UK companies criticise City analysts

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The Independent Online
Merrill Lynch is the UK's favourite research house, according to a survey published yesterday. But the plaudit comes with a sting in the tail - UK companies are becoming increasingly concerned about the quality of City research. Lea Paterson reports.

Four out of 10 UK companies say City analysts do not understand sales & marketing. One in five believes analysts fail to grasp corporate strategy, management structure or market trends, while 15 per cent said analysts could not even understand their accounts.

UK industry also believes the quality of City research has fallen over the last year, according to a survey of 170 top companies by Consensus Research International (CRI), the market research consultancy.

Some 14 per cent of companies believed there had been a deterioration in the quality of research by analysts on the "sell side" during 1997. And 6 per cent said the quality of analysis by institutions (or "buy side" analysts) had fallen.

Merrill Lynch topped the list of favourite research houses by a clear margin, with SBC Warburg coming a distant second.

There was better news for SBC Warburg, though, elsewhere in the survey. The Swiss-owned bank was voted the UK's favourite corporate finance adviser in equity markets, just ahead of Cazenove, the winner in both 1996 and 1997.

SBC Warburg also has the most corporate finance expertise, according to the survey, with J Henry Schroder coming second.

Clive Brand, CRI client services director, said: "This year's survey shows all too clearly how City reputations can be built and lost in a relatively short space of time".

Merrill Lynch was rated just third in the research list in 1996 and Dresdner Kleinwort Benson, the UK's favourite research house in last year, dropped to sixth. Panmure Gordon and Henderson Crosthwaite fell out of the research top 10, with Schroders Securities and Charterhouse Tilney taking their place.

Although both Barclays and NatWest have said that uncertainty over the future of their equity operations hit profits during 1997, the two banks still fared well in the eyes of UK companies.

NatWest Markets, which last year sold its cash equities business to Bankers Trust, came fourth in the research top ten, two positions better than in 1996. BZW Securities, now owned by Credit Suisse First Boston, came seventh.

CRI also surveyed UK attitudes to EMU, and found the sentiment to be "broadly positive". But despite warm feelings towards EMU, many companies are ill-prepared.

Just 1 per cent of companies had specific arrangements already in place, and more than half had yet to begin their preparations in earnest.