Ex-FSA Chief Drops RBS Branch Consortium Role

By Mark Kleinman, City Editor

The former chief executive of the City regulator has withdrawn from a consortium bidding to buy more than 300 branches being offloaded by Royal Bank of Scotland (RBS).

I have learnt that John Tiner, who was chief executive of the Financial Services Authority (FSA) between 2003 and 2007, is to play no further formal role in an offer for the branch network being led by Corsair Capital, the private equity firm where he works as a senior adviser.

His decision to step back from the bid comes amid expectations that two forthcoming reports about various aspects of Britain's banking sector will level robust criticism of the FSA's performance in the period before the crisis.

Corsair had planned to install Mr Tiner as chairman of the RBS business if it succeeds with its offer.

But people close to the situation say that Corsair has now informed both RBS and the Treasury that he will no longer assume this role. This decision is understood to have been made by Mr Tiner himself and without any external pressure from the Government or regulators.

"John is a first-class guy, and there has been no external effort to remove him from the bid, but with everything else that is happening now, he thought it better not to proceed," an insider said.

Mr Tiner's withdrawal follows the tirade of criticism which engulfed Sir James Crosby, the former chief executive of HBOS and ex-deputy chairman of the FSA, when a Parliamentary Commission on Banking Standards report accused him of being the architect of HBOS's disastrous expansion.

The Commission is likely to make further critical remarks about the performance of the FSA in its final report in the summer.

More importantly from Mr Tiner's perspective, insiders said, the Financial Conduct Authority - the FSA's successor body - will publish in the autumn its account of the failure of HBOS in the autumn of 2008. That account will be extremely self-critical and lay some of the blame at Mr Tiner's door, regulatory sources said.

Lord Davies, the respected former trade minister who is a vice-chairman and partner of Corsair, could take the chairmanship of the RBS branch network on a temporary basis, they added.

In addition to his advisory role at Corsair, Mr Tiner is a non-executive director of Credit Suisse, the Swiss-based banking group, and of Lucida, a pension insurance firm.

He was awarded a CBE in 2008 for services to the finance industry, although there have been no calls for him to follow Sir James' gesture and voluntarily forfeit the honour.

Corsair has secured backing for its bid for the RBS branches from Lord Rothschild's investment firm, RIT Capital Partners, and Centerbridge, another private equity group.

Its bid is thought to be well-placed but is up against competition from a consortium of City institutions as well as a potential bid from Virgin Money.

Mr Tiner was unavailable for comment, while RBS declined to comment.

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Retail Sales Drifted As March Snow Fell

The coldest March since 1962 stopped shoppers hunting down spring ranges, resulting in a 0.7% fall in overall retail sales.

The Office for National Statistics (ONS) figures said that left sales 0.5% lower on the year.

Despite the early Easter holiday, non-food sales tumbled by 4% in March and this was only partly offset by the biggest rise since March 2009 in non-store retailing, which includes online shopping.

Online sales accounted for 10.4% of all spending, compared with 8.8% a year earlier.

The information suggests that consumers stayed away from stores, especially those with DIY, gardening and spring clothing offerings, and carried out only essential food shopping.

Other earnings reports - and those of individual retailers - have been mixed.

While the British Retail Consortium found 3.7% annual growth in the value of retail sales, the ONS measured it at just 0.1%.

Meanwhile, Debenhams blamed snow in January for a 5.4% dip in profits in its first half.

Debenhams stock is up sharply on Thursday

Britain's second biggest department store group forecast a better second half of the year after making a pre-tax profit of £120.3m in the 26 weeks to March 2.

That was in line with guidance given in a March profit warning, when the firm said snow in January had dented sales.

Chief executive Michael Sharp said: "We expect to make further progress in the second half, despite consumer sentiment remaining weak and challenging market conditions."

Many retailers have been finding trading tough as consumers, whose spending generates about two-thirds of gross domestic product, continue to face a squeeze on incomes at a time of record household energy prices and other higher costs.

