TSB puts Hill Samuel back on the market

HILL SAMUEL, the troubled merchant banking arm of TSB Group, has been put back on the market five years after it was bought at the peak of the stock market boom.

The bank is understood to be on offer without the portfolio of bad corporate loans that pushed the TSB group as a whole into loss in 1991. These are being taken over by the parent bank, which will manage them as a separate work-out unit in the hope of recovering some of the write-downs made on the loans, once the economy picks up.

Hill Samuel is believed unsaleable with the bad loans included. But the idea of separating them out was first mooted earlier this year at TSB, partly to boost morale and remove the shadow of past disasters, at a time when the merchant bank was being reorganised.

TSB is also believed to be soliciting offers for Hill Samuel both with and without its investment management subsidiary, one of the biggest in Britain.

This is a prime attraction for any potential buyer, because it has pounds 24bn under management or advice. It would be snapped up at the right price during what could become a wave of consolidation in the investment management business. Hill Samuel also owns Bell Lawrie White, one of the largest private client stockbrokers with pounds 3bn of funds.

TSB appears to be keeping open the option of holding on to Hill Samuel Investment Management if it can find somebody willing to buy the rest of the merchant bank.

But it may have to sweeten the pill by selling both together because the recession has had such an effect on some key merchant banking areas such as corporate finance, where activity has almost ground to a halt.

Judging by the time it has taken Royal Bank of Scotland to find a buyer for its Charterhouse merchant banking subsidiary, TSB is unlikely to achieve a quick sale at a good price. Royal has been in talks for months with Credit Commercial de France.

In the year to October 1991, Hill Samuel lost pounds 419m after a pounds 432m provision against bad debts. This dragged TSB Group into a pounds 47m loss.

In the half-year to April 1992, the Hill Samuel loss was reduced to pounds 54m, but the underlying performance of the merchant bank remained 'awful', according to Smith New Court, the broker, which said it would be 'years before TSB earns a decent return on the capital invested in Hill Samuel'.

Hill Samuel was bought by TSB in 1987 when the merchant bank was on the rebound from a takeover by Union Bank of Switzerland. UBS withdrew at the last minute.

The price of pounds 770m was criticised at the time because the offer was made before the October 1987 crash but completed afterwards.

TSB declined to force a renegotiation of the terms despite the big drop in merchant bank share prices and was left holding an overpriced acquisition that soon went wrong.

Under the ownership of the strongly capitalised TSB Group, Hill Samuel raised its own lending rapidly, and also took over some of TSB's corporate business.

In the 18 months after the acquisition, the loan book expanded by pounds 3bn, or 66 per cent, well above banking averages, and standards for assessing new borrowers fell.

Much of the expansion took place at the peak of the late-1980s boom just as longer-established lenders were beginning to withdraw. Hill Samuel ended up with a large proportion of loans to companies in difficulty, of which Brent Walker was the best-known. Losses on the loans in 1990 and 1991 alone were three-quarters of the price TSB paid.

The Hill Samuel management team was purged 18 months ago by Sir Nicholas Goodison, TSB chairman, when Hamish Donaldson, chief executive, retired early.

TSB said it would not comment on market rumours.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The teaser trailer has provoked more questions than answers
filmBut what is Bond's 'secret' that Moneypenny is talking about?
News
Johnny Depp is perhaps best known for his role as Jack Sparrow in Pirates of the Caribbean
peopleBut how did he break it?
Arts and Entertainment
Paul Walker and Vin Diesel in Fast and Furious 5
film
Sport
Lewis Hamilton secured his second straight pole of the season
f1Vettel beats Rosberg into third after thunderstorm delays qualifying
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss