Bankers' Body Urged To Merge After Libor Loss

By Mark Kleinman, City Editor

Britain's banking lobby group is under pressure to consider a merger with another trade body as it seeks to fill a funding deficit triggered by the loss of its role setting the interbank borrowing rate Libor.

I have learned the British Bankers' Association (BBA) has been urged by a number of banks to examine a combination with the Council of Mortgage Lenders (CML) or another trade association.

The issue was discussed at a recent BBA board meeting, according to my sources, and is expected to form part of a new strategy for the banking group that will be unveiled by Anthony Browne, its chief executive, next year.

The BBA, which does not publicly disclose its accounts but circulates them among its members on an annual basis, generates millions of pounds each year from selling licences to data providers to allow them to publish Libor benchmark data.

Fees for membership of the BBA are paid on a sliding scale dictated by a bank's size, with major high street lenders such as Barclays and Royal Bank of Scotland paying the largest sums. Insiders say the biggest banks pay several million pounds a year to fund the BBA's work.

It is unclear what proportion of the BBA's income is generated by Libor-related activities, but one bank executive said the major lenders were reluctant to pay more to replace the lost revenue.

"They have to cut their cloth," the banker said.

The BBA's council voted in September to relinquish its role in setting Libor rates following the scandal which engulfed Barclays in June.

The UK bank paid £290m in fines for attempting to manipulate Libor rates before and during the 2008 financial crisis, and heavy penalties for other banks are expected to follow from regulators around the world before the end of the year.

The Government has said it will implement the recommendations of a review by Martin Wheatley, head of the new Financial Conduct Authority, for Libor rates to be overseen by a new body. Companies, including Bloomberg, have expressed an interest in taking on a role in the new Libor-setting regime.

Sources close to the BBA insisted it was not in talks about a merger or other alliance with the CML, although insiders confirmed such a move had been explored under the leadership of Angela Knight, Mr Browne's predecessor, who now runs the utilities' lobbying group, EnergyUK.

In a statement issued to Sky News, the BBA said: "We are confident any changes to BBA revenues can be managed efficiently and we are currently exploring options to propose to our board."

A CML spokeswoman said it was not in talks about merging with the BBA.

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easyJet Profit Soars By Over 27%

Budget airline easyJet has reported a rise in pre-tax profit of 27.9% to £317m over the year to the end of September.

The firm said a surge in late summer bookings to destinations including Malaga, Alicante and Faro helped boost its revenue, which increased by 11.6% to £3.85bn.

Passenger numbers were up by over 7% at the company - which is Europe's second-largest budget airline after Ryanair - and it more than doubled its full year dividend from 10.5p to 21.5p, or £85m.

The company said its strong results come despite a rise of £182m in fuel costs and low consumer confidence across Europe as a result of the ongoing debt crisis.

Less disruption from weather and strikes helped easyJet reduce its amount of cancelled flights - fewer than 1,000 were cancelled over the last financial year, compared with more than 4,000 in 2011.

easyJet's share price has soared this year

Chief executive Carolyn McCall said: "These results demonstrate that easyJet is a structural winner in the European short-haul market against both legacy and low-cost competition."

She added: "Whilst there is always the potential for unexpected events to temporarily impact financial results, the Board of easyJet is confident that its business model, strategy and people will consistently continue to generate superior returns and growth for shareholders."

The airline has outperformed rivals, which continue to struggle with the tough economic conditions facing the sector.

Earlier this month, IAG's Spanish airline Iberia reported profit of just £13.5m, and announced pay cuts and 4,500 job losses. 

While Spanair and Hungary's Malev have both ceased operations - leaving gaps in the market that easyJet has been able to take advantage of.

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Hovis Owner Premier Foods To Cut 900 Jobs

The owner of Hovis has announced plans to cut 900 jobs in its struggling bread business as profits become harder to come by.

In a statement, Premier Foods said it was to close two bakeries and reform its delivery network.

The biggest impact will be felt in Birmingham, where 511 jobs are to be lost with the closure of a factory and distribution operation.

Hovis operations at Greenford in west London will also shut costing 196 jobs while Premier said it was also preparing to close distribution sites at Plymouth and Mendlesham in Suffolk resulting in 95 job cuts.

The closures are subject to consultation with employees but are scheduled to take place during the course of 2013.

St Albans-based Premier, which also makes Mr Kipling cakes and Bisto gravy, has seen its Hovis division hit by intense competition in the bread market and a surge in wheat price inflation caused by poor weather.

As a result it is set to lose a £75m-a-year contract with a major grocery chain from the middle of next year after Premier was unable to agree a new deal on sufficiently attractive terms.

It is cutting 130 distribution routes and closing the supply centres to take into account the expected reduction in volumes.

Premier chief executive Michael Clarke said: "We recognise the impact these actions will have for our employees at the sites affected.

"Decisions will not be taken lightly but they are necessary if we are to build a strong and successful future for the bread division and those who remain with our business."

Sky's City Editor Mark Kleinman revealed last month how the business had recruited Goldman Sachs to find a buyer for Hovis.

Premier has offloaded several well-known brands in recent times, including Sun-Pat Peanut Butter and Branston Pickle, as it looks to concentrate on a portfolio of what it sees as core brands.

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Payday Lenders Face Regulator Inquiry

Several payday lending firms are facing a formal investigation over aggressive debt collection tactics amid concerns about poor practice in the wider industry.

The announcement was made by the Office of Fair Trading (OFT) which said it was taking several actions in the wake of a progress report on the sector during its continuing compliance review.

The OFT said it was unable to name the specific companies at the heart of its inquiry into debt collection but David Fisher, its director of consumer credit, said: "We have uncovered evidence that some payday lenders are acting in ways that are so serious that we have already opened formal investigations against them.

"It is also clear that, across the sector, lenders need to improve their business practices or risk enforcement action."

The OFT said it was writing to all 240 lenders in the market to outline its concerns but expects to warn the majority of 50 firms it has inspected that they risk enforcement action if they do not improve their standards.

Mr Fisher continued: "Our report shows that a large number of payday loans are not repaid on time. I would urge anyone thinking about taking out a payday loan to make sure they fully understand the costs involved so they can be sure they can afford to repay it."

Payday loans are products designed to cover a person's costs until a salary is paid but have stiff penalties if repayments are missed with some imposing annual interest rates of more than 4,000%.

Recent research from Which? suggested 57% of customers had incurred penalties while 20% who took part in the survey complained about being hit by unexpected charges.

Among the OFT's biggest concerns was the adequacy of checks made by some lenders on whether loans will be affordable for borrowers and the proportion of loans that are not repaid on time.

The industry has previously insisted it has high customer satisfaction levels.

In reaction to today's report the UK's biggest payday lender Wonga said: "We welcome the on-going OFT review of payday and short-term lending, which seeks to provide further protection for consumers and clamp down on unscrupulous lenders.

"We provide a valued, transparent service to more than a million customers and want to see rogue practices rooted out across all financial services.

"Consumers are crying out for clear pricing, more control and fair treatment, while robust credit checks are essential to ensure appropriate lending."

The regulator had cited concerns in its interim report that lenders' advertising often appears to target people who are already in financial difficulty and encourage them to roll over loans.

Around a third of payday lending websites looked at by the OFT included statements such as "no credit checks", "loan extension guaranteed" and "extend loans up to four or five times".

The OFT said it would publish in the New Year a full report setting out further findings on compliance, including whether wider action is needed to tackle problems in the sector.

The regulator has also updated its Debt Collection Guidance, focusing on the continuous payment authority mechanism commonly used by payday lenders to collect repayments.

According to the OFT, it makes clear the minimum standards expected of traders.

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Energy Bills: Shake Up Could Push Up Cost

Families could end up paying more after a shake-up in energy prices because cheaper deals will be axed, experts have warned.

New Government plans are expected to force companies to offer just four tariffs per fuel and make them automatically shift customers onto the cheapest.

The tariffs would have to include a standard variable rate and a fixed price for a fixed term, then firms would be able to decide on another two.

