Icap chief Michael Spencer loses £4m after Guy Naggar company collapses

City Index, the private spread betting business owned by Mr Spencer, is one of the largest creditors to Fitzgerald Securities, a company controlled by Mr Naggar.

The Sunday Telegraph understands that the claim by City Index has not been paid and is unlikely to be for some time as the complex liquidation of Mr Naggar’s business empire continues. “It will take some time to unravel – it’s an ongoing process. But it is a very complex network of businesses,” said one executive working on the administration.
After the credit crisis, City Index wrote off £78m as clients failed to make margin calls as the stock market crashed. The company ran up losses of £91m in the two years to March 2009, forcing Mr Spencer to inject £70m of his own fortune into the business.
Fewer than a dozen major clients – including Mr Naggar – accounted for the majority of the losses. Many of the debtors were friends or acquaintances of Mr Spencer.
The chief executive of London-listed ICAP, Mr Spencer plans to step down as Conservative Party treasurer in the autumn to focus on his business.
This entry passed through the Full-Text RSS service — if this is your content and you’re reading it on someone else’s site, please read our FAQ page at fivefilters.org/content-only/faq.phpFive Filters featured article: “Peace Envoy” Blair Gets an Easy Ride in the Independent.

ALEX BRUMMER: The false market in banking

By Alex BrummerLast updated at 11:45 PM on 11th August 2010

After the great bank profits bonanza of last week, when earnings of more than £15bn were notched up by Britain’s High Street lenders, one might have though the credit crisis was well and truly over. But that is not how it is seen from Threadneedle Street.
One of the more intriguing aspects of Mervyn King’s Inflation Report press conference were his comments on credit and the banking sector.
Bank bonuses may be returning to where they were before the credit crisis but plainly, in the Bank’s view, credit conditions are not.

It remains something of a mystery as to why RBS was allowed to sell-off its 318 English branches of RBS

The governor noted that ‘credit conditions have not eased as quickly as expected’ and potentially this could be a drag on recovery.
He repeated his belief that although big corporations have been able to finance expansion and investment through bond, debt and equity issues (partly helped by the Bank’s £200bn of quantitative easing, or printing money), smaller companies have been less fortunate.
These small firms have faced all manner of obstacles, from higher interest rate charges than might be expected in an era of 0.5pc bank rate, to rough treatment at the hands of their banks, and extra charges.The governor also reminded us that the banks’ recovery has not been achieved on their own.
There is still a great deal of credit being provided under various schemes, including the special liquidity facility for mortgage debt, which has not been cleared.
Such schemes still have 18 months of their three-year life to run.
Interestingly however, King raised the question as to whether banks which cannot obtain funding in the interbank market, where banks lend to each other, should be in the private sector at all.
Until it can be certain that the banks can stand on their own feet it may well make the case for the government going slow on any effort to offload the taxpayers’ 45 per cent stake in Lloyds Banking Group and the 84 per cent in the Royal Bank of Scotland.
Moreover, the Bank notes that some of our lenders – we saw heavy Spanish write-offs at Barclays – have challenges relating to large exposures to euroland countries where the fiscal positions are most acute.
This, it argues, has partly contributed to higher spreads – interest rate margins – in the money markets.
Amid all this concern about Continental economies and banking, it remains something of a mystery as to why RBS was allowed to sell-off its 318 English branches of RBS and Scottish branches of NatWest to Spanish bank Santander for £1.65bn.
The Spanish lender may be one of the best capitalised banks in the world, but its expansion hardly helps competition in the highly concentrated UK banking sector.
Raising standards
Standard Life’s transition from mutual to public company was not the smoothest of events.
But under its current chief executive, David Nish, the group appears to be getting to grips with some of the remaining problems of the business.
It has simplified itself by getting rid of the capital-hungry Standard Bank, as well as the health insurance offshoot - which had little to do with savings and investment.
Nish has also tried to remove some of the mystery surrounding insurance accounting by focusing on key measures of performance like inflows, operating profits and dividend.
All these headed in the right direction in the first half although the UK result was held back by investment in new IT platforms, which seek to bring together Standard Life’s long term savings, ISA and pensions activity.Despite buoyant numbers - profits were up 10pc and the dividend raised by 4.8 per cent - the shares travelled backwards.
This almost certainly reflects the 23pc run up in the price over the last month, and some profit taking. Standard Life is usefully positioned overseas in Canada and the much favoured Indian market place.
 

