Sky News’ City Editor Mark Kleinman writes a weekly column for City A.M., this week on Nationwide, the ‘British ISA’ and Martin Gilbert’s latest venture
NATIONWIDE MUST ACT IN MEMBERS’ INTERESTS
One member, one vote? Not in the case of Nationwide, Britain’s biggest building society, whose £3bn takeover of Virgin Money, Sir Richard Branson’s financial services brainchild, stunned the City last week.
Even more astonishingly, Nationwide’s 16m members won’t be allowed to have their say on the biggest corporate move in the mutual’s 140-year history.
Its interpretation of the Building Societies Act, which sets thresholds on the use of cash resources to fund deals, is, in one sense, legitimate. People close to Nationwide argue that subjecting the deal to a member vote would have been impractically cumbersome and made it much harder to secure a recommendation from the Virgin Money board.
Few are arguing that the deal itself is illogical. The challenger bank model has largely failed to work – at least from a shareholder perspective – and consolidation is the right path forward for many of those in the stranded middle.
“We believe the combination would create a stronger and more diverse business that will be better placed to deliver value to our members and customers, both now and in the future,” a spokesman for the building society said – completely ignoring the question of whether it was fair to ignore its members’ views when using their capital to fund the transaction.
The decision reeks of hypocrisy, not least because of the aggressive sanctimony oozing from every mutual pore in its television advertisements, in which the actor Dominic West plays an avaricious, arrogant bank manager who views his customers with contempt.
Santander UK has already expressed its indignation by filing a complaint with the Advertising Standards Authority, while an executive at another big high street lender told me after last week’s move: “It raises the question of to whom the Nationwide board is answerable. What is the meaning of membership or mutuality if the board can do as they please with no reference to member views? The governance is extremely questionable.”
I agree. If Nationwide believes the industrial logic of the Virgin Money takeover is so compelling, it must give members a vote – and if it doesn’t, regulators should force it to disclose details of its deliberations on the issue. Its members deserve to know whether its claim to be different is substantive, or just a slogan it can choose to ignore whenever it feels like it.
BELL OFFERS NO RINGING ENDORSEMENT OF HUNT’S BRITISH ISA
If there are awards being dished out for post-Budget diplomacy, Andy Bell won’t be winning them. The AJ Bell founder is furious at Jeremy Hunt’s plans for a British ISA, arguing that they will confuse investors and do little to achieve their ostensible objective of boosting investment in UK plc.
His view on the latter is backed by analysts at Citi, who say that just £1.5bn of investment will be generated from the initiative. Bell, though, goes further: ““The introduction of a GB ISA is totally contrary to our long-held view that there should be a single ISA tax wrapper with flexibility to invest in pretty much everything any ISA type can invest in now,” he told me. “We don’t have a cash pension, a stocks and shares pension, a GB pension, et cetera, so why go down this road for ISAs?”
To be fair to Bell, he stopped short of saying that the funds supermarket he founded would boycott the British ISA, but based on the take-up of the Lifetime ISA, it might not make much difference either way.
And he is right: the whole ISA system needs simplifying, whereas what the chancellor has just done is risk delivering the opposite. A “white elephant” as Bell puts it, that should be a “trigger for the next government to realise that the ISA regime needs simplifying into a single tax wrapper.”
The proposal has underlined the conflict between fund platforms and the asset managers which accuse them of seeking to stifle innovation.
Not all innovation is good, though, when it risks sowing such confusion. Wholesale reform would be a better way to benefit the UK economy than a misleading marketing gimmick that might, due to its implementation timetable, never even see the light of day.
GILBERT’S SECOND ACT IS A DISMANTLING, NOT EMPIRE-BUILDING
It’s been a rough three years for AssetCo, the London-listed vehicle which the City veteran Martin Gilbert took control of with the objective of becoming a major industry player.
Today, the shares languish at 37p, having nearly halved in the last 12 months and leaving it with a market capitalisation of just over £50m.
Gilbert’s ambitions of a second act in asset management to rival the success he had in his first (as co-founder of Aberdeen) may now resemble little more than a pipedream, but he still has some cards up his sleeve.
First up is the prospective sale of AssetCo’s 30pc stake in Parmenion, the money manager for independent financial advisers, which Gilbert bought for just over £20m in 2021.
According to a stock exchange announcement from AssetCo last autumn, that stake has been independently valued at between £75m and £90m – equivalent to as much as 63.8p-a-share. I understand that Gilbert has had an approach from a US-based bidder which valued AssetCo’s Parmenion stake at about £50m, which the Scottish veteran, who also chairs Revolut, has given short shrift.
Sources also say he’s prepared to listen to offers for River Global, the old River and Mercantile business. Suddenly, Gilbert’s second act is looking more like a dismantling than the creation of a new fund management empire.