Business News

Simon English: Tighter rules still won't stop the tequila snorters in the City

2019-10-11 21:59:03 admin

As part of its usual initiation ceremony for newcomers, a broking firm hired a room above a pub near Liverpool Street.

The newbies were tied to chairs with their own belts. Booze was not so much drunk as inhaled. A man in a clown suit rocked up with an electric razor.

He shaved the captives’ hair off. The assembled brokers took it in turns to snort tequila from the newly bald heads of the victims.

An onlooker described it as “four hours of total chaos, then everyone suddenly got the train home”.

Like you, I am totally appalled by this behaviour, partly because it is an affront to the proper functioning of markets and partly because I don’t get invited to those sorts of parties.

When was this Wolf of Wall Street-style outrage? At the height of the first tech bubble? Just before the spectacular crash of 2008? No, about a year ago.

There is no doubt that the City is a sterner place and that the rules around entertaining clients are tight, at least at top firms.

There is also no doubt that money remains, as one Tullett Prebon broker said to the Financial Conduct Authority, a people business.

Trades go to the cheapest, most-efficient place. If the cheapest, most-efficient place happens to be where your mate Steve works, well, where’s the harm?

In some ways, today’s FCA statement about historic ongoings at Tullett is a throwback to a lost era. And good riddance to it.

On another level, it is very hard to prevent humans from being human. 

No amount of new rules can stop mates hanging out with each other, and sometimes doing each other favours.

Source Article from https://www.standard.co.uk/business/simon-english-tighter-rules-still-won-t-stop-the-tequila-snorters-in-the-city-a4259506.html

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TP Icap fined £15m over lavish jollies and 'doughnut' accounts

2019-10-11 21:58:56 admin

BROKERS at top City firm Tullett Prebon treated clients to “lavish” all-expenses-paid jollies, which included trips to Las Vegas, Monte Carlo and Ibiza, in return for fake trades that paid commission and could have manipulated markets between 2008 and 2011, the financial watchdog ruled on Friday.

The Financial Conduct Authority fined the broker, now known as TP Icap after a deal in 2016, £15.4 million for a rigging scandal which included attempts to manipulate Libor, the London interbank offered rate which is linked to UK mortgages.

The Tullett brokers were found to have engaged in so-called “wash” trades, which involved buying and selling the same financial instrument at the same time in order to generate the appearance of liquidity in the market to encourage others to deal.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “While these trades did not mislead the market, nor amount to market abuse, the wash trades were entirely improper, undermining the proper function of the market.” Tullett is an interdealer broker which does deals for top investment banks including JPMorgan, Goldman Sachs and Morgan Stanley. It has around 2500 UK staff based mostly at Bishopsgate.

The FCA said Tullett Prebon failed to be open and cooperative with the watchdog and a breach occurred between August 2011 and October 2014, related to the FCA’s request to Tullett Prebon for broker audio tapes. It had no effective control over the brokers, said the watchdog. TP Icap chief executive Nicolas 

Breteau said: “We are pleased to put this historical matter behind us.” He added that none of the individuals involved remain with the firm. City insiders note that regulation is lately so tough that even a moderately expensive lunch has to be signed off by compliance departments.

The FCA said Tullett’s entertainment included drinks, dinners, golf vacations and trips abroad. “This is a people business,” said one senior manager by way of explanation to the FCA. Over the period under investigation, the firm had £900 million of revenues a year, of which 3%, £27 million, was typically spent on client entertainment. A monthly “doughnut report”, a reference to the shape of a graphic on internal documents, tracked entertainment expenditure by departme

Source Article from https://www.standard.co.uk/business/tp-icap-fined-15m-over-lavish-jollies-and-doughnut-accounts-a4259286.html

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British Airways chief executive Willie Walsh warns airline growth will slow

2019-10-11 21:58:46 admin

Willie Walsh, chief executive of British Airways owner IAG, today said he predicted airline capacity growth would slow to 2% to 3% in 2020 in the face of global economic stormclouds.

Given that he recently warned IAG’s capacity for this year would turn out to be about 4% compared with the previous plan of 5%, his words are bound to fuel speculation he is softening up the market for a bigger cut next year.

Asked if he thought the industry as a whole would slow to 2%-3%, he said: “That sounds about right, and it’s down to the economy.”

All eyes in the City will be on his update to IAG’s key capacity number on 8 November, when he hosts a capital markets day for investors. Walsh refused to reveal the number in advance but said: “I am clear growth in 2020 will be less than we had originally put out and that reflects the global conditions.”

In the face of weak economies, airlines are slowing expansion to prevent ticket prices falling. This can involve retiring older planes or ordering fewer new ones.

Analyst Daniel Roeska at broker Bernstein said Walsh was right to be eyeing capacity crimps: “In this sluggish economy you want to grow as slowly as possible to protect your prices.”

He predicted Walsh would now cut his 2020 predictions to 3%.

Capacity is coming out of the industry anyway as a flurry of airlines have gone bust, Walsh said, from France’s Aigle Azur and XL to Monarch and Thomas Cook in the UK. Norwegian, meanwhile, has cut flights in Europe this year by 20% against an increase before of 10-15%. “That’s a huge swing,” said Walsh.

“They may be small,” he said of the firms going bust,  “but some are meaningful,” he said.

