PRESS DIGEST - Financial Times - Oct 8

Financial Times

STEEP FALL IN HOUSE PRICES FORECAST

Global ratings agency Fitch warns that recent gains in UK house prices are likely to prove temporary and a further steep fall is expected next year. After three consecutive months of growth, prices are currently 13 per cent lower than the October 2007 peak. Fitch expects that prices will fall to around 30 per cent below the 2007 level due to a return to the long-term average for the house price-to-income ratio. Fitch head of global economics Brian Coulton says that the ratio fell below the long term average in the early 1990s.

RECESSION HAS EATEN INTO COMPANY PROFITS, SAYS ONS

Figures from the Office for National Statistics show that the rate of profitability at oil and gas companies fell to 33.6 per cent in the second quarter, down from 72.4 per cent a year earlier. The net rate of return on capital for mainland non-financial companies was 10.8 per cent, down from 11.1 per cent in the first quarter and significantly lower than the 2006 peak of 13.7 per cent. The net rate of return in the manufacturing sector was estimated at 6.7 per cent compared to an average of nearly ten per cent over the past decade.

REVENUE WARNS HIGH EARNERS OF TAX AVOIDANCE CRACKDOWN

Dave Hartnett, permanent secretary for tax at HM Revenue & Customs, said on Wednesday that HMRC would take action against tax avoidance schemes. Hartnett argued that those considering converting income into capital gains in order to reduce their tax burden were being lured by the "glister of fool's gold". Hartnett told a Madrid meeting that "where such schemes are seen to work technically, we will not hesitate to go to our ministers to ask for a change to the legislation".

LADBROKES TO LAUNCH 300 MILLION POUND CASH CALL

Ladbrokes(LAD.L), the UK's biggest bookmaker, will launch a 300 million pound rights issue on Thursday. The cash call is expected to be priced with a 35 to 40 per cent discount on Wednesday's 181 pence closing share price and comes seven months after rival William Hill(WMH.L) launched their own 350 million pound rights issue. Proceeds from the capital-raising will be used to help pay down Ladbrokes' 960 million pound debt. A source close to the deal insisted that there was no danger of the firm breaching covenants.

HSBC EYES ING AND RBS ASSETS

HSBC(HSBA.L) is a leading contender in the bidding for both the Asian private banking operations of Dutch lender ING(ING.AS) and the Asian retail and commercial assets of Royal Bank of Scotland(RBS.L). A deal for the ING assets is expected later this month and could be worth up to 1.5 billion dollars. HSBC and Singapore bank OCBC are seen as the front-runners. Standard Chartered(STAN.L) had been in exclusive talks with RBS over its operations in China, India and Malaysia but the two sides failed to agree a price and HSBC is now seen as the favourite.