Antony Jenkins, the new-broom chief executive of Barclays, has the tone of a junior minister, not long in parliament, who finds himself promoted to high office after the big beast who preceded him was toppled by scandal. In fact he’s been in the bank 30 years, climbing the ladder so quietly that none of my contemporaries there (I coincided with him in Barclays for a decade) ever mentioned him as a man to watch before he was picked to follow Bob Diamond. His ‘strategic review’ is full of hot-button stuff about ‘values’, but what struck me about his interview on the Today programme on Tuesday morning was that in his carefully scripted answer to a question about breaking away from the Diamond legacy, he referred to ‘improving returns and dividends to shareholders’ before he recited his mantra about caring for customers and ‘delivering for broader society’.
Evan Davis tried to suggest conflict between those aspirations, but Jenkins rightly corrected him: it really doesn’t have to be that way. No major British bank has been run in the interest of shareholders for the past decade, not since Lloyds in the era of Sir Brian Pitman and Sir Peter Ellwood (readers may recall Neil Collins’s lament for the ‘Ellwood Memorial Dividend’, which lingered until the catastrophic merger with HBOS in 2008). Instead they were run in the boom years in the interest of enriching executives while making them look -ballsier than their competitors; and in the bust years, shareholders barely saw any returns at all, dividends having been bracketed with bonuses by the Governor of the Bank of England as rewards that must be foregone for the greater good. Yet most of the bonuses continued, while the dividends didn’t.
Back to first principles: a bank — or any public company — that has long-term shareholder value as its aim nurtures customer relationships, manages risk and reputation acutely, never lets managers run out of control and tests products exhaustively (for horsemeat or financial hogwash) before launching them on consumers. It does not need to strive self-righteously to ‘deliver for broader society’; it just has to make a positive contribution by doing its best for investors who put up its capital. That’s how capitalism is supposed to work, and it’s the only strategic review any bank needs.
Speak up, gents
Emblematic of a different capitalism — the sort with the ‘whiff of dangerous sophistication’ I often warn against — is Bumi plc, the mining venture assembled by Nat Rothschild and the Indonesian Bakrie family, with whom he later fell out. Investors who put £700 million behind Rothschild’s proposition are sitting on big losses, while the -party-loving scion of the great banking dynasty seeks to regain control at a shareholders’ meeting next week. The complexities of this story are brilliantly unravelled by Simon Nixon in a Wall Street Journal article which concludes, ‘Whatever investors decide, the scandal has damaged the reputations of everyone involved and of London itself.’
Perhaps we should now hear from the grandees who lent gravitas to the board of Rothschild’s cash-shell company Vallar when it listed on the London stock exchange in 2010 and stayed on when Vallar became Bumi after it acquired its Indonesian interests. Step forward deputy chairman and former Vodafone director Sir Julian Horn-Smith, former Washington ambassador Lord Renwick, and oil industry veteran Sir Graham Hearne. With a glittering array of City appointments between you, it’s time to earn your fees and do some damage limitation.
Swedish safety match
From a more verdant glade of the banking forest comes startling news: ‘Handelsbanken announces acquisition’. This from the Swedish bank with 147 UK branches (a new one opening ‘every eight working days’) which has spent these last turbulent years quietly reminding competitors how to do relationship banking the old-fashioned way. When I first came across it in 2011, I wrote that its only disadvantage was to be ‘too distinctive to replicate by acquisition — reliant on organic growth, which means expanding one high street at a time’. Last week’s announcement had me worried. Handelsbanken’s bosses have a unique track record of hiring seasoned managers from less enlightened banks and giving them their head to build local businesses — but had they taken it a step too far? Had they perhaps hired Sir Victor Blank, the Lloyds chairman who so ill-advisedly bought HBOS, or a deal-hungry team from Goodwin-era RBS? But no, the acquisition in question turns out to be Heartwood, a 25-year-old wealth management business with a modest £1.5 billion in hand and offices in London and Tunbridge Wells. So that’s really just one more high street, and the Swedish model is still safe.
To the armchair viewer, the Parliamentary Commission on Banking Standards looks almost identical to the Treasury select committee, both being chaired by Andrew Tyrie MP. But that’s simply because the furniture is the same. The Commission (four lords, five MPs and an archbishop) is emerging as a far more effective forum of inquiry, not least because it is largely free of the grandstanding, soundbite-making and undisciplined questioning that seems to characterise not only the Treasury group of 13 MPs but all select committee hearings when they know the cameras are rolling, whatever the subject matter. A key difference, apart from the moral weight of Justin Welby and the brainpower of Lords Lawson and Turnbull (former head of the civil service) is the participation of a barrister, Rory Philips QC, as counsel to the Commission. His interrogation on Monday of three successive RBS investment bank chiefs — the departed Johnny Cameron, departing John Hourican and left-behind-with-a-bucket-and-shovel Peter Neilson — was sheer joy to watch.
This article first appeared in the print edition of The Spectator magazine, dated 16 February 2013