Suppliers would be forced to offer one price for each of the options, although they could still offer discounts for dual fuel bills or those paying by direct debit.

The move is aimed to address long-standing concerns about soaring gas and electricity prices and fears the current array of tariffs means many people pay too much.

Energy Secretary Ed Davey

A consultation has now been launched and will run until January, with the Government aiming to have all customers on the cheapest deal by summer 2014 at the latest.

Details of the proposal come weeks after Prime Minister David Cameron sparked confusion by vowing in the Commons that firms would be forced to charge customers the lowest price.

Energy Secretary Ed Davey said: "For too long, people have been stuck on the wrong type of energy tariff, paying more than they need to.

"Our new proposals will make things much clearer and easier to understand so that bill payers can get the best deal and feel the benefits in their pockets."

The Prime Minister added via Twitter: "My promise to ensure energy customers get the lowest tariff is being delivered, despite Labour saying it couldn't be done."

It has been suggested the changes could save families hundreds of pounds a year, but industry figures say some may have to pay more.

They warn a simplification would lead to some of the cheapest offers currently available being axed, because firms will be far more limited.

Energy UK chief executive Angela Knight, representing the energy companies, admitted the shake-up would create a simpler system where people could switch provider more easily.

But she also told Sky News: "Some of the choices will reduce because you can't have a variety of choice, including tariffs that offer you a particularly low rate for a particular time."

Guy Newey, head of energy and environment at centre-right thinktank Policy Exchange, added: "Cutting the number of tariffs and forcing energy companies to put households on the 'best' rate could end cheap deals.

"This risks punishing families who do the right thing and shop around. There is a danger this move could see fewer people switching, reduce competition and therefore push up bills in the long term."

Corin Taylor, an adviser at the Institute of Directors, claimed the reforms "miss the point" because firms would just increase their lowest tariff to compensate.

He argued: "Instead, the Government should be promoting competition and making it easier for new companies to enter the energy market."

Mr Davey, speaking to Sky News, admitted he could not "guarantee" lower energy prices because they were dictated by the world gas market.

But he added: "What I can do is the very best for consumers by making sure we have simpler bills, more competition and help people save energy."

The coalition's plans follow a spate of price hikes among the UK's "big six" power firms, who control 99% of the domestic energy supply.

In October, SSE prices rose by 9%, then British Gas and Npower went up by 6% and around 9% respectively this month.

In December, Scottish Power will hike its bills by 7% and EDF by 10.8%. Meanwhile, German-owned E.ON has denied reports it is planning a 11% increase.

The firms all blame rising wholesale prices, which they say are out of their control.

One firm, Co-operative Energy, has bucked the trend by unveiling plans to slash its electricity charges by 2% from December 21.

Shadow energy and climate change secretary Caroline Flint said: "The cheapest deal in an uncompetitive market will still not be a good deal.

"Unless David Cameron stands up to vested interests in the energy market and creates a tough new watchdog with powers to force energy companies to pass on price cuts, his warm words will be cold comfort to people worried about paying their fuel bill this winter."

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Intel CEO Paul Otellini To Retire In Surprise Move

Intel chief executive officer Paul Otellini has announced he will retire sooner than expected.

He will step down in May at the age of 62, earlier than the company's mandatory retirement age for CEOs of 65.

Mr Otellini, Intel's fifth chief executive, has worked at the company for nearly 40 years and became CEO in 2005.

Intel's board was surprised last week when Mr Otellini announced he planned to retire and it tried to get him to stay, Intel spokesman Chuck Mulloy said.

The firm, which has selected chief executives from within its own ranks throughout its 45-year history, said it would consider both internal and external candidates in a transition expected to last six months.

Mr Mulloy explained, due to the complex nature of Intel products, that internal candidates would still have an advantage.

But he added: "Good corporate governance dictates today you should look inside and out."

Wall Street experts said it might make sense for Intel to consider hiring an outsider to shake up its strategy, as the computing world goes through its most significant shift since the advent of the internet.

