European Business News (EBN), 97-09-18

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CONTENTS

[01] Coopers & Lybrand, Price Waterhouse to merge into world's largest accountancy firm

[02] Shares marked down in Frankfurt as first half figures disappoint

[03] US trade gap swells as deficits with Japan and China grow

[04] Rhone-Poulenc will take $1.4 billion charge

[05] Aerospatiale profit more than doubles, bolstered by asset sales

[06] Alcatel Alsthom swings to a profit and projects further gains

[07] Nestle first-half profit rises 40% to $1.28 billion

[08] AGF profit jumps 43% to $179 million

[09] Credit Lyonnais' first half profit jumps to $100 million

[10] French government nominates Spinetta as new Air France CEO

[11] Whirlpool plans 4,700 redundancies as part of restructuring package

[12] P&O profit slips, but comes in at high end of expectations

[13] Allianz premium income rises more than 12% in first half

[14] Alitalia receives $473.5 million capital injection

[15] Daiwa offices raided by pay-off scandal prosecutors

[16] Sun Life posts 11% jump in profit

[17] UK manufacturing orders remain weak according to CBI report

[18] West German business confidence continues upward trend

[19] German M3 expands to 5.8% in August

[20] Mirror first half pretax profit rises 12%

[21] UK Treasury Minister 'extremely disappointed' with Prudential's performance on clearing up pensions mis-selling cases

[01] Coopers & Lybrand, Price Waterhouse to merge into world's largest accountancy firm

Price Waterhouse said the companies together have about 135,000 people world-wide, including more than 8,500 partners.

The companies said, 'Unlike previous mergers in our business, our decision to combine has been driven by the recognition that our clients require seamless global support and unprecedented levels of expertise that, until now, were simply not available from any organisation.'

Price Waterhouse Chief Executive James J. Schiro said 'Both Price Waterhouse and Coopers & Lybrand are solidly committed to offering our clients world-class capabilities to help them solve the increasingly complex business problems they encounter as they expand and globalise.'

Price Waterhouse said Nicholas G. Moore, chairman of Coopers & Lybrand International, will serve as chairman of the merged companies. Coopers & Lybrand and Price Waterhouse said the merged organisation will be headed by a team with oversight from an international board composed of partners from around the world. Additional appointments will be made later in the year.

The merger, which is subject to approval by the partners of firms in both organisations and by regulators, is expected to become effective in early 1998.

[02] Shares marked down in Frankfurt as first half figures disappoint

Deutsche Telekom had reported quadrupled first half pretax profit of 3.6 billion marks ($2 billion) this year, up from 900 million marks a year earlier.

The telecommunications group, which is still 74% state-owned, said sales were up to 32.9 billion marks ($18.3 billion) from 30.7 billion in the same period last year.

But the markets found the results disappointing. 'The results were below consensus and we certainly found them a disappointment,' one dealer said.

Commerzbank said it was maintaining a 'hold' recommendation on Telekom shares. In a research note, Commerzbank analyst Sabine Schauer said Telekom's first-half results were burdened by special factors which should not have an impact on the company's results in future.

Telekom's Chairman Ron Sommer says he expects revenues to increase in the second half as well, as the economy improves.

Sommer also announced Telekom plans to lower rates for customers, especially heavy telephone users, by 5%.

He said Telekom would challenge in court the rates set last week by the Post and Telecommunications Ministry for how much Telekom can charge competitors for access to its network after the telecommunications market is liberalized next year. Sommer said some of the rates were below Telekom's actual costs.

[03] US trade gap swells as deficits with Japan and China grow

The Commerce Department said goods and services imports rose 1.1% to a record $87.7 billion in July. Exports, meanwhile, fell 1.4% to $77.38 billion for the month.

The July trade gap exceeded analysts expectations. A Dow Jones Newswires' survey of 26 economists had been for a $9.5 billion monthly trade deficit.

The July trade deficit followed a revised $8.29 billion gap in June. The June deficit originally was reported as $8.16 billion.

The U.S. trade deficits with Japan and China rose sharply during the month, a trend that is likely to add to growing trade tensions between the United States and the two Asian trading partners.

The deficit with Japan swelled to $5.16 billion in July from $4.05 billion in June. It was the largest deficit with Japan since a $5.3 billion deficit in June 1995, Commerce said. Imports of Japanese cars rose $351 million, and office machines $102 million.

The U.S. trade gap with China widened to $4.71 billion from $4.31 billion, and was the largest shortfall since it was $4.9 billion in October 1996. Imports of apparel rose $201 million, while imports of toys and miscellaneous items rose $173 million.

The deficit with Western Europe grew to $4.34 billion from $796 million. It was the largest gap since July 1996. The U.S. posted record deficits with Germany, $2.06 billion; Italy, $1.25 billion; and France, $754 million.

The trade picture was helped somewhat by falling oil prices. The price of a barrel of crude oil fell to $16.50 in July from $17.07 in June. The price has fallen in nearly every month since January when it peaked at $22.03 per barrel.

The record goods and services imports were driven by record merchandise imports of $73.3 billion. Records were set for imports of capital goods, $21.4 billion; automobile and parts, $12.3 billion; and foods, feeds and beverages.

[04] Rhone-Poulenc will take $1.4 billion charge

The French chemicals and pharmaceuticals group's charge is linked to its plan, announced in June, to combine its chemicals and fibres and polymers activities, into an independent company that will be operational on January 1, 1998, and then floated on the stock market.

Rhone-Poulenc said the charge includes a cash impact of 1.5 billion francs in 1998 and 1999, and 8 billion francs in depreciation of tangible and intangible assets.

The cash impact of 1.5 billion francs includes environmental costs and various restructuring and reorganization measures that will eventually lead to annual savings of some 600 million francs, Rhone-Poulenc said.

The creation of the new company, called Rhodia, and the refocusing of the chemicals/fibres businesses will involve an exceptional charge of about 7 billion francs.

This includes 4 billion francs from the acceleration of the amortization of some goodwill, and an exceptional charge of about 3 billion francs, of which 2 billion francs corresponds to the depreciation of certain assets and 1 billion francs to costs linked to environmental and decommissioning charges incurred in withdrawing from certain businesses.

Rhone-Poulenc said that in its life science businesses, the acquisition of the Rhone-Poulenc Rorer minority interest will lead to the amortization of the about 2 billion francs in goodwill related to research and development costs.

A further provision of 500 francs will be retained in 1997 to provide for future reorganizing costs.

[05] Aerospatiale profit more than doubles, bolstered by asset sales

Net profit surged to 608 million French francs ($99.7 million), compared with 273 million francs the year before.

The French aerospace concern chairman and chief executive officer Yves Michot said the full-year earnings outlook was 'in line with projections.'

In March 1997, Michot predicted that Aerospatiale's full-year 1997 profit would be about double the 812 million francs registered in 1996.

A surge in operating profit to 371 million francs from 1 million francs a year earlier also contributed to the earnings gain. The company gave no explanation for the substantial increase in operating profit.

'Current trends in Aerospatiale's main markets mean that we can expect a significant rise in sales, compared with 1996, while orders should remain at the same level as last year,' Michot said. In March, he had projected a 20% rise in sales this year.

Extensive sale talks in progress at Airbus Industrie, the European commercial airliner consortium of which Aerospatiale is part, 'should lead to significant orders by the end of the year,' the company added.

All business segments posted higher sales, except for the Space & Defense division, where some billings won't be tallied until the second half of the year, the company said.

Aerospatiale's first-half new orders rose 8% to 5.2 billion francs, due primarily to large increases in demand for tactical missiles and helicopters.

The future of Aerospatiale remains clouded, for it remains unclear whether the French government will agree to let the company merge with its Airbus partners. On Sept. 2, Aerospatiale said talks on turning Airbus into a single corporate entity were advancing but declined to be more explicit.

The government has also still to decide on what role Aerospatiale will play in the restructuring of the French aerospace and defense industries. Michot has said on several occasions that his company must be privatised if it's to be able to forge alliances with European partners. The Socialist-led government has taken a policy stance against new privatisation's, however.

[06] Alcatel Alsthom swings to a profit and projects further gains

The group Chairman Serge Tchuruk said the company expected further progress in line with its recovery programme.

'Our objective is unchanged. We want to return to a satisfying level of profitability and 1997 is going to be an important step in the direction,' he said.

The French engineering conglomerate said it swung to a first-half net profit of 1.49 billion francs ($250 million) from year-earlier loss of 374 million francs.

Tchuruk also said much of the improvement stemmed from the telecoms sector and from the cable sector in which Alcatel is a world leader for fibre optic cables.

In late 1995, Alcatel announced a massive restructuring plan in order to revamp its telecommunications and cables unit and sell non-strategic assets. The plan led to a 1995 net loss of 25.6 billion francs, the largest loss in French corporate history.

Tchuruk also said talks with GEC about the future of the unit were continuing and that a market flotation of the joint venture was a possibility.

The chairman also said communications is also the cornerstone of the company's interest in state-owned Thomson-CSF. Tchuruk said the company remains interested in the group for its communications operations, particularly in non-military applications, and is expecting some word from the government on the planned sale within a few weeks.

[07] Nestle first-half profit rises 40% to $1.28 billion

Analysts had expected a profit boost of around 20%.

The Swiss company also said that it expects group sales to rise around 15 percent in 1997 and that the rise in net profit for the year would at least match the sales growth rate.

Nestle's first-half net profit rose to 1.89 billion ($1.28 billion) Swiss francs from 1.347 billion in the first half of 1996.

Nestle credited several reasons for its unexpected surge in first-half profit. The Swiss food group cited favorable currency rates as one factor. It also listed measures and investments to improve competitiveness, its purchasing policy, and price increases which offset volatility in raw materials costs.

Trading profit - also called operating profit - jumped 26% to 3.104 billion Swiss francs from 2.459 billion Swiss francs in the first half of 1996. The company lifted its operating margin to 9.3% from 8.6%.

The net profit margin rose to 5.6% in the first half from 4.7% a year earlier.

Nestle said real internal growth has seen a 'clear acceleration over the past months' and rose 2.7% in the first half. The company said the growth rate returned to normal levels in North America, and good performances in many developing markets contributed to the rise.

As reported previously, first-half sales rose 18% to 33.458 billion Swiss francs.

For the full year, Nestle expects a rise in sales of around 15%. It said 'signs of improving real internal growth should be confirmed' in the second half, although the favorable effect of currency rates 'will be less in evidence.'

As for the full-year net profit outlook, Nestle said the comparison is 'more difficult for the second half of the year' because 'performance in the last six months of 1996 was relatively strong.'

However, 'the good start made in 1997 means that net profit growth for the full year should at least match the growth rate in sales,' the company said.

[08] AGF profit jumps 43% to $179 million

'A marked improvement in the contribution of insurance (both life and non- life), reinforced profitability from the credit insurance sector, a return to profitability in banking...were behind this performance,' said the insurer. 'Strong financial markets gave rise to major headway with the group's program of capital gains realization over the year,' it added.

Analysts had been looking for profits of between 750 and 900 million francs.

'On the long term the results look positive but I think the market is reacting to a certain lack of transparence. There's a lot of 'French cooking' in there,' said a Paris analyst.

Company chairman Antoine Jeancourt-Galignani said it would 'not be possible' for AGF to double its profits in the second half. But he reiterated an earlier forecast that net profit per share for the year would hit 13 francs, double the 1994 level, and up from 11.28 francs per share in 1996. Net profit per share for the first half was 7.55 francs.

[09] Credit Lyonnais' first half profit jumps to $100 million

Net banking income increased to 23.36 billion francs from 21.45 billion a year ago. Other major French banks earlier this month reported substantial increases in net profits due to improved banking income as well.

Credit Lyonnais said that it increased its provisions during the first six months of the year to 3.05 billion francs from 2.33 billion a year earlier.

Total assets, meanwhile, rose to 1.69 trillion francs as of June 30, 1997, up from 1.62 trillion francs a year ago.

The rise reversed a slide that had occurred during the past several years in conjunction with the bank's financial problems. Those financial problems led to a massive restructuring in 1995.

[10] French government nominates Spinetta as new Air France CEO

The nomination of Spinetta, who for three years headed the domestic carrier Air Inter, which has been renamed, is to be confirmed at next Wednesday's weekly Cabinet meeting.

The government will propose to the Air France board Spinetta's name as an administrator with a view to his subsequent appointment as chairman of France's flagship airline, according to a statement from the prime minister's office.

Christian Blanc announced earlier this month that he was stepping down after the leftist government said it would sell only a minority stake in Air France. The French government owns about 95% of Air France, and Blanc had pushed for a full privatization of the carrier to make it competitive. Spinetta headed the state-run Air Inter, now known as Air France Europe, between 1990 and 1993.

Shareholders of Air France and domestic airline Air France Europe voted last week to approve the latter's merger into the new Groupe Air France, the last step in a fusion of the two state-owned carriers struggling to turn a profit.

[11] Whirlpool plans 4,700 redundancies as part of restructuring package

The company said that the restructuring will result in a $350 million charge against its earnings.

Whirlpool plans to sell Whirlpool Financial, its inventory and consumer financing business, to San Francisco-based Transamerica for $1.35 billion.

The appliance maker plans to eliminate positions in North America, Europe and Asia. The company now employs 46,000 people worldwide.

The move is part of an effort to consolidate manufacturing, service and support facilities in Europe and North America while increasing its presence in Asia and Latin America, Whirlpool said.

'While difficult, these changes are necessary to reach the level of operating performance our employees, customers and shareholders expect,' Whirlpool Chairman and Chief Executive David R. Whitwam said.

Whirlpool is the world's leading manufacturer and marketer of major home appliances. The company manufactures in 13 countries and markets products under 11 major brand names in about 140 countries.

[12] P&O profit slips, but comes in at high end of expectations

P&O's pretax profit slipped 8.6% on the year to £123.1 million ($192 million) due to the group's share of costs linked to the merger of its container-shipping operations with those of Netherlands-based Royal Nedlloyd.

Pretax profit excluding restructuring costs and other exceptional items rose 1.3% to £131.9 million.

But while the container merger is proceeding on schedule, with benefits expected to feed through in 1998, P&O's plans to rationalise its ferry business were thrown in doubt earlier this week when European Union Commission sources said Brussels was concerned about the emergence of a duopoly on the cross-channel market would demand substantial modifications to the deal.

Chairman Lord Sterling said he still expects the merger to win clearance without substantial restrictions. He said he expects to hear from the Commission and from U.K. competition authorities by early October.

Sterling reiterated that a management team for the combined ferry operations is in place and that the two businesses could integrate reservations, advertising and marketing functions in about two weeks.

Delayed approval of the ferry merger didn't retard the performance of P&O's European ferries division in the first half. Volumes on the Dover/Calais route were boosted by a temporary reduction in capacity in the channel tunnel and the strength of sterling.

Analysts have so far refrained from including the estimated cost of implementing the ferry merger in forecasts for P&O's full-year 1997 profit. UBS transport analyst Richard Hannah said clearance of the deal would dent profit for the current year.

But he added that future profit would be restrained if regulators don't allow P&O to cut the cost base of its ferry operations, particularly now that the channel tunnel has recovered its full capacity.

Allison Bisbey, Dow Jones Newswires, London

[13] Allianz premium income rises more than 12% in first half

Adjusted for exchange rate changes, premium income was up 9.1%, it said. Allianz also repeated that 1997 group net profit would see double-digit growth, up from 2.2 billion marks in 1996.

It expects to have a profit this year in its underwriting business for the first time since 1990, Allianz said, barring any major claims by year's end. In Germany alone, Allianz' premium income in the first half was 23.8 billion, after the consolidation of the Vereinte group, which had about 4.6 billion marks in premium income in the first half, it said.

Of the recent extensive flooding in the Czech Republic and in eastern Germany, Allianz said that the total claim payments arising from were expected to be below 100 million marks. The estimate is considerably below its original forecasts of 'significant' costs reaching into hundreds of millions.

'We had expected things would be a lot worse,' an Allianz spokesman said. `But when the water levels fell, it seemed that more had been made of the problem in Germany than actually existed.'

So far, Allianz said it had received some 1,000 claims in the east German region for a total of four million marks. There had been 400 claims from the Czech Republic, amounting to 40 million marks, the spokesman said. Allianz said its exposure to Poland, also hit by flooding, was negligible.

[14] Alitalia receives $473.5 million capital injection

The giant state holding company said the payment has been used to pay off Alitalia debt. On July 15, the European Union Commission gave the go-ahead to Italy to grant 2.75 trillion lire in state aid to Alitalia. The subsidy decision was linked to a series of stringent conditions designed to restore the company to profitability.

The Commission said 2.0 trillion lire of the total - including 1.0 trillion lire already paid out in June 1996 - could be paid out immediately. IRI noted that it could make other payments later in 1997 up to the 2.0 trillion lire limit foreseen for this year.

Meanwhile, tranches of 0.5 trillion lire and 0.25 trillion lire are scheduled to be paid out in May 1998 and 1999 respectively.

These additional payments are conditional upon Alitalia meeting a series of conditions, including that the airline must sell its stake in the Hungarian carrier MALEV and that the aid be used 'only to restructure Alitalia and not to purchase holdings in any other air operator.'

[15] Daiwa offices raided by pay-off scandal prosecutors

The raids came one day after the Tokyo District Public Prosecutors Office arrested five current or former Yamaichi Securities officials who allegedly paid off the same racketeer, Ryuichi Koike. Earlier that day, Japan's Securities and Exchange Surveillance Commission filed a criminal complaint against Yamaichi and the five executives.

Today, about 70 officials from the Public Prosecutor's Office entered the Daiwa headquarters building in central Tokyo and began gathering evidence regarding the scandal, an official of the Prosecutors Office said on condition of anonymity.

Prosecutors also raided several other Daiwa locations, including the homes of its president, Motoo Esaka; its chairman, Sadakane Doi; and its vice president, Hiromitsu Sogame. Daiwa Finance, an affiliated finance firm, also was raided. Across Japan, private television stations showed footage of officials entering Doi's home in Kamakura, a wealthy and ancient residential area south of Tokyo.

Daiwa Securities, one of Japan's 'Big Four' brokerages, has been accused by prosecutors of giving 67 million yen ($558,000) to Koike in 18 different payments between January and September, 1995, to compensate trading losses in shares he owned.

Yoshiko Shimosaka, a spokeswoman for Daiwa Securities, said that the company takes the scandal very seriously and will fully co-operate with the investigation. During the raids, officials from the Securities and Exchange surveillance Commission, the nation's securities watchdog, accompanied the prosecutors. And the commission officials questioned several Daiwa employees about allegedly conducting illegal 'discretionary accounts' for Koike and lost 300 million yen ($2.5 million) in 1993, a securities official said.

In discretionary accounts, a customer gives a stockbroker great leeway in deciding what stocks to buy and sell. But such deals were banned in Japan in January 1992, following a series of brokerage scandals.

[16] Sun Life posts 11% jump in profit

The company, which was created in December 1995 and will enter the FTSE 100 share index Monday, saw pretax profit rise 11% on the year to £102.4 million ($162 million) from a pro forma 92.5 million .

Earnings per share climbed to 12.1 pence from 11.1 pence, while the interim dividend surpassed analysts' expectations at 3.80 pence, up from a pro forma 3.34 pence a year earlier.

'This is a cracking company,' said Eamonn Flanagan, insurance analyst at Charterhouse Tilney Securities. 'Sun Life is very focused on profits and is one of the best-quality companies in the sector.'

His sentiments were echoed by Salomon Brothers analyst Trevor May.

'You certainly get the impression this company knows what it is doing,' May said. 'They're willing to stand aside from margin-reducing selling tactics for a better-quality clientele.'

Sun Life & Provincial shares stood at 419 pence at 1223 pm, up 8.5 pence, or 2.1%, on the day and just 1 pence below the all-time peak of 420 pence, hit Sept. 10. The company floated part of its capital on the London Stock Exchange in June 1996, debuting at 232 pence per share.

Sun Life & Provincial operates three principal subsidiaries: Sun Life, UAP Provincial and New Ireland Holdings. May said UAP Provincial was the star of the results, with profit rising 17% on the year to £51.8 million from £44.1 million. The division also recorded an underwriting profit of £1 million.

[17] UK manufacturing orders remain weak according to CBI report

In its monthly trends inquiry for September, the CBI said the outlook for inflation remains promising, with price expectations at their lowest in five years.

A total of 11% of manufacturers believe their export orders are above normal, while 46% said orders are below normal, leaving a negative balance of 35%.

This is a slight improvement on the negative balance of 37% registered in August, but suggests sterling's strength continues to hurt demand for exports.

With the exception of last month, export orders are below average more than at any time since November 1992.

Sudhir Junankar, the CBI's Associate Director of Economic Analysis, said: 'Although our survey shows export demand still to be weak, there is just a hint from the figures that the sharp deterioration seen since June may have levelled off.'

'With home demand holding up, manufacturers continue to be fairly upbeat about increasing production over the coming months,' he added.

Total orders fell slightly in September, with a negative balance of 7% of firms indicating their order books were below normal, compared with a negative balance of 5% in the two previous surveys.

This deterioration, reflecting a slight moderation in domestic orders, leaves overall demand below normal for the sixth successive month.

The CBI survey showed that manufacturers' output growth expectations remain healthy, with this month's positive balance of 17% of firms little changed from August's positive balance of 16% and down only slightly from July's positive balance of 21%.

However, output expectations for the coming four months are less positive than those recorded between September and November last year.

Manufacturers expect domestic pries to fall slightly over the next four months, while stocks of finished goods continue to be more adequate to meet expected demand in September, though less so than at any time since May 1995.

[18] West German business confidence continues upward trend

That's the fifth consecutive monthly rise in the index which tracks sentiment and prospects in the manufacturing, construction and wholesale sectors of western Germany.

But the Ifo survey, which gives separate data for east and west Germany, showed that the business climate, conditions and expectations in the former communist east of the country had fallen.

Analysts said the worsening conditions in the east reflected the problems of ever rising unemployment, a struggling construction sector and a lack of investment.

'(The figure) confirms the recent trend in the Ifo survey. It suggests quite clearly that the German economy is on the mend and is picking up at a steady pace,' said Gerard Lyons, chief economist at DKB in London.

Ifo's business expectations index for west Germany rose to 108.4 in August from a revised 106.3, while the conditions index eased back slightly to 90.4 from 90.6 in the previous month.

[19] German M3 expands to 5.8% in August

The Deutsche Bundesbank's figure for August is slightly faster than July's annualized rate of 5.7%, and keeps the aggregate well within the Bundesbank's target corridor for M3 growth in 1997 of 3.5%-6.5%.

It's also largely in line with economists' forecasts, which predicted the rate to stay unchanged at 5.7% through August. The Bundesbank said monetary trends in the month had been mainly characterized by stronger credit demand from both the public and private sector.

Public sector credit demand 'stayed lively' in August, the Bundesbank said, while bank lending to the private sector strengthened. In the six months through August, bank lending to the private sector grew at an annualized 6.3%, slightly slower than the 7.0% rate posted through July. The Bundesbank said growth in M3 in August alone was 'boosted especially by a collapse in monetary capital formation.' It attributed that to the rise in long-term interest rates in the month 'and uncertainty about the further development in interest rates' which damped bond purchases.

Monetary capital formation, or long-term savings, acts as a counterweight to M3 growth. Capital formation slowed to an annualized 4.1% in the half- year to August, compared with 5.4% through July. M3 consists of cash in circulation, sight deposits, time accounts under four years and most savings accounts.

It is the Bundesbank's preferred leading indicator of inflationary trends in Germany, although in a statement in July, the central bank also emphasized developments in the real economy and financial markets. M3 is also the only economic measure for which it has an official target. Senior Bundesbank officials have repeatedly said in recent weeks that although M3 growth is currently in the targeted range, it needs to slow down further if inflation is to stay at an acceptable level.

[20] Mirror first half pretax profit rises 12%

In the year-ago period, the company's pretax profit was £51.9 million including an exceptional gain of £12.9 million. Trading profit improved by £1.5 million to £52.6 million reflecting a strong performance from the group's core newspapers and further development of its City Television. Earnings per share before exceptionals rose 10.5% to 7.4 pence from 6.7 pence, while the dividend rose to 1.5 pence from 1.35 pence for the period a year earlier.

Mirror's recent £297 million acquisition of Midland Independent Newspapers is expected to make a 'significant contribution' to the Group's future growth prospects, the company said. Although it awaits approval from the Department of Trade & Industry, which it expects to have reached a decision before the end of October.

The highlight of the group's newspaper division was the rejuvenation of its flagship title The Mirror, which has progressively stabilized circulation sales and in recent months has increased its market share.

In Scotland, its Daily Record and Sunday Mail, maintained their market leadership despite the predatory pricing policies of its rivals, the company said. 'Overall profits of the Scottish titles showed good growth,' the company added.

Chairman Sir Robert Clark said: 'We have achieved record results by continuing to drive profits from our core products. Our main businesses, newspaper and television, show positive progress.'

[21] UK Treasury Minister 'extremely disappointed' with Prudential's performance on clearing up pensions mis-selling cases

'I am extremely disappointed that they have fallen behind,' Liddell told reporters at a briefing, 'especially because they seem to have found 8,000 more cases that had been mis-classified.'

Prudential, which at over 60,000 has the most cases of possible mis-selling in the group one priority class, admitted earlier this month that it is 'unlikely' to meet a government deadline of September 30 for dealing with top priority cases. In figures released by the Treasury on Thursday, Prudential said that it has completed 23 percent of reviews including those that had been excluded.

The company was among a group of 24 banks and insurance companies heavily criticised for delays. Others included Norwich Union , Allied Dunbar and Royal Sun Alliance.

Liddell said she will make a further review of progress in the autumn. Asked what sanction she might take against companies like Prudential, Liddell added: 'If further action is required then I rule nothing out.'

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