Royal Bank of Scotland Group (RBS) could slash its investment bank to a third of its current size in the New Year as it reviews the business under incoming chief executive Alison Rose, sources close to the company say. The bank is next week expected to reveal profits fell 25% to £720 million in the third quarter as PPI claims surged ahead of the final deadline in August. Sources told The Mail on Sunday that NatWest Markets faces cuts because its returns are weaker than other divisions. The unit was blamed for billions of pounds of bad debts in the financial crisis. It made huge losses on risky mortgage deals and the taxpayer had to hand over £45.5 billion to bail out the bank. NatWest Markets made profits of £3.7 billion in 2007, but last year made a loss of £70 million.
Investors are betting that gambling giant Flutter Entertainment (FLTR) will succeed in merging with Stars Group in a £10billion deal. Hedge funds have placed bets of £250million in recent days against Flutter Entertainment in an effort to cash in on its all-share deal. Short positions in Flutter – which has a market value of £5.9billion – have surged to an all-time high and now represent nearly 5% of the company’s shares, according to the Financial Conduct Authority. This is up from just 0.59% three weeks ago. Short-selling experts told The Mail on Sunday their bets were what is known as ‘merger arbitrage’, where hedge funds look to profit from mergers through complex trading tactics. As Flutter investors will own 55% of the enlarged group, it is technically the buyer in the transaction. In an all-share merger, hedge funds typically buy shares of the company being taken over while shorting shares of the acquiring company – in this case Flutter – if they think the deal will go through.
Thousands of investors could be left nursing heavy losses after the boss of Sirius Minerals (SXX) suggested the company may be better off quitting the stock market. Chief executive Chris Fraser said being a publicly-listed company was useful at the beginning when it wanted to be transparent about its plans to build a £4billion fertiliser mine under the North York Moors national park. But he complained that attacks from hedge funds, bad publicity and its failure to raise money from big investors such as pension funds meant it was no longer as helpful to be a listed company.
MIDAS SPECIAL: Are there any companies worth backing from the Woodford wreckage? MIDAS VERDICT: Redde (REDD) is linked to the Latin word restoration, helping drivers to get back to normal. With the stock at £1.14, the word is relevant to investors as well. Redde is a strong business with an attractive dividend and the shares should move higher. The Woodford stake is large but big investors have been expressing an interest in the stock so the holding should be sold off relatively smoothly.
