16 MARCH 1991, Page 21

Not bust — official

THE Midland, Sir Kit could see, needed money and needed a friend — best of all, a friend with money. (So it still does.) His answer was have a clear-out of foreign debt, and then to sell peripheral businesses and to call for one more rights issue. (So will his successors, if they can.) He then announced Midland's engagement to the Hongkong & Shanghai Bank. It was a promising walk out, but there were always going to be snags about the marriage. Finally the Midland was left on the shelf, short of a strategy, and short of a chief executive — for that place, in the merged group, would have gone to Willie Purves, Hongkong Bank's formidably Scottish chairman. It was also short of profits. As Sir Kit said, its costs and its dividends were both too high — and (as he did not say) had been so for decades. It was argued, though, that a cut in the dividend might shake the depositors — at a time when the Midland was already the focus of gossip. Know-ails in pubs, well-informed race- goers, women at parties with cousins in insurance — they could all tell you how shaky things were, how they would not put a penny in the Midland, and were planning to take their overdraft out. It happens to banks, and, when it happens, is dangerous. It happened in the 1970s to the National Westminster, which put out a fatuous little statement to the effect that it wasn't bust. This time the treatment was different.