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Leading UK Fund Manager CEO Says Santander Buyout 'Smacks Of' Lloyds Bailout Debacle

Leading UK Fund Manager CEO Says Santander Buyout 'Smacks Of' Lloyds Bailout Debacle
According to the chief of a leading U.K. fund manager, elements reminiscent of the takeover of Britain's failing HBOS by fellow U.K. bank Lloyds in 2009 can be seen to be prevailing  in Santander's takeover of struggling Spanish banking peer Banco Popular.
Martin Gilbert, chief executive officer (CEO) of Aberdeen Asset Management, talking on a television program on Wednesday suggested that without knowing the full facts, it looks as though Santander might have been lent on by the European Central Bank (ECB) to carry out the rescue mission.
"It smacks a bit of the Bank of Scotland (HBOS) / Lloyds where you never know how much pressure is put on the biggest bank in Spain by the central bank so I'd be surprised if they had agreed to it under duress but that will come out," he said.
On Wednesday, the ECB announced in a statement that the "significant deterioration of the liquidity situation of the bank in recent days led to a determination that the entity would have, in the near future, been unable to pay its debts or other liabilities as they fell due."
In order to support the subsequent shoring up of its junior peer's balance sheet as part of the 7.9 billion euros Santander is setting aside to cover the target's non-performing assets and to support the buyout, Santander is set to launch a rights issue to raise 7 billion euro ($7.89 billion).
Given the number of headwinds facing fund managers, such as the rise of passive, more regulation and fee pressure, being bigger certainly helps, Gilbert said turning to mergers across the broader European financial sector.
In order to create an £11 billion asset management giant, described by Gilbert as a "financial powerhouse", his own firm is currently in the process of merging with domestic rival Standard Life.
"The common wisdom in the sector is you either want to be very big or small. The place not to be is that middle ground where you don't have the revenue…to cushion you against these headwinds which are hitting the sector," he asserted.
In what is a structure which many commentators say has a long track record of poor outcomes, the merger has decided to retain both existing CEOs to serve as co-CEOs and this step has resulted in the banks facing criticism for this intention.
Yet the Aberdeen CEO declared that the merger would be a success because of the complimentary skillsets that each boss brings to the table. While Gilbert prefers external facing lines of work such as distribution and strategy, Standard Life's Keith Skeoch is focusing on internal asset management.
"It'll work, it'll work – I'm absolutely certain this will work. And I suspect if it doesn't we'll both be going!

Christopher J. Mitchell

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