Since 2008, Intel's stock has fallen by more than 20%.

The firm's processors are dominant in personal computers, but it has been slow to expand into the fast-growing mobile industry.

Apple's iPads and iPhones and other popular mobile devices use competing technology from Britain's Arm Holdings Plc.

"We all know that everyone is using smartphones and tablets now. It's the era of Intel versus Arm, so it may be good to come in with some fresh blood and a new perspective," Evercore analyst Patrick Wang said.

Intel also announced it was promoting three executives to become executive vice presidents.

They are: Renee James, who is in charge of Intel software; Brian Krzanich, who is chief operating officer and oversees manufacturing; and Stacy Smith, chief financial officer and director of corporate strategy.

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Japanese Food Giant Wades Into UB Auction

By Mark Kleinman, City Editor

One of Japan's biggest food companies has made a late entrance into the auction of United Biscuits' snacks arm, augmenting an array of international interest in some of Britain's best-known consumer brands.

Calbee Foods has joined bidders from Germany and the UK, as well as one backed by a Russian oligarch, for products including KP Nuts, Hula Hoops and Skips, which collectively account for hundreds of millions of pounds of UK sales.

The Japanese company, which manufactures Kappa Ebisen shrimp crisps and Saya-endo snow-pea crisps, two of the country's biggest-selling snacks, has hired Rothschild to advise it on a potential bid for UB's snacks arm.

Its move adds to the competition for the business, which includes offers from Germany's Intersnack and Pamplona, a private equity firm backed by Mikhail Fridman, one of Russia's richest men.

Calbee has only just entered the sale process, which is being run by Credit Suisse on behalf of Blackstone and PAI Partners, UB's current shareholders.

Founded in 1949, Calbee employs more than 3000 people and is headquartered in Tokyo.

People close to the process said it was unclear whether the company would lodge a formal bid ahead of a deadline later this month. Rothschild was previously advising Verlinvest, another bidder which dropped out of the process in the last few weeks, according to people close to the auction.

Nobody involved in the UB sale would comment.

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Shareholders Back Glencore/Xstrata Mega-Merger

Shareholders have finally given their blessing to the takeover of mining company Xstrata by commodities trader, Glencore.

The deal followed nine months of wrangling among bosses and institutional investors in the FTSE 100 firms.

Xstrata's shareholders were the last to approve the tie-up, worth £19.4bn, but they rejected a controversial "golden handcuffs" retention plan for the miner's key managers that would have paid out £140m.

Xstrata said 78.8% of shareholders voted in favour of the merger.

Glencore, which is already Xstrata's largest shareholder with 34%, had offered 3.05 new shares for every Xstrata share it did not already own.

Last week, Xstrata's second-largest investor, Qatar, said it supported the merger, despite initial concerns over its terms.

But the country's holding company said it would abstain from voting on the miner's management retention plan.

Another institutional investor, Standard Life, had said it would reject the proposal.

European competition regulators will decide by Thursday whether to extend their investigation into one of the sector's biggest ever acquisitions.

If the deal goes ahead, it would create the world's fourth-biggest natural resources firm - worth around $90bn (£56bn).

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HP Hit By 'False Accounting' At Autonomy

Hewlett-Packard (HP) has accused Autonomy of lying about its finances, as it announced a write-down of $8.8bn (£5.5bn) relating to its purchase of the company.

The Silicon Valley computing firm said the majority of this charge was because of "serious accounting improprieties" at the Cambridge-based software company.

HP bought Autonomy for £7.1bn last summer, but said it now believes it was "substantially overvalued" at the time of the sale.

Nine months after the deal, the chief executive of Autonomy, Mike Lynch - who founded the company in 1996 and made more than £500m from the deal - stepped down.

Mike Lynch founded Autonomy in 1996

Following HP's announcement, Dr Lynch's spokeswoman said he "flatly rejects" the allegations, describing them as "false".

A statement said: "The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false.

"HP's due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg. HP's
senior management has also been closely involved with running Autonomy for the past year."