The soggy summer of 2012 followed by the cold winter also held back sales - although most economists are now tipping the UK to avoid a triple-dip recession.

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Lagarde: IMF May Urge Osborne Over Austerity

By Ed Conway, Economics Editor

Christine Lagarde has given her firmest signal yet that the International Monetary Fund is on the brink of issuing George Osborne with detailed advice on changing his austerity plans.

The IMF managing director warned that Britain's economic growth performance is "not particularly good", reinforcing suspicions that the fund will ask the Chancellor to moderate the severity and speed of his austerity plans.

The fund's chief economist, Olivier Blanchard, was more forthright earlier this week, telling Sky News that Britain's economic policy plans were "playing with fire".

Ms Lagarde refrained from passing detailed judgement ahead of the fund's official Article IV annual survey of the country, which takes place next month.

But she said: "We have repeatedly said in the last couple of years that should growth abate and be particularly low there should be consideration to adjusting by slowing the pace (of fiscal consolidation).

"Looking at numbers - without having dwelt under the skin - the growth numbers are not particularly good. This is a continuum of (our) position. What has changed is the quality of the numbers."

The comments came as the incoming Bank of England Governor, Mark Carney, said that Britain should be considered one of the world's "crisis economies".

In comments at an event on the fringes of the IMF meetings, he said: "There are three classes of economy. There's the crisis economies, including the United States, which is breaking out of that pack; it includes the Eurozone, the UK and Japan."

Mr Carney also dismissed hopes that central banks such as the Bank of England or the Bank of Canada, where he is currently Governor, could single-handedly generate growth.

He said: "Can they deliver sustainable growth? The answer is no. They can help with balance sheet repair and, for instance, transition to more sustainable euro area.

"But they can't deliver the long term growth necessary. That needs to come through full fiscal adjustment and fundamental structural reforms."

Ms Lagarde's comments on the fiscal situation in the UK will set up one of the most-eagerly awaited IMF annual surveys in recent British history, with the fund expected to set out precisely how far it expects the Government to change its position on tax and spending.

Although the IMF's advice is not binding, a negative judgement would be highly embarrassing for the Chancellor, even beyond the already critical comments of the fund.

Ms Lagarde also addressed the news that she has been summoned to appear in court in France over her handling of a scandal when she was the country's finance minister.

She said: "There is nothing new under the sun. Ever since 2011 I had known very well that I would be heard by the investigating commission of the Courts de Justice.

"I'll be very happy to travel for a couple of days to Paris but it's not going to change my focus, my attention and my enthusiasm for doing the work that I do."

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Tesco Confirms US Exit And Profit Fall

Tesco has confirmed its first fall in annual profits for 20 years and writedowns totalling more than £2.5bn as it moves to concentrate on improving its UK supermarket business.

The retailer confirmed it is exiting its loss-making Fresh & Easy operation in the United States, with a resulting £1.2bn writedown a major factor behind its 51.5% fall in pre-tax profit to £1.96bn in the year to February 13.

Tesco was also hit by costs related to its turnaround plan for the UK while its bank's exposure to the payment protection insurance scandal grew to £115m.

A writedown of £804m was also confirmed on the value of its UK property portfolio as it scrapped more than 100 store developments to focus on store revamps, convenience stores and improved delivery to online customers.

Tesco is seeking a buyer for its Fresh & Easy operations

A £495m 'goodwill impairment' relating to its operations in Poland, the Czech Republic and Turkey was announced too.

Tesco's chief executive Philip Clarke said that the actions would put the company "back on the right track" to deliver long-term growth for shareholders though its share price took a 2.8% hit when trading opened in London.

He continued: "The large stores we have are great and we are doing a lot of work to make them more vibrant and relevant for today's customers, but we won't need many more of them because growth in future will be multi-channel - a combination of big stores, local convenience stores and online."

The group said fourth quarter sales at British stores open over a year, excluding fuel and VAT, grew 0.5% - a slowdown from growth of 1.8% in the six weeks to January 5.

