The events of the past decade have proved that deal sprees in banking generally end badly. Even when they don’t result in institutions that engage in them going belly up and nearly taking the UK economy with them (see Royal Bank of Scotland) they still have the potential to stoke up real trouble that can sometimes take years to manifest itself (see HSBC’s disciplinary file).
So there is good reason to be concerned about the newest entrant on to the UK banking scene, Spain’s Banco Sabadell; its managers appear to be spending an awful lot of time with investment bankers in the City of London.
The company’s assault on the UK market has been modelled on the overseas expansion of its rival, Banco Santander, which is unusual in being a bank that has largely made its M&A fetish work for it.
Unfortunately for Sabadell, which is banking on lightning striking twice, the environment it faces today is very different to that facing Santander when it started to globalise.
Ironically the fact that Sabadell’s latest target is available is in part a reflection of Santander’s deal-making skills. If the rumours are to be believed, Sabadell is the favourite to get its hands on a chunky portfolio of loans that has been put up for sale by the state’s bad bank, which the Treasury would much rather you and I referred to as Northern Rock Asset Management (NRAM).
Some of that portfolio was wisely rejected by Santander when it picked up a few of the good bits of Bradford & Bingley in the wake of the latter’s collapse, including B&B’s savings book, but not its loans – some of which are in the portfolio that NRAM is selling. Those loans looked like a disaster zone when the state was left holding the baby, but a benign economy, high levels of employment and low interest rates mean they look a lot better now.
And, in theory, their acquisition by Sabadell makes a lot of sense – if the price is right and it can beat out competitors. The loan book can be tacked on to TSB, which was spun out of Lloyds and would likely have been looking at deals like this itself had Sabadell not gobbled it up. So there is a decent case for the defence against critics like me.
Who knows, maybe it will all work out just fine in the end and prove that at a mythical creature – a good banking deal – has some basis in reality.
Will Corbyn’s win encourage young people to vote?
The brutal toll it has exacted on the young is one of the great injustices of the austerity era. If you want a simple illustration think on this: a former FTSE 100 chief executive living in a mansion in Spain still qualifies for a winter fuel payment, together with a free TV licence for when they are resident in their London flat, among a string of non-means-tested benefits available to pensioners.
Now consider the plight of the children of some of their former employees – a couple on an average wage, for example. Their offspring face paying £27,000 in fees to go the sort of university our chief executive would have attended free of charge. That’s before living expenses (for which the latter would have received a grant).
Numerous benefits that used to be available for young people who are looking for work have been cut or axed. Various schemes set up to address this issue often rely on stick as much as carrot and have a decidedly mixed record of success.
There is, of course, a reason why such a situation has been allowed to arise with at best muted opposition. It is because the generation of our retired chief executives votes in greater numbers than that of our notional former employees’ adult children.
Some of the latter, however seem to have found themselves rather taken by a certain Jeremy Corbyn, the leader of the Labour Party who capped his victory by appointing a shadow Chancellor – John McDonnell – who would put the fear of God into the City and much of the wider business community if they thought he stood a realistic shot of getting anyway near Number 11.
They should meditate on this: nearly six out of ten young people turned out to vote in the last general election, a significant rise on the 2010 poll. What if Mr Corbyn’s current popularity goes beyond a sub-group of politically active young people, and they persuade large numbers of their friends to vote?
Corbyn-mania may not last. It will have to survive the bloodletting of a divided party, for a start.
Still, if it results in a reassessment by the political class of the contempt with which it has treated the younger generation and its economic struggles, then his election will have achieved something.
Harriet Green – back in business after her holiday
Harriet Green, the former boss of Thomas Cook, has finally ended the vacation she has been on since leaving the holiday firm. She saved the company from bankruptcy and turbocharged its share price, but things started to unravel amid controversies over her huge bonus and the company’s mishandling of aftermath of the death of two children while on a family break with the company.
IBM is apparently undaunted, having created two new divisions for her to run in the hope that she can add a bit of vim to its business with big data. And log on to a better legacy in the process.
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