Investors said they would happily remain shareholders if no
such bid appears by a June 11 deadline set by the Takeover
Panel, citing Severn Trent’s secure dividend prospects, combined
with a dearth of similar investments.

The board of the utility, which supplies 7.7 million people
with drinking water, said on May 15 it had been approached by a
consortium on a possible offer, without saying what it was
worth.

The board rejected the approach, from a group including
Borealis infrastructure, the Kuwait Investment Office and
Britain’s Universities Superannuation Scheme, saying it had
offered only a modest premium to the company’s previous share
price.

Yet several top investors said they would be willing to
consider an offer if the consortium returned with terms priced
at around 23 pounds a share or above.

One noted a premium of a quarter or more to the value of the
company’s so-called regulated asset base (RAB) – a key measure
used by regulators to determine the return the company is
allowed to earn – was reasonable.

“A 25 to 30 percent premium (to RAB) … is not really a
high price when you’re looking at the scarcity of assets out
there,” a top 20 shareholder, speaking on condition of
anonymity, told Reuters.

“22 to 23 pounds may be lower than our expectations, above
23 for sure, 25 is not too high,” he added.

Severn Trent shares were trading at 20.56 pounds at 1255 GMT
on Friday, having risen around 12 percent since the approach was
announced. They have risen by 30 percent so far this year
versus a 13 percent rise for Britain’s blue-chip FTSE 100 index
.

Two people with direct knowledge of the deal told Reuters
the consortium had offered 10 percent above the stock’s closing
price of 18.25 pounds before the approach was announced. That
would put the bid at around 20 pounds per share, valuing the
company at around 4.7 billion pounds ($7.2 bln).

TOTAL RETURN

“On the whole, this is a share that we want to own for a
very long time,” another top 20 shareholder who wished to remain
anonymous told Reuters.

“It’s going to give excellent total return, and on that
basis, we would want some sort of rarity premium for that kind
of asset. You’d be talking about a 25 to 30 percent premium to
regulated assets that would lead you to a price of around 23
pounds.”

Yield-hungry investors have been showing strong interest in
British water and sewerage firms as they seek stable cash flows,
inflation protection and a favourable regulatory structure.

UK water company prices are subject to regulatory review
every five years with the next one due in 2015. Bidders can be
deterred from making an approach halfway through a cycle, given
the uncertainty over the next review.

A third investor said an offer price higher than the mooted
20 pounds per share was definitely warranted, but the risk of
regulatory change could hurt Severn Trent’s earnings power.

“(Severn Trent) is the kind of immensely robust business
that we like – high barriers to entry, strong returns and good
dividend flows,” the shareholder said.

“The only fly in the ointment is that we are already well
into the current regulatory period and the next review is
clearly a potential threat to future returns.”

Another issue is that if investors in UK water are seen to
be paying high premiums to capture typically strong returns,
regulators could conclude prices have been too high and need
adjustment.

“I don’t think the regulatory review is a big issue,” said a
sector banker speaking on condition of anonymity.

“The type of people buying water companies are the very
long-term investors. The isssue is you need a consortium with
deep pockets. To try and come up with a list is very hard unless
it’s names we haven’t thought about that no-one knows is
looking.”

A deal at 23 pounds per share, or around 5.5 billion pounds,
would represent a 37 percent premium to Severn Trent’s adjusted
2014 regulated asset base, Credit Suisse analysts wrote in a
note on May 15, well above average premiums in the sector of
between 25 and 30 percent.

“The scarcity of these assets has to be reflected. Better
keeping it at 20 then selling out,” said the first investor.

The most celebrated manager in the British national game will bid farewell to a stellar career in sport on May 19, but few who know Ferguson outside the world of soccer are predicting an idle retirement for the 71-year-old Scotsman.

Instead, they see him channelling his famous energy and ambition into a string of “hobbies” with serious money-making potential, including horseracing, film financing and real estate investment, where he has already notched up some big wins.

The City of London property market had begun to shake off the effects of the dot-com crash in 2003 when Ferguson made his debut in the sector, purchasing a seven-storey office building at 70 Gracechurch Street in a 150 million pound syndicated deal set up by now-defunct fund firm Active Asset Investment Management (AAIM).

In press releases published by the syndicate manager at the time, Ferguson was quoted as saying: “This is my first step into real estate, and I am quite bullish about it.”

He had every reason to be confident. Banks were falling over themselves to lend on property, and prices were soaring, pushing investment yields on London City offices, or rents expressed a percentage of a property’s value, as low as 4.5 percent by the eve of the credit crunch in mid-2007.

