Week in Review

August 1, 2014 8:37 pm

Week in review, August 2

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week in review

A round up of some of the week’s most significant corporate events and news stories.

Majors brace as sanctions against Russia tighten

Western oil companies said this week it was too early to say what impact tightening US and European sanctions will have on them as the diplomatic battle with Russia over its support for separatists in Ukraine intensified, writes Michael Kavanagh.

However, BP admitted on Tuesday that its profits could be hit by the crisis, even as quarterly earnings were boosted by a surge in contributions from Rosneft, the world’s leading oil producer by volume, of which BP owns a fifth.

On Wednesday the French oil major Total said it had frozen its purchases of shares in Russia’s second-largest natural gas producer, Novatek.

Corporate people in the news

Sachin Bansal and Binny Bansal, founders of Flipkart, which raised $1bn in new equity to expand in India’s rapidly growing ecommerce market

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ExxonMobil said it was still assessing the effect of sanctions designed in part to prevent the transfer of new technology to Russia’s oil and gas industry. The leading US major is developing a liquefied natural gas export facility at Sakhalin in Russia’s far east.

As well as restricting technology transfer, sanctions are designed to restrict access to global debt markets by oil and gas operators in Russia – some of which are consortiums in which western groups hold significant equity stakes.

Ben van Beurden, chief executive of Royal Dutch Shell, said: “It’s a bit early to say how it will play out. We will obey sanctions without hesitation.”

Shell, which also has LNG interests at Sakhalin, has suspended work exploring shale resources in eastern Ukraine. Twelve Shell staff and familymembers were killed on flight MH17, shot down in Ukraine last month.

Related in depth: Ukraine crisis

European banks drawn into US dark pool probe

Credit Suisse, Deutsche Bank and UBS were drawn into a widening US probe into banks’ anonymous dark pool operations this week as it emerged that regulators have asked them for information and some lenders have started their own internal reviews, writes Daniel Schäfer.

Urs Rohner of Credit Suisse Group speaks during the Swiss International Finance Forum

Dark pools – which allow investors to trade large blocks of shares anonymously, without moving the market price against them – have come under fire this year from regulators and lawmakers, who allege that they allow high-frequency traders to gain unfair advantages.

The two Swiss banks and Germany’s Deutsche this week disclosed that they have received requests for information from authorities and are co-operating with investigations into dark pool or high-frequency trading.

UBS said it was in contact with a number of authorities – including the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the New York attorney-general – over its dark pool and “its securities order routing and execution practices”.

Deutsche revealed that it had received a request relating to high-frequency trading and people close to the situation told the Financial Times that the German lender had launched an internal review into its alternative trading system.

Credit Suisse said in its quarterly report that it is “responding to inquiries from various governmental and regulatory authorities concerning the operation of its alternative trading systems”.

Lloyds is fined £218m for rigging rescue scheme rate

The reputation of Lloyds Banking Group hit a new low this week as it was revealed to have rigged the rate used to set fees on a government-backed rescue scheme, writes Sharlene Goff.

The bank, which is 25 per cent owned by the government, was fined £218m by US and UK regulators for manipulating the repo rate used for the Special Liquidity Scheme and for rigging Libor.

It was also forced to pay almost £8m to the Bank of England to make up for the artificially lowered fees it and other banks paid as a result of the actions of Lloyds’ traders.

While six other financial institutions have already settled with authorities over Libor manipulation, Lloyds was the first bank to be penalised for the liquidity scheme issue.

Mark Carney, governor of the BoE, criticised the lender for “highly reprehensible, clearly unlawful” behaviour that “may amount to criminal conduct on the part of the individuals involved”.

Lloyds’ chief executive and chairman condemned the actions of the employees responsible and said the bank would attempt to retrieve or withhold their pay. However, it has emerged that many of the 22 staff that have left the bank or been suspended over the incident have already had their bonuses paid in full.

Lloyds now faces the prospect of convincing the BoE it should be granted permission to resume dividend payments after they were frozen following the financial crisis.

Related Editorial Comment: Lloyds and lessons from past scandals
Related Inside Business: Lloyds staff will find it harder to sneer at RBS rivals
Related video: Bankers change slowly
Related podcast: Banking Weekly

Airbus in talks to offload Dassault Aviation stake

Airbus gave its strongest signal yet that it was gearing up to sell its stake in Dassault Aviation in a move that could shake up the French defence sector and provide a €5bn cash windfall to the aerospace group, writes Michael Stothard.

Tom Enders, chief executive of Airbus, said talks were under way and that it was now “not a question of if but . . . when”.

Selling the stake, held by Airbus effectively on behalf of the French government, has long been a goal of Mr Enders.

Airbus could sell part of the 46 per cent stake in the maker of the Rafale fighter jets to the Dassault family, place it in the market, or find other investors, although Airbus indicated the markets would at least play some part in a sale.

There is longstanding speculation such a move to sell might be the trigger for a consolidation in the French defence sector involving Dassault, Thales and Safran, the jet engine maker in which the state is also a large shareholder.

Shares in Airbus rose on Wednesday after it reported earnings before interest, tax and one-time items up by a tenth to €1.77bn, reiterated a target of “moderate return on sales growth” for 2014 and confirmed its 2015 guidance.

Mr Enders played down worries about the large number of cancellations this year and an overheating in southeast Asia, saying that “we are not approaching the end of the cycle or a precipice” in the commercial jet market.

And finally ... the lighter side of the news

What keeps billionaire hedge fund manager Paul Singer awake at night? Not the prospect of losing his battle against the Argentine government over unpaid debt. In a letter to investors, Singer said he fears an electromagnetic pulse from the sun destroying the world. It seems the rich are on a different planet to you and I . . .

Sigh. If only more men could afford it. News that the private equity group 3i is dressing up British luxury lingerie retailer Agent Provocateur for a sale had boys across the country emptying out their piggy-banks. Sadly, with a pricetag of £200m, it’s unlikely to end up in the bedroom of a spotty teen anytime soon . . .

Big may be better in the US, but former car parts executive Paul Elio is hoping his small, three-wheeled, two-passenger 84-mpg car will be a hit stateside. So far 25,000 motorists have paid a deposit for the oddball vehicle. Until then, for those that can’t afford to pay up $7,000, there’s always a Robin Reliant . . . 

Facebook is hoping its Zambian users press the ‘like’ button after the social media group teamed up with mobile carrier Airtel in the southern African country to offer free internet access to job searches, weather forecasts and Wikipedia on its new app. It’s just another small step in the drive to put the whole world online . . .

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