Liberation of a huge cash-pile by Prudential's planned sale of Egg, the internet bank, could spark a "massive rationalisation" in the life insurance sector, says Chris Burvill, manager of Gartmore's cautious managed fund.
Burvill, who is also joint manager of the Gartmore UK equity income fund, says inefficiencies are still big in the financial services sector relative to most others industries, so it is possible a company like Pru will be looking to use excess cash to liberate improved earnings. Once the first big merger is announced, suggests Burvill, a string of others will follow because no company will want to be left behind. "Many corporate balance sheets have been repaired to the extent companies could go out and borrow at 5% or 6% to make an acquisition, and still make it earnings enhancing," h...
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