Martin Vander Weyer’s Any Other Business
Santander is a port in northern Spain with a population the size of Swindon’s. It is also the eurozone’s largest banking group, an institution that has far outgrown its origins to become the owner, in Britain, of Abbey, Alliance & Leicester and the branch network of the crippled Bradford & Bingley. Having spent more than £35 billion on acquisitions around the world in recent years, it is currently spending another £2 billion to buy 318 Royal Bank of Scotland branches, has just spent £1.7 billion to buy out Bank of America’s stake in a Mexican joint venture, and is hoping to pick up some more branches in Germany. Under the leadership since 1986 of third-generation chairman Emilio Botin, Santander has apparently gone from strength to strength while other major banks have tottered and failed.
Yet Santander’s home market is now regarded by investors as the most worrisome eurozone economy — as heavy selling of its government bonds this week confirmed. Four times bigger than Greece in GDP terms, Spain has unemployment close to 20 per cent and a fiscal deficit similar to our own. The results of its real-estate bust have until recently been buried in an opaque banking system — but are now surfacing in local savings banks such as CajaSur, which was bailed out last month. Botin says Santander has diversified away from Spain, retains a strong balance sheet and has relatively modest exposures to sovereign debt. He argues that traders who have driven its shares downwards (and driven upwards the price of insuring its debt) are simply misjudging its qualities.
Well, maybe: I know nothing concrete to the contrary, except that banks which build themselves up to be the biggest and most diversified have always come unstuck in the end — Bank of America in the late 1980s, Citigroup and RBS in the recent crisis — partly because the challenge of risk control across such a vast portfolio of businesses becomes impossible, and partly because they become complacent believers in their own propaganda. Banks that have been driven by one powerful personality also tend to lose management grip, and find skeletons in cupboards, as the big man comes towards the end of his tenure. Botin, now 75, can’t go on forever, and neither can Santander’s rise: keep a wary eye on both of them.
Elder statesmen
Not that there’s anything intrinsically wrong with active septuagenarians. I’m glad to see 78-year-old Lord Young of Graffham, who was Margaret Thatcher’s ‘minister for deregulation’ a quarter of a century ago, back in harness as David Cameron’s adviser on health and safety legislation and its accompanying ‘compensation culture’. There’s still plenty of wisdom to be gleaned from Young’s cabinet cohort: a senior civil servant told me the other day what a joy it is to have, in Ken Clarke (70 in a fortnight’s time), a Lord Chancellor who knows how Whitehall works, treats officials correctly, and has no fear of taking decisions.
In David Young’s case, the appointment is particularly welcome because his application for it was first set out in these pages, in February 2009: ‘Health and safety has become a whole new industry, taking reasonable precautions to unreasonable lengths… Ministers should summon up their reserves of courage, lighten or even abolish much of the health and safety legislation and face down the criticism that will emanate from special interest groups. The quicker we deal with this, the sooner we will be competitive again.’
Young is also, incidentally, an early adopter of new technology: he told me he reads The Spectator on his Kindle and the Times on his iPad. When he has knocked sense into the elf’n’safety brigade, perhaps he should move on to the issue of how the internet can be used to deliver more cost-effective public services. I refer him to an article by David Crow in this month’s Spectator Business (available, in the old-fashioned way, from 0800 031 9715) on off-the-shelf software from Google and Microsoft that could transform NHS record-keeping for a fraction of the billions the last government was so determined to spend on it.
BP’s goalkeeper?
The news gets worse for BP and its shareholders, just as the company’s efforts to control the oil spill begin to make progress. Obama’s 9/11 rhetoric was a new low in his campaign to deflect US anger away from himself and towards the company’s embattled chief executive, Tony Hayward. I’m reminded of a phone call I received in 2007: ‘Dark forces are at work,’ growled the Northern Irish accent of Roddy Kennedy, BP’s media chief at the time, who had somehow gained the impression that I was being used as a pawn in the PR-spun tussle between Hayward’s predecessor Lord Browne and chairman Peter Sutherland over the matter of when Browne should step down.
I had no idea what Kennedy was talking about, but gained an intriguing glimpse of high corporate drama. Given the weakness of BP’s position today — with Hayward facing a congressional lynch mob and new chairman Carl-Henric Svanberg, recently arrived from a Swedish telecoms company, more qualified to discuss the President’s mobile phone needs when he goes to the White House this week than to defend BP’s drilling record — I hope for the sake of our pensions that BP has some dark forces at work as well. I even wondered whether hapless England goalie Robert Green might be a BP shareholder: a crowing World Cup victory over the United States certainly wouldn’t have helped his prospects of a steady dividend income. And what about those sad, oiled-up pelicans that have suddenly appeared on our screens? Are they for real — or did a US secret service agent borrow them from a zoo and have them sprayed with gravy? In high corporate drama, as in high politics, things are rarely what they seem.
Watch for the dip
Speaking of the World Cup, surely the most forlorn headline before last Saturday’s big game was this from the FT: ‘Huge boost likely if England go all the way’. The Centre for Retail Research had predicted a £2.1 billion rise in retail sales — made up chiefly of giant televisions, replica shirts, barbecue burger multipacks and an ocean of beer — if England gets to the final, while bookmakers expect to take an extra £1 billion in bets. But if we fail to beat Algeria this Friday, then Slovenia on the day after the Budget, I fear the economy will be double-dipping like a Beckham free kick.
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