Sunday newspaper round-up: Catlin, North Sea, Banks

Lloyd’s of London insurer Catlin has agreed to be taken over by rival XL, the Sunday Times reported. The deal was sealed on the night of December 20th and is broadly in line with terms revealed to the market last week. Catlin shareholders will get 410p in cash and 0.130 shares of Dublin-headquartered XL for each Catlin share, valuing the company at £2.5bn. Lloyd’s companies Amlin and Hiscox could be the next takeover targets in a wave of insurance consolidation, industry insiders told the paper.

Government ministers are considering halving the tax bill for North Sea oil explorers, according to the Sunday Times. The proposal, the “most extreme” of those featured in talks between the Government and the industry’s lobby, coincides with a falling oil price and explorations at a 50-year low. The measure would scrap the 30% supplementary corporation tax, which is on top of the 30% basic rate for new fields but not those already found.

The Financial Conduct Authority (FCA) has told banks involved in foreign exchange rigging that their fines should be funded out of this year’s bonuses, the Sunday Telegraph said. Bonus pools that do not reflect the recent big penalties will be considered inappropriate, the FCA has told the banks. Royal Bank of Scotland paid £217m to the FCA and HSBC paid £216.4m. Barclays was due to pay a similar amount before pulling out of the settlement at the request of New York’s financial watchdog.

Sainsbury’s boss has warned investors that supermarkets face up to two years of pain as consumers keep a check on spending and food price inflation disappears. Mike Coupe told the Sunday Times “the market dynamics are going to be extremely squeezed” with “quite an intense level of competitive pressure” as Tesco and rivals cut prices. He said when the market returned to normal Sainsbury’s would outperform.

Unilever has suffered a computer crash in the period before Christmas, the Sunday Times reported. The maker of Marmite and Persil’s main system has been malfunctioning for more than a week, a big customer told the paper. Some orders were processed by hand because of the “unprecedented” glitch, the customer said. Unilever said orders and deliveries were going through normally and that it expected the problem to be resolved soon.

Terry Leahy has raised hopes of improving conditions for supermarkets and other retailers, the Mail on Sunday said. The former Tesco boss said falling petrol prices were leaving people with more money, signalling an end to a long consumer recession.“They’re coming out now and I think this Christmas will be a little bit better on the consumer side, and 2015 will be a little bit better too,” he said. “I think it will be a more favourable environment for the big four (supermarkets) in 2015.” Leahy, who chairs general merchandise discounter B&M, declined to discuss Tesco.

Lower than expected inflation does not require more monetary stimulus but it gives the Bank of England (BoE) time before increasing interest rates, David Miles, a member of the BoE’s Monetary Policy Committee (MPC) wrote in the Sunday Telegraph. Loosening monetary policy seemed “wildly implausible” six months ago and there is no strong case for doing so now, Miles, the MPC’s most dovish member, wrote. “It does mean that there is no great urgency in starting the process of moving monetary policy back towards a more normal setting,” he said.

A former Royal Bank of Scotland trader has been arrested by the Serious Fraud Office in connection with a criminal investigation into rigging of the foreign exchange market, the Financial Times reported. The arrest, in Billericay, Essex, is the world’s first as authorities in the UK, the US and Switzerland probe whether the market was rigged. It marks an acceleration of the worldwide investigation.

Diageo and Unilever are among suppliers that expect to be interviewed as part of a fraud investigation into accounting practices at Tesco, the Sunday Telegraph said. The Serious Fraud Office is set to interview employees at suppliers who drew up deals with Tesco. Payments to Tesco from suppliers are at the centre of the supermarket chain’s £263m overstatement of expected first-half profit.

Investors in shares should hold their nerve in 2015 in potentially volatile markets, Tom Stevenson, investment director at Fidelity Worldwide, wrote in the Sunday Telegraph. Developed markets have further rises in store because the US recovery is firmly entrenched and the Federal Reserve is playing a skilful hand on monetary policy. “Investors’ nerves will be tested in the months ahead as political risk rises at home, the threat of rising interest rates in America becomes the reality of tighter policy and inflation is roused from its current slumber. Hold tight,” Stevenson wrote.

Provident Resources has fought off a $19m law suit from Transocean, the drilling rig operator involved in BP’s Gulf of Mexico oil spill. The Sunday Times said the High Court found Transocean breached its contract by failing to maintain a rig used to find Provident’s Barryoe field off Ireland. The judge left it to the companies to negotiate a financial settlement to the dispute, which concerns drilling delays that happened three years ago.

The annual rate of inflation could soon halve, the Sunday Times said, citing economists. The annualised figure for December is expected to drop to 0.6% or 0.5% from just over 1% a month earlier, reflecting falling petrol and food prices. It would be the lowest reading since consumer price inflation was adopted as the main measure in the 1990s.