Shame of Frankfurt boss
HAD everything gone to plan Carsten Kengeter would now be settling into a new office in sight of St Paul’s churchyard, presiding over the ‘merger of equals’ between the London Stock Exchange and Deutsche Boerse.
Instead, Kengeter has resigned from the German exchange in disgrace. His opposite number, Xavier Rolet, been afforded a leisurely departure date, taking a path undeservedly decorated with rose petals.
As someone who planned to take on one of the most demanding roles in European finance, Kengeter’s misjudgement was inexcusable. His purchase two weeks before formal merger talks opened of £4m in shares in Deutsche in December 2014, was, at best, foolish and, at worst, insider trading. Either way it rendered him unfit to run a merged stock exchange responsible for forensic supervision of listing standards.
One can almost forgive Kengeter’s ambition and Rolet’s willing to cede office if the merger had gone ahead.
What is unconscionable is the way that shareholders in the London Stock Exchange approved the Deutsche deal in record time in spite of regulatory obstacles and danger to the City’s status as a financial centre. At least investors in Deutsche took their time and appeared to be listening – until bullied – to the voices of Hesse politicians, and oth- ers, about the plan’s unworkability. Perhaps, we shouldn’t be surprised.
Too often, investors fail to scrutinise transactions. The current challenge to Lloyds Bank in the High Court is about what was disclosed and what wasn’t when it launched its lifeboat for HBOS in 2008.
Many of the overseas takeovers so detrimental to Britain’s economic, scientific and national security have been nodded through without regard to long-term interests.
Investors are too often negligent when it comes to the broader public interest.
Staley’s struggle
BARCLAYS investors are having a rough ride this year. At a time when confidence in American competitors has never been higher – the Trump effect – the owner of Europe’s only meaningful investment banks is in the doldrums. Low volatility in fixed income markets partly is to blame.
But should corporate activity pick up, Barclays is among the few European players which have a chance of benefiting.
The bank has completed a restructuring, which led to a write-down of £2.1bn of the African business in the third quarter.
Barclays is now setting higher targets for itself. Here in Britain, chief executive Jes Staley is suitably cautious about credit conditions. He is also regretful about the fumbled roll-out of Smart Investor, which has caused serious investor angst.
The complex ring-fencing of the UK bank, required as a result of the Vickers Commission, looks to be progressing well.
What could really change the outlook for Barclays is a rise in interest rates next month. Aside from the ‘endowment’ effect – the ability to earn more from current account balances – it could begin to restore gilt yields.
Staley’s theory is that European banks are around two years behind their American counterparts in recovering from the decade-long financial crisis. If that really is the case it might be possible to make an investment case.
There are still many behavioural issues to be dealt with, including Staley’s whistle- blower problem. The sooner the Financial Conduct Authority gets this out of the way the better.
British banks are in need of stability so it would be a shame if Staley, who is taking Brexit in his stride, were to be pushed over the cliff edge.
Customer disservice
In ITS pursuit of broadcasting, mobile and other add- ons, BT has been abusing its strong market position. Landline customers have been used as cannon fodder with rental rates rising for no extra service.
The cost has weighed heavily on the over65s who comprise two-thirds of landlineonly clients.
Regulator Ofcom has forced a price cut, which will reduce prices by £7 a month to £11.99 from next April.
It argues they receive ‘ poor value’ compared to those taking bundled packages which include broadband, TV and mobile. That looks like a good start.
But triple-play, quad-play customers deserve transparency too, with a proper breakdown of how charges are allocated – another issue for new BT chairman Jan du Plessis, who needs to find ways of reversing a disturbing share price slide.
The task could be even harder for him than it was at Rio Tinto.