This latest probe, conducted jointly by Competition & Markets Authority (CMA) and Financial Conduct Authority, says there are enough concerns with the ‘big four UK banks’ to warrant a full-scale competition investigation. It reported key parts of UK banking lacked effective competition and failed to meet the needs of consumers or businesses.

Catch Us If You Can

A full enquiry could take 18 months and in a bid to side-step further scrutiny, The British Banker’s Association says there are already substantial changes under way. “Last month we published a series of ideas to help new banks set up and smaller players to grow. We hope these suggestions will be taken up by regulators and politicians.”

The industry has so far done the minimum to appease the regulators, who describe measures taken so far as being inadequate.

How Much Will It Cost?

The CMA said going further and imposing so-called structural remedies, such as forcing the break-up of banks, could be expensive, but it said the problems facing the sector were so serious and long-standing that it “cannot rule out the possibility that this may be may be necessary”.

Banks do not always come in easily detachable chunks, and the cost for taxpayer-backed Lloyds’ compulsory sale of branches, as ordered by European rules, is cited to have cost approximately £1.4 billion. 

What Are The Sum Parts Worth To Shareholders?

The value of a bank can be determined by using the tangible book value. It is prudent to use the tangible assets value because if a business is broken up then there is minimal value in intangible assets, such as its brand, goodwill, intellectual property and reputation for any buyer.

Source: Bank interim reports & Q3 updates as of 30 Sept 2013, market caps as of 6 November 2013.

“The low ‘price to book’ valuations we see today are the result of the uncertainty about the quality of the assets that make up book value.”

A low price-to-TBV ratio could mean that there is something is fundamentally wrong with the company. We know that the banks’ valuation remain depressed: HSBC, RBS, Lloyds and Barclays are trading on price to earnings (P/E) ratios of just 11, 13, 9 and 10 respectively, because they are damaged — investors remain reluctant to assign a full valuation until the scandal and fraud investigations abate, or until the challenges posed by increasing regulation and higher capital requirements are overcome.

The post Competition Enquiry Could Lead To The End Of The Big Four appeared first on The Motley Fool UK.

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Lisa Walls-Hester has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.

Previously, the shareholder’s choice of contention was a vote through the market by offloading holdings. Despite some corporate governance reform guidance throughout the last decade, it took the government’s recent regulation to bring the biggest change since the original legislation over a decade ago…

No longer can shareholders be considered a necessary nuisance at the AGM to be accommodated once a year with glossy prospectus and the ambiguous chairman’s speech; increasingly, they are exercising their rights and demanding more governance. 

This shifting relationship between shareholders and their companies will continue as the EU is also planning legislation to make all companies report non-financial data, and allow shareholders to hold businesses to account over a broader range of issues.

The centre of shareholder activism seems likely to stay in the UK because of the high number of majority institutional investor ownership in its companies.

It’s Not Just Pay

An increasing number of revolts have been directed at other issues besides over-inflated pay packets — factors such as dissatisfaction around company performance and the leadership of the business are gaining attention.

Mining giant Glencore (LSE: GLEN) saw 10% of its shareholders reject the appointment of ex-BP CEO Tony Hayward as chairman after criticism of the firm’s failure to appoint any female board members. It is producing a current dividend yield for shareholders of 2.7% and is forecast to deliver a yield of 2.9% for 2014 and 3.2% for 2015.

Sir John Peace is facing a revolt at the three companies where he is chairman. Remuneration is the issue at Burberry and Standard Chartered, but investors at Experian (LSE: EXPN) failed to support the election of his successor, Don Robert, after the intervention of the Institute of Directors warned the appointment breached City codes of independence for the chairman role. Experian delivers a dividend yield of 2.13% to shareholders and is expected to increase this to 2.3% and 2.5% for the years 2014/15.

Most institutional investors have previously been reluctant to criticise board policy publicly and instead preferred to work behind the scenes with firms; however, Barclays (LSE: BARC) (NYSE: BCS.US) suffered a scathing slap-down from major shareholder Standard Life, as it publically voted against the bank’s remuneration report, saying the 10% hike in bonuses cannot be defended.

Alison Kennedy, governance & stewardship director at Standard Life Investments, said: “We are unconvinced that the amount of the 2013 bonus pool was in the best interests of shareholders, particularly when we consider how the bank’s profits are divided amongst employees, shareholders and ongoing investment in the business.”

Dividends from Barclays were 6.5p for 2013 and are expected to grow to 7.73p for 2014 and 10.68p for 2015, giving a yield of 3.7% and 5% respectively.

The post The Future Is Revolting! Barclays PLC, Experian plc And Glencore Plc Shareholders Forge An Era Of Predomination appeared first on The Motley Fool UK.

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Lisa Walls-Hester has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.

Analysts tend to cover the most popular stocks and companies that have a large market capitalisation. Finding a company that analysts are just starting to review gives you an advantage, because the research and guidance is available but the herd has not yet arrived.

Analysts usually only initiate coverage with a bullish outlook, and because they increase visibility of the company the stock can have more investment activity in the short term. A new recommendation can give portfolio managers the validation they need to build a position.

Who’s New In The Spotlight?

Investment analysts at Berenberg Bank initiated coverage on shares of Ashtead (LSE: AHT). Ashtead is a construction and industrial-equipment hire company and is a recent addition to the FTSE 100; its current market capitalisation is £4.57bn.

Berenberg set a buy rating and a £11.10 price target on the stock. Berenberg’s target price would indicate a potential upside of 22.58% from the company’s current price of £9.06. From a total of 13 analysts covering the company, one has rated the stock with a hold and 12 have assigned it a buy. The company has an average price target of £10.35.17.

UK Mail Group (LSE: UKM)is now being covered by Cantor Fitzgerald Europe, and they have set a buy rating with a £7.00 price target on the stock. Cantor’s price target would suggest a potential upside of 17.25% from the company’s current price of £5.97.  UK Mail Group is a holding company of UK Mail Limited and UK Pallets Limited. UK Mail is the UK’s largest independent express delivery company, and UK Pallets provides a network for independent logistic and distribution companies.

Alent (LSE: ALNT) is a supplier of chemicals to the electronics, automotive and industrial market, and has now been picked up by Liberum Capital. Liberum initiated coverage on shares with a buy rating and a £4.00 price target on the stock. Analysts at Espirito Santo Investment Bank Research have also initiated coverage on shares of Alent and set a buy rating of £4.30 price target.

The post Analysts Give The Thumbs Up For Alent PLC, UK Mail Group PLC And Ashtead Group plc appeared first on The Motley Fool UK.

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Lisa Walls-Hester owns shares in Ashtead.

Whilst new to the role of CEO, Mr Bailey is no stranger to Burberry, having joined the company in 2001. He is the chief creative officer and the CEO title was added to his job description earlier this year. As creative officer, Bailey is credited with driving the brand to global success from its low of five years ago. Sales in 2010 were £1.2bn and for the year ending March 2014 they were over £2.3bn.

Bailey’s package is made up of salary, allowances and performance awards, and at the current share price is worth over £30m. Burberry argues that Bailey is vital to its success and that his pay is in line with other global luxury-goods companies.

In addition to his salary and performance awards, Bailey has already received multimillion-pound share bonuses of over a million shares, which were given as part of a golden handcuff deal to secure his tenure as other fashion houses were rumoured to be head hunting last year.

Fashion colleagues declare that “Christopher Bailey is Burberry” and is “a genius” and while shareholders have no doubt about his creative talents they see a red flag over Bailey’s pay packet. In addition there is a question mark over his dual-role abilities and doubt about his ability to master some gritty challenges ahead, such as unfavourable exchange rates and falling product licensing revenues in its biggest market.

Key Man Risk

Burberry’s admission that Bailey is vital and integral to the company’s success should raise concerns for shareholders. Even discounting a risk of sudden departure, combining senior executive roles that have separate and distinct responsibilities weakens the corporate governance perspective. One person performing a dual role will also short cut any decision-making process, rendering internal controls weaker.

Visionary Executives

Comparisons are being made between Bailey and other prominent highly paid CEOs, such as Sir Martin Sorrel, CEO of WPP (LSE: WPP), and Aidan Heavey, the founder of Tullow Oil (LSE: TLW).

Both Sorrel and Heavey are both visionary leaders, commanding multi-million pound pay checks and are credited with building their companies from scratch. They each have held a tenancy in the top job of almost of almost 30 years.

Sorrell bought WPP and began building the worldwide marketing services company by making aggressive acquisitions of advertising-related companies. WPP is now the world’s largest communications services group, with revenues of more than £11bn and a market capitalisation of £16.4bn.

Aidan Heavey built Tullow Oil by buying a small engineering company and through a series of acquisitions and turned it into FTSE oil major. He is the longest serving CEO on the FTSE and draws a remuneration package of £2.8 million.

The post Invest In The Man Or The Machine? Are Burberry Group plc, WPP And Tullow Oil plc’s CEOs Too Big? appeared first on The Motley Fool UK.

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Lisa Walls-Hester has no position in any shares mentioned. The Motley Fool recommends Burberry Group and Tullow Oil.

Vodafone is also happy to relinquish another few league places this year as it offloaded its 45% stake in Verizon Wireless to US telecoms group Verizon Communications, the USA’s largest mobile operator, in one of the biggest deals in corporate history which brought in £84bn for Vodafone.

The company returned £54bn to its shareholders, retaining the remainder for acquisition and investment opportunities. The deal was not so much a well-planned strategy but an accidental adventure that the Vodafone chief executive Vittorio Colao told BBC News: “We got an offer that we thought was in the interests of our shareholders to accept — at the end of the day it’s as simple as that.”

Having slid down the telecom giant league tables, Vodafone still boasts over 411 million customers, 90,000 employees and it operates through various partnerships in nearly 30 countries. Its current market capitalisation is £50bn and it has worldwide revenue of £43.6bn.

Which Way Is Up?

Its long-term strategy now seems unclear; as more and more analysts bail on the share, it is also looking increasingly risky. Despite promising shareholders dividend growth of more than 8% for the year 2013/14, and further growth annually thereafter, returns from its £7bn investment project in cable infrastructure is not expected to deliver returns until FY18/19. This raises questions over where this cash will come from, particularly with European revenues in freefall.

Limits on charges, implemented by legislators across Europe, is forcing the sector to look further afield for revenue growth. There is, however, growth from an expanding array of mobile broadband-based services accessed by an ever-rising number of smart devices. Vodafone has made its intentions clear to seek acquisitions in the machine to machine technology arena including the lucrative mobile payment system segment — the mobile wallet — and move further into the broadband, fixed-line and television services.

Could A BSkyB-Vodafone Alliance Kick BT Out Of The Game?

There is presently no standalone company with all the assets and, going forward, collaboration is key to market dominance. Speculators are keen to pair Vodafone and BSkyB. BSkyB is the market leader in pay television, and a joint enterprise between Vodafone and BSkyB would challenge BT for broadband and entertainment market share.

A takeover of the most profitable satellite network in the world would certainly propel Vodafone back up the leaderboard, and put it in touching distance of ruling the telecom world again.

The post Can Vodafone Group plc Rule The World? appeared first on The Motley Fool UK.

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Lisa Walls-Hester has no position in any shares mentioned. The Motley Fool recommends shares in BSkyB.

Rolls Royce reported record car sales, with worldwide half-year sales up 33%, and high sales are not limited to the luxury car segment. One reason for increased sales in the UK is the increasing popularity of the personal contract purchase (PCP). In 2006, about 45% of new cars in Britain were bought on “finance”. Last year this figure was in excess of 74%, according to the Finance and Leasing Association.

