View from City Road: Can Smiths keep the pot boiling?

First reaction to Smith New Court's profits thriller yesterday was: 'How did they do it?' The second was: 'Why are Rothschilds reducing their stake?'

The first has much to do with the firm's audacious approach to risk- taking in its jobbing business. The achievement of making a cool pounds 36m in the second half alone must win Smiths the title of one of Britain's most successful securities houses.

Indeed, after the Big Bang morass Smiths' progress should put heart into anyone who wants to see thriving independent firms in the City rather than a bunch of grey transatlantic monoliths.

So why has Rothschild shown its hand by reducing its stake via the rights issue? The view from the dealing room last night was that Rothschild had signalled that it was slowly on the way out of its decade-old relationship with Smiths.

The explanation from Rothschild is that from the time it bought the stake it has wanted to co-operate with Smiths in certain areas through being the largest single shareholder. But it did not want to take up the rights and thereby risk having to make a full bid.

The reduction enables Smiths to add to its share register and generally keeps everyone happy. But it also prompts a third question: Where does Smiths go from here?

Smiths would say that it is perfectly happy steering its profitable present course. But can even such a successful firm remain independent in this age of global markets?

Indeed, the very risk-taking at which Smiths excels could be its undoing. Despite its protestations that the juicy profits in the second half came from a wide variety of transactions throughout the business, it confirmed the view of many that Smiths is the leading British punter.

If it gets it right, it is rolling in it. But if it gets it wrong, what price independence then?

Several US investment banks have been mooted as possible partners for Smiths, usually with a Morgan in the name, but it is hard to see a firm with such a strong cultural identity fitting comfortably into a larger, more bureaucratic organisation.

And it would be a sad day for the City to see one its few post-Big Bang successes submerged. Whereas many other institituions went for the slogan 'big is best' and attempted to be all things to all people, Smiths stuck to its strengths and won through - for the moment at least.

Perhaps Smiths can best be compared to a high wire act - exciting, daring, drawing 'oohs' and 'ahhs' from the crowd below. Everyone wants it to carry on defying gravity, but there is also the fear at the back of people's minds that it may slip and fall. High rewards tend to follow high risks.

Start your day with The Independent, sign up for daily news emails
Sport
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Life and Style
Mark's crab tarts are just the right size
food + drinkMark Hix cooks up some snacks that pack a punch
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect