Outlook: Robert Fleming

ROBERT FLEMING is one of Britain's last remaining independent investment banks. For how much longer can it remain so? Or to put the question another way, for how much longer can Robert Fleming stay in its present form and continue to thrive?

Robert Fleming is not as big or successful as Schroders, and it lacks the corporate advisory focus and strengths of Lazards and Cazenove. Like N M Rothschild, it is privately owned and still run in the manner of a family business (a number of family members continue to work at the bank), but unlike NM Rothschild, it is not wholly owned or controlled by the family.

Furthermore, it has taken a bath in the Far East and other emerging markets, quite how bad a one we will learn tomorrow when the bank announces its interim results.

As a private company it could be said that it is nobody's business but its own and its customers how the bank chooses to organise its affairs. It can afford to be more indulgent than others, and it perhaps doesn't have to be quite as obsessed with the pursuit of shareholder value as ordinary publicly quoted companies.

All of which is just as well, for when its shares do change hands, they do so at a discount to what they could be expected to fetch if Robert Fleming were a publicly quoted company. The effect of this is to discourage the "wrong" type of investor from joining the shareholder register, thus keeping it all in the family, so to speak.

Though Robert Fleming is only 46 per cent owned by family and staff, its other shareholders are mostly part of the Robert Fleming club in some shape or form, an inner circle of City institutions and individuals who can be relied apon not to rock the boat. Why, a large chunk of the bank is owned by its own investment trusts, an extraordinary piece of incest which in recent years has damaged the performance of the investment trusts involved.

If Robert Fleming wants to survive and prosper in the next century, can it really afford to stay like this? The imminent departure of Patrick Gifford as head of the investment trusts business is perhaps indicative of continued tensions within the bank between what might be termed the family and modernising tendencies. The bank insists there has been no row, an account which is to some extent backed by the fact that he will continue as a director of seven of Fleming's 19 investment trusts. But the bank cannot rule out disillusionment, for why else does someone quit in their early fifties?

The truth of the matter is that Robert Fleming has a superb name and franchise on its investment management side, which it has built apon through joint ventures with Jardines in the Far East and Rowe Price in the US. But the rest - securities, corporate finance, private and corporate banking - doesn't stand up to the most basic of tests on size, reach and reputation. As long as Fleming remains bound by its present privately owned structure, it will remain incapable of acting effectively on this combination of strength and weakness.

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