Read more

Banks not to blame for a lack of borrowers

All those facts may be true, but, as one banking figure said to me last week: “There will be the ones that make the noise, but politicians have to look at the overall picture.”
With the five major UK banks set to report their half-yearly results this week, and profits set to rise to £8.4bn, according to consensus estimates, the question of lending will once again be uppermost in people’s minds. As George Osborne makes clear in his interview with The Sunday Telegraph today, banks should worry about lending first and worry about pay levels for top executives second.
The Barclays figures show that, for them (and it is likely that this picture is repeated across the industry), the lending approval rate to larger business is still comfortably between 90 and 100pc, as it was before the credit crisis. The number of applications for loans from mid-sized corporates (£10-£100m turnover) has fallen from more than 800 a month in March 2007 to just over 300 now.
For small businesses - those below £5m turnover - that are feeling the financing pinch even more acutely, there has been a relatively rapid uptick in approval rates over the past year. They have risen from a low just south of 70pc in the middle of 2009 to above 80pc now. As with the mid-caps, the number of applications has fallen significantly - from 18,000 a month in January 2008 to between 8,000 and 10,000 now.
When it comes to costs, Barclays says that for small and medium-sized enterprises, the client rate has fallen from 7.8pc to 3pc between 2007 and 2010. As an aside, the average residential mortgage cost has fallen from 6pc to 3.9pc.
It is difficult to see what more a bank like Barclays is expected to do. What would net lending targets, which the Government is still considering, actually achieve? 100pc approval rates? That would clearly be absurd.
Spring storms ahead
More broadly, this week’s results will be another opportunity for an analysis of how the financial sector is performing in that rather odd world we now inhabit, a world where, for banks at least, doing too well is dangerous.
As we report today, the two largely state-owned banks, Lloyds and Royal Bank of Scotland, are likely to report their first profits since the events of autumn 2008. This will probably be largely viewed as “good news” as the Government - and thus the taxpayer - wants to see those banks‘ share price rise. The more the share price rises the better it will be when it comes to the eventual moment to sell.
The other three - HSBC, Barclays and Standard Chartered - are also likely to report strong numbers. One of the main reasons for this will not be a significant growth in banking activity. It will be because the deliberately aggressive writedowns the banks took last year on impairments have proved not quite as apocalyptic as earlier feared. There has been a broad benefit from a decline in provisions for toxic loans for the sector which orginally set aside £35bn for bad debts.
On the investment banking side, as with the Wall Street banks which reported last month, volumes and profits will be down. At Barclays Capital, for example, analysts estimate that in comparison with the £11.6bn income of the first half of 2009, the figure is more likely to be £7.2bn for the first half of 2010. Although the proportion of that put into the compensation pot is the same - at 38pc - the actual quantum will be reduced.
The problems the banks have is that this reporting season, summer 2010, is likely to be the most benign they face for the next year. There are brewing forces ranging against them that could cause something of a “perfect storm” next autumn and spring.
As many school children know, a perfect storm is created when a bank of warm air and a bank of cold air collide in such a way that the intensity of the storm is such that it overwhelms all boats in its path.
In this threatened financial perfect storm the warm air is the gradually improving results: reasonable numbers, trading and profits down maybe in some areas, but balance sheets seeing signs of real recovery.
The cold air? That is flowing in under the banner of public sector cuts, refinancing for many businesses in the next calendar year and the Government’s own banking commission.
The next reporting season will be in the autumn. As corporate activity picks up, some confidence will come back and trading volumes will increase. Profits for banks will start spiking up.
At the same time the Government will announce the comprehensive spending review and the full depth of the public sector cuts ahead. Tens of thousands of workers will fear for their jobs. Businesses, as the Treasury’s Time to Pay support for struggling operations begins to unwind, will eye their refinancing period with a degree of trepidation. The Chancellor raises just such an issue in his interview today.
“My priority is to make sure that small and medium-sized businesses are not innocent casualties of this process and that the finance is in place to allow them to restock and to grow in the recovery,” he says.
By the spring, the public sector cuts will be beginning to bite just as the banks announce their year-end numbers - billions of pounds of profits - and their remuneration plans - millions of pounds in share options and bonuses. There could, by then, be marches in the streets as the full scale of the austerity Budget begins to hit home.
At the same time the banking commission will report on how it proposes cutting banks “down to size” and increasing competition and lending.
That is the risky confluence of events for the UK finance sector and one they have to start preparing for now. The warm air of better performance and the cold air of public sector cuts and the banking commission could create quite a storm. Whatever the reaction to this week’s numbers, it will appear calm by comparison.
Five Filters featured article: “Peace Envoy” Blair Gets an Easy Ride in the Independent. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.

