Inside Track: Lord Davies still in the running for both RBS and Lloyds

Mark Kleinman
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LORD Davies, the former trade minister and one of the City’s most distinguished bankers, is not a man who gives up easily.

So it must have been galling that the share price of Lloyds Banking Group has put on a gallop in recent weeks, faster than the famous black stallion that adorns its logo.

Project Victoria, Davies’s effort to corral a consortium of investors to acquire most of the government’s £20bn stake in Lloyds, has been in gestation for 18 months, when its shares were trading at little more than 25p.

But with Antonio Horta-Osorio playing a canny game of fuelling the stock through not-so-subtle hints about his future dividend policy, a big chunk of the potential value already looks to have eluded the former Standard Chartered boss.

That won’t deter Davies entirely, for he remains firmly on the trail of another set of UK bank assets; the 316 branches put up for sale by Royal Bank of Scotland (RBS).

Bids for the network were due this week, with Corsair, the peer’s private equity firm, pitted against a group of two dozen institutional investors, and a third offer from Anacap and Blackstone.

There is a major, George Osborne-inspired headache facing the three bidders, however: a review of the SME banking market by the Office of Fair Trading announced in June.

Due to report in September, the prospective buyers and RBS are scratching their heads over the way forward if the regulator suggests that the disposal is too modest to make a dent in the competitive dynamics of the sector.

That may not concern Davies too much, since his consortium appears to possess two small advantages: his private equity funders are prepared to write a bigger cheque if the OFT decides a larger disposal is required.

And with the commissioners of the Church of England backing him, he might be able to summon the assistance of divine intervention.

Given the scale of the advertising behemoth being created by the merger of Publicis and Omnicom, disquiet about its market share has been surprisingly inconspicuous.

So who better to stir the pot than a former European Union trade commissioner, in the form of none other than Lord Mandelson?

In a note to clients, his consulting firm Global Counsel argues that the deal is likely to emerge from regulatory scrutiny broadly unscathed but that Beijing may be a “wildcard” factor in delaying it.

“The recent Glencore/Marubeni case in China was a reminder that the Chinese merger control process follows its own political prerogatives and can quickly stray into policy issues much wider than simply anti-competitive behaviour,” it said.

“With state-backed television the biggest seller of advertising in China by a long way, and state-backed radio also a significant consumer, there is every reason to expect the Chinese authorities…to want to take a poke under the hood of this merger. This could potentially slow things down significantly.”

Mandelson, it has to be said, is not an entirely dispassionate bystander in the situation. As it points out in a disclaimer, Sir Martin Sorrell’s WPP Group is a minority investor in his consultancy.

Whitehall’s summer slowdown would not be complete without hot gossip about the next round of senior civil service moves. This August, it is focused on the identity of Sir Nicholas Macpherson’s eventual successor as permanent secretary to the Treasury.

Many insiders favour John Kingman, who was lured back to Horseguards from Rothschild, but Charles Roxburgh, the former McKinseyite who is now the Treasury’s director-general of financial services, is also worth a bet.

Mark Kleinman is the City editor of Sky News @MarkKleinmanSky