It’s £37bn, Barclays goes it alone, bank chiefs gone

Last night’s predictions were pretty much on the button. The only difference is that Barclays has decided to go it alone. It is saving £2bn by dropping its dividend for the second part of this year and is to go to its existing shareholders to raise £6.5bn.

The state is investing £20bn in the Royal Bank of Scotland (RBS) – underwriting £15bn in ordinary shares and buying £5bn in preference shares, now owning a 60% stake in the company.

The total state investment in HBOS and Lloyds is £17bn producing a 40% stake in what will shortly be a single bank. There is insistence that the Government is not to be ‘a permanent investor in UK banks’. The intention is to dispose of the current investments when and how it is appropriate to do so.

RBS, Lloyds and HBOS are to lend to small businesses and homeowners at the same level as in 2007, freeing the credit logjam.

We were right last night that Lloyds would renegotiate the detail of the takeover deal for HBOS. This has been done and HBOS sharehoders will now get 0.605 Lloyds shares for every HBOS share. The original deal offered 0.833.

We were also right that the vaunted curb on executive pay would be more apparent than real and that the bonus would be the focus of any action. Senior directors are to get no cash bonuses this year with future bonuses to be in shares to encourage management to play a longer game. This argument is not wholly plausible.

And it’s not only the RBS’s Fred Goodwin who’s gone. His Chair Tom McKillop is retiring and the HBOS top team are clearing out as well – CEO Andy Hornby and Chair Lord Dennis Stevenson will go when the Lloyds takeover is completed.

There are two questions.

• The immediate one is whether the ban on cash bonuses for this year will affect the bank chiefs now standing down (Fred Goodwin is to get an annual pension of over  £500,000)
• The big one is the one we’ve been highlighting all the way along – control. The state position with RBS now makes an insistence on no control look no less than irresponsible. How can we own 60% of a bank and not exercise any control over the conduct of our investment?