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.

News
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
Sport
footballStriker has moved on loan for the remainder of the season
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
News
Ricky Gervais performs stand-up
people
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering