Sunday newspaper round-up: Bankers´ bonuses, Lloyds, Sterling

3rd Mar 2013 18:09

Banks are furious. Last week they were caught off guard after Germany, under pressure from negotiators at the EU parliament, changed sides in the debate over bankers´ bonuses. A compromise agreement had been struck in Brussels. Now however the European Union wants the caps to extend to employees of European banks abroad. That would leave those who compete with Europe´s financial institutions as the sole beneficiaries. Aware of this France and Germany are said to be softening their stance as regards this element of the new legislation, The Sunday Times explains. The details of Lloyds´s Chief Executive´s bonus plan, released last Friday, seem to suggest that the government might sell its stake for as little as 61p, rather than the 74p expected. Bankers have indicated that is the value at which the stake is carried on the government´s books. That is just 8p above the shares´ closing price last week. That comes a day after Royal Bank of Scotland said a sale of the government´s stake was "coming much closer." The equivalent figure for RBS would be 410p the FT Weekend writes. The automatic 'across-the-board' US federal government spending cuts known as 'sequester' that kicked in on Friday threaten to consume Congressmen´s energies. The world´s attention thus now passes to March 27th, when the stopgap bill which has allowed the federal government to keep running expires. Against that backdrop, Republicans in the lower house are expected this week to vote on a bill that would allow just that - albeit at levels of expenditure consistent with sequester. Interestingly, The Wall Street Journal Europe adds that congressional leaders are said to have never been even close to an agreement to block or replace the aforementioned cuts.BAE Systems is looking for a fresh talent to take over the post of Chairman. The candidate will have to satisfy demanding shareholders but, above all, provide strategic direction and guidance to the board. Two candidates have been sounded out so far, Sir John Rose and Sir Roger Carr. The former, a deputy chairman of Rothschild Group, spent 15 years as Rolls-Royce Chief Executive, and hence possesses a deep knowledge of aerospace and defence markets. Carr, 66, was Chairman of Centrica for nine years and the President of the CBI, The Sunday Times says.This week´s meeting of European Union finance ministers (ECOFIN) will see the Treasury demand that proposals by Brussels to cap bonuses for bankers be flexible enough so that those institutions based in London remain competitive. This is particularly necessary given the British economy´s greater exposure to such pan-European directives. In theory the new rules are aimed at the highest paid bankers, but in practice they could mean whole banking divisions being repositioned outside of Great Britain, according to UK enterprise minister Michael Fallon, The Sunday Telegraph explains. What matters is at what price the government can actually sell its stake in Lloyds, not what it actually paid for it. The lender´s results were poor, with net interest margins down by 14 basis points to 1.93%. Furthermore, the bank is a 'pure play' on the UK economy, and the latest UK manufacturing figures are not encouraging. As well, amongst other things, UK regulators may yet ask it to hold more capital. In any case, the government should get on with the business of selling, says the FT´s Lex column. It is hard to spot an immediate impact on the UK economy from rating agency Moody´s decision to downgrade the country´s debt rating. The recent increase in the premium investors ask for holding Gilts over German bunds merits watching however. For investors holding such a low yielding asset such as Gilts a weakening currency is the last thing they need. In this regard, Jim Leaviss of M&G, a fund-management group says that: "A current-account deficit this large has historically preceded a sterling crisis." That may be so, but currency and sovereign debt markets are an ugly contest nowadays and Britain is not the only country with problems, according to The Economist.Tharisa Minerals, A South African platinum miner, has hired Macquarie and HSBC to lead a share offering on the London Stock Exchange. The transaction, which could value the mining outfit at $300m (£200m), and raise at least $100m, is further fanning hopes of a resurgence in the IPO market, following the five year drought seen in the wake of the last financial crisis. Its mine is located in the Bushveld complex, where last year strikers at the nearby Marikana mine, owned by Lonmin, were shot by police. However, it is an open-pit operation, which keeps costs low relative to underground operations, The Sunday Times reports.AB