Hester told not to expect any more free lunches in 2010

Stephen Hester, chief executive of Royal Bank of Scotland will be expected to jump up through a few flaming hoops next year following the public outcry over his pay award that could reach as high as £9.6 million for this year.

Hester will be given considerably tougher performance targets to meet next year to collect his maximum bonus, and will need to hit exacting goals on profitability and other measures, and not just the internally set RBS share price target set for his 2009 long-term incentive plan.

The news of Mr. Hester’s new deal came as UK Financial Investments, the government body that manages the state’s 70 per cent stake in RBS as well as 43 per cent of the Lloyds Banking Group holding, published its first annual report on Monday. The report made for grim reading, showing that the UKF’s stakes were trading at a paper loss of £10.9 billion as at the end of June.

On the FTSE, it was hats off to British Airways Plc and their Chief Executive Officer Willie Walsh. Shares in the airline advanced 5.5 percent to 126.6 pence after news that the company has secured backing from some investors for a share sale to boost the company’s finances.

Separately, the airline is prepared to improve the terms of a proposed merger with Iberia Lineas Aereas de Espana SA, and is willing to consider a 50-50 share swap ratio.
Shares in the military research company Qinetiq Group Plc rose by 1.5 pence, to 138. The company who split off from the U.K. defense ministry in 2006 reached an agreement on talks with trade union Prospect to avert a pay dispute.

The U.K.’s biggest reader of water meters Spice Plc suffered a fall 1.50 pence to 67.25 pence after reporting an increased full-year net income and stating that they remained confident of future prospects in a wider economic environment that remains “challenging.”

Having recovered from their debt struggles, specialist fabrics maker Low & Bonar have forecast their intention to issue a dividend by the end of the year.
The possibility arises as the company announced the disposal of its flooring division as well as raising £30 million from shareholders over the past year in an attempt to reduce debts that have quadrupled to reach £208 million in the year to May 2008.

In interim results, the group announced that their net debt was standing at £99 million at the end of May, just under three time’s analysts’ consensus for full-year earnings.
The company manufactures specialist materials for carpet tiles, road surfaces and architectural awnings.

The FTSE 100 continues its steady recovery, closing the day up 35.55 points to 4237.18. The FTSE 250 also continues to rise, on Tuesday by 132.29 points to end the day on 7,411.09.

The pound gained ground on Tuesday as rising equity markets boosted investor confidence and statements from Adam Posen ahead of his appointment to the Bank of England’s monetary policy committee, announced that sterling should continue to appreciate in the medium term.

Pound/US dollar 1.6328
Pound/Euro 1.1682
Pound/Japanese Yen 152.8168
Pound/Swiss Franc 1.7766

Wiping the slate with all of the analysts’ forecasts, US bank Goldman Sachs reported a net profit of $3.44 billion (£2.1 billion) for April to June, The rise in profit was put down to decreased volatility in stock markets, rises in global share prices as well as the bank’s increasing involvement in many firms’ rights issues and takeovers.

A spokesman for the bank announced that $6.65 billion had been earmarked for pay and bonuses in the quarter, making for an average of $226,000 per employee.
They can do so with impunity as Goldman recently paid off the $10 billion in government loans it had taken as part of a government bail-out programme.

There was optimism afoot on Wall Street as the Dow Jones index rose for the second day, this time by 27.81 points to 8359.49 while the NASDAQ continued its steady comeback, climbing by just 6.52 points to approach the 1800 mark 1799.73
.
According to a report from the Commerce Department, US retail sales rose by 0.6% in June. The increase followed May’s 0.5% gain, and was an improvement on analyst expectations of 0.4%. The increase in sales was largely led by the automobile and transport sector. Without their input, sales dropped 0.2%, their fourth straight decline.

Official figures have shown Eurozone industrial output also rose in May compared with April, the first month-on-month increase since August last year.
The information comes two weeks after official figures showed eurozone retail sales fell in May, while unemployment rose.

And just to remind us of the French Revolution, on Bastille Day workers at a failed French car parts supplier threatened to blow up their factory unless the company’s two biggest clients Renault and PSA Peugeot Citroen pay them extra compensation. Employees of the engine parts maker New Fabris have rigged up a series of gas canisters inside a factory workshop which they say will be detonated on July 31 if the two carmakers fail to pay €30,000 to each of the 366 workers facing unemployment. Financial analysts are still trying to figure out the logic behind the threat.

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Tags: Bank, British Airways Plc, Financial News, Iberia Lineas Aereas de Espana SA, Money, Royal Bank of Scotland, Stephen Hester, UK Financial Investments