Azure Global : 05/03/13

Friday 3 May 2013

Shell chief Peter Voser stands down as oil company posts profit rise

Voser announces plan to leave Anglo-Dutch oil giant next year, alongside small rise in first-quarter profits to $8bn

Peter Voser, the chief executive and architect of Shell's recent financial success, has unexpectedly announced plans to stand down, less than four years into the job.

The move came as the Anglo-Dutch oil group unveiled a 4% increase, to $8bn (£5bn), in its first quarter profits and raised the dividend a further 5% to 45 cents per share.

54-year old Voser said he wanted a "change of lifestyle" and to spend more time with his family. He is scheduled to retire from Shell in the first half of next year with a pension pot worth almost $20m.

There was immediate speculation he may be lined up for the job of chairman at Swiss pharmacuetical group Roche, where he is already a non-executive director.

Meanwhile current chief financial officer, Simon Henry, said it would be "inappropriate" to comment on whether he would try to follow Voser's path from finance to the top job.

Peter Voser has been chief executive of Royal Dutch Shell for four years.

If Henry takes over he would be the first British boss of Shell since Philip Watts left in 2004 in the wake of a scandal over the wrong booking of oil reserves.

Voser, 54, has spent almost 25 years in total at Royal Dutch Shell, having left in the middle of his career there only to return later.

On Thursday he said: "After such an exciting executive career I feel it is time for a change in my lifestyle and I am looking forward to have more time available for my family and private life," he said.

Shell's chairman, Jorma Ollila, said Voser's reign over the past four years had been "impressive", reorganising the company, delivering growth, and developing a clear forward strategy with a strong portfolio of new options.

Analysts generally agreed. Peter Hutton, energy analyst with RBC Capital Markets, said in a research note that the quarerly results were "solid" and he was full of praise for the outgoing chief executive.

"Peter Voser leaves Shell in a much stronger position than when he arrived. The company still needs to steer through LNG optionality to bring greater clarity, in our view, but he has brought real focus to the business. The testament to a strong legacy will be a smooth transition to his successor.

Neill Morton at Investec Securities added that Voser's exit was a surprise: "He is only 54 years old and Shell is portraying this is as a lifestyle choice."

Shell also reported revenues of $115bn in the first three months of 2013, roughly as much as the cost of running the NHS until the end of the year.

The $115bn revenues recorded by Shell were lower than the almost $120bn for the same quarter of 2012, although that was restated for accounting reasons.

Oil and gas production rose 2% to 3.5m barrels of oil equivalents – but that was excluding the impact of divestments, production sharing agreements and security problems onshore Nigeria.

Voser said the company had also spent $1.2bn buying back its shares in the last quarter.

The company has benefited from strong crude prices, although the global price of oil has in recent days fallen through the $100 a barrel level. This was exacerbated by weak manufacturing data from the US and China, prompting fears of a downturn in the global economy.

On a media conference call, Henry said the company was well placed for the recent fall in prices.

"We also think there are quite few players in the market, quite a few companies, who actually have bet the farm on 64.2 pounds-plus oil prices. We don't," he said. "We're structured around a lower oil price so it is not bad for us," he added.

Henry indicated that the lower oil prices might drive down asset values and give opportunities for takeovers. Shell has periodically been linked with a purchase of BP whose share price has continued to lag because of fallout from the US Gulf oil blowout.

But Simon said: "We dont look at larger companies because they come with a smorgasbord of assets that we don't want ... [we are] more focused on smaller companies."

Shell said it was pressing ahead with shale drilling from China to Argentina but was not currently thinking about fracking in Britain or Europe.

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Article source : http://www.guardian.co.uk

UBS should be broken up says Knight Vinke

Group says Swiss bank should sell off its investment arm and sell it to staff

Activist investor Knight Vinke has reopened the debate about investment banking by calling on the Swiss bank UBS to sell off its casino investment banking arm to its employees.

On the day of the bank's annual meeting, the fund management group said: "We question the merits of keeping the investment bank under the same roof as the wealth management and Swiss banking businesses".

The investment bank, a major employer in the City and fined £940m for rigging Libor last year, is already being scaled back by a new management team, led by Sergio Ermotti who was installed in the fall out from the unauthorised £1.3bn trading losses caused by Kweku Adoboli, who has since been jailed for seven years.

Knight says UBS should sell of its investment banking arm.

The division has just posted strong results for the first quarter of 2013 and Knight Vinke, which sent a representative to the annual meeting on Thursday, said this was now the moment to debate the structure of the group.

