The Week 22Feb2020

CITY 49

22 February 2020 THE WEEK

EconomistspredictedthatChina’s

growthwouldslowsharplyinthefirst

quarterbecauseofthecoronavirus,

amidgrowingfearsofaricocheteffect

onotherregionaleconomies.South

Korea’sPresidentMooncalledfor

“allpossiblemeasures”topreventan

economic“emergency”:manyofthe

country’sbiggestexportershavebeen

badlyhitbydelayedpartsshipments.

Therearealsoworriesthatthevirus

couldtiptheworld’sthird-largest

economy,Japan,intorecession.

Europe’spowerhouse,Germany,isalso

thoughttobevulnerable:itseconomy

stagnatedinthefinalquarteroflastyear.

In Britain, there was some good news

for the new Chancellor, Rishi Sunak:

average weekly wages in the UK are

back to pre-crisis levels. Weekly pay

reached £512 in Q4 2019, which,

adjustedforinflation,isthehighestsince

March 2008. Employment reached

another record high of 32.93 million.

Shares inLaura Ashleysurged by 45%

after the troubled retailer securedaloan

deal following speculation about its

survival. The ratings agency Moody’s

downgraded French carmakerRenault’s

debt to “junk”, following poor results.

Bombardier Transportation,the owner

of Britain’s biggest and oldest train

factory, was sold to the French company

Alstomfor around £6bn. President

Trump included junk bond kingMichael

Milkenin a“who’swho of white-collar

criminals” receiving presidential

pardons, said The New York Times.

SoftBank:psycho-terror strikes
RememberwheneverycompanySoftBanksomuchassniffedat“wasdestinedtobethe
nextGoogle”,askedJeffBishoponRagingBull.Thosedaysaregone.ThegiantJapanese
techinvestorhasjustannounced“anotherpisspoorquarter”:overallprofitsfell99%to
just$24mafterthegroup’shugeVisionFundnotchedupa$2bnloss.Someinvestorsare
concernedfounderMasayoshiSonis“losingit”.Alas,hisstablehascertainlyfaltered.
“Uber’svaluecratered”aheadofitsIPOandthen“continueditsfreefall”.Andanother
formertrophyasset,WeWork,“neededa$1bnbailoutfromSoftBankjusttoWeLive
anotherday”.Lastweek,“Masa”admittedthatplanstolaunchasecond$100bnVision
Fundarelookingdicey.Unfortunately,“promisingstart-ups”and“ 30 0-yearplans”
don’tmeananythingtoactivistNewYorkhedgefundElliottManagement,whichhas
takena3%stakeinSoftBankandisclamouringforchange.“MostbossesdreadElliott”

• apastmasteratwhathasbeendescribedas“psycho-terror”,saidTheEconomist.The
  hedgefundispushingSoftBanktoreturn$20bntoshareholdersviaasharebuyback–
  therecentapprovaloftheSprint/T-Mobilemobilemergerwillhelpinthatrespectby
  enablingthegrouptoshedsome$40bninSprintdebt.ButElliott’sseconddemand,of
  corporatereform,maybehardertogetbythe“strong-willed”Son.Prepareforatussle.

HSBC:forwhomthebell tolls
Talkaboutwieldingtheaxe,saidSimonClarkandMargotPatrickinTheWallStreet
Journal.“Europe’sbiggestbank” plans tocut 35,000 jobs and$100bnofassetsover the
nextthreeyears,as itscales back operationsinEurope,theUSandits investmentbank
“toinvest morein itsfast-growingAsianand MiddleEastern operations”.HSBCalready
“makes half ofits revenuesin Asia”,butfallingprofitsin2019(downbyaroundathird
to $13.35bn)havespurredamajor restructuringunderinterimCEONoelQuinn.The
joblosses are“deeperthanexpectedandrepresentabout15% ofthe workforce”,said
Dharshini Davidon BBCBusiness.HSBChasn’tsaidexactlywherethe cuts willcome,
but“employeesmayfaceananxioustime”.Noonemoreso,perhaps,thanQuinn
himself,said LucyBurton inTheSunday Telegraph.Havingbeencatapulted into the
topjobas“acaretaker”followingtheoustingofJohnFlintlastsummer,he stilldoesn’t
knowif he’llkeephisplace.Theuncertaintyhaspromptedmuch“Kremlinology”in the
City.As oneanalystput it: “Thecynicin mesuggeststheboard wantsto observethe
marketreaction toQuinn’srefreshed strategy,”beforetakingacallon hisfate.

Centrica: Conn-founded
Centrica’sdecline onIainConn’swatch asCEOhas been “spectacular”,said NilsPratley
in TheGuardian: “fromnationalenergychampiontoFTSE100relegation”in five years
flat.Sharesin the BritishGasowner,worth280peach in2015,nowtrade foraround
72p –valuing Centrica ata“puny” £4.2bn.Infairness,Conn’sstrategyofconcentrating
on theconsumerside,and adding“connectedhome”initiatives,madesense –thegroup
containedfar “toomanyoddsandends”.The“tragedyfor shareholders”wasthat
“Conn’s betendedupasagamble onthe Governmentstayingoutoftheretailenergy
market”.Andhe lost. Connreckonslast year’sgovernmentpricecapon billshasalready
costthegroup £300m.“Centrica’sfragilefinancialarithmeticcouldn’tstandthestrain.”

RBS/NatWest: cosmetic rebranding or southern power grab?

Earlier this month, Royal Bank of Scotland

indicated that its new boss, Alison Rose,

would be based solely in London. Now we

know why she chose to become “Queen of

the South”, said The Times. After 293 years,

the lender–still HQ’ed in Edinburgh–is

ditching its RBS name and rebranding itself

“NatWest”, in an overhaul designed to put its

2008 bailout, andastring of recent scandals,

behind it. Existing RBS branches, most of

which are in Scotland, will keep their name,

as will Ulster Bank in Northern Ireland.

“Switching its name to NatWest brings Royal

Bank of Scotland full circle,” said Lex in the FT.

Two decades ago, when RBS “pounced” on

the English bank forathen record £22bn, “NatWest wasatoxic

name withahorrid history”. RBS subsequently “proceeded to

prove itself every bit as flawed”, and only survives today thanks

to a£45.5bn statebailout. Pre-tax profits rose 26% last year to

£4.2bn. But you can’t change history. “For all

the shiny hopefulness fromanew-old name,

anew chief executive andapromised new

era –RBS still looks like tarnished goods.”

The UK government’s 62.4% stake “weighs

on the share price”.

According to Ian Fraser, author ofShredded:

Inside RBS, the Bank that Broke Britain,this

is little more thanacosmetic change: the

real power has long been in London. Indeed,

shouldasecond Scottish independence

referendum deliveraYes vote,the lender

would consider removing its headquarters

from Edinburgh completely, said Greg Russell

in The National. Some Scots are furious about

what they see asaSassenach attack on their financial heritage,

said The Times. The move was slammed by one former SNP MP,

Paul Monaghan, as “a very poor decision that will cost RBS

thousands of customers and many jobs”.

RBS HQ in Edinburgh: heading south?

Seven days in the

Square Mile

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