Abigail’s Awards for 2006

Being a seer is not as wonderful as you think

Those who are ahead of their times are normally derided, sometimes debunked and, occasionally, decapitated. I  have seer-ish qualities and, when the muse possesses me, I tend to speak out. This is always a mistake.

I remember telling Bob Diamond, who, at the time, was head of fixed income at BZW, that Martin Taylor’s decision to dismember BZW would be a disaster. I was correct. I remember telling a colleague in 1998 that the Citicorp-Travelers merger would not work in the long term. “Size does matter,” I insisted. “This creature is too big.” Again, I think I have been proved right. Some disagree however. An insider told me: “We have slimmed down. We’ve sold businesses and re-invested in our three core businesses: global consumer, corporate and investment banking, and global wealth management.” Others say we have not seen the final act of the Citigroup story. I hope for something more meaningful than mere window dressing.

Citigroup shares leapt last week fuelled by inchoate leaks about dismemberment and management changes. The eventual announcement that Bob Druskin has been promoted to chief operating officer may not be enough to muffle investor discontent. While it is good to see the articulate Michael Klein elevated, is the reshuffle such good news for chief financial officer Sallie Krawcheck? Where is she going in the new hierarchy? Perhaps a big job outside Citi beckons? Such speculation has been publicly squashed by Prince. During the Christmas period, I will probably bump in to Prince Alwaleed bin Talal (a significant Citi shareholder) at the George V hotel in Paris. I look forward to learning what he makes of it all.

BarCap

And talking of big American banks, in a previous column I dissected Bank of America and advised: “To become world class, it needs to rethink its lackadaisical attitude towards investment banking.” I suggested that chief executive Ken Lewis recruit either Bob Diamond or Anshu Jain to build an outstanding investment banking presence. And now, seven months later, everyone is talking about Bank of America buying Barclays. Merrill Lynch analyst Edward Najarian said in a recent note: “We think Barclays is the perfect fit for Bank of America, given our understanding of Bank of America’s international aspirations.”

Barclays’ shares closed at a record high last Friday. For the past 10 years, it has been rumoured that Barclays would make a delicious lunch for a larger financial institution. And yet today, it remains feistily independent. “Why does everyone see Barclays as a take-over target?” I asked an impeccable source. Without hesitation, he replied: “Well, Britain is one place where retail banking is still profitable, people rate Bob and they covet BGI.”

But why would Lewis buy Barclays with a share price of 730 pence and sterling at a 14-year high versus the dollar? He could have purchased the bank in June when the share price languished below £6 and a more favourable exchange rate prevailed. Also, Barclays Capital lacks a mergers and acquisition capability (so that would mean another fill-in acquisition) and Barclaycard is a mess.

Is the deal enticing for Barclays? Again I’m not sure. We know that Barclays and Bank of America have talked in the past. Those talks foundered. Was it price then, or was it power? Men like Varley, Diamond and chairman-elect Marcus Agius are not busted flushes. They are looking for the next big challenge – would acquisition by Bank of America give them that? Would there be enough big jobs for the Barclays boys? However, from a balance sheet perspective, increasingly Barclays looks like a shrimp in a sea of sharks. It is only the 14^th-ranked bank by shareholder’s equity according to a Euromoney survey in August 2006. Barclays needs to do a big deal, but I’m not convinced it needs to do the Bank of America deal.

A merger with Credit Suisse could be more interesting. Commentators say that Credit Suisse has turned a corner. I remember the days when a friend who worked for the investment bank CSFB moaned: “It seems as if we’re being sued in every possible jurisdiction.” But chief executive Ossie Grubel appears to have got a grip on the situation. And his decision to create one bank and abandon the CSFB name can only be beneficial for a culture that used to be dubbed “wild-west”. Credit Suisse has some good franchises: private banking, emerging markets and alternative investments, but the bank lacks scale and like rival UBS needs to control costs. However, could and would Grubel (whom I once heard described as “big, German and grumpy”) work with the patrician, ping-pong fanatic Varley? I can’t see it myself but what do you think?

The column

This is my last column for 2006. I have a love-hate relationship with the column. Sometimes it seems to own me rather than the other way round. And it’s hard to win. You are either pitied as a cyber-space sycophant or pilloried as an embittered harridan. It is, of course, gratifying to know that this or that chief executive pores over my words and emits smoke from his nostrils when he or his institution is attacked. Yet, it is the e-mails from ordinary mortals that I value most. For example, one subscriber wrote: “I am a non-entity in the investment banking scene but that doesn't mean I cannot enjoy your musings. I relate to your articles as almost everyone in the city (front office or back office) has an uncanny similarity to the stars you target. Your articles bring a smile to my face, irrespective of whether I have had a good day or a bad day.” Another reader e-mailed me recently: “I'm enjoying your column more and more. No, sorry, let me be plain: as you continue to build out your product initiative, it's becoming closely aligned to my taste footprint.” I asked this reader why he was enjoying the column more. Was it the stories or the voice? “Both, I think,” he replied. “I just find myself looking forward to seeing it, and I learn a little something each time. If I told you you looked good, would you ask me if it was the colour of your eye-shadow or the turn of your ankle?”

A journalist friend opined: “You have a distinct personality in print.” And while this would make a wonderful strapline for the column, I wouldn’t want you to think I am becoming complacent. Almost every week, I receive complaints from powerful investment bankers or their PR peons grumbling that I have been unfair. I often feel more like a pincushion than the spiky hedgehog my editor would like me to be.

Christmas cheer

Anyway, as it is the festive season, I have reluctantly decided to distribute a few Christmas gifts.

The Abigail with Attitude column is taking a Christmas holiday. I wish you all a healthy, happy and prosperous new year. Next time: It’s cold out there or is it? Don’t miss my first column of 2007 on Thursday January 11. Please send news and views to abigail@euromoney.com.

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