How about this for a stark illustration of the credit crunch’s winners and losers: on the day that Citigroup finally started to break itself up by selling off its brokerage business to Morgan Stanley, the boss of Standard Chartered (which has avoided many of the pitfalls that have scuppered its larger rivals) has been made a life peer and given a job in government. Chairman Mervyn Davies, who’s been with Standard Chartered for 15 years and spearheaded its extremely successful push into emerging markets, will take on Digby Jones’s old job as Trade Minister. We suspect his (soon to be ex-) Citi counterpart Sir Win Bischoff is unlikely to get a similar offer…
In his new role, Davies could conceivably become the most important man in British banking. His day job will be to promote trade and investment, but he’ll also presumably be advising the government on how to unlock the credit logjam. In fact, in this sense, his elevation to Whitehall is no great surprise: a long-time Labour favourite, he was already on the Government’s Business Council for Britain and was one of the major architects of the recent banking bail-out. And to make him even more attractive to the government, he’s also free: apparently he won’t be taking a salary for the role, because he sees it as a public service (and, presumably, because he’s rich enough already).
The appointment is a recognition of Davies’s achievement in keeping Standard Chartered’s nose relatively clean during the recent turmoil – the bank seems to have avoided piling into dodgy securities while consolidating its strength in Asia and the Middle East. As a result, Davies has seen his own star rise while many of his supposedly more illustrious peers have come crashing down to earth. We can’t think of many other life-long bankers that the Government would dare to recruit at the moment…
One institution that has fared considerably less well recently is Citigroup, as its so-called ‘financial services supermarket’ model has been found seriously wanting. It’s already been forced to take a big hand-out from the US government, and has since come under pressure from regulators to shrink its bloated empire. Yesterday CEO Vikram Pandit took the first step by flogging its Smith Barney brokerage business to Morgan Stanley for about $2.7bn; next on the block may be its consumer finance arm, while rumour has it that Pandit plans to spin off its toxic assets into a ‘bad bank’, to get them off Citi’s main balance sheet.
The end result should be a smaller, more streamlined Citigroup – a bit like the Citibank that Davies left in 1993 to join Standard Chartered, in fact. And although Pandit’s job is apparently safe, Bischoff looks set to carry the can for the bank’s recent failings. Maybe he could ask Davies for a job?
In today's bulletin:
Mandelson launches £20bn finance scheme for SMEs
Mervyn Davies steps up as Citigroup becomes bitty group
JJB chaos as sales slump and Ronnie left red-faced
Goldfingers: the men with the Midas touch
SME's glass really is half-full