Old Mutual Bids £600m For Wealth Manager

By Mark Kleinman, City Editor

Britain's second-biggest independent wealth manager has rebuffed a £600m takeover offer from Old Mutual, the FTSE-100 financial services group.

Sky News understands that Quilter Cheviot, which manages almost £16bn in assets, was the subject of a recent bid from Old Mutual even as it considers a listing that would catapult it into the ranks of London's 350 largest listed companies.

Bridgepoint, the private equity firm which controls Quilter Cheviot, is understood to have rejected the proposal on the grounds that it undervalued the company.

Other prospective buyers, including Investec, are said to have examined a takeover of Quilter Cheviot although it was unclear on Friday whether any other formal offers have been tabled.

It remains possible that Old Mutual could return with a higher bid for the wealth management group, although Bridgepoint is focused on an initial public offering that is likely to take place by the end of the year.

In a statement, the private equity group said: "Inevitably when IPO plans are being prepared there is parallel speculation and rumours about alternatives. We never comment on such rumours."

The addition of Quilter Cheviot to Old Mutual's wealth management arm would create a more powerful platform for serving affluent clients at a time of consolidation across the sector.

Another big player, Bestinvest, was sold to Permira, another buyout firm, last year, with a follow-on deal taking the firm's assets under management to approximately £9bn.

A flurry of deals has been accelerated by regulatory reforms known as the Retail Distribution Review, which have altered the way that wealth managers are remunerated for their work, shifting from a largely commission-based system to one predicated upon the volume of assets under management.

Quilter Cheviot was formed in 2012 from the merger of Quilter & Co and Cheviot Asset Management, with Bridgepoint understood to believe that the combined group is worth at least £700m.

The company traces its roots back to 1771, making it one of the UK's oldest financial services firms.

Evercore, an investment bank, is advising Bridgepoint, which declined to comment, on the process.

Old Mutual, which also declined to comment, is interested in expanding its wealth management business at a time when it is also reshaping parts of its business.

The Anglo-South African group recently filed plans to list its US asset management business, and has hired a number of top fund managers to work in its London-based operation.

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Europe Agrees On Fresh Russian Sanctions

European leaders have agreed to hit Russia with a fresh round of sanctions despite Moscow signing up to a ceasefire in Ukraine.

The sanctions include credit restrictions on Russia companies, export bans, and travel bans and asset freezes on a new set of officials, according to a European Union diplomat who spoke on the condition on anonymity.

Two branches of the world's biggest oil producer - Gazprom Bank and Gazprom Neft - are targeted by the measures, said the diplomat.

Speaking at the end of a Nato summit in Wales on Friday, David Cameron said sanctions would continue despite both sides agreeing to a 12-point peace plan.

However, the Prime Minister said they could be lifted if a lasting peace was found.

The new restrictions, which will be imposed early next week, come as Britain agreed to supply 1,000 troops to a Nato rapid response force aimed at countering Russian aggression in Ukraine and eastern Europe.

Nato Secretary General Anders Fogh Rasmussen revealed the plan for a Spearhead force after discussions with members in Newport.

Ukraine was a dominant topic on the final day of the Nato summit

"This decision sends a clear message: Nato protects all allies at all times," he said.

"And it sends a clear message to any potential aggressor: should you even think of attacking one ally, you will be facing the whole alliance."

Western leaders accuse Russia of sending thousands of troops into the east of Ukraine - prompting fears of future incursions into other eastern European countries.

Mr Rasmussen said the Spearhead force would establish a "command-and-control" presence in the east of allied territories ready to deploy air, sea and special forces in the event of aggression.

He told Sky News Tonight: "We have decided to improve our ability to act swiftly. The force could be deployed within very few days if needed.

"The intention is to strengthen the defence of our allies."

Mr Rasmussen said alliance countries would contribute troops on a rotational basis to the high-readiness force.

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UK Airlines Axe Flights Due To Italian Strike

Several UK airlines have warned passengers of major disruption to flights as a result of a strike by Italian air traffic controllers.

Ryanair says it has been forced to cancel 96 flights to and from Italy. They include a number of flights serving UK airports.

EasyJet has had to axe a further 60 flights, including 20 in and out of the UK.

British Airways has also had to re-schedule a number of flights.

The four-hour strike is scheduled to last from 11.30am to 3.30pm UK time.

However it is expected to cause delays throughout the day, with more cancellations likely.

Ryanair has apologised for the disruption

Ryanair spokesman Robin Kiely said: "We sincerely apologise to all passengers who have had their travel plans disrupted by these unjustified ATC (Air Traffic Controllers) strikes."

