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from Breakingviews:

Bankers get painful and needed conflicts reminder

By Reynolds Holding

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Bankers just got handed a painful, and necessary, reminder about conflicts of interest. A $76 million penalty against RBC Capital Markets for working both sides of a deal is the latest blow to skewed loyalties. Even with recent knocks against Goldman Sachs and Barclays, however, it isn’t clear the message is reaching Wall Street.

The facts are depressingly familiar. While advising ambulance operator Rural/Metro on its $440 million sale in 2011, RBC was also pitching to finance the buyer, private equity firm Warburg Pincus. Delaware Vice Chancellor Travis Laster ruled in March that the lure of loan and advisory fees – and the potential for touting the transaction to win similar clients – led the bank to advocate a lowball offer. Rural/Metro shareholders, the judge said last week, deserved an extra $76 million.

Barclays ran into similar trouble in 2011 when Laster ruled the UK-based bank had a conflict advising Del Monte on a sale while also financing the buyers. The bank and Del Monte paid some $90 million to settle. And in 2012, Goldman coughed up its $20 million fee for helping pipeline operator El Paso sell itself to Kinder Morgan. Turns out Goldman owned a $4 billion stake in the buyer, which then-Chancellor Leo Strine found “furtive” and “troubling.”

from Hugo Dixon:

How to manage a corporate crisis

How should companies manage a crisis? Tesco is the latest large corporate to go through the wringer after it revealed last month that it had overstated its half-year profit estimate by 250 million pounds. The Financial Conduct Authority has started a probe and speculation is swirling that the UK retailer may need a rescue rights issue.

Tesco’s travails offer a case study about what to do (and what not to do) when disaster strikes. Two other big UK corporate crises – the ones that afflicted Barclays following the Libor interest-rate scandal in 2012 and BP after its Macondo oil rig blew up in 2010 – back up these lessons.

from Breakingviews:

UK banks have much to fear from latest probe

By Chris Hughes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The latest competition review of UK banking should aim to be the last. An antitrust probe in 2000 led to limited price controls after concluding that British lenders made excess profit. There were two more big investigations after the financial crisis. Yet concerns about market inefficiencies persist. That suggests the Competition and Markets Authority should do something radical this time.

from Breakingviews:

Barclays’ hit reflects investment bank fears

By Dominic Elliott

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The market’s reaction to accusations that Barclays duped clients in its dark pool reflects more general fears of investment banking. Shares in the UK bank tanked as much as 9 percent on June 26 after New York Attorney General Eric Schneiderman alleged Barclays misled investors by playing down the number of “predatory” high-frequency traders on its private trading platform for equities. Barclays says it takes the allegations “very seriously.”

from Breakingviews:

Barclays shows why it needs to do a UBS

By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Barclays has shown why it needs to “do a UBS”. Both the UK bank and its Swiss peer had a rotten time in their fixed-income trading operations in the first quarter, numbers released on May 6 show. The difference is that Barclays is only just understanding a problem that UBS attacked 18 months ago.

from Global Investing:

Braving emerging stocks again

It's a brave investor who will venture into emerging markets these days, let alone start a new fund. Data from Thomson Reuters company Lipper shows declining appetite for new emerging market funds - while almost 200 emerging debt and equity funds were launched in Europe back in 2011, the tally so far  this year is just 10.

But Shaw Wagener, a portfolio manager at U.S. investor American Funds has gone against the trend, launching an emerging growth and income fund earlier this month.

from Global Investing:

CORRECTED-Toothless or not, Western sanctions bite Russian bonds

(corrects last paragraph to show that Timchenko was Gunvor's co-founder, not a former CEO)

Western sanctions against Russia lack bite, that's the consensus. Yet the bonds of some Russian companies have taken a hit, especially the ones whose bosses have been targeted for visa- and asset freezes.

from Breakingviews:

A credible strategy for Barclays’ investment bank

By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinion expressed is his own.

Barclays’ Transform plan needs urgent transformation. Chief Executive Antony Jenkins’ year-old strategy to revamp the UK lender is already struggling. First, the Bank of England jacked up gross equity-to-assets requirements last summer, necessitating a scrambled 5.8 billion pound rights issue and a one-year delay to the bank’s 12 percent return-on-equity target. Then Jenkins reneged on an assumed policy of reining in pay – and justified it with a decidedly pre-crunch declaration of needing to pay up to retain talent.

from Breakingviews:

Rudloff’s retirement is bad timing for Barclays

By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Hans-Joerg Rudloff’s retirement at 73 comes at an unhelpful time for Barclays. The UK lender’s chairman of investment banking is stepping down after a distinguished career that spanned five decades – long enough for any banker. Rudloff’s achievements are myriad. A doyen of the eurobond market, which he helped create in the 1960s, 70s and 80s, Rudloff also saw the potential in Russia and central Europe in the 1990s, long before emerging markets became fashionable.

from Global Investing:

Ukraine aid may pay off for Kremlin

Ukraine said today it was issuing a $3 billion in two-year Eurobonds at a yield of 5 percent in what seems to the start of a bailout deal with Russia. That sounds like a good deal for Kiev -- its Eurobond maturing next year is trading at at a yield of 8 percent and it could not reasonably expect to tap bond markets for less than that. In addition,  Ukraine is also  getting a gas price discount from Russia that will provide an annual saving of $2.6 billion or so.

But what about Russia? Whether the bailout was motivated by "brotherly love" as Putin claims or by geo-politics, it sounds like a rotten deal for Moscow. The credit will earn it 5 percent on what is at best a risky investment. What's more the money will come out of its rainy day fund which had been earmarked to cover future pension deficits. State gas company Gazprom will have to stomach a 30 percent price cut, which according to Barclays analysts is "a reminder of the risks of Gazprom's quasi-sovereign status."

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