Comment: Lloyds’ TSB flotation good news for Rev

THE Reverend Henry Duncan – former Moderator of the Church of Scotland, antiquarian, geologist, and founder of the savings bank movement – is more commonly remembered for his role in creating the TSB, whose nameplate is now being polished and primed for a return to the stock market.

George Kerevan. Picture: TSPL

Lloyds does not want anything to get in the way of the flotation and its Scottish roots have been something of an issue in the past week. The Scottish referendum is one such uncertainty facing the bank and the holding company will be registered in England.

But remember that this incarnation of the TSB brand was thought up only last year to repackage 621 ordinary Lloyds’ high street branches that the bank is being forced to relinquish due to EU state aid rules. Two thirds of these branches are south of the Border. The TSB label was dusted down to give the sale of these random (and presumably least vital) operations a semblance of coherence. Duncan can rest easy.

More important is whether an actual Yes vote will trigger the exit from Edinburgh of RBS. Neither is run by a Brit. Ross McEwan, the Kiwi chief executive of RBS, says the bank could adapt to a Yes vote. Antonio Horta-Osorio, Spanish boss of Lloyds, maintains that the time between any vote and the Saltire being run up would give his bank “more than enough time to assess the consequences”. These guys are here to make money, not get involved in political shenanigans.

But Scot Nats should note that, since 2007, the UK has become much more aggressive about cutting corporate taxes, slashing the headline rate from 30 per cent to 23 per cent, with a drop to 20 per cent still to come. In 2009, Britain also switched from a worldwide tax system with foreign tax credits (similar to the US) to a system that exempts foreign profits from domestic taxation. Ernst & Young reports a 50 per cent rise in the number of firms relocating HQs to London.

Don’t shed tears for guys in red braces

THE downsizing of RBS continues apace with the news that the bank’s 120,000 global workforce is expected to shrink further. This week RBS also announced it was selling its equity derivatives and structured products business to BNP Paribas, exiting from most of the investment side of its business. RBS shares jumped on the news, though the bank is likely to report a full-year loss next week.

Last month, Barclays also announced it was shedding jobs in its investment division. More to the point: pay on the trading desks in Wall Street and the City is down for a second year in a row.

I know you don’t believe me, but profits from bond trading are being squeezed by central bank tapering and tougher capital reserve rules. Returns from equity trades are not sufficient to make up the difference so pay and bonuses are hit. Deutsche Bank cut the overall pay of its investment bankers by 14 per cent last year.

Yet with the FTSE 100 Index breasting a record high, you don’t need to cry for the guys in red braces. Investment bankers are due a windfall from share-based bonuses that vest this year and were awarded three years ago before the bull market really got going.