The airline encouraged all passengers to check the status of their flight before travelling.

EasyJet said: "We are doing everything possible to minimise the impact to our customers and we are offering anyone flying to and from Italy during those times the opportunity to transfer their flight free of charge to another day to avoid the strike.

"They should go to easyJet.com to make changes to their flights."

Meanwhile a spokesman for BA said: "We are doing all we can to minimise disruption to customers affected by the threatened strike.

"We have re-timed a number of flights and are using larger aircraft where possible to help more customers, from cancelled flights, fly to where they need to be.

"We are advising customers flying to and from Italy to keep checking the very latest information on our website."

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Eurozone Teeters As ECB's Bazooka Is Held Back

By Ian King, Business Presenter

Only in a 100 metre sprint, a Wall Street Journal correspondent joked on Twitter, does a one-tenth of a unit move normally spark such excitement.

The European Central Bank's shock interest cut today, taking its benchmark policy rate from 0.15% to 0.05%, created drama on currency markets, sending the euro down against the US dollar by almost a full percentage point – a move seldom seen – to its lowest level for 14 months.

As dramatic was the ECB's decision to raise the rate it charges commercial banks to deposit money with it from 0.1% to 0.2%.

This negative deposit rate is aimed at getting commercial banks in the Eurozone to lend money to customers rather than hoard it. It highlights how gravely the ECB now views the chronic state of the Eurozone economy.

Mario Draghi arrives at the news conference

The Eurozone, to put it bluntly, is teetering on the brink of a Japanese-style crisis.

Japan is slowly dragging itself out of two decades during which it has suffered deflation, or negative inflation, a sustained period of falling prices.

That might sound good news for shoppers but is, over time, a ghastly phenomenon that strangles confidence and economic activity.

Played out at a national level, it also increases the value of debt, something many highly-indebted Eurozone economies cannot afford.

Deflation raises the risk economies cannot meet interest payments on their debts – the factor that forced Greece, Portugal and Ireland to seek bail-outs from the ECB and the International Monetary Fund.

The ECB knows the Eurozone is not far away from such a crisis. Consumer price inflation in the Eurozone currently stands at just 0.3 per cent but in some Eurozone economies, such as Spain, deflation has already taken hold.

The problem is that today's measures are unlikely to work.

Many economists believe the Eurozone's money transmission mechanism – how interest rate changes by central banks filter through to changes in the real economy – is broken. So cutting rates, on its own, will not be enough.

Quantative easing could have made it easier for Eurozone banks to lend cash

That is why Mario Draghi, the ECB President, also announced plans to buy asset-backed securities (ABS) and covered bonds issued by Eurozone banks.

These are portfolios of loans like mortgages and credit card debt, that banks normally parcel up and sell on to buyers such as insurance companies and pension funds, and the ECB's purpose in buying them is to deliver more money to the banking sector to be lent elsewhere.

The problem here is that the ABS market in the Eurozone is relatively small and so this action is unlikely to deliver dollops of money to the banking sector in the scale that would be needed to make a difference.

But Mr Draghi did not fire his big bazooka - full-blown Quantitative Easing by the buying of Eurozone government bonds - today.

That would be fiendishly complex, not least because it will require approval from the Germans, who are not keen on the idea. Expect calls for it to increase, though, if today's measures prove unsuccessful.

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ECB Cuts Eurozone Rates And Boosts Stimulus

Eurozone Teeters As ECB's Bazooka Is Held Back

Updated: 6:46pm UK, Thursday 04 September 2014

By Ian King, Business Presenter

Only in a 100 metre sprint, a Wall Street Journal correspondent joked on Twitter, does a one-tenth of a unit move normally spark such excitement.

The European Central Bank's shock interest cut today, taking its benchmark policy rate from 0.15% to 0.05%, created drama on currency markets, sending the euro down against the US dollar by almost a full percentage point – a move seldom seen – to its lowest level for 14 months.

As dramatic was the ECB's decision to raise the rate it charges commercial banks to deposit money with it from 0.1% to 0.2%.

This negative deposit rate is aimed at getting commercial banks in the Eurozone to lend money to customers rather than hoard it. It highlights how gravely the ECB now views the chronic state of the Eurozone economy.

The Eurozone, to put it bluntly, is teetering on the brink of a Japanese-style crisis.

Japan is slowly dragging itself out of two decades during which it has suffered deflation, or negative inflation, a sustained period of falling prices.

