Calling in favours
Bellwether. n. From the practice of placing a bell around the neck of a castrated ram so that it might lead its flock
BIG INVESTMENT BANKS might be battered, but when it comes to calling in favours they remain unbowed. The mega-merger between Glencore and Xstrata must be one of the most well-flagged deals in corporate history – and with the former already holding 34% of the latter, it should be a no-brainer.
While not quite as simple as a conference call between the two firms’ CEOs, nor should the all-share proposal require the heft of six investment banks.
To be fair to Glencore, its team of Morgan Stanley and Citigroup seems reasonable, but Xstrata has called in Deutsche Bank, Goldman Sachs, JP Morgan and Nomura for one last pay day in what is effectively a stake sale – although suggest that to the bankers and they will redden with rage.
Deutsche has earned several million dollars in fees since Xstrata’s inception while JP Morgan has been a mainstay, but Goldman and Nomura were only just getting started with the relationship, and now it seems to be over. Unless they’re plotting an alternative outcome.
FRESH FROM BRINGING Stephen Hester’s metaphorical head on a plate and stripping Sir Fred Goodwin of his knighthood, politicians will probably not want to know the ugly truth of banking pay in 2012.
While it might still be excessive, it’s certainly not the untrammelled nirvana of wedge-trousering that the popular press likes to paint it.
A senior banker at one US institution put it rather neatly this week when he bemoaned the fact that his deferred 80% stock-related bonus in three-year vesting stock had lost half its value since being awarded.
“That is what I call a negative economic event,” he said. “I’m actually paying to work for my bank.”
While it’s not likely to provoke a sympathetic reaction towards bankers who have seen their basic pay more than double since 2008, it’s closer to the real world than people in the real world think. No wonder all those Goldman Sachs partners are choosing to retire and spend more time with their investment portfolios.
DEUTSCHE BANK’S CO-CHIEF executive designate Anshu Jain appeared unusually chilled when asked about the task the investment bank faced in navigating choppy markets when he takes up the reins in May. According to Jain, business will fall into the bank’s lap due to the exit of weaker peers.
“Market share gains will come naturally. We don’t have to do anything particularly unusual to achieve that,” he said.
This might fool journalists or analysts, but it won’t fool the bank’s staff, who don’t expect this laissez-faire stance to be the shape of things to come. Rather, they know they will have to be on their toes when Jain takes the reins, and will be blind-sided by such soothing platitudes at their peril.
THE DECISION BY the UK’s financial services authority to have lyrics to Bob Dylan’s song “Positively 4th Street” in its atrium used to be one of its more baffling decisions – until it started pursuing bankers to the ends of the earth.
On a wall in the reception area of the FSA’s Canary Wharf HQ were the words: “You got a lotta nerve to say you are my friend. When I was down you just stood there grinning.”
With the regulator propensity towards pursuing big name bankers with out-sized fines, it seems that the industry should be singing the words back to the once-supine regulator.
