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Press tips & headlines: Royal Bank of Scotland, Hays, Tesco

Here is a selection of today's business press headlines.
April 11, 2014

Some analysts are wondering whether the agreement reached by RBS (RBS) with the government so as to be able to resume dividends will actually bring forward the date of shareholder payments. The Times’ Tempus is not so sure. In essence, the bank needs to rebuild its capital reserves – so as to receive regulatory approval to resume pay-outs - while at the same time generating sufficient funds to pay the government for its dividend access share. For that to happen, it must return to profitability and pull off the flotation of its US subsidiary, Citizens.

A return to profitability should be achieved by 2016, barring any more horrible surprises. As regards the flotation of Citizens, RBS just recently failed a key hurdle set by the US Federal Reserve, although that need not be a deal breaker. Thus, there are more hurdles to jump before the lender can resume its dividends. However, it is still the most exposed to any upturn in the UK economy, Tempus writes.

Recruiters tend to recover with the economy, so Hays (HAS) ought to do well given that the UK is now expected to be the fastest growing country in the G7 over the coming year. Indeed, net fee income, its take from placing people in temporary positions, accelerated to 14% during the third quarter, from the 9 per cent pace seen over the first half. In parallel, permanent placements rose by 25 per cent in like-for-like terms. The company is also seeing signs of stabilisation in Australia. That follows a notable drop in the Australian dollar, its main market in the Asia Pacific region, which sent its net fee income plummeting by 21 per cent once translated back into sterling.

Tantalizingly, the firm sees full-year operating profits coming in towards £141m this year. That happens to be just above the level at which Hays has said in the past that the board will look into the possibility of increased payments. The German market is also performing nicely. Nonetheless, the stock has a tendency to overreact. At 25 times’ forward earnings, falling to about 20 times next year, that looks high enough for now given that the recovery continues to be fragile. Hold, says The Daily Telegraph’s Questor column.

BUSINESS PRESS HEADLINES:

The Government could start selling down its stake in Royal Bank of Scotland (RBS) this year, according to City analysts, after the taxpayer-backed lender agreed a deal with the Treasury that could lead to the return of dividend payments. The deal to scrap the Dividend Access Share (DAS), which barred shareholder pay-outs, may accelerate the Government’s exit, analysts at Jefferies said. Many investors do not expect the state to begin offloading shares in RBS until after next year’s general election. “The path to full privatisation could be set in motion earlier-than-expected,” the analysts argued. – The Daily Telegraph

Former Tesco (TSCO) directors are “dismayed and angry” at the cull of senior talent at the retailer and fear that Philip Clarke, the Chief Executive, is driving the business “in the wrong direction”. A “whispering campaign” against senior staff including Laurie McIlwee, the outgoing Finance Director, and Matt Atkinson, the Chief Marketing Officer, has generated particular anger. “[Clarke] is just not good enough. He is doing serious harm to the business,” said one former director who worked at the supermarket group for two decades. – The Times

Almost a third of BP’s (BP.) shareholders refused to back “complacent” management at a stormy annual meeting during which the leadership was accused of turning the oil giant into a “laughing stock” because of spiralling payouts over the Gulf of Mexico disaster. Investors refused to support a plan to more than treble the pay package for Bob Dudley, the Chief Executive, to $8.7m (£5.2m). Thirteen per cent voted against the remuneration report and 19 per cent abstained. – The Times

The credit industry is facing its third crackdown in a fortnight after regulators announced that bank customers were paying too much for their overdrafts and, in some cases, were left stranded in perpetual debt by their easy availability. The Financial Conduct Authority, which unveiled research showing that customers were not getting good value or clear information, is to investigate the £8bn market further over the summer and could impose new rules to prevent abuses. - The Times

The squeeze on renters could begin to ease later this year with property specialists predicting that wage rises will begin to outstrip rent rises by July. LSL Property Services predicted today that annual rent rises will dip to 1.7 per cent in July, just as wage rises hit 2.2 per cent - the first time earnings have beaten rents since April 2010. It's good news for tenants, who will enjoy the most monthly disposable income after tax and rent since 2009. – The Daily Mail

George Osborne is to tell an audience of free-market campaigners in Washington that the UK's economic turnaround will defy those who say austerity and low wage growth will lead to long-term stagnation. In his first major speech in the US, the Chancellor will attempt to demolish claims that a further five years of austerity will restrict growth and hurt workers' living standards. – The Guardian