Several other multi-million pound UK deals followed hot on the heels of the Gracechurch transaction, including a 35 million pounds mixed office and warehouse scheme on the outskirts of London and a 43 million pounds purchase of a retail outlet in Gateshead in the northeast of England.

Ferguson and his fellow syndicate members decided to cash in their chips on Gracechurch Street in early 2005, taking a 12 million pound profit after less than two years of ownership.

In the same year, AAIM turned its attention to eastern Europe, taking stakes in malls, hotels, offices and warehouse property in emerging economies like Poland and Hungary and turning Ferguson into a fully fledged international property speculator.

Exactly how much the Glaswegian made from those deals remains a closely guarded secret, known only to members of Ferguson’s inner circle and the syndicate members, who praised his boundless talent for business.

“He could be anything. If he wasn’t in football, he would be the CEO of a major company. I have no doubt about that,” Stuart Le Gassick, deputy chairman of Redhawk Capital Partners, and one of the founders of AAIM, told Reuters.

“He wanted to invest his money in the best way he could. So we put the deals to him and Les Delgarno (Ferguson’s long-time family lawyer), and they got involved,” Le Gassick said.

“Times have been very tough in property over the last few years, but those guys have not gone anywhere. They’re still there,” he said.

While Ferguson was racking up trophy after trophy in soccer, AAIM, armed with cash from the United boss and a host of other wealthy private individuals, was soon sitting on a portfolio valued at more than 2 billion pounds at the peak of Britain’s debt-fuelled property boom.

But when crisis-hit Bank of Scotland ran into trouble in 2008, it pulled the plug on funding to the vehicle in charge of the AAIM operations and brought the investment spree to an abrupt end.

London-based real estate entrepreneur Robert Whitton, who co-invested alongside Le Gassick and Ferguson in the AAIM deals, took responsibility for managing most of the legacy assets after the administration.

He noted the Glaswegian’s great “people skills”, finely honed after years of dealing with temperamental soccer stars, though he also had a reputation for the occasional heated rant.

“We had and have a good relationship, but then I did make him a lot of money so never got the ‘hairdryer treatment’,” Whitton told Reuters.

“How much did I make for him? That’s confidential. But the man is a winner, and that’s coming from an Arsenal fan. He is a real gentleman and a great listener. It surprises people when I say that because they just have the media image of him ranting. But he’s very astute … He always made time for people.”

With an estimated personal fortune of 34 million pounds, Ferguson was ranked joint 26th in April’s Sunday Times Sport Rich List.

The Manchester United press team did not immediately respond to a request for comment on Ferguson’s extensive business interests.

BUSINESS EMPIRE

Ferguson’s track record as a part-time horseracing mogul carries one significant blemish: the bitter spat with Irish racing tycoon and former Manchester United investor John Magnier over the breeding rights to a stallion called The Rock of Gibraltar that they jointly owned.

Magnier offered Ferguson four stud nominations a year for the rest of the horse’s life in an effort to resolve the dispute, which some United supporters suggest prompted the Irishman to sell his interests in the club to its current majority owners, the Glazer family.

Ferguson settled for a one-off payment of 2.5 million pounds, a decision that racing experts claim has cost him many millions of pounds in stud fees.

The Rock, who became the first Northern Hemisphere horse to win seven consecutive Grade 1 races, has more than proved his money-spinning potential since, and has gone on to sire more than 50 horses who have won races in their own right.

Regulatory filings show Ferguson has also dabbled in the world of film finance, in which wealthy individuals team up to bankroll the production, marketing and distribution of movies in exchange for a share of the eventual profits.

He is named among a number of sports celebrities and businessmen as a member of Cherwell Films and Clyde Films, and also Eclipse Film Partners 35, which hit the headlines last year after a tribunal barred it from claiming tax relief for members.

Citing his enormous capacity for work and unshakeable focus on the task in hand, friends, associates and fans of the former Manchester United manager say he would be well suited to a consultancy role or non-executive position in the City of London financial district, also known as the Square Mile.

“There is huge admiration for Sir Alex amongst United fans in the City,” Chris Iggo, chief investment officer in Fixed Income at AXA Investment Management, and a lifelong United fan, told Reuters.

“People respect his drive, his enthusiasm, his success and his qualities as a leader. But there is also the respect for him as a man, his charitable work and for how he always has time for people – qualities that are still valued in the Square Mile.”

That tribute was echoed by Paul Marshall, chairman of London-based hedge fund Marshall Wace and one of the so-called “Red Knights” group of wealthy supporters who considered a takeover of Manchester United in 2010.

