Terry Murden: RBS a popular target but hopes springs eternal

Published on 24/02/2012 00:00

DAVID Cameron’s appeal yesterday for anti-business sentiment to be lifted is a bit rich, given that the Prime Minister did his bit to contribute to the public outrage culminating in Fred Goodwin being stripped of his knighthood.

However, his comments confirm the expectations expressed here yesterday that government ministers would be taking a less aggressive approach to highly paid business figures and begin to appreciate that it is their wealth creation that allows the politicians to indulge in their social programmes.

This more hands-off policy will also help create some distance between the UK government and the Opposition. Both sides have been jostling for position as chief business bashers, but Cameron’s shift of emphasis leaves Labour looking more anti-business and anti-growth if it continues to fight the battle over pay.

Royal Bank of Scotland chief executive Stephen Hester has been among the chief targets, particularly towards banks, and it was apt that, when I asked him yesterday what obstacle he would most like removed in his attempt to turn around RBS, he said “the public controversy” that surrounds the bank. Hester understands that RBS and the banking sector divides public opinion but he claims that when he speaks to individuals they are more reasonable. However, it was a surprise to hear him say that he’d received “hundreds” of letters of support from the public. That suggests a body of opinion that rarely grabs the headlines.

Above all, Hester is appealing for calm and for healing time as he continues his task, admitting he has his “emotional moments” and that the public attacks are “wearing for the staff”.

The politicians may be grasping the need to offer support to the banks as part of the growth story, but they also know that a substantial body of public opinion will take some convincing that the bankers have done enough to deserve theirs.

RBS remains a broken bank, but the reparations are in evidence. The balance sheet clean-up is of Biblical proportions and the profit of £6.1 billion on core operations gives Hester plenty to build on. His hope of achieving a bottom-line profit in two years will depend not only on the continuing grind, but on no further disruptions such as the eurozone crisis which had a singularly major impact on the share price.

There has been much talk of when the taxpayers will get back their £45bn, with some forecasters reckoning it could take a decade. That may be overly pessimistic. Yesterday’s rise alone added some £1.3bn to the market cap. It’s a long way from 28.7p to a 50p break even, particularly with no dividend to provide an incentive to buying. But it’s a start.

Bouquets may replace brickbats at Centrica

ANOTHER company well used to public brickbats is Scottish Gas-owner Centrica. It simply can’t be seen to be making lots of money when its customers are struggling to pay their bills.

Accusing the utilities of profiteering is a British pastime and if there is one thing that puts them in their box it’s unseasonably warm weather.

The gas and electricity provider’s year-end results reflect challenging conditions, not least the cost of wholesale gas. Customers complain – with some justification – that the energy companies are quick to raise prices when their costs go up, but not so fast to cut them when they fall. But the warmer winter and higher wholesale prices hit the company’s profits, which were 2.4 per cent below analysts’ expectations.

In spite of all that, Centrica increased its dividend by 8 per cent, which will please investors who regard it as a good income earner with a current yield of more than 4 per cent.

The share price has underperformed over the year and analysts believe the stock could attract new buyers as the benefits of a new cost-cutting programme and the investments in upstream oil and gas, energy efficiency and its robust balance sheet begin to kick in.

Centrica Energy, which acquired the North Sea assets of Venture Production, is proving a big driver of growth, outperforming the wider group and justifying the Venture deal.

Even customers may learn to love Centrica, not least after it agreed to cut prices. Customer churn is at its lowest ever.