This car buying boom looks set to continue in the UK as the long-term demographics indicate a growing number of drivers in the UK. The SMMT has forecast car manufacturing volumes are on course to break all-time records by 2017. Growth is also expected in US and Asian markets and there are some FTSE companies that are well placed to take advantage of this growth industry:

Johnson Matthey (LSE: JMAT) is a world-leading catalyst manufacturer, and one of the three suppliers that control 90% of the market for ECT. New EU legislation is driving sales for the company as the law tightens on engine emissions, and Johnson Matthey estimates that catalyst value for light duty diesel vehicles will increase by around 20%.

The company performed well in 2013/14, particularly in its Emission Control Technologies division. Sales were up by 11%, underlying earnings per share grew by 16% and the dividend increased by 10%.

Return on invested capital (ROIC) was 20.8%.

Inchcape (LSE: INCH) is one of the leading franchised retailer groups in the UK, partnering many of the world’s best brands including Audi, BMW, Jaguar, Land Rover, Mercedes-Benz, Toyota and Volkswagen. It has shown consistent year-on-year growth across sales, operating margins and EPS, and reports four consecutive years of double-digit earnings growth.

EPS for the year ending April 2014 is 43.5p, up from 39.1p in the last period; its ROCE has been 22% for the last three years; the company has a consensus rating of Buy from analysts; and it is currently trading £6.34.00 up 25.5% on last year price and 234.3% from five years ago.

GKN (LSE: GKN) is a global engineering group, and it Driveline division is the world’s leading supplier of automotive driveline components and systems. The company shows growth across many of its markets. Light vehicle production in the first quarter is 5% higher than the comparable period in 2013.

GKN Driveline delivered a strong first-quarter result, with sales increasing 5% to £885 million; organic sales increased 14%; trading profit was £71 million and trading margin was 8.0% (2013: 6.0%).

The post Will Soaring New Car Sales Figures Drive GKN plc, Inchcape plc And Johnson Matthey PLC Higher? appeared first on The Motley Fool UK.

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Lisa Walls-Hester owns shares in Rolls Royce.

The risk is compounded if there is a void in key board positions, due to the hiring, firing or illness of key executives.

When Jamie Dimon, chief executive at JP Morgan Chase, announced that he has throat cancer, the bank swiftly issued a memo to reassure shareholders that he will remain in the job and continue to run the company throughout his eight-week treatment process. The news leads stakeholders to question the bank’s succession risk and examine if it has done enough to ensure its leadership risk is mitigated.

 CEO’s Wanted

 There are leadership questions hanging over more than 10% of companies in the FTSE 100, including BG Group (LSE: BG), which has been without a CEO since Chris Finlayson left suddenly in April. The empty chair is being filled by BG’s chairman Andrew Gould until a successor is found. Gould has been keen to point out that “… one of my highest priorities is the recruitment of the new chief executive”. Analysts have clearly factored in the risk component and their consensus forecast has been downgraded in the last three months to neutral. BG Group’s first-quarter results for 2014 report total operating profit decreased by 6%, and the Group’s 2014 production is now expected to be at the lower end of the guidance range.

British Gas’s owner Centrica (LSE: CNA) also sees its chief executive, Sam Laidlaw, stepping down this year. Analysts have this company in a holding pattern with the share downgraded in the last few months; it now has an average rating of “Hold” and a consensus price target of £3.49.

Carpetright (LSE: CPR) has been without a CEO since the departure of Darren Shapland last year. The retailer is hoping the long-awaited arrival of its new CEO Wilf Walsh later this month will turn around its recent poor performance. It has issued a series of profit warnings, and pre-tax loss for the period to April was £7.2m, compared to a £5.1m loss the previous year. The share is trading at £5.08, down 16.94% on last year.