That might sound good news for shoppers but is, over time, a ghastly phenomenon that strangles confidence and economic activity.

Played out at a national level, it also increases the value of debt, something many highly-indebted Eurozone economies cannot afford.

Deflation raises the risk economies cannot meet interest payments on their debts – the factor that forced Greece, Portugal and Ireland to seek bail-outs from the ECB and the International Monetary Fund.

The ECB knows the Eurozone is not far away from such a crisis. Consumer price inflation in the Eurozone currently stands at just 0.3 per cent but in some Eurozone economies, such as Spain, deflation has already taken hold.

The problem is that today's measures are unlikely to work.

Many economists believe the Eurozone's money transmission mechanism – how interest rate changes by central banks filter through to changes in the real economy – is broken. So cutting rates, on its own, will not be enough.

That is why Mario Draghi, the ECB President, also announced plans to buy asset-backed securities (ABS) and covered bonds issued by Eurozone banks.

These are portfolios of loans like mortgages and credit card debt, that banks normally parcel up and sell on to buyers such as insurance companies and pension funds, and the ECB's purpose in buying them is to deliver more money to the banking sector to be lent elsewhere.

The problem here is that the ABS market in the Eurozone is relatively small and so this action is unlikely to deliver dollops of money to the banking sector in the scale that would be needed to make a difference.

But Mr Draghi did not fire his big bazooka - full-blown Quantitative Easing by the buying of Eurozone government bonds - today.

That would be fiendishly complex, not least because it will require approval from the Germans, who are not keen on the idea. Expect calls for it to increase, though, if today's measures prove unsuccessful.

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BP's 'Gross Negligence' Led To Gulf Oil Spill

A federal judge has ruled that BP's reckless conduct led to the worst offshore oil spill in US history - a decision that exposes the oil giant to billions more in civil penalties.

BP was assigned the majority of blame for the 2010 Gulf of Mexico spill by US District Judge Carl Barbier on Thursday.

His ruling means BP now faces fines that are expected to total between $10.3bn (£6.3bn) and $17.6bn (£10.7bn).

Judge Barbier ruled that BP bears 67% of responsibility for the spill, while drilling rig owner Transocean Ltd was assigned 30% of blame.

Eleven workers were killed in the April 2010 oil rig explosion

Halliburton, which served as BP's cement contractor on the Deepwater Horizon rig, was assigned 3% of the blame. The energy services giant announced on Tuesday that it had agreed to pay $1.1bn (£665m) to settle plaintiff claims.

Eleven workers were killed when the rig exploded in April 2010, and millions of gallons of oil spewed into the Gulf while BP scrambled for weeks to seal the well.

Judge Barbier said BP made "profit-driven decisions" during drilling that led to the deadly blowout.

"The Court concludes that the discharge of oil 'was the result of gross negligence or wilful misconduct' by BP," Judge Barbier said in his written ruling.

"BP's conduct was reckless."

"These instances of negligence, taken together, evince an extreme deviation from the standard of care and a conscious disregard of known risks," he wrote in a 153-page ruling.

BP said in a news release that it would appeal the ruling, saying the company "believes that an impartial view of the record does not support the erroneous conclusion reached by the District Court".

The company's shares slumped about 6% after the ruling, reducing BP's market value by $7bn (£4.3bn).

BP has spent more than $24bn (£14.7bn) in spill-related expenses in the wake of the disaster. The company estimated that it will pay a total of $42bn (£25.7bn) to the matter is fully resolved.

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CBI Forecasts Economic Growth Slowdown

The CBI has forecast a slowing of economic growth during the second half of the year - weighed down by flatter confidence and uncertainties over the Scottish referendum.

The business lobby group predicted UK GDP growth would ease to 0.7% in the third quarter and 0.6% during the final three months of the year, after growth of 0.8% in each of the first and second quarters.

It said its expected slowdown also reflected weakness in productivity and wage growth, though average earnings would soon start to rise - by 1% this year.

CBI director-general John Cridland said: "The UK's recovery is on solid ground, with our quarterly growth on average outstripping G7 competitors over the last year.

"For the rest of the year, we expect growth to get onto a more even keel and the recovery to become further entrenched next year.

"Business investment has been growing better than expected so far this year, but it still has a lot of catching up to do to get back to its pre-crisis level.

"Although hundreds of thousands of new jobs are being created in the economy, there is little upward pressure on starter salaries outside a few hot spots, such as in parts of the IT sector.

A separate CBI survey showed economic growth slowed in the three months to August.

