Simon Evans: Turn again, Sir Win. Your name needs a bit of a polish

Tapping your friends to help find cash won't wash
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The Independent Online

Sir Win Bishoff came back to the City to repair his reputation in the Square Mile. It's a reputation somewhat dented after a rather unsuccessful stint in the same job at Citigroup which ended in February.

Last week he floated the idea that Lloyds may seek to tap its investors in a gigantic £15bn rights issue in the autumn, lessening the ailing bank's reliance on the Government's elaborate insurance policy known as the asset protection scheme. Too expensive by all accounts.

A week on and Sir Win should be in no doubt that the rights issue avenue is very much closed to Lloyds. The put-upon fund managers who have backed billions of rights issues in the UK this year have had enough.

Backing a cash call for HSBC to the tune of £12bn in the spring was one thing. Despite its US travails, HSBC has done rather well. Bailing Sir Win out of his inherited mess is an altogether different matter.

Why would any shareholder in his right mind want to pump more hard-earned cash into a company where there are so many imponderables and uncertainties?

The threat of the European regulator coming in with a big knife to slice the company up, shaving the bank of its most profitable parts, remains a distinct possibility.

On top of this, why would the City want to back the discredited management team of Eric Daniels? Daniels is quick to distance himself from the HBOS deal, but with Sir Victor Blank paying the price and having been pushed aside, who is left to blame if the HBOS assets sour further? Remember, Wolseley's rights issue earlier in the year. Institutions only backed that one in return for the sacking of management.

Even if support for a giant Lloyds issue materialises, there must be real doubt over whether the City's institutions have the capacity to soak up such a massive offer.

In the wake of HSBC's giant fund raising in the spring, institutions put the word out that they needed a breather. They would need a giant breather after this one.

Many in the City are predicting that a raft of companies are likely to come to market to raise cash in the autumn. The spring raisings were all about repairing distressed balance sheets. But rights issues in the autumn will be about giving company boards the financial firepower to buy rivals in the coming year. There are sure to be plenty of more attractive opportunities for equity fund managers to put their cash to work than old Lloyds.

One leading UK equities chief said there is a real fear that some fund managers might not be able to back even the more attractive raisings. Retail investors and pension funds provide the cash to the fund managers which in turn make investment decisions. There really is no sense, at the moment at least, that we are seeing these investors ploughing their money into equities. Most are still sitting firmly in the dull but safe bond arena.

Many pension funds trustees in particular will be hellishly nervous about switching back into equities at this point, having been burned so badly in the past. Consultants aren't telling the pension funds that British equities are a screaming buy at the moment. There are perhaps more exotic places to put cash to work.

Aside from the rights issues coming our way in the autumn, institutions are also likely to face a wave of possible public offerings at the start of next year. While plenty of these offerings aren't going to be attractive to most large, long-only investment institutions, some might be. Why not keep one's powder dry instead of backing Lloyds.

I can think of some people who would heartily back a rights issue though: the City investment banks that have taken on board little or no risk during the spring raisings, pocketing millions of fees in the process. These are, of course, Sir Win's old muckers at the likes of Citi.

No, I think you need to think of something a bit more interesting than tapping your old pals for ideas, Sir Win, else that reputation you want to repair might be a whole lot worse than when you started at Lloyds.





Sants finds his voice and puts ministers on the spot over City bonuses

Hector Sants take a bow. After being given the mother of all hospital passes by John Tiner when he took over at the helm of the soon-to-be-disbanded Financial Services Authority – I think we can now assume Mr Cameron is already ordering fixtures and fittings for No 10 from the MP's favourite, John Lewis – Hector Sants has at last found his voice.

The former Credit Suisse investment banker put on a number of barnstorming media performances last week accusing Government ministers of passing the buck over the thorny problem of City bonuses. This was an all-out attack from a man clearly fed up at being used as a political football since the collapse of Northern Rock and the advent of the credit crunch in September 2007.

Sants has had an impossible job over the past year with the issue of bonus capping just the latest problem. The proposals from the regulator are something of a fudge but it's difficult to see what else Sants could really put on the table. He has now passed the hot potato back to Westminster to find an answer.

Lord Mandelson, never shy of a soundbite, has already indicated that the Government plans to do something more about bonuses with legislation being mooted. Such a move could be catastrophic.

I'm no friend of the greedy, risk-taking bankers who got us into this mess, but I've yet to hear a practical way to legislate City bonuses. Let's wait to see what Mandy and pals come up with: a dog's breakfast is my guess.

Apparently ministers are keen to force banks to disclose the number of staff taking home giant pay deals. I'm sure that this would make interesting reading but I'm not sure that it'll help London and the British economy in the longer term.

I always frown at talk of our best bankers quitting London for foreign fields, but there is a real danger that political meddling could horribly undermine London in the future.

Margareta Pagano is away

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