The National Association of Pension Funds (NAPF) has recommended that its members, who oversee about £900bn of investments, check boards’ leadership and succession plans. Will Pomroy of the NAPF, said: “With many companies becoming ever more global and complex, management succession is a primary shareholder risk in a number of circumstances.”

Despite recommendations from the Combined Code for boards to have a clear and defined succession legacy, in the form of designate deputy CEO’ or apprentice executives, there are still many companies ignoring the guidance.

The post Centrica plc, BG Group plc And Carpetright plc All Guilty Of Primary Shareholder Risk appeared first on The Motley Fool UK.

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Lisa Walls-Hester does not own shares in the above companies.

Who Else Will Reap Rewards?

The UK housing market is the biggest driver of home improvement and furnishing retail sales. Analysts are predicting that over a million people will move house this year, and they are anticipating growth of 5.5% this year and 6.3%in 2015.

As buyers embark on turning new houses into homes, footfall consequently finds its way to the DIY and furnishing retailers. Here are three companies that could benefit:

Carpetright plc (LSE: CPR) is Europe’s largest flooring retailer its business is closely tied to the property market because householders buy new flooring when they move house. Although the UK’s property market surged recently the company has issued a series of profit warnings.

Lord Harris, founder and chairman of Carpetright said the time lag between buying a property and spending money on refurbishing it has increased as buyers “have to pay a larger deposit than they used to, which gives them less money. Buyers are now waiting to fit new carpet and flooring whereas before it was one of the first things they did.“

It is however upbeat about future prospects for the business, with the launch of several new products in a new and rapidly growing segment. Group revenues declined 2.2 per cent in the year ending April, with an underlying pre-tax loss of £4.6m compared to losses of £9.7m for the previous year.

Kingfisher plc (LSE: KGF) is Europe’s largest home improvement retailer and the home of B&Q which is the UK’s leading DIY and garden center retailer Ian Cheshire, chief executive of B&Q owner Kingfisher, has made it clear he believes a return to a more buoyant housing market will reverse the decline that has hit the DIY market in recent years.

The DIY market has shrunk to £7.54bn in 2012 from £9.76bn in 2004, but Cheshire believes this is due to a lack of first-time buyers and not a more fundamental decline. Investors seem to think he is right – Kingfisher’s shares are up more than 40% this year to date.

Travis Perkins plc (LSE: TPK) is the building materials supplier to the trade, and the company behind brands such as Plumbing Supplies, Tile Giant and Wickes. It is now one of the largest suppliers to the UK’s building and construction industry. Time-pressured homeowners are increasingly turning to tradesmen to do refurbishment work that they would have previously tried themselves and Travis Perkins has seen its share price increase almost 13% on last year’s price. The company has eleven analysts that have assigned it a buy rating and the average price target is £18.25 and is currently trading at £16.45

The post Who Else Gains As Carney Steadies The Housing Market? appeared first on The Motley Fool UK.

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Lisa Walls-Hester does not own shares in the above companies.

However, chief executive of advertising giant WPP (LSE: WPP) Sir Martin Sorrell is in line for a record-breaking £30 million payout — a 70% increase on his previous year’s paycheck.

Sorrell has been the highest-paid chief executive in the FTSE 100 for the last three years, but WPP is keen to point out that most of Sorrell’s pay, almost £23 million, came in long-term bonuses that paid out after five years of rising profits. A WPP spokesman said:

“The remuneration committee was at pains two years ago to consult shareholders fully in order to align executive rewards with the performance of the company. WPP was the seventh-best performer in the FTSE 100 in terms of total shareholder return for the five-year period ending December 2013.”

RBS bypasses the EU bonus cap

Meanwhile over at RBS‘s (LSE: RBS) annual meeting, the UK government — as majority shareholder — nodded through remuneration resolutions, having previously forced the state-owned bank to scrap plans to pay its bankers bonuses twice the size of their salaries.

