View from City Road: Uphill task for Kleinwort import

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Last week a handful of the leading executives at Kleinwort Benson were told ahead of yesterday's announcement that its chief executive, Jonathan Agnew, is to leave in August. Kleinwort says it has yet to find a replacement and has just started to look. Like Mr Agnew, the new chief executive of Britain's third-largest merchant bank is to be an outsider.

Kleinwort's rumour mill - regularly oiled, thanks to its staff's obsession with internal politics - had suggested some time ago that Mr Agnew was serving his last few months in the job.

Its rivals must be licking their lips at the capital they can make out of the uncertainty caused by such an interregnum. Anyone still thinking of taking over Kleinwort (and that probably does not include longstanding shareholders Banque Nationale de Paris and Dresdner Bank) might consider the next few months the right time to strike.

Whoever succeeds Mr Agnew has an uphill task to restore Kleinwort to the position it commanded in the City only four or five years ago. Like SG Warburg, it chose to go down the route of being an integrated securities house and bought the stockbroker Grieveson Grant.

But, unlike Warburg, it has never given the impression of having engineered a system allowing all the parts of the machine to pull together. As a result it has fallen behind not only Warburg but, in different fields, also Schroders, Morgan Grenfell and Barclays de Zoete Wedd.

Its progress has been dogged by departures - the heads of corporate finance of two of its rivals and the former chief of another came from Kleinwort. It still has a great client list but where are the new ideas that are the lifeblood of a forward-looking merchant bank?

All this can change quite quickly. The group is starting to make the sort of money it should and has lots of capital. Clients could come to life with the recovery. An inspirational chief executive should as his first priority tackle morale so that Kleinwort can start worrying about its clients' problems rather than its own.