UK house prices fall in July for only second time this year

The average price of a UK home fell 0.5pc to £169,347 in July, according to the latest figures from Nationwide Building Society released on Thursday. This month’s fall comes after prices stalled in June, and leaves them just 6.6pc higher than they were a year ago.

A combination of record low interest rates and far less unemployment than feared has helped prices rebound after slumping for 18 months in the wake of the credit crisis. However, Nationwide today suggested that the balance between buyers and sellers, which has also helped buoy prices, may be changing as the number of potential buyers dwindle.

Martin Gahbauer, Nationwide’s chief economist, said: “Many potential buyers still lack the confidence to purchase their first home or trade up when faced with uncertainty over future income and employment prospects.”
It will take several months, he added, to determine whether prices will resume falling or remain flat. Some economists are more pessimistic about the outlook, given the public spending cuts and still fragile state of UK banks.
Howard Archer, an economist at Global Insight, said “household confidence is currently weak and concerns over both personal financial situations and the economic outlook have been fueled by extra austerity measures.”
Five Filters featured article: “Peace Envoy” Blair Gets an Easy Ride in the Independent. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.

Cheaper mortgage costs not passed to borrowers

Experts warned that the trend is likely to wane as lenders continued to repair
their balance sheets, damaged by the credit crisis.

Melanie Bien, director of mortgage broker Private Finance, said: “Lenders are
keen to repair their balance sheets, rather than chase the volume of lending
that they did in the past. Instead of offering the most competitive rates,
undercutting the competition, they would rather improve their margins.

“For hard-pressed borrowers, this looks like shameless profiteering when
mortgage rates have so little connection to money market rates.”

Read more

M&S’s Dutch boss on the horns of a dilemma

Dexter endeavours
to solve credit crisis

A call for a Royal Commission into the financial crisis came and went in the
letters pages of a national newspaper last week.

“The turmoil in the City and in world financial markets continues and we
have yet to understand its full cost.”

Exactly.

Read more

Double-dip fears as US recovery falters

The focus this week switched to the US, and a string of terrible data which
prompted fears that recovery in the world’s largest economy is losing steam,
and is about to lead the rest of the world into a double dip.

There are concerns too that growth in China is slowing and may not be able to
provide sufficient support to the rest of the world. And lastly, while the
fevered panic over the eurozone debt crisis, impending austerity, and social
unrest has abated, anxiety has not been erased.

The bad news from the US this week included a nasty drop in consumer
confidence; a fall in US non-farm payrolls; and plunging home sales. The UK,
reliant on world trade to give its fragile recovery wings as it embarks on
an eye-watering fiscal squeeze, would inevitably be pulled down with the US
if a renewed slump took hold.

