FT Alphaville " Markets Live transcript 6 Mar 2012 Markets Live chat transcript for the chat ending at 12:19 on 6 Mar 2012. Participants in this chat were: Bryce Elder/FT Tony Tassell And welcome to Markets Live Another change of cast today. It's Murph's turn to stay at home. So Tony Tassell joins us once more. (GB: I am me. Tony's Tony. Or will be, shortly.) many thanks for having me again... GB Krona: BE could be Bryce or it might not be..you guess You should be able to tell by the punctuation. Anyway, should we have a look at the damage? not the most optimistic of days a lot of reasons to be cautious and people seem to be listening to them (@TK: yeah, we know, but that's just furniture. At dinner parties, do you go round checking for dust on the skirting boards?) Down 1.1% at pixel time. Off 64 points at 5811. So it is concern about oil, the greek deal inevitably blowing up and some caution ahead of the payrolls numbers on friday fair explanation Bryce? Uncertainty about Greece appears to be once again rolling around asset markets. A crucial outcome on the private sector debt swap (PSI) is expected by Thursday night. Although there was some optimism expressed by a large group of debt holders, actual commitments to participate are still far below the 66% level needed for using CACs (for instance, the public announcement by 12 members of the IIF steering committee). It appears the Greece debt swap will go down to the wire (Full Story). This uncertainty is likely to weigh on risk appetite and European assets (including the EUR), as well as boost safe haven assets (such as the USD and JPY) in the near term. Sorry - getting bombarded with emails all of a sudden. That's a fair summary. Oil is the new Greece. While Greece is the old Greece. there was a lot of talk this morning on the twittersphere over the UBS worst case scenario note have you seen a copy yet....we will dig it out Yeah - this is the Iranisation of crude. If you can hold for a moment I'll go find it. in the meantime i can point to a contrary note on commods and oil from capital economics pointing out while oil has spiked, other commods have not ...meaning the inflationary hit is not so bad The recent rise in oil prices has sparked fears that CPI inflation will not fall as fast as hoped. However, the focus on oil prices ignores the fact that other commodity prices have risen by less, if at all. Oil prices have risen by 11% (in sterling terms) since the start of the year. Petrol prices rose by 1.5p to 135p per litre in February and, if they follow oil prices up, will increase further to just over 140p. If so, the rise in petrol prices will have boosted inflation by 0.3 percentage points (pp) by the end of March. Nonetheless, there are good reasons to think that oil prices will fall back this year. Even if they hold steady, energy's contribution to inflation should still fall, due to even sharper rises in oil prices last year. See Chart 1. Furthermore, whereas the rises in oil prices in 2008 and 2011 coincided with increases in a whole range of commodity prices, this year's increase has not been so broad-based. Indeed, while oil prices are just over 5% higher than a year ago, agricultural commodity prices are about 20% lower and cotton prices about 60% lower. See Chart 2. Indeed, taken at face value, the past relationship between cotton prices and clothing inflation suggests that the latter could fall from the 3.3% rate recorded in January to the -10% rates seen in the 2000s. nd as Chart 4 shows, food inflation could fall from 3.6% to close to zero later this year. What's more, these other commodities have a bigger influence on CPI inflation than oil prices. Food and clothing together account for 17% of the CPI inflation basket, compared to 10% for energy (although the rise in energy prices might also put indirect upward pressure on core goods prices). In all, then, higher oil prices will mean that inflation falls at a slower pace than otherwise - and might even rise again in the near-term. However, a look at the wider commodity picture suggests that we are not yet heading for a repeat of the inflation spikes seen in the past few year the author was Samuel Tombs by the way... And I've finally worked out why that UBS note wasn't in my inbox. It's because it was from Sunday. aha...so just recycle this morning then? Which means it's a MASSIVE pain to find. shall we move on discreetly then We'll come back to it. what has taken your eye this morning Bryce... i must say yesterday was probably the quietest corporate news day for a long awhile things are a little better today (Consider the UBS waffle a teaser, Rabble. Like when they say on Fox News: "one of these colas will kill you. Find out which one after the break.") Right - before we go on to corporate .... Should mention Cable & Wireless Worldwide. Cable and Wireless Worldwide PLC (CW.:LSE): Last: 31.50, down 1.96 (-5.86%), High: 32.61, Low: 29.52, Volume: 13.77m Hefty fall on the deadline for Vodafone to firm up its intentions. Daily Telegraph market report speculates that Vod will walk away. Because the network is not good enough .... Voda is being a little capricious? or is Tata in the driving seat We do have to consider that the Vodafone announcement was under the new Takeover Panel rules. It was one of those "considering having a look" announcements. Though they have brought in bankers, suggesting some seriousness. The one thing I would note here is that Vodafone was on a management roadshow yesterday. Now, of course they wouldn't say "we're not bidding" Not least because they're not allowed to. But the feedback from the meetings seems remorselessly negative. so do you think these disclosure rules work in this case Yeah, I do. Once people get used to them. more information is generally a good thing Investors can misinterpret clarity as certainty. As they did with Bowleven, for example. But, yes, more information is better than less. So, back to Vod. Here's Nomura's summary of its management meeting Vodafone notes that the mid-term guidance of 1-4% top-line growth was set with three caveats: the macro backdrop, regulation and competition. Vodafone sees clear risk to this guidance since at least two of the three caveats have moved against it since guidance was set in Nov 2010. The macro outlook has deteriorated in Europe and regulation is tougher notably with dramatic cuts in Italy, the MTR timetable accelerated by a year in the UK and increased downside risk over EU roaming cuts. Regulation, consumer confidence and competition have all become tougher in the UK and Italy which has increased concern for the outlook. On the positive side, Vodafone was bullish on India's operational performance. Vodafone continues to see substantial growth ahead in India and expects increased scale to deliver margin expansion from the mid-20s to the high-20s over the medium term. Operational performance rather than M&A is the main focus for Vodafone. That said, Vodafone acknowledges that it look at many opportunities in its core regions: Europe, Asia and Africa. Vodafone's interest is predominantly in mobile assets but fixed/cable assets are also considered when it can provide a competitive advantage or a defensive feature. CWW offers a competitive advantage in Enterprise, in our view, an area which Vodafone has identified as a key growth driver and a source of differentiation for its investment case. Vodafone will showcase the strengths of its Enterprise positioning at its Open Office on March 14. Now, it's plausible that some buysider interpreted cautious guidance generally as "C&W's network's not up to scratch." Though that's total speculation on my part. what C&W's network not up to scratch? Well, yes. That's the other issue. For backhaul purposes? it is not like their services for the FT have never fallen over or anything Vodafone could've saved themselves a lot of time and money by just speaking to us. or left us staring at a frozen website while we wait for connectivity to return or anything word of advice bryce..never mention C&W to our editor only marginally more diplomatic than mentioning the football after a bad spurs result I do believe we should move on. The Rabble are talking China, as usual. Miners still on the slide. Eurasian Natural Resources Corp PLC (ENRC:LSE): Last: 652.00, down 23 (-3.41%), High: 681.50, Low: 651.50, Volume: 1.44m EVRAZ PLC (EVR:LSE): Last: 388.60, down 16.6 (-4.10%), High: 404.10, Low: 385.00, Volume: 1.06m (We really need to do more work on Evraz .............. polymetal took a hit didn't after a UBS note Can someone check how much Evraz's Moscow headquarters cost shareholders? Do feel free to Google that, ROTR .....) is it on an RBS scale? any wet bars near the boardroom It makes RBS seem Calvinistic. Anyway, its compatriot Polymetal's getting smashed on a UBS downgrade. Polymetal International PLC (POLY:LSE): Last: 953.50, down 62.5 (-6.15%), High: 1,020, Low: 928.00, Volume: 542.02k that was from Michael Hunter our colleague in markets UBS has a relationship with Polymetal. I think they tried to float it in 2007. platonic? or a goldman like one it would not have been a good day to be in the Goldman press office by the way a slew of very damaging, negative press this morning Anyway, here's the summary. We fine-tune our production forecasts and incorporate higher cash cost expectations, resulting in a significant earnings cut. We believe that Polymetal, like its peers, will not be able to resist cash cost growth in 2H11E and going forward, especially given the launch/ramp-up of complex new projects in 2012. We cut our gold output forecast by 1-4% in 2012-15E, mainly due to more conservative assumptions on the start of Mayskoye ore processing at Amursk POX, which is unlikely before 2013, in our view. We also increase our cash cost assumptions by 15-22% in 2012-15E and longer-term on the back of strong cost inflation in 2011. Both factors lead us to cut EBITDA in the range of 6-22% and net income by 8-26% in 2012-15E. We view Polymetal Int as a high-quality name with an attractive 2010-15E output CAGR of 11%, though we think this growth is largely priced in. Without catalysts such as a strong gold/silver price or expansion in reserves base, the stock is unlikely to outperform the sector in the short term. We cut our price target (based on 1.4x P/NAV) to GBp1,100/share. Polymetal's earnings multiples are in line with global peers, though they are highly sensitive to output growth (+15%/17% y/y in 2012/13, respectively) and cost inflation, which are both among the main risks. Ten points to @Ptolemy who finds a report that Evraz's headquarters cost A HUNDRED MILLION US DOLLARS. That's according to Troika. i assume it was built by the Candy brothers i kind of miss the old days of grand corporate HQs...they are pretty anonymous now No fountains in the lobbies. the rbs palace was probably the last hurrah for awhile Unless you go to Moscow. should we return to Goldman as tl requested Hang on - I just wanted to round up on China. no worries...go ahead please.. Two bits of bad news to note, commodities wise. Steel industry PMI's down. The CSLPC reported Februarys steel industry PMI at 42.8, down from January"s 47.9 sub-index for production dropped sharply to 39.4, down 16 points from January jarvis...from a recent meal at BNP, they still do inhouse dinners very well February new orders sub-index stable month-on-month at an abysmally low level of 36. That's HSBC saying "abysmally," not me. jarvis..very good wine...even if was french Current steel production is c. 8.5% below the average rate of 2011 and 16% below the peak reached in June 2011. Despite the fall in steel production, Chinese iron ore imports and domestic iron ore production have not shown much decline. Sub 50 PMI indicators suggest that Chinese steel production might not rise and thereby signal a material risk for Chinas iron ore importers who seem to have restocked in anticipation of rising steel production. This would be negative for iron ore prices. In addition, there is a high degree of correlation between demand for steel and demand for other metals. Therefore, by extension, we will remain nervous for the entire mining sector until we see a pickup in Chinese steel production data. And they also note that China construction's not getting any more intervention. China's local governments have the financial resources and negotiating power to clean up their 10.7 trillion yuan ($1.7 trillion) debt pile without the need for Beijing to intervene, a senior Chinese finance ministry official said Monday. Many investors we speak to see intervention from the central government as necessary to resolve what they consider a key risk to China's financial health. A 2012 economic blue-print presented to the National People's Congress by Premier Wen Jiabao on Monday also suggested that Beijing was not about to extend aid to local governments. Local governments in China borrowed heavily from state banks to build infrastructure and boost economic growth at the behest of the central government when it unveiled a 4 trillion yuan stimulus package in response to the 2008/09 global financial crisis. SGs China economist Wei Yao does not expect another infrastructure-driven stimulus and sees a weak infrastructure spending environment going forward as she believes local governments are too indebted to spend heavily on infrastructure. Clearly, if the central government does not step in to help local governments, this may be another signal that it is not looking to provide further economic stimulus. so we have that split - oil under upward pressure, other commods under down pressure Oil on war, rest on global recession. To hugely oversimplify, as is my wont. And it all fits with what Credit Suisse's professional China watcher was saying yesterday. In among the more poetically gloomy notes I've ever seen. we appreciate poetically gloomy a lot of golden in there though But, one more leg of urbanisation is expected. Further acceleration in policy housing is likely. Still, trend growth in the next decade is projected at 7-8% versus 10.3% in the past decade. Growth engines will shift from exports and infrastructure to consumption, which means that it will take less commodity consumption for each unit of GDP. The industrialisation model in China is changing. Over the past two decades, industrialisation and modernisation have been done through funnelling rural labours to the coastal areas and export industries. In the next two decades, industrialisation and modernisation will take place locally, at the village level. That would create new needs for commodities. that sentence could been a little more golden interesting note though Sorry - I've gone out of order. China had a massive surge in its demand for commodities over the past decade, fuelled by its housing boom and infrastructure investment boom. It is the biggest consumer in virtually all commodity categories. China was the key factor behind the global commodity super-cycle. After a period of economic slowdown, all eyes are on China, hoping that the middle kingdom can return to its might in commodity demand. In our view, the golden age of infrastructure investment is behind us now, the golden age of the housing boom is behind us, the golden age of export is behind us, and the golden age of policy stimulus is behind us. The big picture is that the trend growth of China is expected to slow down to 7-8% over the coming decade, from 10.7% recorded in the previous decade. As the economy shift its growth engines away from infrastructure, construction and exports towards consumption, especially service consumption, the propensity of demand for commodities is bound to decline. In 2011, it took 71 mn tonnes of steel for 1 p.p. of GDP growth - that is unheard of in the world's modern history. We project that the ratio would moderate to 30-40 mn tonnes for every percentage point of GDP growth by 2020. do you think the analysts play mahler or something when they get themselves into the mood to write that kind of thing maybe just joy division Most of them read like they're listening to Chinese opera. Anyway, we should move on. as i said a bad day for the goldman press office where a former colleague David Wells works everywhere i looked this morning there was another jaw dropping piece about the bank first there was this one Greece's secret loan from Goldman Sachs Group Inc. (GS) was a costly mistake from the start. On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country's debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said. Enlarge image Papanicolaou and his predecessor, Christoforos Sardelis, revealing details for the first time of a contract that helped Greece mask its growing sovereign debt to meet European Union requirements, said the country didn't understand what it was buying and was ill-equipped to judge the risks or costs. "The Goldman Sachs deal is a very sexy story between two sinners," Sardelis, who oversaw the swap as head of Greece's Public Debt Management Agency from 1999 through 2004, said in an interview. history..but remarkable nonetheless and this extraordinary piece on how Goldman "dealt" with its conflicts of interests over the sale of El Paso a deal that is fast becoming notorious basically it recused itself from advising from El Paso... as it was advising a potential bidder Kinder Morgan in which it held a stake But then came this: "When a second investment bank was brought in to address Goldman's economic incentive for a deal with, and on terms that favored, Kinder Morgan, Goldman continued to intervene and advise El Paso on strategic alternatives, and with its friends in El Paso management, was able to achieve a remarkable feat: giving the new investment bank an incentive to favor the merger by making sure that this bank only got paid if El Paso adopted the strategic option of selling to Kinder Morgan," Chancellor Leo E. Strine Jr. of Delaware's Court of Chancery wrote last week in a must-read opinion that has been whizzing around the in-boxes of Wall Street. "In other words," Chancellor Strine continued, "the conflict-cleansing bank only got paid if the option Goldman's financial incentives gave it a reason to prefer was the one chosen." Francesco Guerrera, inter milan fan and formerly of this parish, was very good on the el paso deal this morning as well in the journal and finally there was this on the beeb US investment bank Goldman Sachs swung to a loss in Asia for the first time since 2008 following declines in the Chinese stock market. Goldman's Asia division posted a loss of $103m (£65m) in 2011, compared with a $2.1bn profit in 2010. The firm was hit by a dip in the value of its holdings in Industrial & Commercial Bank of China (ICBC), which generated a loss of $517m i thought asia was meant to be the big growth for investment banks anyway i seemt o have bored the rabble....we shoud move i just thought the whole goldman moral morass is astonishing really It would be astonishing if Goldman still had the capacity to surprise. And just to wake the rabble again. I assume everyone's seen the story of Alex Hope in the tabs this morning. And bought a £125,000 bottle of poo. Revealed: The big-spending businessman who ran up £203,948 bar bill was 23-year-old City whizkid Young financier ........ Which, as we know from the Pippa Middleton fiasco, could mean nearly anything. never quite worked where her armour was meant to have worked the papers kept describing him as a banker but nothing else ZeroHedge has taken its tinfoil hat long enough to find his biography. London born and bred, Alex Hope, 22, is a self-taught trader who specialises in the Foreign Exchange Market. Despite his tender years, Alex is a name to watch out for in the city; an expert in the UK economy, he works the currency markets, regularly trading millions. Alex teaches people how to make money from trading the biggest financial market in the world, the Foreign Exchange. With a trading volume of $4 trillion a day, in his eyes it is undoubtedly the best and most exciting market to be involved in. Another specialist area for this young entrepreneur is Commodities - Gold, Silver, Copper and Platinum; all materials that have great volume and movement on a daily basis and can earn a healthy profit. They say he's at Zone Invest. Which I've never heard of. Though if anyone from there wants to email me, do. hey is 22..you can be forgiven a lot at 22 i assume the bar bill was great publicity for his firm and they will be offering trading seminars soon? the ones with candlesticks and thingees That tends to be the form. Anyway, just wanted to note it in passing. Let's return to matters of greater gravity. if only i could read the candlesticks and make a fortune on fx Imperial Tobacco Group PLC (IMT:LSE): Last: 2,510, down 24 (-0.95%), High: 2,531, Low: 2,509, Volume: 556.83k yes investec gloomy on the sector British American Tobacco PLC (BATS:LSE): Last: 3,202, down 3 (-0.09%), High: 3,215, Low: 3,185, Volume: 1.18m maybe not poetically so..but nonetheless gloomy Had a very good run, not least on the theory that Imps wouldn't see out 2013 as an independent entity. Sector update We call the top on UK tobaccos and downgrade our recos on BAT & IMT from Buy to Hold. The FY13 earnings outlook remain solid and industry mood music is upbeat. Weighing against this is massive sector out-performance in 2011, our bullish call on the wider market, relative valuations that look stretched and the resultant risk that the long run earnings and valuation equation gets re-scrutinised at this more demanding level. Time to sit on the sidelines we think. Back on the beat post BAT. We review our forecasts and recommendation on the UK tobacco sector in the light of BAT's prelims on 23 February. We also attempt to harmonise and increase the rigour of our valuation approach on the two stocks. Changing recos, but not forecasts & valuations. As it happens our forecasts and target valuations change little as a result. But we elect to sit on the sidelines in terms of recommendations and move from a Buy to a Hold reco on both BAT and IMT. The end of the run? BAT and IMT have out-performed the FTSE 100 by 35% and 29% respectively since their recent nadir in January 2011. They have still performed strongly in the "risk on" climate of early 2012, outperforming the FTSE 100 by 4% and 7% respectively in the most recent month. Since January 2011, BAT has moved 6% PER premium to the FTSE 100 to a 32% premium. IMT has moved from 21% discount to a 6% premium. Valuations now feel much more appropriate to us relative to some of the extreme bearish sentiment that prevailed around the sector just over a year ago. eeling more cautious now. At this higher level the stretched level of relative valuations and apparent dissipation of long-standing upgrade momentum for both BAT and IMT become grounds for caution for us. With tobacco stocks back on high relative valuations and fears of a plain packaging "contagion" spreading from Australia, we see a risk that the sentimental climate on tobacco once again becomes more questioning and sceptical, in contrast to 2011′s "safety first" mindset. We think the failure of BAT's increased buyback to put fresh legs on its shares may be a signal that the summit has been reached in market-relative terms. It also signals to us that BAT are unlikely to be a party to any take out of IMT anytime soon. But still great core holdings for us. We have a bullish call on the wider market but concede that much remains uncertain, particularly with the strong open to the year. And the earnings climate in tobacco looks decent on a one year view, pace recent comments from PMI. So BAT and IMT both represent strong foundation stones in any staples portfolio for us. good note..could have done with a leitmotif..a few goldens inserted randomly Is that Martin Deboo? Very good analyst. i regret to inform you that i have just lost the note...it could take a while to get it back We're a bit of a shambles this morning. As every morning. Ok - few things to round up on in the three minutes that remain. SOS..enjoyed the zerohedge attempt at cockney though: We can only HOPE that the next time he decides to go down the rub-a-dub-dub for a Leo Sayer, maybe he'll take some of us Septic Tanks with him on the frog-and-toad...as the days of the ship-it-in-large-on-the-left John, done-a-yard by-breakfast spot FX trader are clearly back with us things seem to be running much more punctually since paul return to alphaville Yeah, we both have day jobs. Not like that Hume fella. @Kwok Wan: .... no, we don't know why there's panic among the Liberation Front. Gulf Keystone Petroleum Ltd (GKP:LSE): Last: 304.00, down 35 (-10.32%), High: 334.38, Low: 291.00, Volume: 22.22m ouch..a lot of muppets hurt All I can say is that the volume seems to be in dribs and drabs just a follow through from yesterday? The HSBC note? Yes, possibly. Read it on the Tube last night. It was really very good. yogabba...yes the hint was pretty strong this morning from temenos..but we have to wait and see Though entirely wrong and a criminal attempt at deramping, if you suffer from Muppetism. Muppetism (n). a dogmatic belief in True Value of your investment, to the point that anyone holding a different view is regarded part of an organised conspiracy. you still read on the tube? it is usually my scrabble on ipad time So, GKP ... Looks retail panic, Winterfloods handling all the volume today, probably a lot of people getting margin called. No actual story out there that we're aware of, beyond some comments on the wires about Exxon getting a deadline to explain to Baghdad why it's in Kurdistan. Today's Temenos deadline day. Though I'd not be surprised to see an extension. tears for fears..i assume it did not really matter what the grog was..it was just important to have a very big bill Think Lex was very good this morning. Not that it isn't every morning, of course. you dont mean lombard? jonathan guthrie wrote a note on the deal Oh - sorry, was it Lombard? Jonathan certainly was not shy about nailing his colours to the mast Yes, the thing about Valueact acting to put a floor on the price seems bang on to me. A takeout at wlell over 400p, as predicted by some analysts, remains possible. But only when Elvis rides through Misys headquarters on a unicorn personally i would like to see that Sadly, I don't think you're allowed horses in Paddington Basin. he had another very good line Jonathan... Misys seems to have failed the stock market equivalent of the L'Oreal test (because i'm worth it) (TFT1: in reference to the bird, you can. Otherwise, you're red with prejudice.) Ok - couple of requests to cover. Pace PLC (PIC:LSE): Last: 91.00, up 10 (+12.35%), High: 95.00, Low: 87.23, Volume: 2.89m They've found some hard drives. That aren't under water. or have they just dried out a bit Don't get over-technical. The gist is that the results are in line, outlook improving. Whether Pace can actually sell any boxes remains to be seen. maybe they have passed the high watermark of their performance Here's Collins Stewart with the summary. Pace reported 2011 numbers in line, and a better than expected 2012 outlook for profit and cash generation. The estimated hit to 2012 profit resulting from the Thai floods has been lowered to $25-35m. vs $35-50m guided in November. FY11 revenue, EBITA, EPS and net debt were broadly in line with our numbers and consensus. Other highlights included: 1) Greater synergies on its acquisitions earlier than anticipated. 2) Reduced inventory YoY by $73m to $150m. 3) Latin America and ROW segments grew 25% and 13% year on year, helping to offset some of the decline in Europe (19% to $458m). 4) Dividend payment in line with consensus. Shipments were not disclosed, although STBs saw an 8.3% decline year on year. While the short term outlook is better than expected, we feel that the medium to long term negatives will continue to outweigh the positives. Our key concerns remain; intensifying competitive pressure, plethora of substitutes for STBs, question marks over the turnaround plan and continued pricing pressure in the US cable STB market. The prediction of strong cash flow delivery, better than expected profitability and good visibility of forward orders should see the shares rally in the short term. We continue to advise shareholders to take advantage of any share price strength to reduce their holdings. We will revisit our forecasts following today's analyst meeting but forecast risk for FY 2012 looks to be on the upside. Pace trades at 4.5x 2012E EV/EBITDA and 5.9x P/E, before any upward revision to 2012 numbers from today's statement. The current price is factoring in scepticism around Pace's ability to execute its turnaround plan and/or fundamental questions about the long term relevance of the set-top box. We continue to regard either assumption as sensible. a bit odd the shares are up 10 per cent on results that were in line Give new management the benefit of the doubt. Ok - let's close this. Anything to wrap up on? it is getting towards that time when the main news desk and the day job beckons is milky still lurking around? or banned for life by neil in a parting shot there was a postiive note from credit suisse this morning... yes..it helps to name the company i am talking about... Restructuring the business Following the full year results we have updated our estimates. We think that management are starting to restructure the business into a smaller more profitable unit, which we view positively, although we also think that consensus is still too high and there is a lot of work to be done. We now expect EPS of 1.1p in 2012E, 1.7p in 2013E and 4.0p in 2014E with a 35p target price (old 33p). ■ Net interest margin of c.200bps expected in 2014E - compared to guidance of 220-235bps. We estimate 192bps NIM for 2012E, which is in line with the new guidance given with the FY results. Whilst we see the upward re-pricing of the SVR as a positive, we see this as more of a necessity in getting to the guidance already given rather than an incremental positive - as such we would caution against reading too much into this. Assuming no liability, cost or substitution offset this is worth c.£200mn to the bottom line. Further, whilst the group took a larger than expected €14.6bn of ECB funding in the second tranche of the 3yr LTRO, we see this having a limited impact, given the scale of group funding needs. Project Verde still unclear, risk of a more expensive solution - the most recent press commentary (Telegraph) suggests that FSA may require the Co-op group to hold more capital and restructure the business in order to purchase the branches. If the transaction does not proceed in its current state, we think that Lloyds may have to find a less optimal solution for the Verde assets, incurring additional cost. We have a £500mn loss on disposal in our numbers, in addition to £1bn of associated restructuring costs. ■ More positively, we think that management are beginning to reshape the group - whilst it will take time, we believe the management are starting to get to grips with the business and make the group more "Lloyds-like," slowly deleveraging the assets acquired with the HBOS transaction. At 0.6x 13E TNAV for a 5% RoTE in 13E and 7% in 14E, the stock remains Neutral. still don't think Glen Moreno's depature from the board was a great sign for full disclosure purposes, he is the pearson chairman.... Pearson plc is the parent company of the Financial Times, publisher of FT Alphaville. i think we quoted a friend of his at the time of announced departure..saying he was tired of dealing with all the government crap... @Titleist: we have no more information than what you can read in the Media Guardian. Ok - the rabble are drifting into Dinner Party Live territory. where are you going for lunch bryce that is a little disappointing..i was hoping for something a little more interesting to live vicariously through B yrce is the one of the mostly widen eaten people in London I've become over-familiar with every Costa, Nero and Starbucks in Mayfair recently. top three restaurants bryce>? That's impossible. Horses for courses. go ahead..genuinely curious Byrce actually knows what he is talking about on this Quo Vadis. Right - that took a lot of thought. And, with that, we end. Thanks for your comments everyone. i like polp..will have to revist quo vadis since the revamp.. and hedone i know nothing about..look forward to going thanks for having me..always an honour Likewise. Thanks Tony, and goodbye Rabble.