United Kingdom

UK fracking revolution calls for national thinking

12 Aug 2016

Handouts to disgruntled communities and tax breaks are unlikely to make shale gas extraction more appealing for investors, given the shaky outlook for prices. A better strategy could be to create a national drilling titan in the mould of Norway's Statoil to get Britain fracking.

Peppa Pig could find her fortune stateside

12 Aug 2016

Entertainment One, owner of the cartoon swine, could be attractive to American suitors after spurning ITV's low-ball 1 billion pound proposal. Amazon and HBO are keen to lard up on content. Higher valuations for similar U.S.-listed peers also offer a potential line of defence.

Mortgage race could scramble UK banks’ nest-eggs

12 Aug 2016

Nationwide's net interest margin fell over 25 basis points in a year, due to increased mortgage competition. UK banks - including Nationwide - have enough capital to cope. If demand for cheap mortgages intensifies, though, banks could end up less profitable and more risky.

M&A activist twist suits almost everyone

11 Aug 2016

Activist hedge fund Elliott won a bump in value on two agreed deals - for brewer SABMiller and UK retailer Poundland. Both results are good for shareholders in the targets, and not too bad for the bidders. It should, though, provoke a subtle shift in how deals get done.

William Hill could turn tables with tilt at Rank

11 Aug 2016

The UK bookie has spurned a joint offer by 888 and Rank despite potential pre-tax cost savings of 100 mln stg. The pair might snare William Hill by giving it half the company and piling on debt, but 888 could end up worse-off. Or the hunted could turn hunter with a bet on Rank.

Prudential’s Brexit-padding does the job

10 Aug 2016

The UK-based insurer beat forecasts in the first half, helped by the fact 70 pct of operating profit comes from outside the EU. But its UK asset manager is doing worse than peers, and low rates hit it too. Pru still looks reasonably diversified, just not so well balanced.

ITV can pay more for a slice of Peppa Pig

10 Aug 2016

Canada's Entertainment One rejected a 1 billion pound approach from ITV, an 8.5 percent premium on its closing share price. The Peppa Pig owner is well positioned for the shift towards digital content. And ponying up more would help ITV to diversify away from the UK.

William Hill triple merger not quite win-win-win

9 Aug 2016

A joint 3 bln pound-plus offer from rivals 888 and Rank was rebuffed by the UK gaming group. What it might offer in synergies is undermined by complexity. If the merger logic is so compelling, maybe 888 and Rank ought to start with a simpler twosome.

L&G goes from golden child to whipping boy

9 Aug 2016

The UK insurer’s first-half earnings rose, but shares sank. Its core insurance business was weak, but other areas like “bulk annuities” should ride to the rescue. After the financial crisis, investors fell in love with L&G. Since the Brexit referendum, they are cooling.

Big banks’ stranglehold on UK loosened by a finger

9 Aug 2016

British lenders give customers poor service, but a two-year competition probe has offered few remedies. Caps on overdraft charges could cost the largest banks 1.2 bln pounds a year. But trustbusters have done little to improve all-important small business lending.

Hammond and Carney play discordant UK bond duet

9 Aug 2016

British finance minister Philip Hammond will have to sell more gilts as the economy slows. The Bank of England is buying. But markets are increasingly tuning out rate-setters’ interventions. Extra supply could mean central bank boss Mark Carney has to raise the volume.

China overplays its hand in UK nuclear debate

9 Aug 2016

Making the $24 bln Hinkley reactors an acid test of mutual trust is unwise. The Sino-British relationship is already tilted in China's favour, so Beijing has little to retaliate with if the UK scraps the project. Conversely, forcing it to go ahead could prove a pyrrhic victory.

Cheap wind energy can deal final blow to Hinkley

8 Aug 2016

Electricity from offshore wind farms costs a third less than in 2013. It now undercuts power costs at the two new nuclear reactors planned in the UK. With prices falling further and low project risk, the case for pulling the plug on the Hinkley Point plant is building.

RBS’s grand relaunch in danger of running aground

5 Aug 2016

Since CEO Ross McEwan took over in 2013, the state-owned UK bank has been slowly sorting its issues. But Brexit, low rates and ongoing high conduct charges are big problems. Throw in new losses from the tortuous Williams & Glyn disposal, and RBS looks hobbled for years to come.

UK’s new bank crutch betrays post-Brexit jitters

4 Aug 2016

The Bank of England's Term Funding Scheme is a reasonable attempt to make UK lenders pass on now-cheaper funding. The bigger their loan book, the cheaper their borrowing. But opting not to restrict cheap funds to specific sectors reveals how concerned the BoE is about a slowdown.

Mark Carney’s sledgehammer isn’t up to the job

4 Aug 2016

The Bank of England boss deserves credit for trying. He has halved the policy rate, will resume asset purchases, and done his absolute best to limit the perverse effects of ultra-low rates. But the economic shock of Brexit is probably bigger than anything his toolbox can handle.

RSA and Aviva have hedge against Brexit gloom

4 Aug 2016

Both UK insurers can dodge post-EU referendum blues. Falling rates pose a risk to their half-year positions, but operations are solid and sterling's slide helps groups with big overseas earnings. Losing EU market access is also less of a threat than it might appear.

Standard Chartered thrives on low expectations

3 Aug 2016

The UK bank will take longer than planned to hit pretty modest return targets. Yet shares surged. Relief that the turnaround is on track and a bombed-out valuation explain why. If it can sell $7 billion of toxic assets for a good price, investors may even be pleasantly surprised.

Struggling HSBC has grounds for its payout pledge

3 Aug 2016

The UK bank is holding its dividend and buying back shares, despite scrapping a timetable for hitting an RoE target in a world of lower-for-longer rates. A sky-high dividend yield would usually imply an imminent payout cut. But stronger capital gives HSBC grounds to hold firm.

UK banks’ light at the end of PPI tunnel darkens

2 Aug 2016

British lenders smarting from Brexit and EU stress tests face redress for mis-sold loan insurance lasting a year longer than expected. An actual cut-off date beats none at all. But the delay means fines relating to commission mis-selling will further inflate PPI's $32 bln cost.