Hail to the Co-operative Bank, which has snapped up the 632 branches that Lloyds was under orders from Brussels to shed by next year. The price looks like a buy-one-get-one-free sofa sale: £350 million down with £400 million to pay over 15 years ‘if targets are met’, against Lloyds’ initial expectation of £1.5 billion-plus. That’s hardly a joy for taxpayers who own 40 per cent of Lloyds, but it triples the size of the Co-op branch network — a boost to banking biodiversity that must surely be positive for the high-street economy.
One good thing about the Co-op is that it is based in Manchester, far from the taint and corruption of the City of London. Handelsbanken, the Swedish group which scores high marks from customers of its 129 UK branches, also has an HQ nearby, and if I was Manchester’s spinmeister I’d be ringing Robert Peston with an ‘exclusive’ about the ‘new capital of sensible banking’. But there’d be no Bollinger-popping, perhaps not even an extra digestive from the tea trolley to celebrate a deal which instantly promotes the Co-op team (the highest paid of whom earned a modest £766,000 in 2011) into the premier league of UK retail banking.
They should not imagine that their ethical profile and roots to the Rochdale Society of Equitable Pioneers in 1844 will protect them from anti-bankerism, however. Far from it: negative reactions were instantaneous. Pundits concerned for the taxpayer interest argued that the downsizing of Lloyds would have been better achieved by reinventing its Halifax subsidiary as an independent mortgage lender and giving the busted Bank of Scotland back to the Scots. Affected Lloyds customers were reported to be ‘furious’ that they have no choice but to join the Co-op — or experience the trauma of closing accounts and opening new ones if they insist on staying put. Commentators demanded to know more about the Co-operative movement’s links to the Labour party, and whether the Co-op Bank’s computer systems (outsourced to a French firm called Steria) can handle the expansion.
More competitors with critical mass, more regionalism and more differentiation are just what’s needed in the banking sector; Virgin Money’s acquisition this week of an additional chunk of Northern Rock’s loan book was another step in the right direction. But the banker-bashers can’t wait for the newcomers to slip up.
Doghouse to dog-collar
The chairman of the Co-op Bank, Paul Flowers, is a superintendent Methodist minister and, I assume, no relation to the American financier Christopher Flowers, who comes from a different sect: the alumni of Goldman Sachs. You may think we need more men of the cloth to help re-set the moral compass of finance — hence the appointment of the Bishop of Durham, Justin Welby, to sit on the parliamentary inquiry into banking standards. But being an ordained Anglican is not helping trade minister Lord Green, who is under pressure to reveal whether he knew about industrial-scale money-laundering at HSBC when he was its chairman. And the Vatican Bank is in the news again after being told by an official report that it is delinquent in matters of money-laundering, finance for terrorism and tax evasion. Perhaps better to keep God and Mammon apart, and for more bankers to follow the example of Brian Crowe, who used to be the number-two man in RBS’s investment bank and is now a vicar in rural Cumbria. As he wrote in his parish magazine, the transition from ‘doghouse to dog collar’ has done him a power of good.
The Bishop of Durham was treasurer of Enterprise Oil before he took holy orders, and was about to be my hot tip for the Barclays chair. But then I read Robert Peston’s blog: ‘From my conversations with senior Barclays sources, I have learned there is a favoured candidate for each of its top vacancies… Lord O’Donnell is the board’s preferred choice as new chairman. And Bill Winters, the former JP Morgan banker, is the front-runner to succeed Bob Diamond as chief executive.’ Well, I don’t want to start a row with the hyper-sensitive BBC man as to who has the more senior Barclays sources — several of mine are so senior I can only reach them by ouija board — but I suspect someone has been feeding him hogwash.
The challenge facing Barclays is a case study for any public company. If you lose your chairman and chief executive simultaneously, you have to replace the chairman first, because any serious candidate for chief exec will demand to know who he’s going to report to. Current deputy chairman Sir Mike Rake, who also chairs BT and easyJet (where he is under attack from the permanently digruntled founder, Stelios), might have taken the job if it had been offered immediately, but I gather he wasn’t prepared to enter the contest against globally sourced outside candidates that corporate correctness demands. Perhaps he also wanted to avoid banker-bashing references to his private polo ranch in Argentina and jokes about ‘raking it in’ — just as another insider, Rich Ricci, has ruled himself out for chief exec. Either way, white smoke for the chair is unlikely before September with the chief executive to follow; everyone close to the process is sworn to secrecy, Gus O’Donnell is an underemployed ex-mandarin with minimal City experience, and Bill Winters — though some would say a cut above Bob Diamond — is yet another recycled American investment banker. So pace Pesto, I think the race is wide open.
How lovely to enjoy the capital in sunshine at last, to be able to get a table in any restaurant, a room in any hotel, a taxi across the West End with no sign of a jam, and the best seats for Chariots of Fire at the Gielgud Theatre. That’s as close to the Olympics as I intend to get, but I’m grateful to the Games for making London so unexpectedly quiet.