Mr Cridland said heightened tensions in Ukraine and the Middle East added to risks such as higher commodity prices and global market instability.

He described the possibility of a Yes vote in the Scottish independence referendum on September 18 as "the most important risk that the CBI and business are facing".

"The economic case for Scottish independence has not been made," he said.

"Overwhelmingly, British business believes that the UK should stay together."

Deputy director-general Katja Hall added: "It is a one-way ticket to uncertainty and there is no return."

In another development, the CBI also confirmed a story by Sky News that it was launching a "great business debate" to highlight the positive contribution made to society, as well as to answer public concerns on issues such as wages, diversity and tax contributions.

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Standard Life Investors Net £1.75bn Windfall

Shareholders in Standard Life are on course for a £1.75bn windfall from the insurance firm's sale of its Canadian interests.

Canada-based Manulife is to pay £2.2bn for the long-term savings, retirement and insurance business on completion - expected early next year.

Standard Life said its board intended to return £1.75bn to investors, the equivalent of 73p per share, by way of a dual-share scheme that would allow shareholders to choose to receive the proceeds as capital or income.

The deal, which will also herald a global collaboration agreement with Manulife, is the latest in chief executive David Nish's turnaround plan.

The company said the agreements marked "another major step in furthering Standard Life's strategy to build a global investment solutions business" and accelerating the growth profile of the Group.

The collaboration, Standard Life said, would deepen its access to global markets for Standard Life Investments, with Manulife seeking to distribute its funds into Canada, the US and Asia.

It forecast a trebling of total assets under management distributed by Manulife within three years.

Mr Nish said of the deals: "This transaction provides our Group and its shareholders with significant strategic and financial benefits.

"It accelerates our growth and reduces capital-intensity, while delivering substantial value today.

"The proposed capital return of £1.75bn , equivalent to 73p per share, will take the total amount of dividends and returns to shareholders since 2010 to 147p per share.

"We have transformed our Canadian operations into a business which has consistently delivered strong results, contributing to the overall success of the Group.

"As a result, the Canadian business is now a much more attractive proposition and the Sale allows us to realise fully the value of the business for our shareholders".

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Co-op Group Back In Black After Bank Turmoil

The troubled Co-operative Group has confirmed a return to half year profit after distancing itself from big bank losses.

The supermarkets-to-funerals group, which gave up control of the Co-op Bank after posting a £2.5bn loss last year, made a statutory profit of £12m compared to a loss of £767m in the same period 12 months ago.

Richard Pennycook, the interim chief executive who was confirmed in the position on Thursday, said the wider overhaul to bring a more plc-style structure to its governance allowed it to "look to the future with greater confidence".

He took over when Euan Sutherland walked out earlier this year claiming the group was ungovernable.

In addition to the governance changes agreed since that time, the group has also disposed of its Pharmacy, Farms and Sunwin Services businesses.

Richard Pennycook has been handed the chief executive role

Mr Pennycook said: "I am delighted to have the chance to lead the Co-operative Group through the crucial job of rebuilding the business.

"We have taken major steps forward over the last six months, securing governance reform and repairing our balance sheet, but we have much to do to return the group to full financial health and improve the performance of our businesses".

Underlying profits - a better measure of the day-to-day business' performance, fell to £66m - down from £116m.

Mr Pennycook admitted that result showed the scale of work necessary.

He added: "Underlying profitability in the business has been curtailed by the deliberate actions we are taking to implement our detailed rebuild plan and to face into the tough trading conditions prevailing in the markets in which we operate".

Only the Co-op's food and funerals businesses returned a profit in the six month period.

It retains a 20% interest in the Co-op Bank, which last month reported an improved £75.8m loss for the same half year.

More follows...

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Payday Loans: Charity Demands Tougher Action

A charity has reported a 42% rise in the number of people suffering under the weight of payday loan debts and called for tougher regulation of the market.

StepChange said it dealt with 43,716 people in the first six months of this year, compared with 30,762 for the same period last year, handling more that £72m in debts.

The body argued that its experience showed that plans to toughen regulations in the payday market from January did not go far enough to protect vulnerable consumers.

Under the measures announced by the Financial Conduct Authority (FCA), those who cannot repay payday loans on time will never have to pay back more in charges than the amount borrowed.

The plans include capping default fees at £15 and a limit of 0.8% per day on interest on unpaid balances.

StepChange said it wanted to see a tougher total cost cap than 100% of the value of a loan, the default fee cap reduced and a regulation to promote more responsible lending by ensuring lenders see a borrower's history in advance.

