Swiss-Life CEO: 'We paid too much for AWD'

With better advice Swiss-Life could have saved itself a lot of money and even more bad publicity. The chances that main-stream investment banking 'advisers' talk a willing client out of any deal he wants to do is very small. Too high is the pressure to generate fees that justify a high cost base for the employing firm, too strong the desire to buy an even bigger pad in London's Westend or in the Hamptons. A cursory examination by an experienced observer would have had loud warning bells ringing at the prospect of marrying a solid but staid organisation with a gogo marketing firm lead by a high-profile entrepreneur. On paper the numbers may have made sense - especially before the eruption of the global financial crisis - but the all-important human aspect was overlooked by the blue-eyed analysts in Swiss-Life's planning and strategy team. That the CEO still thinks that acquiring AWD was the right decision is odd - to say the least.

Bank of England appointment - not so glorious

Amid the orchestrated adulation for the newly-appointed Governor of the Bank one should not gloss over the shameful fact that once again the Government has failed to find a suitable candidate among the vast number of highly educated and experienced economists and other professionals here in the UK. Add the fact that a highly excessive pension 'contribution' is made to an already high basic salary (while huge numbers of hard-working public sector employees see their pension packages cut in unilateral fashion) and one can only wonder about the mental state of the decision makers that participated in this mock selection process. With respect to Carney's achievements in Canada one has to say that managing the affairs of a small country (by population) during a global resource boom that supports its economy while the banking system is by tradition a closely controlled oligopoly cannot have been all that difficult. And the conspiracy theorists will have a field day and argue that another Goldman Sachs 'clone' has obtaining vast discretionary powers in an unelected position.

P.S. - those who still think that Carney will save the UK may wish to look at this

HP/Autonomy: Poor Due Diligence, Poor Implementation

This tale of woe again demonstrates that relying on number crunching accountants and fee-hungry deal brokers is the wrong approach to acquisitions. And when a desperate CEO (see story) is at the controls of a business this turns into a toxic cocktail. Looking at targets for acquisitions all-too-often omits the human aspect of the assets to be acquired and - even more deadly - afterwards neglects the fact that a business is the sum of its human capital and not just a number on a balance sheet. Dealing with real people all the time in our recruitment business allows us to bring this crucial aspect into play when advising on strategic transactions.

City of London a "cesspit"? - get real Wall Street Journal!

A sad day when a respected business journal gives an experienced (?) journalist space to write such a poorly-researched and one-sided article. The so-called mis-selling 'scandals' are all the product of a politically correct media hysteria - no one was forced to purchase payment protection insurance and those claiming to have been poorly advised when they entered into swap arrangements are the victim of a crass zero-interest rate policy forced on us by clueless politicians (and applauded by equally clueless economists and media pundits). Basically they bought insurance which did not pay off - would interest rates have gone up no-one would complain, much less be willing to hand his winnings back to the banks. And outright fraud? Dare we mention Mr. Madoff and numerous US-based investment scamsters onereads in the press on a regular basis? And what about the victims of the MF Global collapse?

Bill Winters - harsh critique of UK bank reform proposals

"Bank overhaul 'may leave UK rudderless' if new crisis hits" reads the headline of the report about his evidence to the Treasury Select Committee (Daily Telegraph).
We could not agree more as we have repeatedly argued that overcomplicated 'Solutions' to the problems of the banking sector are no help, and more (expensive) 'studies' even less so. A few simple solutions are glaringly obvious: higher capital ratios on interbank lending and derivatives, funding that in its majority (90%?) matches the maturity on both sides of the balance sheet. No PhD, MBA etc required to implement or monitor this.

Hewlett-Packard - one poor Acquisition after another

Hewlett-Packard could easily become Exhibit Number One for any future case studies about the dangers and pitfalls of hastily concocted acquisitions. When common sense takes a leave of absence and megalomania takes charge of a CEO's desires nothing can stand in the way. An army of (sycophantic and conflicted) advisers is nothing but a rubber stamp and the board - full of well sleepy 'worthies' that are appointed by the CEO and for the CEO - are not providing the necessary checks and balances. The same can be said for the (mostly institutional) shareholders who are not given half a chance to properly question the proposed transaction.

UK Bank Bailout Money may never be recovered?

Opine the Solons sitting in Westminster. While this may not be a firm prediction but just a way of garnering a headline (CNBC) in the media it speaks volumes about the incompetence among 'lawmakers' (and the political class in general). Why should major banking institutions such as Lloyds TSB and Royal Bank of Scotland be beyond repair? If that would be the case one should start an orderly dismantling now. Maybe the raft of well-intentioned but often counterproductive regulation is intended to achieve just that. But then it would be better to admit this rather than trying to gain political capital with irresponsible statements. There is no reason why both banks should not be worth a lot of money in a few years time, maybe not as much as the taxpayer has put in but close to it at the very minimum.

BoA manager on wrong track

If it would not be printed in black and white I would believe that this initiative comes from a third-rate bucket shop (Bloomberg). That the equity sales staff at Bank of America Merrill Lynch (BAML) has reportedly been set a quota of 30 client meetings each month smacks of sheer desperation but also of a complete lack of trust between management and staff. This augurs badly for the future of BAML.

Commerzbank wins right to appeal UK bonus ruling

This headline made me look up the details of the original court case in which a large group of employees in the former Dresdner Kleinwort investment bank were vindicated in their claim that the bank should honor its promise of a guaranteed bonus pool. This amazing quote made by Stefan Jentzsch in a town hall meeting in the winter of 2008/09 makes you wonder what goes on in the heads of Commerzbank management when he said.....".. both Martin Blessing and Michael Reuther are men of honour who will stick to the bonus commitments already publicly made. Also I could not understand how and why, for what no doubt will be just a small economic amount even if it happened, they and their senior Commerzbank management collectively would wish to destroy their reputation as trustworthy leaders ..". No further comment required I think. The irony is that it was sheer folly for Commerzbank to buy Dresdner in the first place - but in that respect the management found itself in good company as Lloyds and Bankamerica entered into similarly suicidal bids at roughly the same time when they purchased HBOS and Merrill Lynch respectively.

Rating Agency reform- new idea but not enough

John Carney (CNBC) makes a new suggestion when he writes that rating agencies should not receive non-public information. While this may be a useful step in the right direction he does not explain why the shift to a different payment model would not be appropriate. The current system of having the issuer pay for the ratings is not only fraught with conflicts of interest, it is also expensive as usually more than one agency has to be hired thus duplicating effort and expense - and in many cases a third agency gets its pound of flesh. Agencies might be less profitable but this reduction in cost is only appropriate in the current climate of austerity. If the Value Line Investment Survey can achieve a long history of excellent service to the investment community there is no reason why there should not be enough demand for rating services that have to be paid by the investor. Does the financial community really want for the dead hand of bureaucrats in Brussels and elsewhere to get involved by dragging its feet and hoping that the current state of affairs can continue?