THE COMMERCIAL YEAR 2015-16
at least two years to sell off a further piece of the public’s stake, as its shares slowly recover. The interest rate cut so keenly felt by the financial sector is also affecting savers and may even have a wider impact on everyday banking. NatWest has changed the terms and conditions for its 850,000 business customers, warning them that in the event of negative interest rates, it may have to start charging in order to accept deposits – meaning that money held in a bank account would slowly decrease in value over time. Changes in consumer habits are also transforming retail banking: the number of customers visiting banks in person has declined, while the mobile banking explosion continues apace. The trend is resulting in branch closures and job losses on the high street, with Lloyd’s alone set to axe over 10,000 posts between 2014 and 2017, even while recording healthy profits. But the most worrying forecast in banking is the suggestion that the reckless, profit-at-all-costs culture which led to the financial crisis still reigns supreme. Kweku Adoboli, the so-called “rogue trader” who lost UBS £1.4 billion and was found guilty of fraud (and has since apologised for his actions), has warned that investment banks have not learned the necessary lessons from the last crash. Adoboli told the BBC: “I think the young people I’ve spoken to, former colleagues I have spoken to, are still struggling with the same issues, the same conflicts, the same pressures to achieve no matter what. And this goes back to the structure of
the industry. People are required to take risk to generate profit, because yields in the industry are consistently compressed. And if investment banks continue to chase the same level of profitability as they have in the past, the only way to generate those profits is to take more risk.” And the regulators are arguably not helping the situation. Former Chancellor George Osborne forced out Andrew Wheatley, the chief executive of the Financial Conduct Authority (FCA), after the Conservatives won the May 2015 general election; the City had complained about Wheatley’s tough stance, while Osborne said it was time for a new deal and an end to blaming the banks for the financial crisis. Under new chief executive Andrew Bailey, the FCA has taken a markedly lighter-touch approach to regulation, with a sharp decline in the number of fines issued in the past year. Amazing M&A It has been quite a year in the world of corporate deal making. Among the biggest acquisitions was Microsoft’s purchase of LinkedIn for £18 billion, giving the software
giant unfettered access to the world’s largest professional social network. Elsewhere, UK-based microchip designer ARM was snapped up by Japan’s Softbank, one of the world’s largest technology companies, for an eye-watering £24 billion. In the cosmetics sector, Revlon announced the purchase of Elizabeth Arden in a £611 million deal that unites its own beauty and hair colour products with its rival’s anti-ageing creams and celebrity fragrances. And in big pharma, Pfizer moved on from the collapse of its merger with Allergan by acquiring Anacor, a smaller US pharmaceutical company which specialises in anti-fungal treatment, for £3.6 billion. There were also major changes in the food and drinks industry, as iconic doughnut purveyor Krispy Kreme was bought by JAB Holdings, the owner of Kenco Coffee, Douwe Egberts and designer shoe firm Jimmy Choo, for £935 million. The Peroni and Grolsch lager brands changed hands too: both were sold to Japanese beer brand Asahi by AB InBev as part of the latter’s takeover of SABMiller. That said, it wasn’t all plain sailing this year. One of the
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