TODAY’S FAYRE – Monday 23rd February 2015
“Often and often it came back again
To mind, the day I passed the horizon ridge
To a new country, the path I had to find B
y half-gaps that were stiles once in the hedge,
The pack of scarlet clouds running across
The harvest evening that seemed endless then
And after, and the inn where all were kind,
All were strangers. I did not know my loss
Till one day twelve months later suddenly
I leaned upon my spade and saw it all,
Though far beyond the sky-line.
It became Almost a habit through the year for me
To lean and see it and think to do the same
Again for two days and a night.
Recall Was vain: no more could the restless brook
Ever turn back and climb the waterfall
To the lake that rests and stirs not in its nook,
As in the hollow of the collar-bone
Under the mountain’s head of rush and stone.”
Edward Thomas – poet – 1878-1917
I much enjoyed Sunday Telegraph’s articles by Bill Jamieson and James Titcomb on 20th anniversary of the collapse of Baring Brothers, courtesy of some fraudulent behaviour of Nick Leeson, whilst ‘wheeler- dealing’ Baring’s ever expanding futures operation in Singapore.
Whilst Mr Leeson carried the can for the demise of this celebrated blue-blooded merchant bank to the tune of £827 million pounds in February 1995, which resulted in the residue of the business being sold to ING for £1, perhaps we should remind ourselves of the other dramatis personae who were more than spear carriers in this extraordinary tale.
At the time Peter Baring was chairman of Barings Holdings and Andrew Tuckey of the bank. Up until 1992 Christopher Heath, the flamboyant head of securities at Barings, which was a strong performer in Japanese warrants, was virtually omnipotent as the trading guru. He and his wife Maggie had a string of jumpers with Oliver Sherwood with more than a few winners at the Festival. This was ample evidence of Heath’s success and lifestyle.
Then it went wrong and Peter Norris was appointed to oversee the investment banking operation. He was well-liked and respected. Barings, which was a bank with a relatively small capital – if I remember £600 million – and it’s directors were desperate for it to play in the big boys league and could see that under an experienced leader this could be achieved by expanding its derivative presence. This task was given to Ron Baker, who was hired from Bankers Trust in 1990. Not only was he considered a ‘mover & shaker’, but he also had a reputation as a man motivator. Barings investment banking operation exploded relatively speaking with the daily profit and loss account raising a few eyebrows such was the level of volatility.
The demise of the bank and the antics of Mr Leeson have been told in detail by better briefed people than me. In passing I was surprised that Sir David Frost may have chucked in a penny of two in to the making of the film ‘The Rogue Trader’. – Leeson’s story, starring Euan McGregor.
The collapse of Baring Bros, I fear, was totally down to greed, ignorance of derivative products, inadequate accounting procedures and naive regulatory controls. Messrs Baring, Tuckey, Norris and Baker were not on top of their game. 1995 was the time credit officers suddenly became the most ‘key’ appointments whilst tighter regulatory control were implemented by Eddie George, the then Governor at the Bank of England and Rupert Pennant-Rea. Peter Baring upon his resignation never worked again and Peter Norris, having served a 4-year ban from the City was appointed chairman of Virgin Group in 2009.
The Sunday Times’s Oliver Shah wrote a magnificent valedictory piece on the occasion of the retirement of Chris Gibson-Smith as chairman of the London Stock Exchange after 12 years at the age of 69. He was also appointed chairman of British Land in 2007. The business world has always told us that Mr Gibson-Smith has a massive intellect but when Dame Clara Furse, the CEO of the LSE endorsed his appointment as chairman– very few had ever heard of him. We knew that he was a senior appointee from BP’s treasury operation, but his name had never appeared in neon lights.
Together with Dame Clara they doggedly rejected 5 takeover bid from Deutsche Boerse to the NYSE, which saw the share price rattle up from about £3.50 in 2003 to £18 in 2007 – fantastic for the shareholders but in the meantime the business was losing ground rapidly for a number of reasons. They bought a tiny Italian Borsa Italiana – not very inspiring or competitive in the grand scheme of things. Both Gibson-Smith and Furse failed to bring the rest of the world to London or take London to the rest of the world. Dame Clara also failed to land LIFFE, having carped over the price, losing out to Deutsche Boerse. This automatically disadvantaged the LSE, as futures were integral for expansion. The LSE also charged too much for execution of trades and its contact with its members was minimal – hence screen based trading platforms grabbed market share from the LSE. At one point Chi-Ex had 17% of the markets before being bought by BATS. Xavier Rolet was an inspirational appointment as CEO in May 2009, when equities were very depressed, with the LSE’s share price standing at 350p. Rolet has always been very innovative and progressive with international IPO business, bond business and excellent technology. He deserves great credit in contributing to the shares rallying to the best part of £25.08! I hardly think that Mr Gibson-Smith was the leading light over the LSE rising like the Phoenix from the ashes. Anyway I hope he enjoys his share option scheme in his retirement.
More on HSBC’s slightly disappointing results tomorrow – shares down 4.87% at 575p. Bovis posted a 46% increase in sales this year (unch at 950p) and AB Foods expect Primark sales to increase by 16% – up 1% at 3066p.
UK companies posting results this week – Monday – AB FOODS, HSBC, UNITE, DECHRA PHARMACEUTICALS, BOVIS HOMES, BUNZL, BHP BILLITON, Tuesday – DRAX, PERSIMMON, JUST RETIREMENT, MEGGITT, Wednesday – TSB BANKING GROUP, PETROFAC, BARRATT DEVELOPMENT, HAYS, Thursday – COUNTRYWIDE, KAZAKHMYS, CAPITA, LADBROKES, RBS, SPIRENT COMMUNICATIONS, RPS GROUP, INTERSERVE, DOMINO PIZZAS, MERLIN ENTERTAINMENT, RSA, Friday – OLD MUTUAL, LLOYDS BANKING GROUP, RESTAURANT GROUP, RIGHTMOVE & WILLIAM HILL.
US companies posting interim results – Monday – TENET HEALTHCARE, Tuesday – TOLL BROTHERS, HOME DEPOT, DYNERGY, Wednesday – LIBERTY MEDIA, TJX, Thursday – KOHL’S, CHICO’S FAS & JC PENNEY.
David Buik – market commentator
Panmure Gordon & Co
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