Tuesday tips round-up: Banks, Petropavlovsk, Glencore Xstrata

14th May 2013 07:10

Authorities attempts to create a challenger to the main established lending groups - RBS, Lloyds, Barclays, HSBC - are in a state of disarrray after Moody´s six notch downgrade of Co-op last week. Simply put, creating a large new lender is far more difficult and risky than many appreciate. In any case, the fact remains that the sector´s main players continue to dominate the current account market, of which they still possess over 70 per cent. The lesson to be drawn from the above may be that a bunch of focused, niche banks - such as Aldermore - could be a bigger threat to the big four banks than any Frankenstein-like creation which the government may try to spawn, says the FT´s Lex column. Glencore and Xstrata have two very different business philosophies, with Glencore being more entrepreneurially focused and less inclined to carry passengers. More importanly, once the more 'hard-nosed' strategy post-merger becomes apparent they will start to outperform again, says The Times´s Tempus. Furthermore, yesterday´s combined production report seems to point in precisely that direction, with the newly merged companies announcing their intention to close their London and Zug headquarters, previously owned by Xstrata. As well, the miner is calling a halt to its export terminal on Balaclava island while at the same time having made much of the commitment to return surplus cash to shareholders. I suspect we will look back and decide that the Glencore side got the better of this "merger," Tempus writes. In light of the current realities in its sector, namely the decline in the gold price and its $1.2bn of debt, Russian miner Petropavlovsk has decided on a range of cost-cutting measures. As well, and as Tempus suggested last month, it will defer the opening of the pressure oxidation plant at one of its mines. Production will not be affected and the company says the savings will put it on a sound financial footing. Now all it needs is for the gold price to start rising again, Tempus muses.Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB