Lord Cairns' beau geste

The blow fell on Lord Cairns, chief executive of Warburg, on Saturday morning at an emotional meeting with Sir David Scholey, his chairman, at the bank's Broadgate offices.

The official version of what must have been a traumatic occasion for the two long standing colleagues is that Lord Cairns fell on his sword without prompting. But few in the City believe that if he had refused to resign, he would have survived a full board meeting called for the next morning. Warburg's reputation has been declining so fast in recent months that the board would almost certainly have insisted on tough action.

In the event, the directors who assembled at Warburg's offices were called upon only to ratify a decision taken privately 24 hours earlier. So on Sunday, a defeated Lord Cairns slipped away two hours before the board meeting broke up, his career at the bank over.

Voice cracking yesterday with emotion and strain, he refused to elaborate on the reasons for his departure from a job that once may well have carried more City clout than any other apart from the governor of the Bank of England.

But to most observers it was clear he was carrying the can for six months of mistakes, infighting and senior resignations that have severely damaged the reputation of the investment bank.

According to a former executive, people outside Warburg will find it hard to grasp quite how seismic these events are for those still within the bank.

It is a group that sees itself as hiring the best and grooming an elite for the succession.

Warburg is the classic case of an outsider - a bank founded by an immigrant, Sir Siegmund Warburg, in the 1930s - becoming more establishment than the establishment.

But after all his careful preparation, Lord Cairns has had the final prize of the chairmanship, already promised to him, cruelly snatched from his grasp, only months before he was formally due to assume the role.

The board meeting then had to decide how to get the bank out of the dead-end street into which it has driven so quickly and unexpectedly.

The immediate reason for the emergency meeting, which brought Warburg directors jetting in from all over the world, was probably the departure last week of two key international equity specialists for Deutsche Bank, followed by members of their team.

By Friday, the City was gossiping about Warburg as if it was already a lame duck waiting for rescue, and there was talk - later denied- of a Bank of England inspired rescue. In a business where reputation is all, the gossip had to be stemmed at all costs.

The defections may have been the straw that broke the camel's back. But most of the trauma at Warburg has been traced back to the failure in December of a plan to merge with Morgan Stanley, the US investment bank.

Fairly or not, Lord Cairns, as chief executive, took much of the blame for the failed deal, which fell apart because Warburg - the pre-eminent fixer of bids and deals - failed to square the directors of Mercury Asset Management, its 75 per cent owned subsidiary. They would not recommend a bid for the 25 per cent in public hands at the price Morgan was offering.

Sir David Scholey, as chairman, would be hard put to distance himself from what happened then. Nevertheless, it was Lord Cairns who offered to resign at that point, but was persuaded to stay.

But there had been straws in the wind much earlier that suggested to some of the band of Warburg watchers that the bank was losing its touch.

The balance sheet gave substantial clues of the decline. Though impressive for a local UK merchant bank, Warburg did not have the money to compete on an international scale with some of the most powerful New York investment banks.

In the early 1990s, these banks turned in a handsome extra profit by speculation in their own names. Warburg did not have the money or the expertise to do that.

The failure of the grand plan to merge with Morgan Stanley exposed Warburg's need for capital. It also forced Lord Cairns to cut the bank's coat according to its cloth. Jobs began to go. Most observers are betting on further contraction.

VIDEO
News
Plans to decriminalise non-payment of television licence fees would cost the BBC £500m according to estimates drawn up within the Corporation
people
News
people
Life & Style
The new low cost smartphone of Motorola, 'Motorola Moto G', is displayed in Sao Paulo, Brazil on November 13, 2013. The smartphone, with dimensions 65.9mm W x 129.9mm H x 6.0 - 11.6mm D is equipped with a Qualcomm Snapdragon 400 with quad-core 1,2 GHz CPU, a 4.5-inch display and Android Operating System 4.3 and a suggested price of $ 179 USD.
techData assessing smartphones has revealed tens of millions of phones are at risk of being harvested
Arts & Entertainment
Jessica Pare as Megan Draper and Jon Hamm as the troubled, melancholy Don Draper
tvAnd six other questions we hope Mad Men series seven will answer
Arts & Entertainment
Cody and Paul Walker pictured in 2003.
film
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Data Analyst - Financial services, Client data, LEI

£40000 - £50000 per annum + BONUS + BENEFITS: Harrington Starr: A leading, Cit...

Management Consultancy - Operational Research Analysts

£35000 - £50000 per annum + Bonus + Benefits: Pro-Recruitment Group: You must ...

Corporate Actions Consultant - Market data, ISO15022, presales

£45000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: Corporate Acti...

Prudential Risk/Operational Risk Associate - London

£350 - £400 per day: Harrington Starr: An opportunity has arisen at a FCA regu...

Day In a Page

Homelessness: Why is the supported lodgings lifeline under threat?

Why is the supported lodgings lifeline under threat?

Zubairi Sentongo swapped poverty in Uganda for homelessness in Britain. But a YMCA scheme connected him with a couple offering warmth and shelter
A History of the First World War in 100 Moments: When the world’s biggest shed took over Regent’s Park

A History of the First World War in 100 Moments

When the world’s biggest shed took over Regent’s Park
The pain of IVF

The pain of IVF

As an Italian woman vows to keep the babies from someone else’s eggs, Julian Baggini ponders how the reality of childbirth is often messier than the natural ideal
Supersize art

Is big better? Britain's latest super-sized art

The Kelpies are the latest addition to a growing army of giant sculptures. But naysayers are asking what a pair of gigantic horse heads tells us about Falkirk?
James Dean: Back on the big screen

James Dean: Back on the big screen

As 'Rebel without a Cause' is re-released, Geoffrey Macnab reveals how its star perfected his moody act
Catch-22: How the cult classic was adapted for the stage

How a cult classic was adapted for the stage

More than half a century after it was published 'Catch-22' will make its British stage debut next week
10 best activity books for children

10 best activity books for children

Keep little ones busy this bank holiday with one of these creative, educational and fun books
Arsenal 3 West Ham United 1: Five things we learnt from the battle between the London sides

Five things we learnt from Arsenal's win over West Ham

Arsenal still in driving seat for Champions League spot and Carroll can make late charge into England’s World Cup squad
Copa del Rey final: Barcelona are paying for their complacency and not even victory over Real Madrid will put things right

Pete Jenson on the Copa del Rey final

Barcelona are paying for their complacency and not even victory over Real Madrid will put things right
Rafa to reign? Ten issues clay courts will serve up this season

Rafa to reign? Ten issues clay courts will serve up this season

With the tennis circus now rolling on to the slowest surface, Paul Newman highlights who'll be making the headlines – and why
Exclusive: NHS faces financial disaster in 2015 as politicians urged to find radical solution

NHS faces financial disaster in 2015

Politicians urged to find radical solution
Ukraine crisis: How spontaneous are the pro-Russian protests breaking out in Ukraine’s east?

Ukraine crisis

How spontaneous are the pro-Russian protests breaking out in Ukraine’s east?
A History of the First World War in 100 moments: The first execution at the Tower of London for 167 years

The first execution at the Tower of London for 167 years

A history of the First World War in 100 moments
Fires could turn Amazon rainforest into a desert as human activity and climate change threaten ‘lungs of the world’, says study

New threat to the Amazon rainforest:

Fires that scorch the ‘lungs of the Earth’
Liverpool, Chelsea and Manchester City: And the winner of this season’s Premier League title will be...

Who’s in box seat now? The winner of the title will be ...

Who is in best shape to take the Premier League prize?