Read more

Billions wiped of British shares as FTSE plunges 3% over shaky recovery

By
Simon Duke
Last updated at 10:40 PM on 29th June 2010

More than £40billion was wiped off the value of Britain’s biggest companies yesterday amid mounting concerns over the health of the banking system. The FTSE 100 fell 157 points, or 3.1 per cent, to a nine-month low of 4,914 as the spectre of a second credit crisis returned to haunt stock markets across the globe. On Wall Street the Dow Jones index fell by more than 300 points at one stage amid warnings that the losses in the banking system could trigger double-dip recessions in Europe and America. It closed down 268 points at 9870.
Recovery fears: The benchmark London index plunged almost 3 per cent Fears are growing that British and eurozone banks will struggle to
raise cash when the European Central Bank withdraws a key £356billion
support package tomorrow.
Wholesale interest rates surged to a nine-month high yesterday amid
signs that banks across Europe are hoarding cash ahead of the deadline,
which could produce a funding shortfall of as much as £100billion.
The gigantic financial squeeze could further constrain lending to
businesses and consumers and snuff out the embryonic economic recovery
in the developed world, experts warned.
The fragility of Britain’s bounce out of recession was underlined by
a stark warning from a Bank of England policymaker that the economy was
not strong enough to withstand higher borrowing costs.
Monetary Policy Committee member Paul Fisher said: ‘We need to be
sensitive to the risk of tightening policy (raising interest rates)
prematurely, stifling the nascent recovery.’ The prospect of another
crisis in the banking system was compounded by signs that the Chinese
economy is grinding to a halt and a shock fall in U.S. consumer
confidence.
This will set alarm bells ringing in the Treasury, which is relying
on a potent rebound in world trade to revive the moribund economy.
Stephen Gallagher, an economist at French Societe Genmoreerale,
said: ‘Financial market turmoil and concerns about premature fiscal
tightening are finally weighing on the U.S. consumer after two months
of resilience.’
Investors who own mining shares were among the biggest losers from
yesterday’s rout with concerns over demand from China triggering falls
of than 6 per cent for Rio Tinto and Xstrata.
But banks were also pummelled, with Barclays losing more than 6 per
cent of its value and Royal Bank of Scotland down 4 per cent.
The index of Britain’s largest companies has now lost 14 per cent
since the April 20 explosion at BP’s oil rig in the Gulf of Mexico. Its
woes have so far wiped more than 50 per cent off the value of the oil
giant.
The calamitous falls will not only hit millions of Britons who
invest directly in shares but many millions more pension savers across
the land.
Further turmoil is expected on markets this morning as European
banks, including UK lenders, prepare to re-pay some £356billion in
one-year loans to the European Central Bank tomorrow.
The programme was put in place to help banks survive the worst
ravages of the crash last year, but the ECB is trying to wean banks off
the support.

Share this article:

Here’s what readers have had to say so far. Why not add your thoughts below,
or debate this issue live on our message boards.

Read more

Say goodbye to your bank if the computer says ‘no’

Now, he may be doing his job, but the constant harassment makes me want to
change my bank, although I was told not too long ago that I was a “blue
chip” customer. An independent financial adviser suggested it is better
to be with the devil you know, than the devil you don’t. Is he right?

Computers, risk management and control from head office have changed the way a
bank manager can operate. Today banking is less personal and more driven by
process. Perhaps key performance indicators have become more important than
customer service

I don’t agree with your financial adviser. If you are a gold-plated client you
deserve help, not harassment.

Read more

Private equity and £75m case of the phantom haddock

By
Andrew Leach, Mail on Sunday Financial News Editor
Last updated at 10:23 PM on 12th June 2010

Fishermen always regret the one that got away, but private equity firm 3i’s problem has been the £75 million whopper that it landed. The FTSE 100 company fell hook, line and sinker for British Seafood, one of Britain’s biggest fish importers founded by businessman Mark Holyoake to source fish in the Far East for dining tables in Europe. Lured by Holyoake’s story of fastgrowing profits and soaring purchases by British Seafood from its top ten suppliers in places such as Hong Kong, 3i splashed out £71.8 million in December 2007 and a further £2.8 million last August. But British Seafood was hit by the credit crisis, which curtailed its ability to borrow money to bridge the time gap between paying suppliers and being paid by customers. It went into administration last February, wiping out the 28 per cent stake of 3i.

