U.K. Treasury Advisers Earn 107 Million Pounds for Bank Advice

Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc. and law firms working on the government bailouts of British lenders Northern Rock Plc and Royal Bank of Scotland Group Plc will earn 107 million pounds ($178.2 million) in fees for their advice.

London law firm Slaughter & May, the biggest recipient of fees, will make 32.9 million pounds, followed by Zurich-based Credit Suisse, which will get 15.4 million pounds, according to National Audit Office documents published today. The fees will be paid for advice given from September 2007 through March 2010.

The audit office expressed concern about the use of monthly retainer fees for more than a short period and the use of “success fees” paid to the advisers. Financial advisers Credit Suisse and Deutsche Bank each received retainers of $200,000 a month for a year, the agency said. The contracts included success fees of as much as 5.8 million pounds, payable at the Treasury’s discretion.

“In instances such as this, where criteria for success will be unclear, it is not good practice to enter into such an agreement in the first place or to leave payment solely to the discretion of the procuring authority,” the audit office said in the report.

The U.K. Treasury took majority stakes in Royal Bank of Scotland and Lloyds Banking Group Plc and seized Northern Rock, Alliance & Leicester Plc and Bradford & Bingley Plc after financial turmoil brought the industry near collapse in 2007.

Recovery Plans
Of the fees, “the Treasury intends to recover just under 100 million pounds from the banks, the vast majority from RBS and Lloyds,” it said in the documents.

Edinburgh-based RBS agreed last month to sell insurance units and some branches as the lender took an additional 25.5 billion pounds of taxpayer aid, making its rescue the world’s most expensive bank bailout. RBS also said it would put 282 billion pounds of assets into the government’s toxic-asset insurance program.

Frankfurt-based Deutsche Bank will earn about 5.3 million pounds for “financial advice on a range of measures” and Goldman Sachs about 4.5 million pounds for its advice on Northern Rock, the documents show.

More than a third of the 20 biggest acquisitions announced in late 2008 were government-induced, data compiled by Bloomberg show. In the U.S., Bank of America Corp. in Charlotte, North Carolina, agreed to buy New York-based Merrill Lynch & Co. in a $40 billion transaction announced Sept. 15. Three days later, Britain’s HBOS Plc was taken over by Lloyds in a 10.4 billion pound sale brokered by the government.


News Source: bloomberg.com


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