Its chief executive Mike O'Connor said: "Today's figures show that the payday market all too often fails to treat customers fairly, especially those in financial difficulty.

"High-cost short-term credit is rarely the answer to financial difficulties.

"While the FCA's proposed price cap is a crucial step forward, there is still much work to be done to ensure that payday loans can no longer plunge people into a cycle of unsustainable borrowing and entrenched financial hardship.

"Consumers will continue to need access to short-term credit and FCA action should also stimulate the reform of this market.

This needs to include problems in the adjacent markets including overdrafts, logbook loans and home credit where consumers also suffer detriment.

"The goal of an affordable lending market treating consumers fairly will also involve others but the FCA has a critical role to play in creating the right environment."

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PPI Complaint Volumes Ease In First Half

Complaints about payment protection insurance (PPI) have eased back by more than 50% from last year's record peak.

But the Financial Ombudsman Service (FOS) - set up to settle disputes between financial firms and consumers - said the volume it was receiving remained at a "significant level" at a time when complaints about other issues within the industry rose.

The FOS said it took on 133,819 PPI complaints in the first half of the calendar year, compared to 193,054 over the previous six months.

The body stated: "Around 5,000 people a week are currently asking the ombudsman to look into their PPI complaint.

"This is down from the highs of 2013 when we were receiving over 12,000 a week, but still significantly more than any other financial product."

The City regulator, the Financial Conduct Authority (FCA), said last week that banks and others in the financial services industry had so far paid out £16bn in just over three years to compensate customers mis-sold PPI.

PPI policies were meant to protect customers who fell ill or lost their jobs but were often sold to people who didn't need them or would have been ineligible to claim.

The FCA confirmed last Friday that lenders had been asked to look again at 2.5 million complaints they had either paid too little to or originally dismissed 

It acted after noticing a significant fall in the number of cases being upheld in favour of consumers.

The FOS's chief ombudsman Caroline Wayman said: "We're seeing more and more people turn to us in frustration where they feel their bank or insurer simply doesn't understand or really care.

"And we're hearing growing dissatisfaction from people about being processed industrially as a number rather than being listened to as an individual customer."

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'Huge Leap In The Dark': Boris Island Rejected

Boris Johnson's proposal for a new four-runway airport to be built in the Thames Estuary has been rejected by the Airports Commission.

The grounding of an airport in Kent leaves three options for expanding airport capacity: two additional runway plans at Heathrow and one at Gatwick.

These are being considered by the Airports Commission, which was established by the Government to recommend the best option for expansion, and will issue its final report after next year's election.

How a Thames Estuary airport would have looked. Pic: Foster and Partners

Mr Johnson, who is against a third runway at Heathrow, spoke of his disappointment ahead of the decision, which was widely expected.

The London Mayor said: "In one myopic stroke the Airports Commission has set the debate back by half a century and consigned their work to the long list of vertically filed reports on aviation expansion that are gathering dust on a shelf in Whitehall.

"Gatwick is not a long term solution and Howard Davies must explain to the people of London how he can possibly envisage that an expansion of Heathrow, which would create unbelievable levels of noise, blight and pollution, is a better idea than a new airport to the east of London that he himself admits is visionary, and which would create the jobs and growth this country needs to remain competitive.

One of the proposals for a third runway at Heathrow

"It remains the only credible solution, any process that fails to include it renders itself pretty much irrelevant, and I'm absolutely certain that it is the option that will eventually be chosen."

Sir Howard Davies, head of the Airports Commission, told Sky News: "This would be a huge leap in the dark and we simply don't think it's a practical scheme."

He added there were "a lot" of reasons to rule the idea out.

Boris Johnson attends a rally against Heathrow expansion

"We think that it is too expensive; we don't believe that a future government would be prepared to spend the public money, between £30bn and £60bn that would be necessary to even the smaller version of his airport up and running," he said.

"We think that is too risky, the logistical problems of moving an airport 70 miles and of doing so in an environmentally extremely sensitive area are, we think, awe-inspiring and we're not entirely sure in fact it's the right model for London to think of one huge airport in a very diverse market where we think that competing airports produce a better solution."

The Heathrow and Gatwick options had been shortlisted by the commission last year, with Sir Howard announcing that further studies would be made on the estuary plan with a decision towards the end of 2014.

Sir Howard Davies said he didn't think Boris Island was 'practical'

The issue of airports is a thorny one for Mr Johnson, who is trying to become the Conservative candidate for Uxbridge and South Ruislip at the election.

That constituency borders Heathrow and contains many people who depend on it for their livelihood.

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