“Sir Alex Ferguson is one of the world’s greatest leaders, not only in soccer but in any walk of life. He will be impossible to replace,” Marshall said.

Chief Operating Officer Menezes, 53, replaces Paul Walsh,
who is stepping down after 13 years, the maker of Johnnie Walker
whisky said in an announcement that surprised few investors,
even if the timing of Walsh’s exit had not been certain.

The value of Diageo has tripled under Walsh and grew by
around 30 percent over the last year alone, as the world’s
biggest spirits group has sucked up acquisitions in markets such
as Brazil, India and Turkey.

But its shares barely reacted to his departure; those close
to the firm, which also sells Tanqueray gin, Guinness beer and
Smirnoff vodka, said much of the move to emerging markets that
is welcomed by investors has been driven by Menezes and others,
including American chief financial officer Deirdre Mahlan.

“Paul was burned in the emerging markets crisis in the late
1990s so he was very anti those markets,” said a British
equities manager with Diageo shares in his portfolio.

“He didn’t see the point in buying local spirits businesses
- even though they offered perfect distribution platforms for
his branded products. He changed his mind latterly, but he never
quite grasped that fast enough.”

Faced with sluggish demand in recession-hit Europe, Diageo -
like many of its consumer goods peers – has been expanding in
emerging markets, where it aims to make around half of its
turnover by 2015, compared to a current 42 percent.

Menezes’ background – born in India, he graduated from Delhi
University before an MBA at the Kellogg School near Chicago -
may underline the global credentials of London-based Diageo.

“Ivan takes on the role of CEO at an exciting stage of the
company’s global development,” said chairman Franz Humer.

ACQUISITIONS

Menezes as COO was key in Diageo’s two-stage purchase of a
stake in India’s biggest liquor maker United Spirits.

Although the deal, announced in November, has been dogged by
regulatory delays and a second-stage open offer is unlikely to
succeed, Diageo is expected to content itself with a stake of
about 30 percent along with management control.

Investors are also waiting to hear Diageo’s plans for its
U.S.-focused tequila business following the collapse in December
of talks to buy a stake in Mexico’s Jose Cuervo, whose brand the
group distributes under licence.

The naming of Menezes, who ran Diageo North America for
eight years, was less than a surprise after he had been elevated
a year ago to COO. One investor among the biggest 20 of Diageo’s
shareholders said there had been a number of internal contenders
and there was “nothing controversial at all” about the choice.

The timing of Walsh’s departure was the only unknown
quantity, said Jefferies analyst Dirk Van Vlaanderen: “We would
not expect any significant change to strategy and see this as
the natural ‘next step’ in Diageo leadership,” he said.

“Ivan is a known quantity and has done a good job managing
Diageo’s largest and most profitable business segment.”

Menezes has been with the company since 1997, when it was
formed in a merger between Britain’s Grand Metropolitan and
Guinness. Among its brands it counts some venerable names,
including J&B whisky, dating from the 18th century.

The company trades at 17.5 times expected earnings, equal to
France’s Pernod Ricard, the number two spirits group.

Walsh had not yet decided what his next move would be, a
Diageo spokeswoman said; one shareholder said he thought Walsh,
who at 57 is still some way from typical executive retirement
age, had “big aspirations to become chairman somewhere”.

He holds a number of non-executive positions, as well as
roles in the British government’s departments of business and
energy. Walsh will remain with the company over the next year to
ensure a smooth handover to Menezes of key relationships,
including those essential to recent acquisitions, Diageo said.

Its shares were flat near the London close, a little softer
than the wider FTSE-100 index, which gained 0.4 percent.

Knight Vinke’s intervention, in an open letter to UBS
management, staff and investors, was not taken up by other
shareholders during hours of questioning at the bank’s annual
general meeting (AGM) on the outskirts of Zurich.

UBS said forecast-beating first-quarter earnings earlier
this week showed its pared-back investment bank complemented its
prized wealth management arm, and contradicted Knight Vinke’s
view that the two could hold each other back.

“I would not buy the argument that one side is preventing
the other side from reaching full potential,” one of UBS’s
largest ten shareholders told Reuters on condition of anonymity.

“For sure, there was a phase where that was the case because
of the way the investment bank was run but to me, UBS is
learning from past mistakes and is moving forward.”

UBS is battling to recover from a taxpayer bailout at the
height of the 2007-9 financial crisis and focus on its business
with wealthy clients after a series of scandals at its
investment bank, including a record $1.5 billion fine for its
part in rigging benchmark interest rates and $2.3 billion of
losses from a rogue-trading scandal.