The two Paris collapses were potentially useful for IAG. Aigle Azur has attractive take off and landing slots at Orly airport.

“We will see more smaller airlines in financial distress,” Walsh predicted.

While citing the usual culprits of weaker economies and high fuel prices, he stressed the under-reported significance of credit cards being far tougher on weaker airline clients. Card companies had been repeatedly burned by having to make refunds to customers of bust airlines and were demanding bigger deposits to protect themselves.

“They’re becoming far more risk averse than before,” said Walsh. 

The Evening Standard reported last week on how payment processing companies were also becoming increasingly wary of the sector.

On Brexit, Walsh said his airlines had not been as badly affected as EasyJet or Ryanair because of its relatively higher exposure to London, where the economy has been more resilient. “London is just different to the rest of the UK,” he said. He repeated that IAG is factoring into its projections that a no-deal Brexit would make the economy “slightly weaker” than a negotiated exit with a transition period.

However, he said: “Whatever happens, you deal with the implications at the time. We operate in parts of the world where there is even more political uncertainty than Brexit.”

On Heathrow’s planned third runway, he said the project faced a bigger challenge today than it was a year ago due to the financial and environmental costs. “Two years ago I would have said it was 60-40 that it would go ahead. Now I’m probably 60-40 the other way.”

“Heathrow is incapable of doing that third runway in a way that makes financial sense,” he said.

Source Article from https://www.standard.co.uk/business/british-airways-chief-executive-willie-walsh-warns-airline-growth-will-slow-a4259491.html

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British Airways owner confident Boeing's 737 Max will resume flights

2019-10-10 21:53:45 admin

The boss of British Airways-owner IAG on Thursday declared he was confident Boeing’s 737 Max aircraft would be given the green light to fly again and scotched reports that European regulators were disagreeing with positive noises from the US safety watchdog.

Willie Walsh was speaking after Europe’s aviation authority reportedly told its US counterpart that it was not happy with the proposed remedies to the planes, which have been grounded worldwide since two crashed, killing 346 people.

Reports yesterday suggested European and Canadian officials were breaking away from America’s Federal Aviation Authority over the fixes, which involve tweaking the software behind the flight control system.

However, Walsh, who spoke to the European regulator Patrick Ky recently, told the Evening Standard he thought this was a misrepresentation and that the agreed alterations “should address the concerns.”

He said: “I am very comfortable this aircraft will fly again and when it does, it will be the most tested aircraft there is.”

IAG has signed a letter of intent to take 200 of the Max aircraft.

A fault in the flight control system is thought to have forced the nose of the planes downwards, defying the commands of the pilots and causing the crashes.

Walsh was speaking at the sidelines of the launch of plans to make his airline group carbon neutral by 2050. IAG will achieve this with a mixture of more fuel efficient planes and investing in projects that reduce the planet’s carbon emissions.

Air travel contributes 2% to global carbon emissions but this percentage would increase as other industries such as automotive switched to greener technologies. Air travel was unable to do so yet because electric, hybrid or hydrogen powered flights were “a long way off,” he said.

This was particularly true of long haul planes, which produce 80% of the industry’s CO2 emissions, he added.

“We don’t see an alternative to carbon based fuel for a very long time,” he said. 

Part of the reason is the weight of batteries needed to store the power. Current technology makes them extremely heavy, which in turn requires more energy to keep the plane flying. Tanks full of liquid fuel, on the other hand, get lighter during the journey as the engines burn it.

Similarly, he said it was unlikely biofuels would ever be produced in enough quantities to satisfy IAG’s needs.

While the carbon neutral initiative was not forced upon IAG by its shareholders, he said environmental issues had gone from being rarely, if ever mentioned by investors to being always on the agenda in meetings.

“A few years ago you’d have had one or two people asking but now every shareholder asks questions about it,” he said.

While he hoped other airlines would follow IAG’s lead, he said the reaction was likely to be mixed, with European companies the most enthusiastic. The US, where president Donald Trump has been vocally sceptical on causes of climate change, was less likely to follow suit.

Source Article from https://www.standard.co.uk/business/british-airways-owner-confident-boeing-s-737-max-will-resume-flights-a4258436.html

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OnTheMarket posts deeper losses but investments start to pay off

2019-10-10 21:53:38 admin

OnTheMarket, the online property firm set up by estate agents to challenge Rightmove and Zoopla, on Thursday reported wider losses but pointed to rising momentum around the business.

Since floating on the junior market last year at 165p per share the firm has been trying to entice agents to list on its website with cheaper deals than its rivals.

That, coupled with investments into tech and marketing, contributed to pretax losses of £7.1 million in the six months to July 31, compared with a £5.7 million loss a year earlier.

The portal’s shares have halved since it listed on AIM and today lost 1.75p to 81.75p. 

But boss Ian Springett said the moves are starting to pay off. Revenues rose 14% to £8 million in the first half and more companies have started committing to full-price long-term contracts.

Last month a record 27.2 million people visited OnTheMarket’s website and there are about 650,000 properties listed on it.

Springett cautioned that a “wait and see approach” from buyers amid Brexit uncertainty is delaying purchases. However, he told the Evening Standard: “It’s likely that political certainty will reignite the muted market in terms of transaction volumes.”  

 

Source Article from https://www.standard.co.uk/business/onthemarket-posts-deeper-losses-but-investments-start-to-pay-off-a4258406.html

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