The investment bank had "nearly destroyed UBS" between 2007 and 2009 when the bank was bailed out by the Swiss authorities, said Knight Vinke, which has in the past criticised HSBC.

Knight Vinke said: "Investment banking is a very risky business and these risks pose a serious threat to UBS's wealth management and swiss banking franchises.

"They may also be preventing them from achieving their true potential. This is a discussion that is best had when all the businesses are doing well – as is the case today – and the board needs to be encouraged to act quickly and decisively so as not to lose the opportunity."

The fund manager, led by Eric Knight, suggested that the "best owners" for the investment could be its employees. Since 1998, the investment bank has paid Sfr115bn (£80bn) in salaries and bonuses to its employees but knocked a Sfr25bn hole in the entire group. "Transferring full or partial ownership of the investment bank to insiders would almost certainly lead to more prudent behaviour," Knight Vinke said.

The group voted against the remuneration report at the annual meeting at which 18% of shareholders failed to back the pay policies which included a potential £17m signing on fee for the new investment banking head Andrea Orcel.

However, this was an improvement on the 40% who had failed to support the pay awards the previous year. In response to the criticism by Knight Vinke, UBS said its shareholders had the opportunity to speak out at the annual meeting.

At the meeting "UBS confirmed that the firm is on track and comfortable with its new strategy".

"The results of the first quarter 2013 confirm that the company made significant progress and is reaping the benefits from its focus on wealth management and the Swiss bank supported by focused and de-risked investment banking activities and asset management," UBS said.

UBS has attempted to show restraint over pay since pharmaceutical company Novartis was forced to scrap a payoff of Sfr72m for its former head Daniel Vasella. There was also a national referendum which voted to ban big payouts for new and departing managers.UBS is said to have warned half its 16,000 investment bankers than they would not get bonuses and cut its total bonus pool by 7% to Sfr2.5bn.

Article source : http://www.guardian.co.uk

The economics of enough

It's time to abandon the pursuit of growth in wealthy nations and consider a new strategy – to improve quality of life without expanding consumption

It's been over five years since the global financial crisis began, and yet we are still no closer to ending it. George Akerlof, a Nobel Prize–winning economist, has provided a good analogy for the uncertainty facing economists. "It's as if a cat has climbed this huge tree—the cat of course is the crisis. My view is 'Oh my God, the cat's going to fall and I don't know what to do'." Nor is he alone in this uncertainty. The IMF's chief economist, Olivier Blanchard, warns: "We don't have a sense of our final destination."

The economics profession has lost its moorings. The traditional cure to our economic ills has always been growth. But now, despite the best efforts of all concerned, the UK economy refuses to grow. The economic tools that have been applied – lower interest rates, quantitative easing, and strict austerity – are failing. GDP in the UK is now 2% lower than when the crisis began.

Jobs fair in New York. People fear that reducing consumption will lead to fewer jobs.

In our new book, Enough Is Enough: Building a Sustainable Economy in a World of Finite Resources, Rob Dietz and I argue that it's time to abandon the pursuit of growth in wealthy nations and consider a new strategy – an economy of enough. Suppose that instead of chasing after more stuff, more jobs, more consumption, and more income, we aimed for enough stuff, enough jobs, enough consumption and enough income.

Abandoning the pursuit of growth may seem like a radical idea, but there's a strong case to be made for it. Economic growth is causing a number of global environmental problems, ranging from climate change to biodiversity loss. At the same time, economic growth is no longer improving people's lives in wealthy nations like the UK. To continue to pursue growth for growth's sake is simply irresponsible.

Our main indicator of progress, GDP, is a measure of economic activity—of money changing hands. It doesn't tell us anything about what kind of activity is occurring. If the police came to your door and said that "activity" in your neighbourhood had increased by 3% last year, you'd want to know what kind of activity. Was it more children playing in parks, or more break-and-enters? We need to ask the same kinds of questions about GDP. Did it grow because our society became wealthier, or did it grow because we ran up huge debts and liquidated our natural assets?

The blueprint that we describe in our book is based on the contributions of over 250 economists, scientists, NGO members, business leaders, politicians, and citizens. Some call the blueprint the "new economics", some call it "degrowth", and some call it a "steady-state economy". No matter what you call it, the key idea is to develop economic policies that improve quality of life without expanding consumption. These policies include methods to reduce resource use, limit inequality, fix the financial system, create meaningful jobs, and change the way we measure progress.

Perhaps the biggest fear that most people have when they hear "no growth" is "no jobs", but the evidence for a relationship between economic growth and job creation is much weaker than you would expect and varies remarkably between countries. In the US, for example, a 3% increase in GDP tends to be accompanied by a 1% fall in unemployment. In France, the same amount of GDP growth reduces unemployment by only half a percent. In Japan, there is no relationship whatsoever. Clearly it is possible to break the connection between economic growth and unemployment; we just need the right economic policies.

