PRESS DIGEST - Financial Times - March 26

Financial Times

HOARDING BY BANKS STOKES FEARS OF CRISIS

Efforts by central banks to ease strains in the money markets are failing to stop financial institutions from hoarding cash, stoking fears the recent easing in equity markets may not signal the end of the credit crisis. Banks' borrowing costs in the United States, eurozone and Britain have risen again even after moves by the Federal Reserve to lend to banks against weaker than usual collateral. The three-month Libor rate was set in London on Tuesday at 5.995 percent, its highest for the year and nearly 0.9 percentage points above the level investors demand for risk free money. However, equity markets ignored the stresses in the financial system with the FTSE 100 rising 3.5 percent on Tuesday and Japan's Nikkei rising 2.1 percent.

CITY'S FRAUD SQUAD POISED TO STEP UP DRIVE AGANST MORTGAGE SCAMS

Under a plan that highlights alarm about the impact of mortgage fraud on business and residential property markets, City police are preparing a big increase in probes into mortgage fraud. Fifty new investigators are due to arrive next month, increasing the force's anti-fraud strength by a third. The lending industry has challenged a police chiefs' report which says mortgage scams rake in at least 700 million pounds a year. The police have stressed their desire to work with the private sector as part of a crackdown on mortgage crime which manifests itself in the overvaluation of "new build" houses and the ramping up of existing commercial property values.

RISE IN DEBT AMONG OLDER PEOPLE

A study by Help the Aged and Barclays, commissioned by the Personal Finance Centre at Bristol University, has found more people are reaching retirement age in debt, with some owing four times as much as a decade ago. A quarter of all people approaching retirement age have outstanding credit commitments. The report warns that "levels of credit use may already be forcing people to delay the timing of retirement". New retirees face "the double whammy of living on a fixed income while managing existing credit commitments" and that unlike borrowers in other age groups "older people use credit cards to cover essentials such as food". The report called on the government to provide greater financial support to improve financial education for older people and to reduce pensioner poverty.

INDUSTRIAL DEMAND BEHIND BOOM FOR METALS

New research has found that despite investors being blamed for driving up commodity costs, demand from industrial users is the reason for a price boom in a range of metals. The prices of metals that are traded privately between producers and customers, such iron ore and cobalt, have risen faster than others, such as copper, which are traded on exchanges. Lehman Brothers says this lends weight to the argument that supply and demand factors, rather than just financial flows, are behind the boom in prices. The investment bank's new index of non-exchange traded metals rose 598 percent from January 2002 to early 2008, but during the same period an index of exchange-traded metals rose 246 percent.

FSA PLANS CLOSER CITY SCRUTINY AFTER HANDLING OF ROCK EXPOSES

In order to correct weaknesses in its industry supervision that have been exposed by its handling of Northern Rock (NRKx.L), the Financial Services Authority is to put the UK's top financial institutions under greater scrutiny. A FSA report, to be published today, will reveal plans by the regulator to beef up its supervision teams and their direct contact with top banks. The FSA has already begun to develop a new team of specialist risk experts and the team will undertake more detailed analysis of banks' risk models. Since the credit crisis began last summer, the FSA has been urging all firms to "stress-test" their risk models under the most extreme scenarios.

BP RECALLS STAFF FROM RUSSIA

BP (BP.L) has recalled 148 technical staff on secondment to its Russian joint venture TNK-BP due to visa problems as pressure on the UK's largest investment in the country intensifies. The staff have been told to stay away from work until confusion about visa arrangements has been resolved. Tension over TNK-BP has escalated in recent days with police last week raiding the Moscow offices of BP and TNK-BP, and Russian security services charging an employee of TNK-BP and his brother of industrial espionage. Russia's environment watchdog also intends to begin a "routine probe" into TNL-BP's biggest oil field. Some analysts say TNK-BP has been identified for takeover by Gazprom (GAZP.MM).

VODAFONE FORECASTS VERIZON DIVIDEND

Vodafone (VOD.L) says that next year it expects to start recovering dividends again from Verizon Wireless. Verizon Wireless last week emerged as the highest bidder in a U.S. radio spectrum auction with a bid of 9.4 billion dollars, prompting questions about when dividend payments might be resumed. The bid exceeded the expectations of some analysts and could increase the company's debt position to an estimated 17-20 billion dollars. Verizon Communications, which has management control of Verizon Wireless, has declined to spell out a timetable for the resumption of dividend payments.

CAMBRIAN UP BY NEARLY 30 PERCENT AS TRADING RESUMES

Shares in Cambrian Mining HGV.L rose by nearly 30 percent to 98.5 pence on Tuesday after trading in the company resumed on Aim following suspension on December 11. On Monday, the company will announce results for the first half to December alongside the outcome of a strategic review initiated by chief executive Mark Burridge. Results for the year to June 2007 were delayed by a review by the Financial Reporting Review Panel. Revenues for 2006-07 increased from 542,000 pounds to 2.6 million pounds. Pre-tax profits were reported at 1.4 million pounds after exceptional gains of 18.6 million pounds. Pre-tax profits for 2005-06 were at 32.4 million pounds.

SURPRISE AS UNIQ PASSES ON PAYOUT

Shares in Uniq (UNUNI.L) fell 20 percent to 107.25 pence on Tuesday as the food group passed on its final dividend and warned of delays in its recovery plan and worsening trading conditions. Uniq returned to a small profit for 2007, but said that raw material prices, the need to invest and weak consumer spending would restrain profits growth in 2008. The company took a 31.1 million pound impairment charge against its dessert factory in Shropshire, where it said volumes are still too low to fill the large plant. Group sales were up 2.9 percent at 736.1 million pounds and the company made a profit of 1.9 million pounds for 2007, compared with a loss of 21.9 million pounds in the previous nine-month accounting period.

FAROE STARTS DRILLING AT YODA PROSPECT

Drilling started on Tuesday at the Yoda oil prospect, in which Faroe Petroleum (FPM.L) has a 15 percent stake. The drilling launch was welcomed by chief executive Graham Stewart and he said the company now has interests in a number of exploration prospects in the Atlantic Margin. Faroe Petroleum, which has seen its shares increase 34 percent over the year, expects it may become a takeover target and is aiming to maximise its value ahead of any possible deal. Peel Hunt analyst Tony Alves remains sceptical on the fortunes of Faroe, arguing that little value is attributed to exploration assets and that the Atlantic Margin has proved both expensive in exploration and disappointing in development.

Prepared for Reuters by Durrants.