Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading


Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading


Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

Continue Reading


RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading


China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Categorized | Banks

RBS seduced by UK’s property obsession

Posted on November 30, 2013

Let’s all stick pins into Derek Sach. He is the man in charge of Royal Bank of Scotland’s hit squad, the Global Restructuring Group, and it seems that, just as in the movies, he has almost single-handedly blown up the great swaths of British business that were his targets.

To read two reports this week, you’d think Mr Sach’s bonus depends on destroying as many viable companies as he can, before flogging the rubble at silly prices to his mates in other parts of the bank. Well, maybe. The behaviour of big banks never ceases to surprise, and seldom on the upside, but this is a bit much.

    We have not seen all the gory details of the Tomlinson report into the treatment RBS meted out to small businesses, but even the author must be surprised at the traction it’s got, considering he commissioned himself to write it. However, many of the cases that we have seen have a common theme.

    They are essentially about property, the great British obsession. The developers/speculators from whom Mr Sach’s men pulled the rug had borrowed heavily from RBS in the good times. Had they continued to roll, the borrowers would have got stinking rich, while the bank would get its money back – a high-stakes version of heads I win, tails you lose.

    This hardly excuses the more extreme brutality of Mr Sach’s hitmen, but both borrower and lender might have investigated beyond the mark-to-market value of the property before taking the plunge. Merely looking at the asset backing of a venture is lazy banking. A loan may be under water, but if the business plan still stands up, an intelligent lender will not pull the plug, or cause death by a thousand cuts with fees and charges.

    Looking may be what GRG actually did. The other report, from Andrew Large, found that only one in 10 businesses that went to the boot camp subsequently went bust. Unfortunately for Mr Sach, they are the loudest decile.

    Rentiers at the ready

    The days may be short, but it is still autumn at the Treasury, and next week George Osborne will make a statement to prove it. Please don’t call it a Budget (we will, we will). This is supposed to be about spending, but no recent chancellor has resisted the chance of a headline-grabbing tax initiative.

    Few tax increases are popular, but an outfit called the Intergenerational Foundation may have found one. It argues that removing tax breaks from buy-to-let landlords would yield £5bn, and judging from the invective that followed Norma Cohen’s report of the report, the Foundation may be on to something.

    The rentier benefits from tax relief on the mortgage, dilapidation allowances and – if the owner times his residence moves right – freedom from capital gains tax on disposal. The Foundation argues convincingly that buy-to-let has helped push up property prices, particularly in London, and has done little to stimulate new building.

    Well, the clue is in the name, and since everyone else has a lobby group, we shouldn’t argue about one for the young. There is nothing inherently wrong with buy-to-let, but subsidies for the rentier class are another transfer of wealth from the young to the old. That looks wrong today – and £5bn is a useful extra sum for George Osborne to play with.

    The right priority

    Robin Leigh-Pemberton, who died this week, was a very odd choice for governor of the Bank of England in 1983. But after Kit McMahon had described Nigel Lawson’s Medium Term Financial Strategy as hokum, and Jeremy Morse spoke out about being bullied into subsidising the financing of UK exports, the two front runners effectively ruled themselves out.

    Gordon Richardson had been governor for a decade. He was so cross at not being asked to continue that he gave little help to his successor, whose mixture of effortless charm and ability to delegate overcame his ignorance of the mechanics of central banking. Lord Kingsdown, as he later became, considered that being made Lord Lieutenant of Kent mattered more to him than being governor of the Bank – which may also help explain why he was rather good at it.