Let’s try to be generous to Paul Pester, TSB’s beleaguered chief executive. His handling of the fallout from the botched IT “upgrade” has been poor – some of his statements and tweets have been nonsensical, others have been factually wrong – but it is already clear that the primary blame for the fiasco itself lies in Spain, at the door of Banco Sabadell, TSB’s parent.
When Pester said on Thursday that he would take personal control of the crisis, many customers will have wondered why the boss wasn’t in charge already. The answer is that the platform switch was being managed from Spain by Sabadell, albeit with help from TSB’s offices in Bristol and London. The arrangement made sense in theory. TSB is adopting Sabadell’s in-house Proteo platform and the parent claimed to be a wizard in the art of migrating data.
Pester’s announcement that, on assuming control, he’d hired a crack team from IBM to fly in to Bristol therefore amounted to an expression of little confidence in his Spanish bosses. Note, too, his explanation of why he had tweeted that TSB’s services were “up and running” when they were not. Pester said he’d been assured by the IT provider – meaning Sabadell – that all was well. He should have checked the information himself, but relations between parent and subsidiary do not sound good.
TSB crisis could drag into next week as bank turns to IBM
The mood probably won’t improve as overworked TSB staff see pictures of Sabadell contractors drinking champagne on Monday to celebrate the “success” of the data transfer. Nor will tensions ease, one suspects, as the bills rise. Over in Spain, Sabadell unveiled an additional €77m (£67m) charge related to its TSB project, which may indicate the IT challenge has been steeper than anybody has previously cared to admit. Pester’s giveaways – no overdraft fees for a month and a better interest rate on the main current account – will cost another £20m-plus. IBM’s emergency crew won’t come cheap either, and there’s a likely financial whack from UK regulators to come.
In the circumstances, you can understand why Pester dodged questions about whether he’d accept a bonus this year. He should have made the gesture, but he may be wondering if the internal blame game will end with his exit and the usual contractual wrangles. The head of an overseas subsidiary usually makes a suitable fall guy.
Banking advisers get another payday in Nex takeover
There has rightly been outrage over the advisory fees racked up by GKN as it tried, unsuccessfully, to defend itself against Melrose’s hostile bid – a cool £107m, including a ridiculous £27m dispatched to advisers acting for Dana, the US firm that wanted to buy GKN’s automotive division.
But here’s a deal where the bankers’ bonanza looks even more extreme. Nex Group, Michael Spencer’s financial technology outfit, has somehow found itself on the hook for £45.4m as it is bought by Chicago-based CME Group for £3.9bn. Formal documentation shows the lion’s share of £37.9m is ear-marked for “financial and corporate broking advice” – meaning the services of investment bankers at Citigroup, Evercore and Goldman Sachs.
Yes, Nex’s bill is slightly less than half GKN’s, but consider the differences. The UK engineering firm was fighting a hostile bid over a 60-day timetable. Nex is doing a smaller friendly deal that involved no extended scrapping in public. Indeed, the way Terry Duffy, the boss at CME tells the tale, the tricky part of the negotiation was conducted one-on-one with Spencer before the talks became public.
How on earth, then, do Nex and CME, which itself clocked up £21.9m on financial advice (principally from Barclays and JP Morgan), justify the sums? There is no explanation, of course. It’s just what the City and Wall Street has been able to demand from compliant clients. Directors convince themselves this is the inevitable price of doing business and, in non-hostile takeover bids, nobody makes a fuss.
They really should. In total, the two sets of banking advisers in the Nex/CME alliance are collecting almost £60m. At a rough guess, that covers the work of about 20 principal individuals in a negotiation where there was goodwill on both sides and the heavy all-night sessions were probably compressed into a fortnight. The sums are absurd.
BP chair is no stranger to pay rows
Just what BP needs as its new chairman – an expert in boardroom pay rows. Unfortunately, Helge Lund is used to being the target of revolting shareholders. His £25m signing-on package at BG Group caused a stink in 2015. It wasn’t his fault, of course, that BG’s board wanted to shower him with incentives, or that Shell soon made a takeover bid that crystallised his windfall. But the Norwegian Lund makes an unlikely figure to police BP’s traditional excess.