Good news: pay to bankers is falling. Bad news: having wiped out the shareholders, they’re still eating all the pies. Morgan Stanley and Citigroup reported tolerable figures only thanks to FVOOD, a piece of accounting nonsense which turns the bank’s deteriorating credit quality into earnings because the market value of its debt has fallen. Goldman Sachs has lost money for only the second quarter in its quoted history. RBS is preparing to swing the axe among its poor bloody infantry.

But among the top ranks, life remains pretty good, if not quite as good as when they were trashing the world’s economy four years ago. We shall have to wait and see whether the profit prestidigitation at Citi and MS is miraculously transformed into bonuses, but the rewards in the industry still reflect the bankers’ belief that they are somehow superior beings deserving of seven-figure sums. Ian Gordon of Evolution reckons that 90% of RBS’ income will have disappeared in costs when the nearly-nationalised bank reports its full-year figures – and he’s an apologist for the banks.

Mind you, this pales into insignificance compared to the gold at Goldman. Despite the third-quarter loss, the bonus pool for the first nine months of 2011 totals $10 billion. You can read the gory details here. Suffice to say, that $10 billion is $333,000 per employee, but most of the moolah will end up in the hands of the few, most of whom have already been paid several lifetime’s earnings of, say, a bank clerk. As The Daily Beast’s Gary Rivlin puts it: “That’s the beauty of working at a major investment bank. Performance doesn’t matter nearly as much as just showing up.”

Pickings are (slightly) thinner among the M&A kings who pine for mega-deals, but that doesn’t mean they’re cutting their fees. When Melrose caught welding specialist Charter with its profits down, the Charter executives knew they were toast should Melrose’s opportunist bid succeed. Desperate times need desperate measures, so they turned to Goldman. These are not the moments to query the bill, especially when the bidder’s shareholders may end up paying it; according to The Sunday Times, Charter will have spent £30m on advice alone, most of it coming from the Gold-diggers. Including underwriting fees, the whole farrago will have cost £100m for a £1.5 billion acquisition. That’s an awful lot of spot welds, but who cares when someone else is paying?

Dynasty

I doubt whether he needs the money, but the odd $4.7 million in cash always comes in handy, even if you’re backed by the fabulous wealth of Jardine Matheson. Simon Keswick has liquidated a small fraction of the family’s billions, following the elevation of his son Ben to managing director (they don’t believe in fancy titles like CEO at Jardines).

The two events are not related. Simon’s brother Henry remains chairman, while Adam, the son of “Chips”, his other brother, has also been pushed up the ladder. The grip of the family on the business is as strong as it was when the business was founded in Hong Kong in 1840. Shareholders who have joined the party more recently can hardly complain; Henry Keswick claims that loyal investors have done better holding Jardine Matheson shares than they would have done with Warren Buffett’s Berkshire Hathaway. I suspect he’s right. Since the turn of the millennium, the price has multiplied twelve-fold.

Valued at $30 billion, it’s bigger and Britisher than the unpronounceable mining stocks which dominate the upper echelons of the FTSE100, but its Bermuda incorporation rules it out of the index. As a result, it gets little attention, which is how the Keswicks like it. At a shade under $50, the shares stand on 13 times last year’s underlying earnings, although the yield is only 2.3 per cent. The Keswicks hardly need the income — Henry takes the scrip alternative for his holding.

Like the family, the Jardine machine shows no sign of flagging as the dynasty slips smoothly into its fifth generation. The underlying businesses trade almost everything in the far east, and the cash goes into property, principally in Hong Kong. The company is stuffed with assets, and its hidden gems include a stake in Rothschilds Continuation, London’s last merchant bank.

There is no need to put the gems into the shop window. Thanks to its circular share structure, where a subsidiary of the top company owns a majority stake in its parent, Jardines is bid-proof. In the long run, those hidden assets will doubtless shine, having been cut and polished by generations of Keswick jewellers. It’s unlikely that Simon’s sale of 100,000 shares signals any change at the top – including his trust interests, he still has over 11 million left. Some of the Keswicks live like emperors, it’s true, but their empire has looked after the interests of the outside shareholders.

This entry was posted by Neil Collins on Friday, October 21st, 2011 at 22:00 and is filed under Capital markets, People. Edit this entry.