An internal investigation into Autonomy's finances was launched by HP after a whistleblower came forward, alleging suspect accounting and business practices at the firm.

These "mislead investors and potential buyers", HP said, adding that it had referred the case to the Serious Fraud Office and the US Securities and Exchange Commission.

"HP is extremely disappointed to find that some former members of Autonomy's management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy's acquisition by HP," the company said in a statement.

"These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management's ability to fairly value Autonomy at the time of the deal."

This one-off charge pushed HP to a $6.9bn (£4.3bn) loss in the fourth quarter - compared with a $200m (£125m) profit in the same quarter last year.

The company's share of the personal computer and printer markets also shrunk, and revenues fell 6.7% to $29.9bn (£18.8bn).

Earlier this year, the struggling firm warned of cuts to its UK operations as part of a restructuring resulting in 27,000 job cuts globally.

HP shares fell by 12% in early trading in the US.

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UBS Rogue Trader Adoboli Jailed Over Fraud

A rogue trader who lost £1.4bn in bad deals that nearly brought down Swiss bank UBS has been jailed for seven years for fraud.

Kweku Adoboli, once a rising star City trader, was found guilty by a London court of the biggest fraud in British history.

At one point, he had stood to run up losses of £7.5bn for his employer.

The 32-year-old admitted to the bad trades, but denied any wrongdoing.

He wiped away tears as he sat in a glass dock at the back of the courtroom while the jury delivered the verdict.

Adoboli was convicted of two counts of fraud by abuse of position linked to the £1.4bn loss, but jurors cleared him of four counts of false accounting between October 2008 and September 2011.

Judge Mr Justice Keith, sentencing, told Adoboli: "There is a strong streak of the gambler in you. You were arrogant enough to think the bank's rules for traders did not apply to you."

"The fact is you are profoundly unselfconscious of your own failings."

He sentenced Adoboli to seven years for one count of fraud and four years for the other, to be served concurrently.

A judge told Adoboli his fall from grace was "spectacular"

Adoboli will serve half the sentence before being released on probation, and -- taking into account the time he has already spent behind bars -- he could be out of prison in about two and a half years.

In a statement, UBS said: "We are glad that the criminal proceedings have reached a conclusion and thank the police and the UK authorities for their professional handling of this case."

Adoboli maintained during the two-month trial that senior managers had been fully aware of his activities and had encouraged him to take risks to make profits for UBS.

Giving evidence in tears last month, he said he viewed his UBS colleagues as "family" and had acted for the good of the bank.

The multi-billion-dollar deals happened at a time when he was suffering from burnout and had "lost control" of his trading, he added.

But prosecutors painted a different picture, saying Adoboli had exceeded his trading limits, failed to hedge trades and faked records to cover his tracks in a bid to boost his status and ego.

They said he saw himself as having a "magic touch" as a trader.

Prosecution lawyer Sasha Wass told jurors he was "a gamble or two away from destroying Switzerland's largest bank for his own gain".

"Mr Adoboli's motive for this behaviour was to increase his bonus, his status within the bank, his job prospects and, of course, his ego," she said.

Ghanaian-born former public schoolboy Adoboli joined UBS as a graduate trainee in 2003 and, at the time of the fraud, was a senior trader on the Exchange Traded Funds desk at UBS' investment banking arm in London.

He was arrested in September 2011 after he confessed his losses in an email to colleagues.

The police inspector who investigated Adoboli called him "one of the most sophisticated fraudsters the City of London Police has ever come across".

Behind the façade of a man whose career appeared to be taking off "lay a trader who was running completely out of control" and a "young man who wanted it all and was not willing to wait", Detective Chief Inspector Perry Stokes said.

The Crown Prosecution Service said the case, behind all the technical jargon, ultimately rested on whether Adoboli had acted dishonestly.

"He did so, by breaking the rules, covering up and lying," said Andrew Penhale, deputy head of fraud at CPS.

"At the heart of any complex fraud is a simple notion of dishonesty which is something that we can all understand."

Also attending the session was Adoboli's father John, who has travelled to London from Ghana to support his son throughout the trial.

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