2005-07-29

Money: RBS moving into China? Sure of 'Shell'?

Plenty of speculative activity around 'Royal Bank of Scotland' at present, and it has a feel of being 'the real deal'. It looks certain that Mr.Tom Mckillop, who has just announced his retirement in 2006-01 from the helm of drugs group 'AstraZeneca', will fetch up at 'RBS' in a vice-chairman's role prior to succeeding Mr.George Mathewson as Chairman at some juncture. And the rumours have become equally deafening as 'The Royal' plays a 'straight no-comment bat' that Chief Executive Mr.Fred Goodwin will imminently announce a major deal in China. Personalities often drive the business news agenda, and Mr.Mckillop's expected appointment also has a strategic dimension for 'RBS'. But the 'hard-headed' 'City' will probably be more interested in the idea that the bank looks set to spend well over 1_000_million_GBP in taking a substantial minority stake in 'Bank of China'. It would be a major geographical departure. 'RBS' over the past decade and more has built itself into a 'top-two' UK bank by profitability (largely through the purchase of 'NatWest'), and amassed a sizeable banking business in the USA that now contributes 1_000_million_GBP/year in profits. There are regular British and European 'bolt-on' acquisitions for 'The Royal', but a move into China would be a major new strategic direction. Everybody knows the Chinese economy is going 'gangbusters', and 'RBS' is not alone in wondering how to get a 'bridgehead' there to get access to its vast population and increasing consumerist aspirations. But the Chinese political and business backdrop is far more volatile and even opaque than the USA's eastern seaboard, and there are bound to be 'siren' voices that there is risk involved and also a danger of management stretch. Mr.Goodwin, whose business style is instinct tempered by a calculation of the percentages, looks to be 'hedging his bets' by only going in for a minority stake with 'Bank of China' (it is believed 10/15 per cent) at this stage. Critics of any such deal -- if it does happen -- will argue it will tie up a big slice of capital without getting enough managerial influence to make a difference. China feels a long way away, both physically and culturally. The thrust of 'RBS's' response may be to say it hasn't messed up a major new geographical move yet, so trust us. The 'City' will probably look 'trust' up in the dictionary, give Mr.Goodwin the benefit of the initial doubt, and hope like hell the bank is not about to enter what the Chinese call interesting times. Not so sure As Mr.Jeroen van der Veer wrapped up the press conference to mark 'Shell's' second-quarter results yesterday, a curious thing happened. The screen behind the Chief Executive began to show a black and white television advert. We were treated to a blast from the past that no doubt delighted older viewers. In the ad., people drive around town in cars and buses, while a jingle chimes:
'You can be sure with "Shell".'
Why the company wanted to remind us of this bit of marketing is a mystery, as what is obvious from yesterday's update is that you quite clearly can't. More than 18 months after The Great Reserves Fiasco that ripped the company's reputation to shreds, investors were told of the second major project delay in as many weeks. 'Bonga', a 1_500_million_GBP deepwater project off the coast of Nigeria, will not start producing until the fourth quarter, as opposed to the third. This after conceding that 'Sakhalin_II' -- its huge gas project in the Pacific Ocean -- would run a staggering 5_700_million_GBP over budget. Irritatingly, 'Shell' was asked whether it would be announcing such a delay just last week, and it said no. How are we to believe when it says 'Bonga' will stick to its budget? It's far more likely that it won't. Mr.Van der Veer went on and on about the need for 'Shell' to:
'improve its project management',
But it was pointed out that at last year's second-quarter results, he said:
'We have taken vigorous action on "Bonga" and "Sakhalin" and are strengthening our project management.'
Same time next year then? Of course, it must be conceded that both set-backs are products of the Mr.Philip Watts era. Perhaps the disgraced Chief Executive was just being shifty with the figures, as he was with the group's oil and gas reserves. Mr.Van der Veer was brought in to correct his predecessor's mistakes, and perhaps he will do a good job. But 'perhaps' is still the key word. 'Shell' is now the biggest company on the FTSE100, but those investors who aren't automatically taking part due to tracker funds should think before buying the shares. Sure of 'Shell'? I think not. 'McKillop eyes RBS chair, as Goodwin sets its targets east', MARTIN FLANGAN and JOHN BOWKER Yahoo! Business News, 2005-07-29 03:00

1 Comments:

Anonymous Anonymous said...

Beware the yellow race

8/05/2005 05:31:00 am  

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