stage marine projects – could jeopardise the sector’s ability to hit the UK government’s 2020 renewable energy targets.
Terry Duddy, chief executive of the Home Retail Group, will this week have to defend another set of dire fourth-quarter sales at Argos amid suggestions that the group will ditch its final dividend. Philip Dorgan, the analyst at Panmure Gordon, forecasts that Home Retail will axe its final-year dividend and follow suit for the next two years, after it paid 10p last year. He also slashed his pre-tax profit forecasts for Home Retail’s current financial year and 2013-14 by 34% and 45% respectively.