New York-based Knight Vinke, which owns just under one
percent in UBS, has a track record of agitating for change at
companies from banking group HSBC to retailer Carrefour
, although its results have been mixed.

Some 89 percent of investors backed UBS’s 2012 performance
at the AGM, a much stronger endorsement than last year, when
anger over the rogue trading scandal meant UBS’s board only
narrowly avoided defeat with a 52 percent vote in favour.

More than 82 percent of shareholders also backed UBS’s pay
plans despite anger among retail shareholders at a $26 million
signing-on fee for the head of the investment bank. Last year,
over a third of investors rejected the remuneration report.

SIGNS OF SUCCESS?

UBS’s decision to shrink its investment bank bore fruit in
the first quarter when a more equities-focused division swung to
a pretax profit of 977 million francs. Its private bank, the
world’s second-largest after Bank of America, also
attracted the most customer money for six years in the quarter.

Crosstown rival Credit Suisse illustrated the
benefits of maintaining both an investment banking division and
a wealth management arm last week when stable revenues at the
former helped compensate for a slide in private banking profits
in the first quarter.

A previous campaign to radically restructure UBS by a former
president, Luqman Arnold, fell apart when Lehman Brothers
collapsed in September 2008. Arnold’s investment fund’s stake in
UBS was held by Lehman Brothers meaning he could not access the
shares when the U.S. investment bank went bust.

Shares in UBS were down around half a percent to 16.53 Swiss
francs in Zurich on Thursday, after hitting a near two-year high
of 16.90 francs on Tuesday following its first-quarter results.
The European banking index was flat.

RISKS

Knight Vinke has made a name for itself by targeting
corporate titans but its report card is mixed.

Despite a slew of strongly-worded letters and public
outbursts, it failed to block the $31 billion takeover of miner
Xstrata by commodities trader Glencore late last year.

A two year public campaign against HSBC’s diversification
strategy failed to stop the bank raising fresh capital to meet
its U.S. debts. HSBC closed its U.S. consumer finance business
and focused more on Asia around the time of the campaign,
stating that such changes were already in train.

In a letter in Thursday’s Financial Times newspaper, Knight
Vinke’s chief executive Eric Knight said UBS’s investment
banking activities posed risks for its wealth management arm.

“It is argued that the investment bank brings cross-selling
opportunities to the wealth management business – and to a
limited extent this may be true. However, whatever benefits
there may be need to be viewed in the wider context of the risks
that the investment bank brings to the group as a whole.”

Knight Vinke said the best owners of UBS’s investment bank
were probably its management and employees.

“This is a discussion that is best had when all the
businesses are doing well – as is the case today – and the board
needs to be encouraged to act quickly and decisively so as not
to lose the opportunity,” it said.

New York based Knight Vinke, which owns just less than 1 percent of the Swiss bank, said its investment banking activities between 2007 and 2009 “nearly destroyed” its prized private banking business, which was still reeling from a slew of scandals during financial crisis.

Knight said the union was preventing each division from achieving its full potential.

“Investment banking is a very risky business and these risks pose a serious threat to UBS’ Wealth Management and Swiss Banking franchises,” Knight Vinke board member Eric Knight said in an open letter.

“This is a discussion that is best had when all the businesses are doing well – as is the case today – and the Board needs to be encouraged to act quickly and decisively so as not to lose the opportunity,” he said.

The break-up call is likely to dominate the agenda at the meeting, eclipsing a debate on executive pay and a celebration of strong first quarter results after one of the most turbulent phases in UBS’s history.

But a proposed a $26 million signing-on award for investment bank chief Andrea Orcel is bound to attract criticism.

Former Bundesbank president Axel Weber, who has been chairman of the Swiss bank for the past year, will have the job of handling any opposition. And some of it could be personal, after he pocketed 4 million Swiss francs ($4.3 million) for joining, on top of his basic pay and an award of UBS shares.

Fed up with corporate excess, Swiss voters pushed through some of the strictest controls on executive pay this year, including the introduction of binding shareholder votes on compensation from next year.

“Chairman Weber talks of a new corporate culture and that managers should set an example, but he himself is taking eight million Swiss francs,” retail investor Brigitta Moser-Harder, who has campaigned against UBS bonuses, told Reuters.

Banker pay and bonuses have become hot topics across Europe since the financial crisis, when a string of major banks including UBS had to be bailed out by taxpayers.

Earlier this month, shareholders at Julius Baer (BAER.VX: Quote, Profile, Research, Stock Buzz) rejected the Swiss private bank’s pay plan, while a sizable minority of investors were critical of a move by Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) to issue new shares to pay staff bonuses.

