HomeBusinessMoneyALEX BRUMMER: 'Greed is good' sign over banks not a good look

ALEX BRUMMER: ‘Greed is good’ sign over banks not a good look

The British public never takes kindly to displays of great wealth or a group of privileged people taking an after-work drink while they suffer at home. 

Bankers have never been much loved and there is residual resentment of how the taxpayer had to pick up the bill for misjudgments, greed and grandiosity in the financial crisis. 

How incredible that 12 years on from the rescue of Royal Bank of Scotland, which is now known as NatWest, that the Government still holds a 50.9 per cent stake in the disgraced lender. 

‘Greed is Good’: The catchphrase of banker Gordon Gekko (pictured) in the movie Wall Street

It is terrific that 2021 saw NatWest make a pre-tax profit of £4billion, reversing a loss of £351m last year. 

This enabled the bank to pay a dividend (£1.7billion of which goes to the Government), do a £750m share buyback and contemplate the moment when another 4.99 per cent of the taxpayer-owned shares return to the market. 

The sharp improvement at NatWest, and across the UK banking sector, is forecast to generate a stonking £34billion of profits over the reporting season. 

Strong banks, able to lend to business and consumers, are vital to the economy. Less welcome is the entitlement in terms of pay and bonuses. What makes the payouts even more uncomfortable is that they come at a moment when the governor of the Bank of England, Andrew Bailey, is urging restraint. Yet Bailey cannot hold back the cash gusher in his own backyard. 

Rewards for NatWest boss Alison Rose jumped to £3.6m in 2021 from £2.6m in the previous year. This will almost certainly turn out to be modest compared to colleagues at other banks. 

Behind the substantial increase was a decision not to take her full pay package in 2020 because of Covid. So she is playing catch-up this year. 

Moreover, some of her award will be taken in deferred shares, aligning her interests with the broader body of investors. Nevertheless, compared with front line NHS staff who preserved our well-being in the pandemic, delivery drivers who came to our homes, supermarket check-out staff at constant risk of infection and Downing Street officials who kept the country running, this is a mighty benefit. 

It is also uncomfortable after a year when the bank was required to apologise and pay a £265m fine for money laundering. 

The difficulty with all regulatory penalties levied on the banks, non-stop in recent years, is that shareholders pay the price of mistakes, not the people in charge. 

The overall bonus pot at NatWest for 2021 was a relatively modest £298m, to be distributed among as many as 28,000 of the bank’s workforce.

Since the financial crisis, NatWest has turned in on itself and exited many of the trading, M&A and global activities which generate the biggest bucks. 

A glimmer of what awaits the nation when the other banks report was evident from the results of Standard Chartered. Staff at the global bank shared a bonus pot of £1billion for 2021, up 38 per cent on the previous year. 

Current estimates suggest that when the spoils among all the High Street banks are totted up, the bonuses will total at least £4billion. The biggest incentive payouts are likely to be at Barclays if Wall Street is any guide. 

As the pandemic wound down in 2021, the volume of IPOs, bids and deals and trading profits soared. 

Barclays, as the last UK investment bank standing, which still competes with Wall Street rivals, will be the biggest winner. 

This could be awkward as former chief executive Jes Staley, who backed the investment bank strategy, was required to step aside to fight allegations surrounding his association with Jeffrey Epstein. 

HSBC, which also has a large global trading arm, can be expected to be a big winner. 

UK banks are in a different universe to EU counterparts where bonus pots are confined to two times basic salary. 

City banks are free to pay what they like and that is seen as necessary to attract and keep the finest traders in London. Indeed, the bonus pots are a great source of revenue for HMRC. 

At a time when energy prices and food bills for most consumers are surging, and wage rates struggling to catch up, the ‘greed is good’ sign posted over the banks is not a good look.

It is in danger of provoking a disruptive return of the 2011 ‘Occupy’ movement.

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