Self-fulfilling prophecy, wishful thinking, fantasy economics: call it what you will, but the prospect of George Osborne fulfilling the desires of Britain’s banks in next week’s Budget is, to say the least, remote.
Misplaced expectations that the chancellor would announce a review – or even the abolition – of the bank levy in his Mansion House speech were succeeded by a sense among bankers that their moment of gratification was merely delayed.
From the City’s perspective, that’s not unreasonable – the UK economy’s transition from recovery to sustainable growth begs the question of just how long banks will have to shoulder the burden of post-crisis retribution.
Even for a Conservative chancellor basking in the glory of a General Election victory, Osborne is not complacent enough to believe that cutting taxes for banks while outlining £12bn of welfare cuts is an acceptable narrative. This is, after all, a chancellor with even loftier political ambitions less than five years hence.
That’s not to say there won’t be any changes. Osborne may signal a review of, or changes to, the bank levy’s structure: some are pushing instead for it to be imposed instead as a corporation tax surcharge, which would reduce HSBC’s bill while increasing that of UK-focused lenders like Lloyds and RBS.
That might enable the chancellor to satisfy another recent pledge – to maintain the UK as a home for global banks – but it would also have the perverse effect of damaging taxpayers’ interests by increasing the tax burden on two companies which he wants to sell for an overall profit.
DEUTSCHE CHIEF READY TO MOP UP
John Cryan’s in-tray as Deutsche Bank’s new chief executive is as daunting as it gets – and in the context of challenges facing Bill Winters and Sir Howard Davies at Standard Chartered and RBS, that’s saying something.
The fallout from German regulators’ probe into its manipulation of benchmark interest rates dates back to Deutsche’s previous leadership, but it will be Cryan who has to mop up the residual reputational damage.
Tackling Deutsche’s vast investment bank and its stubbornly disappointing performance is an obvious priority – yesterday’s decision to postpone its strategic update until the autumn suggests Cryan acknowledges that.
It was suggested to me this week that he is already thinking of shaking up the investment bank’s leadership. Word is that he has reached out to Paul Idzik, a former Barclays executive, about spearheading an overhaul.
Culturally and operationally, it will not be achieved easily – and it would require someone of the iron-fisted reputation of Idzik to do it. Alas, a Deutsche spokesman tells me, Cryan and Idzik, now the chief executive of New York-listed ETrade, are holding no such discussions about a role at its investment bank.
“They haven’t met for several years,” he said.
It’s an intriguing idea, though – and if it does happen, I’ll be sending Cryan a bill for a cut of the headhunter’s fee.
GREXIT FEAR FORGOTTEN AMID IPO WAVE
Grexit might be the City’s most common word right now, but there’s little sign that the crisis is dampening corporate expectations of another IPO wave after the summer.
The motor insurer Hastings will shortly announce a crop of heavyweight new board members as its owners look to float Among them will be Tom Colraine, a Schroders board member and former finance director of AIG Europe, and Malcolm Le May, a highly regarded ex-UBS banker. They will complement a board with Mike Fairey as chairman-designate.
I suspect Hastings will weather any storm that Greece produces, but after a mixed performance from the most recent crop of public companies, other prospective issuers might not fare so well.