All at sea: The FTSE fell hook, line and sinker for one of Britain’s fish importers

Administrator Deloitte then contacted the Serious Fraud Office, which has begun a probe into the collapse of the business.
Now, in an explosive legal document seen by Financial Mail, 3i
claims it was fraudulently induced to invest in British Seafood by
Holyoake and the company’s finance director, David Wells. It is
claiming the £75 million it lost plus damages for deceit.
As well as pursuing Holyoake, 3i has targeted his parents, Alan and
Micheline Holyoake, who live in a £2 million house in Buckinghamshire
and sold shares in British Seafood to 3i. According to the legal claim filed at the High Court, the couple
received £34.2 million in cash for their shares and paid about £20.5
million to Mark Holyoake who acted as agent to his parents.
The deal involved creating two new companies to purchase the
operations of British Seafood. Its other shareholders, including Mark
Holyoake, received ei ther shares in the new companies, cash or loan
notes repayable at a later date, for their stakes.
The private equity firm says it partly made its investment decision
based on a report by accountant KPMG entitled ‘Project Orkney Financial
due diligence report’, which contained information such as earnings
figures.
It also detailed millions of pounds of purchases from British
Seafood’s top ten suppliers, including the exotically named Golden Sea
Aquatic Product Limited and Oriental Northern-Pacific Seafoods Limited,
and described some of their operations. 3i says it was told that Mark
Holyoake had no business interests that were in any way connected with
any of the suppliers. The legal document quotes the report as saying:
‘Golden Sea has, in management’s view, the best haddock facility in the
world, the natural attributes of that fish having specific handling
challenges more difficult than other white fish, and it has become
dedicated to that product in 2007 and supported its growth.’ However,
3i claims that Golden Sea and three other top ten suppliers are
actually ’shell’ companies and that Mark Holyoake was their
‘beneficial’ owner, while two of the suppliers did not exist at all.
The claim says: ‘Golden Sea Aquatic Product Limited did not have
“the best haddock facility in the world” (or indeed any “haddock
facility”).’ It adds that it was inconceivable that Mark Holyoake and
David Wells did not know of this situation.
Holyoake founded British Seafood in 1995 and the company featured
regularly in league tables of the fastest-growing companies in Britain.
The 37-year-old, whose majority stake in British Seafood was lost in
its collapse, lives in a multi-million pound white stucco Georgian
house near Kensington Gardens, west London.
A spokesman for Holyoake said his client completely rejected the
allegations and would be vigorously defending the claim. ‘Our client is
perplexed that such a claim has been made as the reason for the failure
of British Seafood was due to the credit crisis leading to the
withdrawal of banking facilities,’ he said.
The spokesman added that 3i spent £4 million, funded by British
Seafood, on due diligence before the deal, had a seat on the board and
never raised any concerns.
The spokesman added: ‘The Serious Fraud Office has not contacted our
client and nor is it expected that the SFO will do so going forward.
This matter amounts to nothing more than a standard commercial
dispute.’
KPMG declined to comment, while Wells was not at his address listed
at Companies House and according to 3i’s claim now lives in
Switzerland. A spokeswoman for 3i declined to comment.
The legal action is a huge embarrassment for Britain’s oldest
private equity outfit since it raises questions about its due diligence
and how it monitors its investments.
The firm, whose investments include luxury underwear brand Agent
Provocateur, has had a tough few years in line with the rest of the
industry, however chief executive Michael Queen oversaw a rescue rights
issue last year and last month the company moved back into the black
with annual profits of £159 million.
British Seafood was one of the three investments it lost during the
year, but for the sake of its reputation it may be wishing it had never
caught it in the first place

Read more

Next Page »