PRESS DIGEST - Financial Times - Feb 20

Financial Times

MORTGAGE LENDING AT TEN-YEAR LOW

Figures from the Council of Mortgage Lenders have revealed that gross mortgage lending in January fell to its lowest level in ten years. Buyers have been deterred by the end of the stamp duty holiday, but there are also concerns that lending will fall further as the government withdraws monetary support for banks between 2011 and 2014. Gross mortgages totalled 9.1 billion pounds in January, a 32 percent fall compared to December's 13.4 billion pounds. Despite a recent increase in mortgage availability, the CML's Sue Anderson said poor market conditions would continue or even worsen.

GROWING OPTIMISM ON FINANCE

Research by accountancy firm Grant Thornton has found that the number of private companies expecting finance to become more readily available has increased five-fold. Its annual survey of 500 unlisted UK businesses found 44 percent thought finance was more accessible this year, compared with eight percent with the same view in last year's survey. A fifth of companies believe finance will be less accessible, but this figure has fallen from 69 percent last year. However, despite rising confidence in the availability of finance, fewer businesses said their lender was more supportive than 12 months ago.

EMPLOYEES OFFERED PENSION ALTERNATIVES

Changes to pension tax rules for high earners are resulting in more interest in non-mainstream investment schemes. Consultants at both Mercer and Punter Southall Financial Management have seen more companies pressured by senior executives and tax planners into setting up Employer-Funded Retirement Benefit Schemes, which are exempt from a special tax charge on investors making over 150,000 pounds a year whose contributions exceed 20,000 pounds annually. Barclays Wealth, meanwhile, has said it is seeing "huge" interest in Maximum Investment Plans, which allow bonuses to be carried into pension schemes over a ten-year period.

MANDELSON TAKES AIM AT MONETARISTS

Business Secretary Lord Mandelson has criticised monetarist economists for their involvement in getting Britain into its present economic "pickle". Mandelson supported two letters from leading economists reported in Friday's Financial Times, which warned how "reckless" early spending cuts could hamper Britain's fragile recovery, saying the views were correct to anyone "with an ounce of common sense". But he attacked 20 economists who wrote to the Sunday Times last weekend supporting the Conservative Party position for early fiscal tightening. Mandelson's comments come as Labour seeks to take advantage of the support for delaying spending cuts until 2011 from more than 60 economists.

RENTOKIL PLANS EUROPEAN ACQUISITIONS

Shares in pest control group Rentokil Initial (RTO.L) rose on Friday after it announced plans to make a further 75 million pounds in cost savings as part of chief executive Alan Brown's ongoing turnaround strategy. Revealing pre-tax profits of 65 million pounds in the year to the end of December, Brown indicated that the company was considering European acquisitions and expansion into manned guarding and emerging markets. A third of Rentokil's efficiency savings are intended to come from its City Link delivery arm, a third from its textiles and washrooms business and the rest from administrative functions.

LLOYDS CHIEF FACES PRESSURE OVER PAY

Lloyds Banking Group (LLOY.L) chief executive Eric Daniels faces increasing pressure to waive the bonuses of senior staff as the state-backed bank prepares to announce a second consecutive year of losses totalling billions of pounds. Daniels is entitled to a bonus of up to 2.25 million pounds for 2009, but Lloyds shareholders have praised a decision by Barclays' (BARC.L) two most senior executives to waive their 2009 bonuses, and have expressed support for a similar move by Daniels. Royal Bank of Scotland (RBS.L) will also soon decide whether its chief executive Stephen Hester should receive a bonus for last year.

L&G FREEZES ANNUAL BONUSES

Financial services company Legal & General (LGEN.L) is the latest life insurer to announce it will be freezing annual bonus rates for with-profits policyholders, despite delivering a 14 percent investment return in 2009 on the fund backing these long-term policies. Legal & General blamed "huge declines" in investment values during the economic downturn for plummeting values in some of its policies, but said maturity values of some ten year policies were increasing. The decision comes after rivals Aviva (AV.L) and Standard Life (SL.L) also announced they would be freezing their annual with-profits bonuses.

PLACING RAISES 42 MILLION POUNDS FOR BLUEBAY FOUNDERS

A share placing by two founders of BlueBay Asset Management BBAY.L, one of the largest independent managers of debt-based investment products in Europe, has raised them more than 21 million pounds each. Details of the sale of 6.7 percent of the company's shares were revealed as the FTSE 250-company posted a three-fold increase in first-half pre-tax profits and a larger rise in its interim dividend. Chief executive Hugh Willis, and Mark Poole, chief investment officer, each sold 6.5 million shares in the London Stock Exchange-listed firm at 325 pence each, enabling them to continue to invest seed capital in new BlueBay funds.

M&C SEES CLEAR SIGNS OF STABILITY

Hotel business Millennium & Copthorne (MLC.L) surprised the market by delivering better than expected fourth-quarter trading and a return to sales growth, causing shares to gain around 13.5 percent. The business, which owns 102 hotels around the world, saw fourth-quarter revenues per available room drop 7.6 percent, on a constant currency basis, compared with a 19.8 percent fall in the first half. Pre-tax profits fell 20 percent from 103 million pounds to 81.9 million pounds in 2009. Chief executive Richard Hartman said: "Business travel has revived. There is more leisure travel in the market." M&C's optimism contrasts with rival InterContinental Hotels (IHG.L), which issued a cautious outlook on Tuesday, prompting shares to slide across the sector.

SCRUTINY OF RIO VENTURE WITH BHP INTENSIFIES

Mining companies Rio Tinto (RIO.L) and BHP Billiton (BLT.L) are hoping to convince regulators of the efficiency gains of its controversial iron ore joint venture, as Germany's competition watchdog announces a full-scale probe into the deal. The heightened regulatory scrutiny by Germany's Bundeskartellamt, coupled with a European Commission investigation into possible breaches of restrictive business practice, follows a tide of third-party criticism. Rio and BHP are expected to make the case that the efficiencies the merger would deliver will be made in the least restrictive manner possible.

Prepared for Reuters by Durrants