Philip Clarke has signalled an end to 'store wars' by halting new building

Mr Clarke admitted that sales over the past few months had been impacted by the horsemeat scandal as customers steered clear of frozen meat products.

Tesco had to withdraw four products from sale amid the crisis, but said the effect on overall sales was minimal and stressed that trading was now "back to normal".

While still well ahead of its supermarket rivals in terms of market share, Tesco has been facing a greater challenge from the likes of Asda, Morrisons and Sainsbury's.

They had been investing in their UK operations at a time when Tesco had concentrated on diversifying its business.

Tesco apologised in January for horsemeat in some of its burgers

Last year, Mr Clarke pledged a £1bn investment to upgrade its stores and customer service offering - at one stage taking personal charge of the turnaround plan.

Capital expenditure fell by 19% or £0.7bn to £3bn in the financial year.

Recent surveys have suggested the supermarket chain is still struggling to win round customers, with a study by Which? in February suggesting that Tesco was the most complained-about.

Researchers Espirito Santo said this week that customer perceptions of Tesco had deteriorated since November, with the horsemeat scandal a contributory factor.

It found that views on Tesco's quality, prices, promotions and overall value for money had all fallen while a net 16% of Tesco customers chose to shop more elsewhere because of horsemeat.

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'Quick House Sale' Market Investigated

The Office of Fair Trading (OFT) is investigating fears people desperate for money are being preyed on by firms offering "quick house sales".

Fifty unidentified companies operating in the market have been contacted by the watchdog for details on their business models while consumers are being urged to contact the OFT with information on their experiences.

Firms in the sector offer to buy a house themselves or find someone else to snap it up, often for less than the full market value of the property.

The OFT said that while such companies may offer a "valuable service" for people who need fast access to cash, it is concerned that stressed and vulnerable home owners looking for a way out of financial difficulties could be misled into selling for far less than their home is worth.

There have been suggestions that some customers have been told at the final stage of the 'quick sale' process that the price they were getting had been considerably reduced.

Other practises the watchdog is watching for include firms hiding their fees behind initial valuations which appear to offer a good price and severe penalties for breach of contract.

The number of 'quick sale' operators has grown as the tough economic climate has continued.

More than 157,900 UK households had fallen behind on their mortgage payments at the end of 2012 and over 110,000 couples divorced in 2011 in England and Wales.

The OFT plans to publish a report on the quick house sale sector in July.

The new regulator, the Financial Conduct Authority, welcomed the investigation and said it will work with the OFT to tackle any concerns.

Peter Bolton King, global residential director of the Royal Institution of Chartered Surveyors, said that anyone considering a quick house sale should take a step back and consider other options.

He said they should get an estimate of what their house could sell for on the open market, even if their house is priced for a quick sale.

Mr Bolton King said: "Naturally, people feel under financial pressure. You think: 'I can sort out my problems in one fell swoop'.

"But you should take a breath, take a step back and make sure you totally understand what it will mean."

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Apple Share Value Peels Away On Demand Fears

Apple shares fell below the $400 mark on Wednesday for the first time since December 2011 amid fears about weakening demand for its iPhone and iPads as competition intensifies.

A surprise warning about disappointing revenue at Cirrus Logic, which makes audio chips for both products, sparked the sell-off.

The US firm's forecast added to market speculation that sales of the iPhone - which make up more than half of Apple's revenue - are slowing more quickly than expected as Samsung and other rivals flood the market with cheaper devices.

It also threw the spotlight on Apple's quarterly earnings announcement due out next week, with some analysts saying the results could miss already reduced estimates.

"This is a tough environment. Apple is in transition between products," said Michael Yoshikami, a portfolio manager at California-based Destination Wealth Management which owns about 50,000 Apple shares.

Cirrus Logic had warned of a reduced product forecast from one customer - which it did not name - but at least 90% of its business comes from Apple.

Apple shares dipped below $400 on the Nasdaq before closing 5.5% lower at $402.80.

The drop wiped more than $22bn (£14.4bn) off its market value.

