Worst banking conspiracy ever | FT Alphaville

Worst banking conspiracy ever

Have you ever heard of Inter-Alpha? We hadn’t until this weekend, although we tend not to frequent the conspiracy sites that lump it in alongside the world’s Bilderbergs, Rothschilds, and the Stonecutters.

It is a group of banks that meet together to, erm, discuss stuff, but there’s no conspiracy. The truth is that Inter-Alpha’s list of members, are much, much more intriguing than that.

It’s basically a strong SELL list of European banks that’s been cleverly masquerading for years as an ‘ideas and experience’ talking shop:

See what we mean? What a coincidence of names. Put those in your pension portfolio and weep.

Inter-Alpha isn’t a conspiracy, or a talking shop. Inter-Alpha is like a bizarre nexus of everything — and we mean everything — that went wrong in European banking 2005-10, from subprime to sovereigns.

Consider this annotated list of Inter-Alpha member achievements:

Commerzbank — Subprime exposure, disastrous acquisition, 2008 blow-up, government capital injection, peripheral exposure*

ING — Subprime exposure, 2008 blow-up, government capital injection, forced break-up, peripheral exposure

Allied Irish Banks — too painful to recount

Banco Espirito Santo — peripheral exposure

National Bank of Greece — peripheral exposure from hell*

KBC Bank — subprime exposure, 2008 blow-up, government capital injection(s)

Royal Bank of Scotland — subprime exposure, disastrous acquisition, 2008 blow-up, government capital injection

Société Généralesubprime exposure, weird derivatives stuff, weirder staff management

Santander Spanish property exposure, peripheral exposure

It’s only really Intesa Sanpaolo and Nordea that could be said to emerge from a typical Inter-Alpha meeting still smelling of roses. (And that’s an irony, somewhat — Nordea was already the product of a European bank crisis.) But there is a big question-mark over Santander. Sure, it has its problems, but it remains striking that Santander is the only Inter-Alpha alumnus to have become anything like a global bank and seen off its own subprime exposure pretty well.

(In fact, that’s how we heard of Inter-Alpha — this author thinks that Spanish banks used the group to become international players.)

The others all blew up in trying to grow their assets to get to global or mega-investment bank status. That, or they now find themselves trapped in dead, distressed-sovereign markets.

Which actually makes us very curious about the ‘ideas’ that these banks were sharing together for so long.

Either way, an academie disastre. Or, an example of when clubbing together doesn’t necessarily work. And finally, here’s an interesting observation made by (ahem) RBS analysts a while back: the most profitable banks of 2000-07 were the ones that ended up needing government support most of all.

*Here’s an up-to-date run-down of bank peripheral exposures as a percentage of total book value, via Deutsche Bank.

Spot the Inter-Alpha members (click to enlarge):

Related link:
Coming clean about the European bailouts – FT Alphaville