It's a miracle that these snowdrops return, so please don't jump up and down on them
CHRISTOPHER FILDES
It is nature's annual miracle. Peeping up above the frozen ground like snowdrops, here come the High Street banks to tell us that they have survived another year. Earlyflowering varieties like Barclays and Lloyds will be with us next week, and already — for this is an annual, too — the first headline has complained of greedy banks. Just look at the profits they will be declaring: billions of pounds, all gouged out of us as their customers, so throw a brick at them now or write to your MP about them. It's a scandal. Vainly they retort that official investigators have been crawling all over their business for years, that dozens of mortgage lenders and credit-card issuers are hurling money at us, that if there is less competition to lend to small businesses, that is down to the Chancellor, who has imposed a standard tariff — or even that big banks require many billions of capital, which has to be fed. We brush these excuses away but, of course, if a bank lost money and got into trouble, that would be a scandal, too. None of them has had an easy year. St Valentine's Day, which is when Lloyds reports, will be more of a shoot-out than a love-in. Abbey National has forecast a loss and is conducting a clearance sale. Lending to customers like Marconi has proved expensive for all the banks, and there would be more damage to come if the boom in consumer lending went sour and the great shiny house-price bubble burst. Worse than a greedy bank, as we might even learn, is a needy bank.
Bet your old age
A NEEDY provider of pensions is, as Oliver St John Gogarty said of a small whisky, unhappily a matter of everyday experience. Actuaries have been picking over the pension funds' depleted finances. They tell employers that, if they want to go on earning posterity's gratitude, they will have to top the funds up. The employers then wonder what posterity has ever done for them, and close their pension schemes. The life offices' needs are more evident. They have been forced sellers of shares, driving the market down and so making their troubles worse. As last week ended, the regulators agreed to bend the rules in their favour, which is good news or bad news, depending on how you look at it. All of them (Standard Life is the latest) are cutting their bonus payments to policy-holders. Some of them will not survive in their present form, or at all. Those who have bet their old age on these pension providers will have to scale down their hopes. They can still be thankful that they did not bet their old age on the government.
Waving money away
ONLY the other day these pension providers seemed to have more money than they could possibly need. Gordon Brown thought so. In his first budget he hit the pension funds for £5 billion a year, calculating that this would be a painless way of raising taxes. There is no such thing, as the losers could tell him when the doors of their pension schemes close in their faces. As for the life offices, they had been keeping ample reserves for a rainy day — but since the sun was shining, why not hand the money out and label it a windfall? Think, too, of all the people who had bought pension plans from them and then wished they hadn't. That must make them victims of mis-selling, so the Compensation Fairy needs to wave her wand and put things right for them. By now she has redistributed all of £10 billion and she is still waving money away. She has even forced the Equitable Life, which has to think twice before paying for stamps. to write to policy-holders past and present, telling them that they may have a new chance to put a claim for mis-selling. If that claim were to succeed, who would pay? Answer: all the other policy-holders who, between them, own the Equitable. Weakening the pension providers has weakened us all.
Prime examples
TO see what a needy bank looks like, you do not have to go far. Some prime examples are on show this week in Germany. Commerzbank has led the way with a loss. HVB is expected to follow, and Dresdner, with question-marks over one in every eight of its loans, is in the deepest hole of all. In the last two years, shares in German banks have lost two-thirds of their value, and you could now swap the lot of them (Deutsche, the leader, included) for Barclays and still be left with change. What needy banks need most is capital, but how are they going to attract it? Otherwise, they have no choice but to be tight-fisted lenders, which will not please their customers and may push the weaker ones over the edge. The last thing the German economy now needs is a contraction of credit. It shows signs of contracting without one.
The receiving end
ONE City firm in need of a cash transfusion is Teather & Greenwood, the stockbrokers. These are thin times in the markets, T&G has been operating at a loss, and this week its own share price crumbled on news that it was raising £3 million to shore up its capital base. The catch is that raising money costs money. By the time that T & G has paid its financial advisers and the troop of accountants and lawyers who have to come with them, it will be looking at a bill for £500,000. This ought not to come as a total surprise, since T &G is in the business itself, but now it is on the receiving end. For the plainest bread-and-butter transaction to do with corporate finance, the City charges a fortune and the money goes on people, all of them highly paid and not all, necessarily, worth it. In the good times this seemed only natural. Now, surely, the need to compete and survive will prompt some adviser to offer a simplified service on sensible terms. Teather & Greenwood could show the way.
Take your partners
THE moral, or one of them, is that businesses whose stock-in-trade is people work better as partnerships than they do as companies. In the distant days before the Big Bang and long before the invention of integrated investment banking — how lucky our own High Street banks are to have dropped out of it — this was the rule for the City's stockbrokers and jobbers. In the crushing bear market that raged thirty years ago, an office boy asked for a rise and was threatened with a partnership.
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