Since its September 2012 peak, Apple has lost 40% of its market value - slightly more than Google's entire capitalisation.

The drop has been fuelled by worries about the effect on Apple's industry-leading margins if it is forced into faster updates of its products to keep up with rivals.

Some say Apple will not be able to sustain its high gross margins as competition in the tablet and smartphone markets leads to lower prices.

Analysts expect Apple to report a 9% increase in quarterly revenue on April 23, with net profit expected to be down 17%.

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Npower: Energy Firm Denies Tax Avoidance

Npower has admitted it has not paid corporation tax in the UK for three years - just months after increasing prices by around 9%.

The company made the admission to the Energy and Climate Change select committee - but its boss said they had invested billions in new power stations and wind technology.

Chief Executive Paul Massara said: "Effectively we have invested £5bn in the last five years building power plants, creating jobs, creating employment and helping to keep the lights on.

"If we had not made that investment we would not have the deductibility that we would be allowed. That is a simple accounting UK rule."

Npower reported a 34% rise in profits to £413m last year.

The admission came as the "big six" energy companies were questioned by MPs over topics including profits and how they treat their customers.

A company statement added: "Looking at RWE npower specifically, our investment programme since 2008 has amounted to almost £3bn, which means we have seen a large increase in tax relief.

"This is in no way tax avoidance, and all of our business is taxable in the UK. We've not paid corporation tax because we've been investing hundreds of millions to keep the UK's lights on."

Prime Minister David Cameron's official spokesman said: "I wouldn't comment on an individual taxpayer.

"More broadly, the Prime Minister's view is that it is important that companies pay the tax that is due."

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M&S Fightback Hit As 'Knicker Queen' Quits

Marks & Spencer's battle to overturn a slump in clothing sales has suffered a blow after its head of lingerie and beauty quit after just three months in the job.

The appointment of Janie Schaffer, who is known as the Knicker Queen, was announced amid much fanfare in November as part of a wider plan to bolster its general merchandise offering.

A spokeswoman for M&S confirmed last night that Schaffer, who had previously worked as chief creative officer at Victoria's Secret, had left the firm but declined to comment further.

It is understood she had wanted more creative input at M&S.

Only last week the company announced its seventh straight quarterly fall in underlying sales of clothing, footwear and homewares - a performance which intensified pressure on chief executive Marc Bolland.

He had previously said that his turnaround plan would not make a major impact on sales until July when autumn and winter collections hit the shops.

His new general merchandise management team is led by John Dixon, the former boss of M&S's food business, and Belinda Earl, the former chief of Debenhams and Jaeger.

News of Schaffer's departure overshadowed M&S's announcement that it was to make a greater advance into Europe in the Netherlands, Luxembourg and Belgium.

M&S, which exited all of its stores in continental Europe in 2001, had previously confirmed a return to France.

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Tesco Confirms US Exit And Profit Fall

Tesco has confirmed its first fall in annual profits for 20 years and writedowns totalling more than £2.5bn.

The retailer confirmed the closure of its loss-making Fresh & Easy business in the United States, with a resulting £1.2bn writedown a major factor behind its 51.5% fall in pre-tax profit to £1.96bn in the year to February 13.

Tesco was also hit by costs related to its turnaround plan for the UK while its bank's exposure to the payment protection insurance scandal grew to £115m.

A writedown of £804m was also confirmed on the value of its UK property portfolio as it scrapped more than 100 store developments to focus on store revamps, convenience stores and improved delivery to online customers.

A £495m 'goodwill impairment' relating to its operations in Poland, the Czech Republic and Turkey was announced too.

Tesco's Chief Executive Philip Clarke said that the actions would put the company "back on the right track" to deliver long-term growth for shareholders though its share price took a 2.8% hit when trading opened in London.

He continued: "The large stores we have are great and we are doing a lot of work to make them more vibrant and relevant for today's customers, but we won't need many more of them because growth in future will be multi-channel - a combination of big stores, local convenience stores and online."

The group said fourth quarter sales at British stores open over a year, excluding fuel and VAT, grew 0.5% - a slowdown from growth of 1.8% in the six weeks to January 5.

While still well ahead of its supermarket rivals in terms of market share, Tesco has been facing a greater challenge from the likes of Asda, Morrisons and Sainsbury's.

They had been investing in their UK operations at a time when Tesco had concentrated on diversifying its business.

Last year, Mr Clarke pledged a £1bn investment to upgrade its stores and customer service offering - at one stage taking personal charge of the turnaround plan.

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New Round Of Fuel Price Cuts Revealed

Petrol: The Pump Price Conundrum

Updated: 10:35pm UK, Wednesday 30 January 2013

By Ursula Errington, Business Correspondent

So, the OFT says motorists aren't being ripped off, that the price of petrol on our forecourts is fair and isn't the result of collusion or price-fixing.

Outraged motoring groups still aren't convinced.

The reality is, I don't think anyone knows how to work out the relationship between crude oil and pump price.

From the moment crude oil is pumped out of the ground to when we hand over our money at the till to pay for a topped-up tank, the price of the commodity has been influenced by multiple markets all subject to their own supply and demand idiosyncrasies.

I last worked in oil trading about a decade ago and back then the relationship between the price of Brent crude oil and pump prices was deemed to be pretty sketchy.

Assiduous analysts, whose job it was to structure financial instruments to hedge the bank's customers with exposure to fluctuations in the oil market, pored over oil prices and pump price data looking for a concrete correlation on which to base a safe hedging instrument.

Judging by the collective sighing, teeth-gnashing and head-in-hand gestures, it proved both time consuming and difficult.

Broadly a six-week time lag was identified between a movement in the crude oil price to a correlating adjustment in the pump prices back then but it was considered too statistically patchy to appeal to clients.

So why is it so difficult to find a relationship between the price of oil and the pump price drivers pay?

Firstly, pricing crude oil itself is pretty complicated. Before the black stuff is even out of the ground its anticipated value has been traded on the futures market for weeks, months or years before.

On any one day the oil price is set by taking a combination of a weighted average and straight average up to two months in the future, of all the trades over 600,000 barrels executed on the electronic trading platform the Intercontinental Exchange (ICE).

So it is fair to say that part of the oil price is set by traders who are speculating, who have no intention of allowing their futures contracts to mature and "go physical" (i.e. become related to an actual cargo of oil) but who are buying and selling futures contracts depending on their day-to-day view of the multiplicity of variables effecting the market.

This need not be considered a bad thing. Speculative traders aren't just plucking figures out of the air, they are working on the basis of fine-tuned mathematical models used to assist them in weighting all the factors in play - an outlandish speculative trade based on few decent indicators wouldn't be in their interest at all.

Crucially, these traders add a huge volume of trades to the market, which actually means that big distortions in one trader's view are evened out across the average when the price is set. 

Then there is the shipping market to get the stuff to shore. Highly volatile and as prone to geo-political influences as the commodity itself, shipping deals are opaque because they are over-the-counter and are often based on long-term trading relationships.

The economics of refining are also unhelpfully complex, predominantly because optimising refinery operations is tricky.

Refinery margins (the difference in price between the wholesale value of the products coming out of the refinery and the crude oil from which they were derived) have been surging for many companies of late because of a relative drop in the cost of crude oil and solid demand for products but unscheduled refinery outages, workers on strike, storage costs, changes in the quality of the crude itself - all these things will impact the margin within hours.

And then there's the cost of haulage and the variables at petrol station level, such as a franchise owner's credit rating, local forecourt wars and location.

All of that and we still have some of the cheapest fuel in Europe, according to the OFT.

But it's not over yet - the taxman must also have his share. In the 10 years from 2003 to 2012, prices at the pump increased from 76p per litre (ppl) to 136ppl for petrol and from 78ppl to 142ppl for diesel. Nearly 24ppl of that increase was because of tax and duty.

Is it any wonder then that trying to compare the price of crude oil and the pump price proves a largely fruitless task?

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