A $2.3 billion loss due to a rogue-trading scandal and a record $1.5 billion fine for its part in a global interest rate rigging scandal have singled UBS out for opprobrium.

Last year, over a third of shareholders rejected the bank’s pay plans and only the thinnest of majorities approved the performance of the board and management.

This time round, opposition is likely to be more muted after first-quarter results signaled UBS’s plans to scale back its investment bank and focus on private banking are paying off.

Shareholder advisory group ISS has also recommended backing UBS’s pay plan.

($1 = 0.9290 Swiss francs)

(Additional reporting by Steve Slater; Editing by Mark Potter and Jane Merriman)

Its shares jumped more than 6 percent to their highest in
some two months.

The capital increase by Germany’s biggest lender bolsters
its balance sheet and puts it comfortably in line to meet bank
safety rules ahead of a 2019 deadline. It also means it can
forge ahead with acquisitions and win new business as rivals
retrench, co-Chief Executive Anshu Jain said.

Tapping shareholders for funds allows banks to plug
regulatory capital demands and use their profits to invest in
expansion and for higher dividend payouts, rather than spending
months diverting the money for regulatory purposes.

The fact that Deutsche Bank – which placed 90 million shares
at 32.90 euros each – managed to sell its shares without a hefty
discount signalled fresh demand for financial markets stocks,
towards which investors had long been wary.

“For Deutsche, there were clear business reasons why they
managed to raise capital so well. This is a global investment
bank which wants to remain a global investment bank,” said Jaime
Ramos Martin, portfolio manager at Standard Life Investments.

“They needed more capital to support those ambitions because
the U.S. regulator wanted more capital and European regulators
were worried that this left domestic operations looking weak.
Now they can take on more risk,” he said.

Deutsche is among a slew of European banks raising capital,
including Russia’s second-largest bank VTB and
Germany’s Commerzbank, as well as Greek and Spanish
banks.

Jain said pressure to narrow the gap with peers inspired the
move. “We were asked to raise capital by virtually a unanimous
opinion across investors and analysts in June, September and
December,” Jain told analysts on a conference call. “Resolving
the capital issue had to be our top priority.”

Deutsche Bank shares closed up 6.1 percent at 34.91 euros,
helping drag the European sector up 0.5 percent.

REGULATOR DEMANDS

Jain had said in January the question of whether Germany’s
lender needed a capital increase was driven by uncertainty over
the likely burden of future regulation.

Since then the U.S. Federal Reserve Board has renewed calls
for foreign banks operating in the United States to hold as much
capital as their U.S. counterparts, regardless of how well their
overseas parent companies are funded.

“Everybody knew they needed to raise some capital and nobody
wanted to take a position until they completed their capital
raising,” Olivier Lefèvre, a Paris-based European equities
portfolio manager at Natixis Asset Management, told Reuters.

“With this capital increase, they did a great job, they will
close the discount on the valuation and keep in touch with their
Swiss competitors. The bank seems to be on the road now.”

The share sale combined with further measures to sell hybrid
debt in the next 12 months will bring Deutsche Bank’s core Tier
One capital ratio to approximately 9.5 percent from 8.8 percent
at the end of March.

By comparison, rival Barclays has a core Tier One
ratio of 8.4 percent, Credit Suisse 8.6 percent, JP
Morgan 8.9 percent and Goldman Sachs 9 percent.

Britain’s banks have also been told by their regulator they
must plug a 25 billion pound hole in their finances by the end
of the year, although the watchdog has said actions already
taken should cover half the shortfall.

Yet UK banks are unlikely to go directly to shareholders for
extra funds. State-backed Royal Bank of Scotland and
Lloyds Banking Group for instance would want to avoid
such a scenario because it would require British taxpayers to
foot at least some of the bill.

Barclays has also pursued alternative means to
bolster its capital strength, issuing debt that converts into
equity should it hit trouble. It has issued $4 billion of
contingent capital debt and may issue $6 billion more. RBS
and Lloyds have also asked shareholders for permission
to issue the same kind of debt.

For Deutsche, a higher capital cushion could also open the
door to higher dividend payments.

“Today we can say that the so-called hunger march is over,”
Jain said, referring to investor appetite for more generous
payouts. Germany’s biggest bank by market value has kept
dividend payments steady at 0.75 euros per share since 2009.

