Barclays Profits Fall 25% Amid Restructuring

Barclays endured a 25% fall in first quarter profits as £514m of restructuring costs weighed heavily.

The bank reported an adjusted pre-tax profit for the three months to March of £1.79bn, down from £2.4bn a year ago, just below analysts' expectations.

The investment bank made a profit of £1.3bn in the first quarter, up 11%, and accounted for almost three-quarters of group profit.

Barclays said group profits were dented by the charge to cover Project Transform - new CEO Antony Jenkins' plan to axe 3,700 jobs, prune the investment bank and reform the bank's culture after a series of scandals.

Investment bank chief Rich Ricci is the best-rewarded at Barclays

He is aiming to make the lender the 'Go-To' bank on the high street following the PPI and interest rate swap scandals and Libor interbank lending rate-rigging.

Mr Jenkins confirmed an additional £500m in restructuring costs were expected to be found over the remainder of the year.

He said: "While there remains much to do to build a stronger and more resilient Barclays, we are completely focused on executing our Transform programme and are making good early progress."

Most of the costs incurred so far were in its European operations, where it has cut almost 2,000 jobs, and the investment bank, where it is axing 1,800.

The bank last week announced a fresh shake-up of its senior staff, including the departure of its head of investment banking, in the wake of last year's Libor scandal.

Rich Ricci and Tom Kalaris, who runs its wealth-management arm and US business, were both appointed by former boss Bob Diamond.

Under their watch, the Libor system was found to have been open to abuse, with some traders lying about borrowing costs to boost trading positions or make the bank seem more secure.

Barclays was later fined £290m by regulators for manipulating the rate.

Mr Ricci - Barclays' best-paid banker - recently revived the debate about remuneration in the sector when it was confirmed he was getting a £17m share payout under the terms of his contract.

It was part of a £40m windfall to be shared between nine executives.

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Apple Profits Fall For First Time In 10 Years

Apple has reported its first fall in profits for nearly 10 years - a move that could further threaten its market value.

Analysts expected a tumble of up to 18% in earnings when the company delivered its second quarter trading statement on Tuesday.

In the end, the technology giant announced that its profits for the second quarter of the financial year - the three months to the end of March 2013 - were down £1.38bn ($2.1bn) to £6.27bn ($9.56bn), which was what analysts had predicted.

Soon after announcing the profit fall, the Apple board cleared the way to buy back $100bn worth of shares by 2015.

It is rumoured that higher component prices and the lower costs of some of its products were what ate into Apple's profit margins.

There has also been stronger competition in the smartphone and tablet markets.

Weaker demand - largely because of the competition issue - has been blamed for the 40% drop in Apple's stock value since September last year.

But Apple reported strong growth in the sales of many of its products.

The company sold 37.4 million iPhones in the quarter, compared with 35.1 million in the same quarter the year before.

It sold 19.5 million iPads compared with 11.8 million in the previous year. Sales of Macs were down, too.

Apple did its best to make light of the profits fall.

CEO Tim Cook, who took over when Steve Jobs died of cancer in 2011, said: "We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad.

"Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline."

Apple shares fell below the $400 (£262) mark last week for the first time since December 2011.

Despite the fall, the markets responded positively, buoyed by the fact that the results were not worse than expected and off the back of the sales results.

Apple leapt 5.5% in after-hours trading, also boosted by the buy-back plan.

The US firm's forecast had added to market speculation that sales of the iPhone - which make up more than half of Apple's revenue - are slowing more quickly than expected as Samsung and other rivals flood the market with cheaper devices.

A cloud was lifted from the iPhone on Monday night when the US International Trade Commission threw out a Motorola Mobility patent claim that threatened to block the import of some iPhone models into the US.

The commission dismissed a complaint by the Google-owned firm which accused Apple of infringing technology that makes touch screens ignore fingers when people are holding smartphones to their ears for calls.

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Chinese Hacking Suspects 'Back In Business'

By Alistair Bunkall and Mark Stone, Sky News

A group of Chinese hackers suspected of being behind a cyber attack on the New York Times earlier this year may be restarting its campaign.

BAE Systems, the defence contractor, says it has unearthed evidence that indicates the group is active for the first time since February, when the hackers were accused of being linked to a Chinese military unit in Shanghai.

Although the connection has not been proven, the hacking group went immediately quiet on the day the allegation was made. Now analysts believe the hackers are ready to strike again.

David Garfield, managing director of cyber security at Detica, a BAE Systems subsidiary, told Sky News: "The activity we have detected indicates that the espionage group was lying low until the attention around their activities died down, before getting back to 'business-as-usual'.

"Detica researchers have obtained a copy of malware that has all the hallmarks of being crafted by this espionage group.

"This malware was created in the last week and contains a PDF which contains the agenda of an upcoming US defence conference which is consistent with the mode of operation of these particular attackers.

"The conference, taking place at the end of this month, fits with the style of event which is commonly used as a 'lure' for this group, and others of its kind."

Informal hacking groups operate differently to state-sponsored cyber units

For four months, towards the end of 2012 and into early 2013, hackers repeatedly infiltrated the New York Times, obtaining staff passwords among other things.

Security consultants found that some of the attacks were being routed through US universities to divert the blame away from the source, a method commonly associated with Chinese hackers.

The newspaper said the attacks were probably motivated by work reporters had been carrying out concerning senior figures in the Chinese government.

In February the American computer security company Mandiant published several years of research which it claimed pinpointed the hacking to one building in the Pudong district of Shanghai.

The building was reportedly the headquarters of the People's Liberation Army Unit 61398.

Mandiant represents the cyber-security interests of several major multinational companies, all of whom believe they are the victims of Chinese hackers.

The HQ said by Mandiant to be the source of much hacking (Pic: City8.com)

On Monday, the Chinese army's chief of the general staff, General Fang Fenghui, was asked about cyber security at a rare news conference with the visiting US chairman of the joint chiefs of staff, General Martin Dempsey.

General Fang issued an alarming warning on the dangers of hacking.

"Cybersecurity, if it is uncontrolled, the effects can be, and I don't exaggerate, at times no less than a nuclear bomb," he said.

General Fang also reiterated a longstanding Chinese government assertion that China is also a victim of cyber attacks and that it is "strongly against any kind of cyber attacks".

China is not the only country connected with cyber attacks - the US, Russia, Israel and Iran are all suspected of developing cyber weapons. Most Western countries are believed to be doing the same.

Both BAE Systems Detica and Mandiant have commercial interests in highlighting the dangers of cyber crime.

The Chinese government has not responded to the latest allegations.

:: The Syrian Electronic Army has made an uncorroborated claim that it hacked the Twitter feed of the Associated Press news organisation. On Tuesday, the AP feed falsely stated that an attack on the White House had left the US president injured.

:: Australian police have arrested the self-proclaimed leader of non-state global hacking group LulzSec, which its members have said was responsible for breaching the CIA's external website.

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Govt Courts Buyout Firms Over Royal Mail Deal

By Mark Kleinman, City Editor

The Government is courting some of the world's biggest private equity groups about a potentially controversial plan to acquire a major stake in Royal Mail.

I have learnt that advisers to the Coalition have in recent weeks begun reaching out to the buyout firms - which include CVC Capital Partners, the owner of Formula One motor racing - to gauge their interest in an investment in Royal Mail.

Insiders said on Wednesday that the private equity firms being courted also included Carlyle Group, which bought the defence research firm QinetiQ from the then Labour administration in 2003, and Kohlberg Kravis Roberts, the US-based firm whose British investments include the parent company of Boots.

Lazard and UBS, the investment banks overseeing the discussions with the buyout firms on behalf of ministers, are understood to be informing them that a deal with a private equity investor is "a Plan B route" that would only be formally pursued if a flotation of Royal Mail is ruled out.

Michael Fallon, the Business Minister, has made it clear that the Government has not ruled out any options for injecting private capital into Royal Mail, which it argues is essential as part of efforts to modernise the company's systems and processes.

An initial public offering (IPO), possibly as early as this autumn, has emerged in recent months as the preferred route for ministers. A decision to hand at least 10pc of Royal Mail to employees has now been enshrined in legislation, and would remain the case however the Government elects to offload a major interest in the company.

Any eventual proposal to sell a stake in Royal Mail to a private equity group would, though, inevitably spark opposition from the CWU, the main postal workers' union, which is resisting the move to inject private capital.

The extent of interest among the private equity firms being sounded out about a deal is unclear.

CVC has an extensive track record in the European postal services sector, and is in the advanced stages of planning an IPO of bpost, the Belgian postal group.

The firm, which also owns a stake in the Danish postal service, was also the furthest advanced party in discussions to acquire Royal Mail during the most recent attempt to privatise it in 2009. The then Business Secretary, Lord Mandelson, abandoned that effort when it became clear that a sell-off would not deliver value for taxpayers.

Royal Mail is expected to be valued at between £2bn and £3bn this time around, having transformed its business prospects by shedding jobs, returning to profit in its core letters business, and shedding its historic pension liabilities under a deal with the Government.

Carlyle is also thought likely to be interested because of the significant profits it made on its QinetiQ investment between 2003 and 2007.

Earlier this week, Sky News revealed that a further debate was taking place in Whitehall about whether the 13,000 employees of Royal Mail's European parcels arm, GLS, should be included in a share distribution plan.

A private contractor is being hired to administer an employee share ownership scheme, although it is unclear whether that will involve tens of thousands of postmen and women being handed free shares or being invited to subscribe to discounted shares.

A BIS spokesman said: "No decisions have been taken on the form or timing of the sale of shares in Royal Mail."

