The tale of how Banco Santander hired Andrea Orcel as its chief executive, and is now dropping him because it will not pay a €50m golden hello, is a mini classic. All the familiar banking features of greed, incompetence and hubris are present. And all the main players look ridiculous.
Top of the list is Ana Botín, the Spanish bank’s executive chair. Recruiting Orcel, an Italian investment banker, was a bizarre move in the first place. Orcel, at UBS and previously at Merrill Lynch, was a longstanding adviser to Santander on acquisitions, but deal merchants tend to make terrible retail bankers.
Botín’s biggest mistake, however, was to announce the appointment last September before she had squared Orcel’s money. Who would pick up the tab for Orcel’s pile of unvested rewards at UBS, reputed to be as much as €50m? It was an obvious issue.
Usual practice is for the new employer to shoulder the sum, but for Santander to shell out €50m worth of shares just to get Orcel through the door would cause a storm in Spain, not least among the customers. Botín seems to have gambled that she could bully UBS into taking some of the hit, since the Swiss bank presumably wanted to continue to serve as adviser to Santander. When UBS refused to cough up, she was in a pickle. Her own board seems to have told her to call the whole thing off.
Orcel emerges as ridiculous because he quit his lucrative gig at UBS before he had tied down his new contract at Santander, an astonishing oversight on his part. He could, of course, have agreed to cut his price to secure a job he apparently craved, but that idea seems to have gone nowhere.
Do not weep for him. By rights, his status as a respected adviser should have been ruined for his role in helping Royal Bank of Scotland buy the toxic parts of ABN Amro in 2007, a deal that led to RBS’s collapse the following year. Orcel was reportedly paid £7.5m for that gig.
At a push, one might say the refuseniks on Santander’s board emerge with credit for saving the bank from a bigger PR disaster. Really, though, they should be asking themselves whether Botín, the towering figure at the bank, has too much power.
As for UBS, it was entirely within its rights to refuse to cooperate, but it will also have to explain how Orcel could have clocked up such huge rewards during his seven-year stint. It’s not as if UBS’s share price has soared in that period.
As a demonstration of how little has changed at the big banks since the crisis a decade ago, the Orcel parable is hard to beat. The sums remain enormous and the cult of the superstar banker remains entrenched. The only difference is that boards are sometimes dimly aware that the outside world is repulsed.
Orcel described the banking industry as “too arrogant, too self-convinced” in the pre-crash years when he appeared before the UK’s banking standards commission in 2013. The idea was that the future would be different. Ho, ho.
No cakewalk for Patisserie Valerie
It is hard to choose the most shocking ingredient in Patisserie Holding’s latest confession.
Was it the revelation that the financial misstatements uncovered last October stemmed from “thousands of false entries into the company’s ledgers”? Was it the news that profits will be “materially below” even the reduced sums predicted soon after the scandal was revealed? Or is it in the fact that the firm is still trying to extend its standstill banking facilities beyond this Friday?
The borrowing deadline looks hideously tight but, if common sense prevails, one suspects the banks will probably play ball. In theory, there should still be a profitable business somewhere beneath the sticky mess.
All the same, the chairman, Luke Johnson, is taking a very long time to get the bottom of this affair. Forensic accountants have been on the job for three months, yet it will still be “some time before a reliable trading outlook can be completed”.
Johnson did the honourable thing last October in pumping in £20m of his own money in loans to keep the firm alive and organising emergency fundraising. He has also appointed an entirely new management team. Well done, but come on, Patisserie Valerie runs a chain of cake shops; it is not an international conglomerate. Clarity should not take this long.