Deutsche said its strengthened balance sheet would allow it
to buy up assets and poach market share from rival lenders who
are pulling back. It declined to specify where the market share
gains would come from, but has in the past said it would
continue investing in its investment bank even as rivals like
UBS pull out of fixed income.
($1 = 0.7634 euros)

(Additional reporting by Matt Scuffham and Kylie MacLellan in
London; Editing by David Holmes)

A failure to attract buyers from the banking sector means
that state-backed groups Lloyds and Royal Bank of
Scotland are racing to prepare stock market flotations
of hundreds of branches they have been told to sell by European
regulators.

Their initial public offerings (IPOs) could clash with
existing plans by Spain’s Santander and Virgin Money,
the financial group that is part of Richard Branson’s empire, as
well as a possible move by National Australia Bank to
float its British businesses.

The higher cost of running banks in the aftermath of the
financial crisis, the complications of integrating IT systems
and staff and the worsening outlook for the British economy have
deterred trade buyers but such factors could help lower the IPO
price, attracting investors.

All five groups – if they list – will be pitched as a ‘pure
play’ British retail bank without exposure to riskier investment
banking or international markets and without the challenge of
running off large books of soured property loans, which will
remain with the parent group.

“When you look at the returns that most banks today
generate, the returns of the pure retail banking divisions are
quite often the highest returning units of the bigger bank, and
very attractive investments if you can find them on a pure-play
basis,” said Richard Black, fund manager at Legal & General
Investment Management, one of the UK’s biggest equity investors.

Return on equity (RoE) for core UK retail banking was 24
percent at RBS and 16 percent at Barclays last year, well above
returns of 10 percent for “core” RBS and 8 percent across
Barclays. Lloyds said its core UK retail arm delivered a return
on risk-weighted assets of 3.6 percent, easily its best area and
above 2.6 percent for what it regards its future core.

FRESH START/OLD NAME

All five groups — Williams & Glyn’s, Trustee Savings Bank
(TSB), NAB’s Clydesdale, Virgin Money and Santander UK — could
end up listing in the next 12-36 months, bankers say, breaking a
decade-plus hiatus since the last significant bank IPO of
Bradford & Bingley in 2000.

For at least two of the brands, it would be a chance for
investors to re-engage afresh with an old name.

TSB, which in the 1980s was the self-styled “bank that likes
to say yes”, could reappear after being swallowed by Lloyds in
1995. Its roots date back to 1810 and it bulked up by merging
trustee savings banks – which specialised in accepting deposits
- between 1970 and 1985. TSB floated in 1986.

The 630 Lloyds branches designated for sale by Lloyds -
dubbed “Project Verde” – will be rebranded TSB this summer.

If no buyer comes forward, TSB is set to return to Britain’s
blue-chip share index in the second half of 2014 after a 20 year
absence.

Another name set for a reboot is Williams & Glyn’s, which
was last seen in the 1980s before being absorbed by Royal Bank
of Scotland and which will be used for RBS’s 312
branches currently dubbed, “Rainbow”, which made 305 million
pounds in operating profit last year.

The revival of such brands is no coincidence.

“The Verde proposition plays on the fact that we are in an
environment where most people hate their banks,” said Ralph
Brook-Fox, portfolio manager for UK equities at Ignis Asset
Management.

“So if you can revive an existing brand that has an element
of trust attached to it, that could be very attractive.”

CROWDED SPACE? NOT HISTORICALLY

Between the FTSE 100′s formation in 1984 and the financial
crisis there had always been at least six banks among its
constituents and as many as 11 in the late 1990s. Eight to 10
has been the typical number, according to Reuters analysis.

The FTSE 100 only has five banks at present, its
lowest ever number, after Northern Rock, Bradford & Bingley,
Alliance & Leicester and HBOS left during the 2007/08 crisis.

“A few years ago there were several medium-sized banks
listed, so it shows there is an investor universe for them. An
RoE (return on equity) of 15 percent is possible for a focused,
well managed smaller player. That could tempt people to invest,
especially at below book value,” one investment banker said.

Santander UK is gearing up for a flotation next year or in
2015, once it has improved its balance sheet and increased
corporate lending, following the path taken by Santander’s
Brazil and Mexico operations.

The business, encompassing former building societies Abbey,
Alliance & Leicester and Bradford & Bingley, is likely to be the
biggest of the new arrivals, potentially worth 15-20 billion
pounds. Santander UK made a pretax profit of 1.2 billion pounds
last year.

Virgin Money said after its purchase of Northern Rock in
2011 that it wanted to grow and float between 2014 and 2017.
Virgin Money is set to publish its first consolidated results
including Northern Rock next month. In 2011, Virgin Money made
an underlying pretax profit of 44 million pounds but Northern
Rock made an underlying loss of 111 million pounds.

National Australia Bank may also pursue an IPO, bankers said
after several fruitless years spent trying to find a buyer. NAB
UK made a loss of 139 million pounds in the year to
end-September due to losses on bad loans, after a 183 million
pound profit in 2011.

Lloyds has not broken out Verde’s profits, but Deutsche Bank
analysts estimated its annual profit at 200 million pounds.

Britain’s five big banks trade at 0.9 times book value on
average, but stripping out emerging-market focused HSBC
and Standard Chartered cuts the valuation to an average
of 0.7 times.

Bankers said valuations of new firms will, as ever, dictate
their success, but they also warned there remain a number of
headwinds that could throw the flotions off course.

Separating the operating platforms and IT systems is a big
challenge for RBS and Lloyds; the regulatory landscape and
treatment of capital for new names remains in flux; and none are
likely to list until the British economy perks up.

The threat the government will flood the market with its RBS
and Lloyds shares is also a risk. But on the other hand,
lawmakers may smooth the path for any new banks ahead of the
next general election in 2015 to help lending.

Some of the banks could get snapped up before floating, said
bankers who advise on deals. With several private equity firms
such as J.C. Flowers and WL Ross still sniffing around, a buyer
could even have their eye on combining more than one.

Steve Pateman, head of UK banking at Santander UK, said he
was unconcerned by competition from others for investors.

“Bank valuations are improving in the UK and that will
continue as people get more confidence in the banking sector.
The regulatory environment will be clearer by 2015.”

Their comments followed a Reuters report on Wednesday that Verizon had hired advisers to prepare a possible $100 billion bid to buy Vodafone’s 45 percent stake in their Verizon Wireless joint venture, likely to be structured as a roughly 50:50 cash and stock bid.

Should the $100 billion figure stand, the six shareholders, with around 1.3 billion of Vodafone’s shares between them, said they would prefer the British group to push for a full merger with Verizon instead.

The main concern among investors contacted by Reuters was the fact that a sale of Verizon Wireless – the best performing asset by far in the Vodafone portfolio – would highlight the operator’s exposure to its troubled European markets.

“Without wishing to be too disrespectful, (Vodafone is) sitting with a rather ugly set of assets once you lose the Verizon Wireless stake,” said Ralph Brook-Fox, UK equities fund manager at Ignis Asset Management, a top 40 institutional shareholder in Vodafone.

“I think the merger or full takeover scenario, although not at the forefront of discussions right now, could actually end up being the more palatable deal.”

Verizon Communications released a statement earlier this month to say it did not have any intention to merge or make an offer for Vodafone following bid speculation.

Vodafone’s share of Verizon Wireless represented around half of the British group’s adjusted operating profit in the six months to the end of September 2012, according to its financial results.

It also received before the end of 2012 a 2.4 billion pound dividend from its Verizon Wireless stake, and said it would pass on 1.5 billion pounds to its shareholders via a buyback, showing the importance to the group of its holding.

Among its core European operations Vodafone operates in crisis-hit and heavily regulated markets such as Italy, Spain and Portugal, where revenues have come under pressure because of economic turmoil and intense competition.

With that in mind, investors contacted by Reuters would rather an offer for the stake at between $120 billion and $135 billion as acceptable. At its current share price, Vodafone’s whole market capitalization stands at around $146 billion.

“I think … $120 billion is the point where you think you’ve got a decent premium,” one top 20 shareholder said, on the condition of anonymity. “I think that’s reasonable and if they achieve that, I think the (Vodafone) shares go up.”

Another big question mark for Vodafone and its shareholders is the potential tax bill the sale of its stake would incur: anywhere between $5 billion and $25 billion.

The wide range is due to a lack of clarity about which holding companies within Vodafone own which assets – for instance Vodafone America holds assets in a number of other jurisdictions – leaving those outside the company unable to say with any conviction how much tax would need to be paid.

(Additional reporting by Kate Holton; Editing by Sophie Walker)

Chief Executive Mark Wilson told staff the cuts would equate
to around 6 percent of Aviva Group’s global workforce over the
next six months and reiterated a commitment to deliver more than
400 million pounds ($609 million) in cost savings by year-end.

“I know this is difficult news for our employees but these
changes are essential if we are to remain competitive,” Wilson
said in a statement emailed to Reuters.

“I am determined that Aviva gets through this phase of our
business transformation as quickly as possible,” he added.

Aviva, which employs around 31,200 people, has launched a
root-and-branch shake-up after years of spiralling costs,
disappointing share price performance and an investor revolt
that led to the departure of former chief executive Andrew Moss
in 2012.