From 2014, executives will get up to 400% of salary through share allowances. Other allowances such as housing and travel are also making a bigger appearance in pay awards as these incentives circumvent new EU rules, which stipulate that bonuses are capped at 100% of annual pay.

Commenting on pay deals Chairman Sir Philip Hampton replied that “overall bonuses had come down by 60% in the last four years, and by 75% in investment banking alone. I don’t think it’s ‘job done’ yet, but huge progress has been made”.

Overall investors were not impressed by the pace of progress and shares of RBS have traded lower at  £3.21.37 today.

Tesco’s next in the spotlight

The Tesco (LSE: TSCO) AGM on Friday is also set to be a tense affair as it has a history of shareholder revolt over excess pay to its executives as far back as 2010 when 47% of shareholders voted against its boardroom pay policy. In a bid to avoid further embarrassing shareholder revolt, the retailer has overhauled its pay policy.

Philip Clarke, Tesco’s chief executive, has overseen three years of falling sales in the UK. The supermarket reported a 3.7% revenue slide earlier this month — its worst quarterly figures for 40 years, which meant there was no cash bonus or share award for the executive team. Mr Clarke, last year, received a £1.1m salary and £57,000 in benefits.

On Monday, Fitch cut Tesco’s credit rating from BBB+ to BBB, citing increasing competition from discount retailers. It followed a downgrade from Moody’s after a 6% drop in the company’s 2013-14 trading profit and weak first quarter sales this year.

The post Executive Pay In Focus As AGMs Kick Off appeared first on The Motley Fool UK.

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Lisa Walls-Hester does not own shares in the above companies. The Motley Fool owns shares in Tesco.

Chief executive Mark Wilson, who joined Aviva last year, undertook a business-wide review to streamline operations and reduce expenses. In a bid to revive the insurer’s fortunes, Wilson has excited non-core, non-performing divisions and these decisions reduced the group’s net debt. Total external debt has been reduced by £240 million.

Aviva is the UK’s largest insurer with more than 14 million customers. It provides life insurance, general insurance and asset management, and it is Europe’s leading provider of life and general insurance. The insurance group was formed by the merger of CGU and Norwich Union in 2000, CGU came from the merger of Commercial Union and General Accident in 1998. The group re-branded under the Aviva  name in July 2002.

If we consider market capitalisation, Aviva’s £15bn valuation does not constitute it a place anywhere in the top twenty league table of the world’s largest insurers. Despite this, Aviva claims to be the second-largest general insurer in Canada, one of the top foreign insurers in China and one of the largest insurers in Singapore. It has joint-venture projects in Indonesia and Vietnam and a strong market position in Hong Kong. In India it has a wide distribution network of 135 branches, spreading across nearly 1,000 towns and cities.

Whilst Aviva has been a darling of the analysts in recent months, the shares now have a consensus recommendation of ‘Hold’ from the eleven analysts that are covering the stock.

Rainy Days Ahead For Aviva, And A Watershed For The Industry?

Aviva has succeeded in its restructuring efforts and future cost benefits are now believed to be fully priced in. In addition, competition among insurers remains intense and further European regulatory changes are on the horizon. Industry commentators are predicting it may be a watershed for the industry over the next two years, as the Retail Distribution Review regulations will soon be introduced.

Regardless of what the lawmakers do, consumers will continue to demand transparency and less complex products, particularly as consumers are increasingly responsible for their own retirement welfare.

Growth in this industry is like many other sectors in that those looking east will reap the best rewards. Aviva has existing distribution channels in many of the developing markets and it well placed to leapfrog some other players in the industry. It is highly unlikely Aviva will rule the insurance world, but its size and ability to be agile as the industry shifts gear might give it more of an edge over some of the majors that are not known for their dynamism.

The post Can Aviva plc Rule The World? appeared first on The Motley Fool UK.

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Lisa Walls-Hester does not own shares in Aviva.