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LG's Profit Falls Despite Record Phone Sales

LG Electronics has reported a fall in quarterly profit, despite a strong recovery in its smartphone business.

The South Korean company said new models helped push smartphone sales to a record 10.3 million units over the three months to March.

The figures make LG the world's third biggest maker of the phones by sales - overtaking Taiwan's HTC - although its market share of 3.3% remains significantly below that of rivals Apple and Samsung.

But LG's television business struggled in the last quarter, as tough global economic conditions hit demand.

Stiff competition from companies including Samsung also contributed to an 82% fall in profit at its Home Entertainment division.

The difficult market has already caused Japanese rivals Sony and Panasonic to downsize their television businesses.

Operating profit at LG dropped by 13% when compared with the year before to 349bn won (£203.9bn) - its first fall in five quarters.

It comes after US technology giant Apple reported its first fall in profits for nearly 10 years, despite strong iPhone sales.

Looking ahead, LG said earnings would improve as it released new smartphone models and revamped televisions.

"Since the third quarter of last year, market demand for TVs slowed, intensifying competition and driving down prices as a result," said chief financial officer Jung Do-hyun.

"We expect that profitability will recover in the second quarter as new models help recover prices."

But he warned that worldwide demand for televisions was expected to remain muted this year, as many consumers already own a flat-screen television.

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Funding For Lending Scheme Given Makeover

The Funding for Lending Scheme (FLS) to boost the economy has been extended and reworked in an attempt to help get more credit to small firms.

Under the reforms announced by the Treasury and Bank of England the country's banks are being offered an up to ten-fold increase in the low-interest funding they can access in return for extending loans to smaller businesses.

The FLS, they said, was also being opened up to non-bank lenders such as invoice finance houses and leasing firms that provide around £20bn of working capital to small firms, and will be extended for a year to January 2015.

The scheme was launched last summer to offer banks and building societies funding at low interest rates on condition they are passed on to households and businesses.

But while it has been helping the home loans sector, it has failed to make an impact on small businesses which have complained of remaining starved of credit.

Bank figures last week showed net lending to companies had slumped by £4.8bn in the three months to February.

Under the new deal, every pound of additional lending to small and medium-sized enterprises (SMEs) next year will allow the lender to access £5 of discounted funding from the Bank. The ratio in the rest of the scheme is 1:1.

In a bid to speed up the flow of much-needed credit into the system, each pound lent to SMEs for the rest of this year will allow a draw-down of 10 times that in 2014.

The Treasury said there was "no upper limit to the scheme" and the move was hailed by the Chancellor George Osborne, who said: "This is a big boost for the small and medium-sized businesses that are at the heart of the British economy.

"The Funding for Lending Scheme has already reduced the costs of household mortgages and loans for businesses. This innovative extension will now do even more for small and medium-sized businesses so that they can play their full part in creating new jobs."

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Singapore Stages New StanChart Protest Vote

By Mark Kleinman, City Editor

The Singaporean state investment company Temasek Holdings is to stage a protest vote for the second consecutive year at next month's annual meeting of Standard Chartered, the emerging markets bank.

I have learnt that Temasek, which holds an 18.2% stake in StanChart, intends to abstain from supporting the re-election of a quartet of executive directors amid continuing concerns about the structure of the bank's board.

The ongoing dispute comes at an awkward time for StanChart, the shirt sponsor of Premier League side Liverpool. Last year, the bank was forced to pay $667m (£436.5m) to US regulators to settle allegations that it had breached US sanctions on Iran.

Temasek declined to comment on Wednesday. However, its annual report published last July, said: "We promote sound corporate governance in our portfolio companies, and support the formation of high calibre, experienced and diverse boards to guide and complement management leadership.

"Board directors have a fiduciary duty to safeguard the interests of relevant stakeholders.

"To provide effective oversight of management on behalf of all shareholders, we advocate that boards be independent of management. We do not support excessive numbers of executive members on company boards."

The four executive directors whose re-election Temasek will abstain on are: Steve Bertamini, consumer banking chief executive; Jaspal Bindra, chief executive of Asia; Mike Rees, who runs wholesale banking; and V Shankar, chief executive of StanChart's business in Europe, Middle East, Africa and the Americas.

Crucially, Temasek has decided to vote in favour of the remaining resolutions at StanChart's annual meeting on May 8, including the re-election of Sir John Peace, the bank's chairman.

Sir John came under intense criticism last month when he was forced to apologise to US regulators over comments he had made suggesting that the sanctions breaches were inadvertent.

A number of City shareholders believe that Sir John, the only man to chair three FTSE-100 companies, should prune his portfolio by resigning from either Burberry or Experian, or both.

"It is essential that he [Sir John] gets a grip on things, and this week's events compound our sense that he cannot do that when he is chairing three FTSE companies," one investor told Sky News last month.

Reports last year that Temasek was looking to offload its StanChart shareholding were understood to be erroneous.

StanChart declined to comment.

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