What we do not need is unrelenting austerity: the best way to save the cat is not to cut down the tree. If we're serious about achieving a better life for the vast majority of people in Britain then we need a new approach – an economic model that prioritises people and planet over short-term profits. It's time to embrace the new economics and say"Enough Is Enough!"

• Dan O'Neill is a lecturer in ecological economics at the University of Leeds, and co-author (with Rob Dietz) of Enough Is Enough: Building a Sustainable Economy in a World of Finite Resources.

Article source : http://www.guardian.co.uk

RBS signals government could sell taxpayer stake next year

Bailed-out bank's chairman uses strongest language yet to talk of sale, as RBS reports first-quarter profits of £826m

Royal Bank of Scotland has given the clearest signal yet that the government is preparing to sell off part of the taxpayer's 82% stake in the bailed-out bank next year.

As the Edinburgh-based bank reported a profit of £826m for the first quarter compared with a £1.4bn loss the same time last year, its chairman, Sir Philip Hampton, said RBS could be ready for sale from the middle of 2014 – or even earlier.

At the 2012 results in February, Hampton had said the bank hoped to be ready for sale in 2014, but he used more definitive language on Friday, raising the prospect of drawing up a prospectus for shareholders "from the middle of 2014".

RBS shares were trading at 294p on Friday morning – below the 500p average price at which the taxpayer bought the stake during 2008 and 2009.

"It could be earlier. We think the recovery process will be complete in about a year or so's time," he said.

A prospectus contains all the details about the bank's financial performance and would be needed to be sent to prospective shareholders if the shares are to be sold off.

The government will need to decide the price at which it wants to sell any shares, which closed on Thursday at 307p. This is below the 500p average price at which the taxpayer bought the stake during 2008 and 2009 – the equivalent to a £17.5bn loss.

But in March it emerged that government had reduced the average price to 407p.

The shares fell further after the results were announced to 294p, widening the loss to £19bn, partly on slower than expected growth in revenues.

Ian Gordon, banks analyst at Investec, said: "Underlying trends are weaker, with operating profit of £800m – down 28% – a £400m consensus miss. The markets division [pre-tax profit down 64%] looks awful. Fresh speculation that the UK government may start off-loading its stake in RBS and/or its 39% stake in Lloyds at a loss is negative for shareholders."

Stephen Hester, the chief executive of RBS, said the group was "back in profit … a big change on recent times".

"The cleanup mission is nearing its successful completion," he added, with £900bn taken off the bank's balance sheet which was £2.3tn at the time of its £45bn taxpayer bailout.

Hester said there had not been any recent discussions with the government about the timing of any nature of any share sell off – although there is mounting speculation that the chancellor, George Osborne, wants a sale before the election.

"It is our view that privatisation would be a terrific thing for the country both psychologically and taxpayers money be freed up for other needs," Hester said, insisting that £500bn of financial aid to RBS in the form of liquidity and toxic asset insurance had already been removed.

The £45bn of taxpayer money ploughed into the bank's shares was still "left to go" and a complete share sale would likely take a number of years.

"Privatisation is a good thing for RBS as well the country," he said. He added that the decision lay with the government, which is expected to sell off the shares in tranches, with the first one possibly at a loss.

But Hester, who said the slow economy and tougher regulations had made all bank shares less valuable, said that by the time the entire stake was sold taxpayers should get their money back.

There were still "bumps in the road", said Hester, who was parachuted into RBS at the time of the October 2008 bailout to replace Fred Goodwin.

"There is hard work still ahead for the economy and our industry. Nonetheless, our sights are set on moving RBS beyond its restructuring phase towards the ambition of building a really good bank for customers and for all we serve.

"These results show pleasing progress in delivering a strong and valuable RBS for all our stakeholders. We expect to substantially complete the bank's restructuring phase during 2014."

A number of question marks still hang over any share sale. The Prudential Regulation Authority, the new City regulator, is still in discussions with the industry about how to plug a £25bn capital shortfall it has identified across the industry. The parliamentary commission on banking standards is due to report next month and has been asking questions about whether RBS should be broken up into a good and bad bank. The proposals from the independent commission on banking to implement a ringfence between high street and investment banking still need to be implemented.

The bank did not make an additional charge for payment protection insurance on top of the existing £2.2bn, although it put aside an extra £50m for insurance rate swap mis-selling.

Article source : http://www.guardian.co.uk