LONDON (SHARECAST) - Barclays’s new chief executive has warned that its huge investment bank will be scaled back in response to tough new regulations and a stagnant economy. Antony Jenkins told The Sunday Times that he would not rely on a rebound in the global economy to fuel profit growth at the investment banking arm, formerly known as Barclays Capital. Rules aimed at preventing future financial crises, such as Britain’s plans to create a “ring-fence” around banks’ retail divisions, would bear down on profits in the future, he said. The complex new Basel III regulations, which will force lenders to hold more reserves as a buffer against their riskier activities, meant large chunks of Barclays’ investment bank would become unprofitable, he suggested. “There are a number of external factors coming down the line and regulation is clearly a very powerful one,” said Jenkins. There was “no doubt” the regulatory clampdown would “make some activities in investment banking difficult to make an adequate return on”.
International Airlines Group (IAG), the BA and Iberia carrier, is considering taking a small stake in a new US airline expected to be formed by a merger of American Airlines and US Airways. The UK-listed group was one of the first to sign a confidentiality agreement giving it access to AA's financial books but Willie Walsh, IAG's chief executive, is adopting a cautious approach about making a financial commitment to a cash-hungry airline seeking help to climb out of administration. Mr. Walsh is anxious to strengthen IAG's position in the US and protect its position on the important North Atlantic routes. IAG already has close links with AA through membership of the Oneworld alliance of airlines, although relations with US Airways have been more explosive, The Sunday Telegraph explains.
Sir John Bond, chairman of Xstrata, is under pressure from his shareholders to step down in the wake of the miner's faltering £45bn merger with commodity giant Glencore, which is expected to be voted down this week. Ahead of Friday's shareholder vote on the deal, unhappy Xstrata investors have questioned how the City grandee can stay in the role with the board-backed merger expected to fail. Knight Vinke, the activist investor which holds around 0.5% of Xstrata, on Friday issued a statement in which it said if the deal collapses it will agitate for a change in the board's make-up to make it more "independent and robust". The Sunday Telegraph understands the fund is scrutinising the roles of the chairman, Sir John, as well as David Rough, the senior independent non-executive, amid concerns as to how they have fulfilled their role of standing up to management to represent the interests of smaller shareholders, The Sunday Telegraph says.
Insurance giant Standard Life has unveiled plans to quadruple the size of its Asia and emerging markets division as it seeks to diversify its core UK and Canadian life and pensions business. The five-year plan is to be spearheaded by Nathan Parnaby, who took on the newly-created role of chief executive of Asia in a recent shake up of senior personnel at the Edinburgh-based firm by chief executive David Nish. Standard Life has an established, wholly-owned operation in Hong Kong, and two significant joint ventures in mainland China and India. Parnaby expects to establish a “fourth pillar” to the firm’s global emerging market ambitions by entering another new market “or two”, although he declined to be drawn on where this would be as the firm is awaiting regulatory approval, The Scotsman on Sunday reports.
The European Central Bank president, Mario Draghi, is battling to piece together a rescue package for Spain this weekend ahead of a crucial meeting on Thursday. Spain is due to redeem €15bn (£12bn) of bonds next month, but cannot borrow at affordable rates to refinance the debt. Nevertheless, the ECB’s task is being complicated by the Bundesbank. The German central bank is firmly opposed to ECB intervention in the bond market and Jens Weidmann, the Bundesbank president, is understood to have threatened to resign over the issue. The efforts to rescue the Spanish financial system come as the European Commission presses ahead with plans to give the European Central Bank wide-ranging powers to regulate lenders across the Eurozone — a move that needs approval by all 27 member states. The proposal is likely to trigger opposition from Britain, The Sunday Times reports.
The OECD is expected to downgrade its forecasts for Britain when it releases its interim economic assessments for G7 economies on Thursday. In May, the group predicted Britain would grow 0.5% in 2012 and 1.9% next year. Independent forecasters now expect the economy to shrink by about 0.2% this year. Philip Shaw of Investec, the investment manager, said: “Any positive growth for 2012 is looking optimistic and we would expect a downgrade to a decline of 0.2% to 0.3%. The key question is how much of a pick-up we get next year,” The Sunday Times says.
The chief executive of Wm Morrison, Dalton Philips, will put his faith in a new fresh-food format for the company's supermarkets this week as he battles to reverse a decline in sales. The City is forecasting that like-for-like sales at Morrisons could be down as much as 1.5% when the company reports half-year results on Thursday, with one analyst warning that he is "expecting the worst". Jonathan Pritchard, analyst at Oriel Securities, said: "At the start of Dalton Philips's tenure, it was possible to look at the lack of convenience stores and online as unfortunate. They now look positively careless, as these are the two areas in which there is any growth at all in the UK food retail industry, according to The Sunday Telegraph.
Waitrose could double the proportion of goods it sells via the internet to at least 6% within eight years, and ultimately take 20% of sales online, managing director Mark Price has said. Price also believes the up-market grocery chain has the potential to double in size to 600 stores over time, taking the retailer's market share to as much as 10%, up from just 4.5% today. According to figures from Kantar Worldpanel, the supermarket, which is part of the John Lewis Partnership, is the UK's fastest-growing grocery retailer thanks in part to a 60% rise in online sales in the last three months. Price says that despite the UK's economic woes, Waitrose as a whole is likely to see stronger growth in the second half of 2012 than the 7% achieved in the first six months of its financial year, The Sunday Telegraph writes.
Russian leaders have hailed their powerful energy industry as the country posted a post-Soviet record high rate of oil production that should boost coffers in uncertain global economic times. The energy ministry's data reporting unit said Russia produced 10.38m barrels per day in August - a fractional increase on July that put it above any mark seen in the past two decades. Nearly a quarter of that oil was produced by the state's massive Rosneft unit that recently struck historic new Arctic exploration alliances with the US super-major ExxonMobil as well as Italian and Norwegian firms, The Sunday Telegraph says.
A powerful defence of the economic and business benefits of Scotland staying in the union will be delivered this week by the head of Britain’s biggest employers’ lobby group, the Confederation of British Industry (CBI). John Cridland, director-general of the CBI, will tell one of the biggest gatherings of business leaders that the clear majority of his members in Scotland, England and Wales believe the single British market is too important economically to be given up lightly. He will stress that it is for the Scottish people to decide whether to separate from the UK, but that the CBI, representing 240,000 businesses, does have the right to air its concerns about the potential economic threats to “the glue that holds us together,” The Scotsman on Sunday says.