It was almost inevitable that the RBS CEO would bow to political pressure to give up his annual bonus following the decision by the Chairman to waive his and the political pressure that had mounted.
Whilst it will be seen as the right thing to do by the electorate, his employment contract drawn up by the previous government back in 2008 stipulated his pay and award scheme and has never been any secret. Since the bank made the biggest corporate loss in British history back in 2008 and the taxpayer made its massive investment in order to prevent the bank from going bankrupt and protect our savings, the present CEO has slowly but surely been nursing the bank back to health. 2011 has been a tough year by anyone’s standard but expectations are for the bank to see a return to profit after three years of losses. The share price may not reflect this but RBS is by no means out of the woods and the underperformance in share valuation reflects the overall risk aversion to banking stocks around the globe.
The word on the street is that the current CEO plans to remain in the job in order to see the bank through these tough times and get us a return on our investment. If in two or three year’s time we get our money back and he is rewarded accordingly it’s hard to see the same furore not repeating itself. If Mr Hester had foreseen today’s headlines when he took the job back in 2008 it’s most unlikely he or any other banker for that matter would have taken on the task.
A bit of risk off this morning as yet another EU summit gets underway and the Greek debt talks continue. The lack of agreement between bondholders and the Greek government seems to have reached loggerheads and is unsettling investors as they take money off the table. The FTSE has now dipped back below the 5700 level following a weak start that has gradually got weaker and at the time of writing we stand at 5680. This move has taken the index below the previous resistance around 5720, which had offered a little bit of support last week, but now that’s given up the ghost the next level of support is seen at 5650 and then 5600.
Economic data is thin on the ground today with the only one to watch being European confidence. This is expected to remain flat, maybe even tick higher, but we can’t expect anything too exciting.
The euro finally ran out of steam against the dollar after surging to a five day gain and its highest level since December 13th. Just as the situation seemed to be improving for the Greek debt situation, Fitch swopped in and downgraded the credit ratings of Italy, Spain, Belgium, Cyprus and Slovenia. This, combined with the unknown outcome of today’s meeting in Brussels over eurozone debt, result in the pressure on the euro continuing. The euro is currently trading lower against the dollar at 1.3130.
After plummeting from its record high of 1920.9 towards the end of last year to lows of 1522.4 on the back of EU woes, investors are now starting to view gold as a safety haven again, especially when last week the Fed told the markets that US interest rates were going to stay low until at least 2014. It appears that confidence is being reinstated into investors’ minds that Greece could at the very least avoid a default in the short term and with this the precious metal rallied 18 bucks on Friday to close at 1738.4, a level last seen on December 8th. Currently, the shiny brick trades down on the day at 1720.5 as it declines in line with other risk assets.
Even with a weaker greenback, energy investors couldn’t keep crude prices up and instead followed the slumping equity markets. A slower than projected growth for the US economy, the biggest oil consumer, heightened concerns that demand for black gold could drop and this showed in the trading session. On the other hand, the 2.8% growth was the fastest in more than 18 months and the US economy is expected to surpass Europe this year which helped limit the losses during the session. Brent is a little softer this morning at 110.90.
