Crisis deepens at Warburg

The directors of SG Warburg were locked in crisis talks at the bank's London headquarters yesterday as it emerged that the Bank of England recently intervened to prevent Lord Cairns from resigning as chief executive.

There is mounting speculation there will be changes in the boardroom coupled with a heavy redundancy programme that could affect more than 1,000 staff.

The Bank's intervention over Lord Cairns, according to a senior merchant banking source, happened soon after the collapse late last year of Warburg's attempt to merge with Morgan Stanley, the US investment bank.

Lord Cairns, who spent much of yesterday discussing the crisis of confidence at the bank with other directors, is seen in the City as the architect of the plan to link with Morgan Stanley.

According to the banking source, Lord Cairns discussed his position with fellow directors soon after the collapse of the merger talks. The Bank of England is understood to have advised Warburg to continue with Lord Cairns at the helm until it resolved its problems.

This has sparked additional speculation that Sir David Scholey may be coerced into rethinking his decision to step down as chairman of Warburg in the summer. The intention, should Sir David leave the bank, would be to make Lord Cairns chairman and chief executive.

Sources said that Lord Cairns would be placed in an impossible position and would need to appoint a strong right-hand man as chief executive. An appointment from outside the bank would probably be necessary to placate investors, who last week started to show open signs of concern.

Warburg shares started trading at 761p last Monday but finished the week at 726p, losing 25p on Friday alone while the rest of the stock market advanced. The week's fall sliced £77m from Warburg's stock market value to £1.6bn.

The collapse of the Morgan Stanley deal has left Warburg struggling to cut costs while trying to achieve its global banking ambitions. It is also faced with the problem of what to do about Mercury Asset Management, its 75 per cent-owned subsidiary which was instrumental in scuppering the Morgan Stanley tie-up. Shares in Mercury slipped last week from 776p to 764p, valuing it at nearly £1.4bn.

Rumours of sweeping redundancies among Warburg's 5,500 staff worldwide have become rife, and the consensus is that the bank will soon wield the axe on one-in-five employees. It is thought the research department and back-room support areas will feature prominently in any redundancy programme.

Meanwhile, top staff have already started to leave, and Warburg is expected to move fast to prevent a trickle of defections from becoming a flood. Six equity trading executives walked out on Friday. Their departures followed those of Maurice Thompson and Michael Cohrs, who resigned as joint heads of equity trading on Tuesday to join Morgan Grenfell, Warburg's rival owned by Deutsche Bank.

Leading merchant banks are set to capitalise on Warburg's difficulties. Money is no object, with Mr Thompson and Mr Cohrs reportedly lured by two-year pay packages of £3m each.

Germany's leading banks have signalled their intention of bolstering operations in London after concluding that Frankfurt will never live up to expectations that it would become one of the world's leading financial centres.

Simply recruiting valued staff, though, will not satisfy the aspirations of German banks to become prime investment banking forces in London. Securing a stronger foothold in equity trading in London is seen as a precursor to an acquisitive strike by Deutsche. As well as Warburg, Cazenove, the blue-blooded stockbroking firm, and James Capel have been suggested as possible bid targets.

Morgan Stanley has not ruled out the possibility of a second attempt at a merger, although such a move might be resisted by Warburg employees, many of whom would have been made re dundant under the original proposals.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea