Barclays moves forward

This Monday another big deal was announced in the UK banking sector. Barclays, one of the world's largest, agreed to acquire Scottish insurer Standard Life in a 226 million-pound transaction. The Edinburgh-based bank aimed to be one of Britain's leading institution back in 1998, during its creation. Now after eleven years it is selling its mortgage and savings arm, worth 8 million pounds, for a lower price than estimated (£300m-£400m). Barclay's move intensifies even more the sector's competition, as less and less mortgage lenders are left standing. Also, at a time of positive thinking, it marks a new step in the bank's path following its credit crisis performance, somewhat better compared to the others'.

The stock market didn't seem to be that convinced, though. Both companies' shares declined today, BARC at of rate 2.45% while SL closed down 1.5%.

As for the financial media, it's possible to say that, to some extent, the same applied. I've read this story on the Guardian, The Times, the FT and the Herald Scotland. In general, the first ones published a similar format of article, which was not as gentle as the last two. Considering the information given, however, they basically showed the same type data.

The Scottish paper focused mostly on the financial aspects of the transaction. In short paragraphs and sentences it revealed the reason (according to SL CEO's Sir Sandy Crombie, new objectives in the long-run) and aims (of a mutual cooperation) behind the deal. Also, it reminded us in a quick passage about the employee's destiny as the transaction takes place. Contrary to what I firstly thought, it wasn't really a Scottish-oriented article. Apart from publishing SL's headquarter in Edinburgh, it was pretty neutral to me.

In contrast, the Guardian and The Times seemed a little bit too sensationalist in my opinion. The Times, especially, right from the headline opted for a more shocking than informative one. As both articles went by, their writing style was comparably alike. Either interpreted the story as a sad end to Standard Life, reacting extensively critical about the transaction, in a way that gave me the feeling that it shouldn't have been done, or at least that it wasn't indeed something expected. The use of the expression "to throw in the towel" by the two editors possibly summarises my view on the articles - in meaning as well as in originality. Besides, information divergence left me in doubt whether SL had ten or eleven years of establishment.

Finally, the Financial Times gave me a rather clear view of the agreement. Differently to the ones mentioned above, it didn't emphasise the fact that SL was giving up on its ambitions and so forth. Its correspondent paid more attention to the surrounding facts of those institutions and the banking sector itself, including a reference to Barclays recent history of coping with the crisis.

Therefore, this was an interesting story to me, because it is reflecting the current stage of the world financial crisis, of new perspectives and an increasingly agitated competition. After this Standard Life deal, Barclays moves forward after a likely successful management throughout the late turbulent times. Thus, my own view differs from that of The Times and the Guardian, because I believe them both will benefit from that by working together as a rather concrete financial institution in the UK (and world) market, which can feasibly draw substantial changes in the sector, in next to no time.

The Guardian:
http://www.guardian.co.uk/business/2009/oct/26/standard-life-bank-barclays

The Times:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6891211.ece

Financial Times:
http://www.ft.com/cms/s/0/857a78e2-c27a-11de-be3a-00144feab49a.html

Herald Scotland:
http://www.heraldscotland.com/news/home-news/barclays-agrees-to-buy-standard-life-bank-1.928653

GE and the economic crisis

World markets were alerted this week as GE published its third-quarter results - and so was the financial media.

The multinational giant caught the world's attention after showing unfavourable figures in comparison to last year's data. Profits shrank 44% to 2.419 billion dollars, against USD 4.312 bi for the same period in 2008; Revenues were reduced by 20% to 37.799 billion dollars. That was mainly explained due to losses in the company's financial branch, GE Capital Finance. There, income slumped 87%, even though it is still the segment which generates the highest revenues in the group. GE's other divisions Energy Infrastructure and Technology Infrastructure earned 1.6 billion and 1.7 billion, an increase of 11% and fall of 8%, respectively.

For many analysts, however, it did not come out as a total surprise. Forecasts were even more pessimistic concerning GE's performance, and that led to mostly soft articles in the media. Shares were down 0.8%.

This week I will be comparing the differences in reporting this story by a British newspaper (FT), a Brazilian newspaper (Valor) and a French news agency (AFP).

From my research, what I realised is that the articles, as a whole, tended to offset the negative aspects of the news by actually looking at GE Capital recovery plan, the good market perspectives and the better-than-forecasted argument. With so many negative figures exposed by the company this may sound a bit controversial, but to be honest for me it seemed like editors are already looking forward, to the bright end of the crisis - believed to be on the way -, and not that worried about dark past results.

In this sense, the Brazilian and French sources could be two examples. Valor did mention the "red numbers", however it emphasised the fact that GE's cost cutting and industrial profit did not give the company such bad results as predicted. Also, that GE Capital, which is the big responsible for the downturn, looks stabilised and with a good risk management it can still be going as a leading segment for the company.

AFP basically followed a similar approach to story. GE's numbers were pointed out and even though were reflecting the bad economic situation they were still better than expected. All in all, it was a rather positive article, only reminding that "cost cuts at many large firms may help profits in the short term but will not sustain profit growth", in the end.

The Financial Times, on the other hand, gave me a pessimistic impression of the story. Right from the headline and the first line it focused on how bad the results were and its negative consequences. Such alerting numbers by GE leave space for that, surely, but probably the fact that the correspondent decided to add the combination of BoA's, S&P 500 and Dow Jones loss results and also seemed not to be very convinced by CEO Jeff Immelt's arguments, left the focus more on investors still expecting "that GE will convert its record backlog into higher revenue".

Thus, my view for this story is that GE Capital profits were really impaired by the estate sector, as a direct result of the economic crisis that we are going through. However, as it is foreseen that recovery is on the way, GE will be amongst the ones that will benefit and improve together with the economy. For now, in my opinion, it is a good thing that the numbers were not as bad as analysts thought and that its CEO can talk about stabilisation in the troubled GE Capital. Therefore, it seems to me that GE engines are strong enough to resist this cloudy period, if they are kept with the right maintenance.

Financial Times:

http://www.ft.com/cms/s/0/b767bc8e-ba46-11de-9dd7-00144feab49a.html

Valor Online:

http://www.valoronline.com.br/?online/empresas/11/5874326/lucro-da-ge-cai-mais-de-40%-no-trimestre&scrollX=0&scrollY=528&tamFonte=

AFP

http://www.google.com/hostednews/afp/article/ALeqM5j7LsoCa4CGf38fX8j-DhBV0Mj5Ew

The end of BAA's monopoly?

This week I will be talking about a story that will possibly lead to substantial changes in the way airport businesses are conducted here in the UK. Gatwick’s sale negotiations seem to be coming to a deal as BAA’s appeal hearing is just a week away.

The company, which has maintained a 40-year monopoly of London’s main airports, might have already sold LGW by October 19, when The Competition Appeal Tribunal hearing is due, and although Gatwick negotiations are well advanced, BAA will appeal over the order to sell some of the other ones it owns (Stansted and either Glasgow or Edinburgh).

Ferrovial, Spanish infrastructure company controlling BAA, is expecting a deal of about £1.6 billion and an investment fund started by Credit Suisse and General Electric is said to be the most interested. Global Infrastructure Partners (GIP), as it is called, already runs London City Airport and offered 1.36 billion pounds earlier this year. This time, however, both parts seem to be moving to a final deal, which will finally meet Ferrovial’s price and conditions.

In the financial media I could find three different approaches to this story. I found it at the Financial Times, the Telegraph and The Sunday Times.

As careful and clear as it could be, the FT correspondents in London and Madrid gave me a broad view of this story, attempting not to speculate about it. They explain the past events surrounding the negotiation and mention the possible acquisition by GIP, though they also alert about another bidder that is still being considered by Ferrovial. The article finishes with a brief preview of how the deal would positively affect BAA’s troubled finances.

The Telegraph chose a similar style but it actually published a smaller article for this story. It tells straightly about the bidding process so far by GIP and its anticipated move for LGW this week, including a quick description of BAA’s appeal over the Competition Comission’s decision that is coming up.

Finally, The Sunday Times was the one that mostly called my attention, since its article relates the story as if the negotiation was decided by now. It basically focuses on how the GIP acquisition will take place. Thus, it showed to be a pretty biased piece of news as its journalist is not very careful about telling how the negotiation has been going. Mr. O’Connell leaves the date for the deal as uncertain – even though speaking about “the next few days” – and mentions the possibility of the talks falling through. On the other hand, he surprised me by telling in one the first lines: “The new owner and operator of the airport will be Global Infrastructure Partners (GIP)”.

Therefore, after reading these three sources of financial media my opinion is that a deal between BAA and GIP seems to be imminent. Since May, when the other bidders abandoned the “race” to Gatwick, it is now the moment that is felt to be closer to a final deal and, to be honest, my view is that it will probably be a good thing for everyone. BAA will solve one of the orders of the Competition Commission and will find a way to meet its existing bank debt that is due in March. For the GIP, they will then be in control of two important airports in Britain, which is expected to stimulate the competition against BAA and finish the monopoly that lasted 40 years and proved not to be positive – with the resolution of the CC to force BAA to pass the control of some airports in order to improve passengers and airlines’ services. Thus, for me, as a traveler that did not have a great experience in LGW, the long-run outcomes of a successful negotiation look as bright as a clear sky.


The Sunday Times:

http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6869413.ece

Telegraph:

http://www.telegraph.co.uk/finance/newsbysector/transport/6300422/Gatwick-sale-back-on-as-talks-progress.html

Financial Times:

http://www.ft.com/cms/s/0/fbf07dd0-b68d-11de-8a28-00144feab49a.html