Speed up the challenger banks

THE racier floats on the London market, featuring tax havens, billionaire stake-builders and sharp private equity sellers, make the TSB selloff seem straightforward.

Lloyds has seen a late surge in demand from investors and is selling off a much larger stake than originally planned, at the upper end of the price range.

The bank owes a vote of thanks to Mark Carney for remarking that interest rates will rise sooner than the markets think, as most of the mortgage loans on TSB’s books are variable rate and therefore likely to be switched to more profitable fixed deals as borrowing costs go up.

TSB is being marketed as a clean and simple bank: clean, because chief executive Paul Pester can palm off any old mis-selling on to Lloyds, and simple because it will not indulge in any fancy-pants casino banking – just UK savings and loans.

That is appealing for those who see the existing players, burdened with legacy issues and threats from

On a Roll

the regulators, as virtually uninvestable. For private investors prepared to forgo a dividend until 2018, it amounts to a play on the recovering UK economy.

TSB has the edge on other wouldbe challenger banks, including One Savings, whose stock market debut was disappointing, due to its readymade branch network and an established brand.

With a sore need for competition, we must hope it encourages Williams & Glyn, the RBS equivalent, to follow Vince Cable’s urgings and embark on its own spin-out as soon as possible. ROLLS-Royce shares have had a terrific run right through the financial crisis, increasing in value by more than 200pc over the past five years, only to be derailed in recent months. They were back on form yesterday with a gain of 8pc that propelled them to the top of the FTSE 100 risers.

The return of £1bn to shareholders through a buy back, coupled with assiduous efforts to communicate better with investors on accounting policy, should go some way to allaying doubts about the Derby-based engine maker.

There have been concerns on a number of fronts that have been bubbling away after a shock profit warning in February.

These include the Serious Fraud Office investigation into its dealings in Indonesia and China, and the possibility that chief executive John Rishton is hankering to resurrect an £8bn offer for Finnish marine engineering firm Wartsila, which fell by the wayside earlier this year.

The buy back has put the merger concerns to rest, though the SFO probe may well drag on for years.

Rolls has been at pains to bring more clarity to its accounting for TotalCare contracts, after being forced to shave £40m off last year’s profits as a result of discussions with accountancy watchdogs.

TotalCare deals, which form a large part of after-market revenues, are also relatively low margin.

Rolls, however, has been investing heavily and is not yet seeing the full returns.

It expects production to gather pace between now and 2018 at three new factories, including one in Sunderland.

One striking observation is that it made 1,600 Trent engines over the past decade, but expects to make 4,000 in the coming ten years.

Rishton is up against a difficult defence climate, with military spending cuts in the United States and Europe. But one only need think about Iraq and Ukraine to conclude that the world is not becoming a safer place.

The hope is that Rolls is surmounting its problems – and that the recent glasnost, in a company that sometimes appears closed and arrogant, will continue.

Quindell question

INSURANCE claims group Quindell was yesterday the most-viewed share by small investors on the Hargreaves Lansdown website.

That is a remarkable fact considering people normally use the facility to check up on popular shares such as Royal Mail, Vodafone or Lloyds Bank, not small AIM stocks.

It shows the level of interest in Quindell, which has had a torrid time in the past few weeks.

Its efforts to win a premium listing have been spurned, and its share price slumped after a damning report from US outfit Gotham City Research.

Quindell is vigorously fighting its corner and says it has launched legal action against Gotham.

But it is not helping its own cause by barring reporters f rom i ts annual meeting, or by refusing to reveal the voting numbers on the resolutions. Merely saying all the resolutions were passed is useless.

It is very, very rare for a resolution to be voted down outright. The level of dissent can be telling, but on this Quindell gave no clue.

An obstructive attitude towards legitimate interest in a company’s affairs never sits well.