Chairman John McFarlane sought to appease angry investors
with a strategic review last July, which called for the sale or
closure of more than a dozen underperforming and non-core
business units.

Aviva is also overhauling its redundancy policy for all
employees on UK contracts. From December, staff will only
receive two weeks’ pay for each year of service, rather than a
current four weeks’ pay. Pay will also be capped at 78 weeks.

Wilson, who took the helm in January, slashed the 2012
dividend by more than a quarter in March to repay debt, as the
company reported a 15 percent drop in operating profit to 2.13
billion pounds, broadly in line with forecasts.

The company has made annualised cost savings of 275 million
pounds so far. Its shares were trading 0.5 percent higher at
296.3 pence by 11.52 GMT, broading in line with London’s top
blue chip companies.

A European parliament panel has called for tighter control of fund manager pay though lawmakers are split over how far reaching a cap on bonuses should be.

Experts say any cap on performance related pay will have a bigger impact on the industry in Britain where firms like Schroders or Henderson, say they use variable pay for money managers, often relying on bonuses rising and falling with the fortunes of the firm.

Henderson’s variable staff costs published with 2012 earnings, for example, rose from 77.4 million pounds in 2010, peaked at 103.3 million pounds in 2011, but dropped to 77.6 million pounds in 2012. This, the company said, reflected variance in fund performance fees and the shifting fortunes of the overall business.

The equivalent business in Europe is more likely to be a unit within a wider financial services group or bank rather than a standalone business, and pay is more frequently fixed, according to Ben Phillips, partner at consultants Casey Quirk.

“It (the bonus cap) would have an outsized impact on the UK managers,” Phillips said.

Phillips said the cap could prompt firms to introduce pay structures based on “franchise value” whereby managers become part owners of the firm and are paid a dividend, or share of profits.

“This is a further kick in the pants to get (fund managers) thinking about compensation structures that are more deferred and more based on franchise value – actual ownership of the fund manager,” he said.

Some experts say British fund managers could compensate for being forced to limit the variability of their wage bill by introducing fixed, short term contracts where staff sign new agreements, with a new pay deal, each year.

“Either you can reserve a right to make a change … or exercise a right to terminate on one month’s notice and re-engage you the next day on a new contract and your salary will be 30 percent lower,” said Trevor Bettany, partner and employment law expert at London based legal firm Speechly Bircham.

WELL-COMPENSATED

Britain’s investment managers are a well-compensated group: salaries in 2012 averaged 84,716 pounds ($130,100), a survey carried out by financial sector head hunter Astbury Marsden showed.

This compares with an average gross annual salary in Britain of 26,000 pounds while lawyers are paid on average 70,731 pounds, medical practitioners earn 69,741 pounds and airline pilots get 77,906 pounds, according to government figures.

However, managing director Jonathan Nicholson said the highest paid fund managers in Britain can command pay measured in millions of pounds, with an annual bonus several times a top end basic salary at between 200,000 to 250,000 pounds.

The EU proposals involve capping bonuses at 100 percent of basic pay.

Fund managers warn the main impact will be to increase the fixed costs of running an investment manager because staff will expect bigger base salaries, leading to layoffs in lean times if firms cannot cut the wage bill in line with performance.

“We think this is a thoroughly bad idea. Fixed costs will rise which helps no one because it just makes the industry less flexible,” said a British-based senior source at a large international fund manager who asked to remain anonymous, wary of the possible public reaction to a fund manager objecting to attempts to cap pay.

Ian Gorham, chief executive of investment firm Hargreaves Lansdown, which selects funds from across the industry for its retail investor clients said making pay less variable could ultimately punish consumers.

“If a fund manager is going to be paid a higher basic salary or other rewards that are fixed, that means they are going to receive that money whatever performance they’ve put in and that can’t be good,” he said.

Others warn a bonus cap will leave firms unable to stop their best money managers moving beyond the reach of the rules.

Kevin Poulter, a senior associate at lawyers Bircham Dyson Bell warned of an exodus of talent overseas, suggesting financial services hubs beyond the reach of EU rules such as Dubai or Hong Kong as possible destinations.

“What the European Parliament might do is send all the top quality fund managers elsewhere to unregulated parts of the world,” he said.

But some in the industry dismiss the gloom. Casey Quirk’s Phillips says much of the new framework could lead to a better performing industry.

“It’s not the end of the world and some of the options around it are best practice anyway so it’s certainly something that can be dealt with,” he said.

(Editing by Giles Elgood)