ALEX BRUMMER: Banks must recognize that the world has changed


As painful as it will be for bank investors, it is only fair that dividend payments and share buybacks be suspended in these extraordinary times.

As the British and global economy falters on the edge of a cliff, the last thing needed is for a health disaster to become a financial crisis.

Security must be paramount. If savers and pension funds are required to sacrifice £ 8 billion, bankers should too.

End of the party: Bank of England wants cash bonuses for senior banking staff to be locked and wants to see new incentives plan measures

End of the party: Bank of England wants cash bonuses for senior banking staff to be locked and wants to see new incentives measures

In his message to lenders, the Bank of England’s largest regulator, Sam Woods, makes it clear that bank bosses must also suffer.

The Bank wants cash bonuses for executives to be locked and wants to see other measures regarding incentive plans. The current crisis offers the possibility of resetting wages, not only in banks, but across the FTSE100 and more broadly.

Taylor Wimpey led the way by canceling his annual bonus in 2020 and cutting base salaries by 30% until June 30. This could be extended if the lockout continued.

Bankers will argue that they are different because there is a global market for talent. This may have been the case before Covid-19, but it is no longer the case today when the global banking system is kept afloat on an ocean of currency newly printed by central banks.

Bankers are now supplicants of taxpayers and no longer the masters of the universe.

Compensation on UK boards is set by a cabal of compensation committees, which are too often led by weak reeds.

With audit firm compensation advisory services, and in line with executive training, they were able to set their own rewards.

They created a system of social protection councils. This includes several levels of long-term incentive programs and a variety of privileges, ranging from chauffeur-driven cars to allowances for personal financial advice.

It is a self-sustaining and self-enriching building that needs to be demolished. Certainly, in banks such as Barclays and HSBC, there will be star investment bankers who are actually the trading floor Lionel Messis.

But like star footballers, they have to recognize that the world has changed. NatWest, where the government controls 62.4% of the shares, has no choice but to comply.

Lloyds, Barclays and HSBC must wake up and smell the coffee.

Paper hunting

One of the benefits of being a public company is the ability to help yourself.

During and after the 2008-2009 financial crisis, much of the home building industry was brought back to life through rights issues or equity offerings.

The paper issue, if investors can be persuaded to keep it, strengthens the balance sheet. Under the current foreclosure, many listed companies have chosen to strengthen balance sheets by canceling, reducing or deferring dividends.

A handful of companies have chosen to issue new shares, viewing the current economic disruption as an opportunity to improve their competitive position.

Auto Trader places 195 million pounds of new stock on the market. In return, the board of directors has offered to give up half of his salary and the managers are giving up the 2020 bonuses.

Food service company SSP, which earns most of its money at train stations and airports, raises £ 216 million from a share placed at a time when it experiences 80-85% loss of revenue in the UK Uni and Europe.

The Chocolate Hotel wanted to raise 20 million pounds and found that the appetite was so strong that it brought in 22 million pounds.

Carnival Corporation (quoted in New York and London), owner of P&O and Cunard, has a mountain to climb as future reservations go away.

He wants to raise $ 6 billion to stay afloat through a combination of new bonds, convertible bonds and new stocks – guaranteed against his fleet.

Debt is favored by CFOs under normal circumstances because interest rates can be charged against tax.

In difficult times, equity financing – along with the right conference room package – is a better way to go.

Street smart

The publication has been hit hard by the virus. The free CityAM financial sheet has unfortunately abandoned street corners to be online.

So incidentally, Playboy has in the United States. It’s great to see that Sainsbury’s grocer and McColl’s newsagents come to the rescue of The Big Issue, which is a lifeline for the homeless.

They must store the paper in their stores because the vendors are driven from the streets for security reasons. Capital city.

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