Barclays Bank Second Investigation

Barclays bank after being investigated and fined over £290m in the Libor scandal case and have to pay over £450m on mis-selling products to customers have find itself in another pitfall over its transaction in 2007. This latest investigation is about the funds raised from investors in Abu Dhabi and Qatar sovereign wealth funds just after the financial crisis.

The previous LIBOR investigation claims some causalities which includes the CEO Robert Diamond and the Chairman which will leave soon. This probe is about disclosure of the fees the bank intends to pay the Qatari authority. The 7 billion pounds raised from the middle east helps it to weather the storm in 2007 and eventually avoided any bailout funds from the UK government.

The bank however has appointed Antony Jenkins who runs Barclays Retail and Business Banking has the new chief executive with a basic salary of £1.1m and a performance bonus of up to 250% of his salary. The new CEO takes over at a very difficult time when the bank is facing a running battle with regulators as well as its reputation been damaged.

This series of investigation into the banks will however have a significant impact on its profit for the second half of the year.

The Sacking of Founders by Shareholders

by Michael Durwin

This is also a huge reason why so many companies falter: you've just replaced the visionary leader. It almost every case of a founder-CEO being replaced, it is at the behest of the shareholders and board. Why? Greed. They simply want the company to get bigger and make money. Unfortunately, once you removed the visionary, you remove the vision. You replace him with, as the article says, ''An individual skilled to manage the growth''. Why does this person need to replace the founder? Let's call this guy the Growth Manager.

The growth manager wasn't smart or clever enough to come up with the business, he didn't have the [passion to grow it from nothing into a successful company. His only skill is his ability to squeeze out profits and manage resources issues' great skill, but not one that will lead to real , long term growth, just immediate dividends. Look at two recent turnovers: apple and Twitter.

All the founders are out of leadership roles at Twitter or out all together Instead they have Dick. What has Dick overseen? Censorship, advertising ,sponsored links and recommendations, and mass user departures.

Apple ousted Steve Jobs and replaced him with a bean counter named John Sculley because they wanted to ''limit (Jobs) ability to launch expensive forays into untested products''. What happened? Disaster one of those expensive forays was a new operating system which Jobs launched at NEXT. Once Apple's board smartened up and brought Jobs back, he continued to launch expensive forays into untested products'' which became the iPod, iphone, iPad, MacAir. Now the company is bigger than Exxon.

Does a start-up need a Growth Manager once it gets big enough? Absolutely but that person should be an advisor and partner to the visionary that gave birth to the company. That person has special skills and experience that the founder-CEO does not. But to replace a visionary leader with a visionless business manager is to remove the Soul from the company, without which it will die. It's a far smarter move to teach the visionary how to manage growth and take on managerial responsibilities to let the CEO do what he has always done best: envision, inspire and lead.

If Mark Zuckerberg is ever ousted from Facebook, you will see a rapid decline within the first year. The same goes for Richard Branson. He may not be managing the companies day to day but his vision and charisma make it one of the coolest most successful brands around.

Culled from Inc.com

Open Forum: Why do Private Firms Go Public?

Looking at a catalogue of companies like Facebook, Groupon, Vonage and Pet.com going public after much hyped but eventually did not live up to the expectation. Why then do founders/entrepreneurs go public apart from raising more funds which can still be raised without going public.

Let us discuss this.

Going Public a Blessing or Curse for Facebook?

Having spent the weekend reading through the whole story about facebook shares downward trend since going public. The thoughts that comes to mind now is that going public a blessing or curse to Facebook? The raising of IPO by Facebook about 3 months ago came with lots of pump and pageantry with every investor hoping to get their grip on the shares while some investors also expressing their concerns about revenue and sustainability of the social media company. Their fears is becoming reality going by the constant fall in its shares since the 'public show'.

The first phase of lock up period was over last week which allowed the (institutional) investors to hold or sell their shares. It is no more news that after lock up periods ends, most company's share price usually goes down which is also evident in the case of Facebook Inc. and making Facebook the second worst IPO performer in history after lock up period ends with a sharp decline from $38 down to $19.87after lock up.

I overheard a discussion about the impact of share prices on the performance. I think in the real sense there is no significant impact of the company's share price on a company performance if the company keeps making profit and does not run out of cash but having said that, a constant fall in share price makes it easier for the firms to be a target for hostile takeovers or a rival company to buy up the shares and offer irresistible deal to the shareholders of the target company.

Another problem of a fall in share price is that it can affect the rate at which Facebook can borrow money if the need arises. Creditors looks at the  company valuation before deciding on the rate of interest and the ability of the firm to payback upon maturity. This is the major reason why companies ensure that their share prices is considerably stable to fend off this potential treat.

October and November later this year is another phase of lock up period for the social media firm. We will keep you informed on the trend of share price and the revenue of the firm.

Emerging Markets : Focus on Singapore

Image: destination360

Singapore  formerly a British colony which became fully independent in 1965  with  approximately 5 million people with almost 60% Chinese. Singapore is one of the major hub for investments in the Asian pacific because of its cosmopolitan nature with different cultural background. Many foreigners find Singapore as their new home because of the peace and tranquillity and co existence of people of diverse culture and religion.

One of the reasons that makes Singapore to rise is the creation of Economic Development Board (EDB) which facilitated companies like HSBC, MAYBANK, ASCOTT to have their regional headquarters in Singapore. The general knowledge that economic growth solves social problem and the realisation of the small domestic market with the understanding that there is no natural resources to rely on made Singapore government to invest in its people to have the required knowledge am be able to compete well with the foreigners.

The government created possibilities for export by opening up its borders for foreign direct Investment unlike other countries they have always been outward looking.

Singapore Stats:

Ranking	Quality of Life	Economic Activity
1	London	London
2	Singapore	New York
3	New York	Hong Kong
4	Geneva	Shanghai
5	Sydney	Singapore
6	Hong Kong	Beijing
7	Paris	Dubai
8	Vancouver	Paris
9	Miami	Tokyo
10	Dubai	Frankfurt

Figure 1:  Quality of life

Ranking	Data 2010	$ US	Expected 2050	$ US
1	Singapore	56,532	Singapore	137,710
2	Norway	51,226	Hong Kong	116,639
3	US	45,511	Taiwan	114,093
4	Hong Kong	45,301	South Korea	107,752
5	Switzerland	42,470	US	100,802
6	Netherlands	40,736	Saudi Arabia	98,311
7	Australia	40,525	Canada	96,375
8	Austria	39,073	UK	91,130
9	Canada	38,640	Switzerland	90,956
10	Sweden	36,438	Austria	90,158

Figure 2: GDP Per Capita (2010 PPP US$ )

( Figure 1& 2 according to The Wealth Report 2012 published by Knight Frank and Citi Private Bank)

The Attractions:

The above stats might give you small indication about the growth and prospect of Singapore. Let us look at some of the attractions

Closeness to China: Singapore's closes to China which is the second largest economy in the world has definitely impacted on her growth  going by this shows a direct relationship between the two economies.

Free trade: Singapore government has always been one of  the foremost advocate for free trade and this preaching is paying off on the level of influx of foreign companies. Singapore has the busiest port in the world. it is also a key factor in its economic development.

Tax advantages: Singapore opened up its borders by allowing Investors and companies to benefit from the double taxation agreements with other nations. Start ups can gain tax advantage for the first 3 years if certain conditions are met. Angel Investors Tax Deduction Scheme (AITD) this like (venture capital) will also enjoy 50% tax deduction when they invest in start-up companies

Real Estate : The property business is booming with the abundant opportunities and also the policy that allows investors to own property in their name which is not common in the Asian-pacific.

Low Business cost: Investors are drawing towards Singapore also because of the low cost of doing business which is evident when the World bank ranks the country as the world's easiest place to do business in its report (Doing Business 2011 report). It takes just two procedures to register a company in Singapore with maximum of two days timeline.

The challenges:

The multi cultural divide might be used to disrupt the economy by some politician when they fill threatening. There are also barriers for foreign companies to operate in some sectors like legal services.

Emerging Markets : Focus on Asian - Pacific Countries

Having noticed that lots of multinational firms and investors see the Asia, Latin America as well as some African countries a safe haven in this time of financial crisis coupled with major European countries struggling to overcome the Euro debt crisis, we will be focusing on some Asian- pacific countries that are attracting these investments and also discuss why these countries have become the toast of investors.

In our previous post, we have featured some large financial firms in Europe who  find succour in the Asia, Latin America and Middle East, like Banco Santander, Standard Chartered bank and HSBC etc.

Looking at the responses and emails we have got from this part of the world, we have decided to write about some of these countries like, Singapore, Malaysia, Honk Kong, Indonesia and host of others in the next few days . We will focus on why these countries attract investors and the potential challenges. 

Why Standard Chartered Bank Operates Outside UK

Standard Chartered bank  is a UK bank with its  headquarters in London the assumed hob of financial activities in Europe. Standard Chartered bank has little commercial activities in UK compared with the financial activities in Asia, Africa and some part of middle east.

The question that comes to mind is why did Standard Chartered moved? or why don't they have considerable presence in the UK or even EU at large? Our  submission at EcoInshore is that, there  has always been contagion effects in the UK banking sector where the problem with one financial institution affects the other this is because of the exposure of trading of these other banks in the same market, the risk of one will ultimately affect the other.

The British banks that operates and realise more than 60% of their business activities  in the UK like Lloyds banking group , Royal Bank of Scotland (RBS) fell victim of this contagion effect predominantly caused by the Euro crisis which eventually affects their  balance sheet position and profits.  The unwillingness to diversify and enter into the emerging markets in other to hedge their risk exposure to Euro lead them to government bailout. This is evident because the UK government had to use tax payers money to bail out both Lloyds bank and RBS with the government having 43% stake and 83% respectively.

The two British banks Standard Chartered and HSBC have significantly diversify their business operations in Asia, Africa, Latin America and Middle east see their businesses not only grow compared to its other UK banks but with no bail out from government. 

Standard Chartered bank half year result of 2012 shows Income growth of 9%  these growth are based on 2 elements which are not evident in other UK banks  like  RBS and Lloyds bank.

1. Diversification and multiple income engines with growth rates in double digit : UK and America 26% , China 22% , Malaysia  21%, Indonesia 20% , Korea 13%  and Hong Kong 10%.

2. Cost and risk : The Payment Protection Insurance(PPI) provisions have depleted the profits Lloyds and RBS because of their more reliance on the UK increased their cost. Standard Charted have limited exposure to the Euro though but only acts as a bridge to link the Asia ,Africa with Euro

Though some might argue that Standard Chartered bank is not much of a retail bank that is why they do not have much presence in UK, but they understood that doing business in Malaysia, Singapore , china , Indonesia, Africa and middle east has been the best business decision they make because these regions make up 90% of their operating profit in the half year result.