Is this as good as it gets?

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By:
Abigail Hofman
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Frothy art prices, frenzied bidding for London property and smiling faces make me nervous.

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Strictly come dreaming about HSBC

Loosch lips,
Pamela Anderson and a Barclays Capital connection?

Dedicated readers will know that I am a committed curmudgeon with pessimistic tendencies. Surely all this seasonal cheer and chatter about turbo-charged bonuses has to be the perfect contrarian indicator? Record merger and acquisition volumes, frenetic private equity activity and buoyant debt markets must be exciting if you’re a financier. However, who believes this environment is sustainable for the whole of 2007? Within every investment banker’s corpulent chest, beats a reedy voice that rasps: “It can’t last!” Indeed, Jamie Dimon, chief executive of JP Morgan Chase, is on record as saying: “The very benign credit environment can only get worse.”

A top equity specialist told me: “I’m advising all my clients: ‘If you want to issue, do so in the first quarter of 2007.’”

I have two friends, both involved in finance, who are good at the vision thing. John is a trader. He worries about the fissure between the ‘haves’ and the ‘have-nots’ in today’s world, where a $10 million bonus is viewed as disappointing. And he’s right. “One day soon,” he told me, “the trappings of the rich will be useless. If you park an Aston Martin in Piccadilly, someone will drag a key through the paintwork. The ‘soak the rich’ mentality is back.”

The other friend, Terry, runs a family office. He claims to have pulled his money out of Amaranth shortly before it imploded and to have warned his contact at Goldman Sachs Asset Management that they should do the same; advice that apparently went unheeded. Terry worries about some sort of nuclear nasty that could disrupt markets. I am unable to pinpoint my unease so precisely, yet I have a sense of foreboding. Frothy art prices, frenzied bidding for London property and smiling faces make me nervous.

"When everyone else is on a roll, it’s much worse if you’re trudging through the snow, clad only in a pair of underpants and with no umbrella. That’s how I imagine Stephen Green and Michael Geoghegan, respectively chairman and chief executive of HSBC, must be feeling"

When everyone else is on a roll, it’s much worse if you’re trudging through the snow, clad only in a pair of underpants and with no umbrella. That’s how I imagine Stephen Green and Michael Geoghegan, respectively chairman and chief executive of HSBC, must be feeling. There’s Lloyd Blankfein bouncing around with his $50 million bonus and Robert Nardelli who’s been ejected as chief executive of Home Depot but slinks away with $210 million in severance pay. HSBC’s shares went exactly nowhere last year and investors are impatient. So the two Gs have to wade through acres of critical newsprint and have no real money to compensate them. In fact, you can make it the three Gs because it’s only a matter of time before the press vultures turn on HSBC’s investment bank and start savaging chief executive Stuart Gulliver.

A source who was obviously finding it hard to settle back in to the work groove sent me the following e-mail.

“I had a nasty dream the other night. I was reading the Lex column in the Financial Times and it went like this:

‘In Strictly Come Dancing and other reality TV voting shows, the number 10 is usually good for contestants. For Daniel Davies at Exane BNP Paribas, it is also his current year (2007) estimated PE for HSBC, now the fourth largest global bank by capitalisation after the meteoric rise of ICBC. In spite of well-publicised consumer-debt worries in the UK and US, this does seem extraordinarily cheap. The world’s local bank contains some good businesses: corporate and consumer banking in France (CCF) and the UK (Midland), a stunning Asian business and a Middle East franchise any bank would die for. Chuck in a decent private bank (remember Republic?), a quality mix of other emerging markets franchises, a sensibly run asset manager and a sub-prime business in the US bought on the cheap, and you might begin to think that the sum of the parts was greater than the whole.

‘What might unlock value? A leveraged private equity bid could be one step too far, since even at this humble PE the bank weighs in at a market capitalisation of over £107 billion. Regulators might also protest, especially given HSBC’s enormous retail client base.

‘But a break up bid? Bank of America is supposedly sniffing around for European assets. Perhaps ICBC could be enticed to look at the Asian portfolio, moving dramatically beyond its recent toe-dipping in Indonesia. Any number of US banks would consider either the Latin American assets or the Household business, and there would be no shortage of bidders for the emerging markets operations, particularly those in the Middle East, India and Turkey. The recent comment by a retiring fund manager that chairman Green was “asleep on the job” was regarded as rude. How much ruder would it be to argue that if a driver is asleep at the wheel, he should be removed from the bus entirely?’”

Source’s email finished abruptly with this image of Green disguised as a bus-driver and he refused to return my calls seeking clarification. Perhaps there are similarities between working for London transport and being an HSBC employee. A break-up of HSBC is certainly an interesting idea for 2007. What do you think?

Green is also apparently a lay preacher of the Church of England. I suppose churchman to chairman is an acceptable transition. Everybody knows that the name of the game today is re-invention.

Loosch lips

One of my favourite pastimes is to curl up under the duvet with a cup of hot Ovaltine and a copy of the National Enquirer. Reading about the stressful lives of the rich and famous is so soothing. However this week, I practically fell out of bed as I was devouring the Loosch lips column. The lead story, New blow for Pam, featured an LA lovely named Diana Jenkins. Diana is supposedly the best friend of sex kitten Pamela Anderson. But a cold front hovers over the relationship. Loosch lips relates that pouting Pam’s estranged husband Kid Rock whisked La Jenkins, comedian David Spade, vintage supermodel Cindy Crawford and her husband Rande Gerber to Hawaii for a U2/Pearl Jam concert. An insider (according to the Enquirer) trills: “Pam is absolutely devastated. She believes that Kid is trying to influence her friends and turn them all against her. She especially doesn’t like the way Diana, who served as one of her two bridesmaids during her wedding bash in St Tropez, has jumped in and started cozying up to Kid. It’s a real slap in the face to her – and the ultimate betrayal.”

Hmm, this left me with a few simple questions. Is Diana Jenkins the Bosnian babe formerly known as Dijana Jenkins? And is she the same Dijana Jenkins as the one married to suave, super-earner Roger Jenkins, head of structured capital markets at Barclays Capital? The same Roger Jenkins who prides himself on keeping a low profile? Or, at least, used to keep a low profile until someone persuaded him to grant an interview to the Financial Times. And those of us in the know are aware that Roger and Diana (or should that be Dijana?) Jenkins appeared at number 50 in Tatler’s 100 most-invited list for 2005, just above Sir Elton John and David Furnish. The Jenkins’ names were adorned with the words: “New entry. Banker and socialite.”

As I said, re-invention is a concept so relevant to our age. I really must re-read Vanity Fair and reacquaint myself with that minx, Becky Sharp.

Next week: My coveted Abigail with Attitude awardscause controversy, and another global local bank annoys me.

Please send news and views to abigail@euromoney.com


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