UK Bonus Deal with Banks Deemed Ineffective, Reckitt Benckiser Falls 6%

Devan Biswas
09 Feb, 2011
New York City

Stocks in London edged lower and government announced a deal with banks to hold bonuses and lend more to small businesses. The deal was criticized by the members of the ruling party and the opposition as ineffective. Reckitt Benckiser dropped on a cautious outlook.

[R]4:00 PM London – Stocks in London edged lower and government announced a deal with banks to hold bonuses and lend more to small businesses. The deal was criticized by the members of the ruling party and the opposition as ineffective and analysts surmised that banks have won the battle. Reckitt Benckiser dropped on a cautious outlook.[/R]

FTSE 100 index declined 21.82 to 6,069.51 and the pound edged higher to $1.563.

Chancellor of Exchequer George Osborne said Britain’s biggest banks and the government agreed on lower bonuses for bank employees and disclose the bonuses of key individuals to government.

The agreement faced quick criticism from members of his own party and opposition that the agreement is largely ineffective and banks will find ways to avoid the government demand.

According to Osborne, Lloyds Banking Group Plc, Barclays Plc, Royal Bank of Scotland Group Plc and HSBC Holdings Plc are among the banks that agreed to pay lower bonuses than last year but failed to disclose any details.

The government ministers and bank chiefs have been haggling with details of the restraint. The discussions have been labeled Project Merlin sought higher lending to small businesses and areas affected by recessions and hold bonuses that are more in line with other industries.

Banks also agreed to make 190 billion pounds of loans to companies in the year. Analysts and consumers have already criticized the agreement. There is no mechanism to verify and track loans and bonuses may be deferred till the government scrutiny is lifted.

LSE Proposes to TMX Group

London Stock Exchange Group Plc soared more than 9% after it agreed to acquire Toronto based TMX Group in all-share transaction that valued the bourse at C$3.2 billion.

LSE and other exchanges in North America have been losing business to other private trading pools and non-exchange trading platforms.

Trading in stocks on London exchange has been on a steady decline and accelerated in the last two years. LSE said in the last quarter its share of equity trading declined to 63.8% from 75% only two years ago and The Toronto Stock Exchange share declined to 64% in December from 95% according to regulatory filing.

LSE shareholders will control 55% of newly merged group and TNX shareholders will control 45%.

In a Regulatory News Service filing the exchange said TMX shareholders will receive 2.9963 LSE shares for each share held in TMX Group valuing the Canada based exchange at C42.68 a share.

Stock Movers

Reckitt Benckiser Group Plc declined 6% to 3,247 pence after it said current year sales will increase at a slower pace on the estimate of slower worldwide economic expansion.

The net for the year 2010 increased 13% to £2.14 billion from £1.89 billion in the prior year as sales increased 9% to £8.45 billion. The sales increase in constant currency was 7%. Net income increased 15% to £1.55 billion.

Following stocks declined after trading ex-dividend today. International Power paid 92 pence and Royal Dutch Shell Class B paid 26.82 pence and GlaxoSmithKline aid 19 pence a share.

Of the stocks in the FTSE 100 index, Whitbread rose 2.6% to 1,840 pence and Prudential gained 2.5% to 733 pence and Morrison Supermarkets added 2.4% to 284 pence.

Of the stocks in the index, International Power led the decliners with a loss of 20% to 227 pence followed by losses in Reckitt Benckiser Group of 6% to 3,247 pence and Essar Energy of 4%.