I will have appeared on Sky News for a documentary by the time you read this. The question I am being asked; ‘what are bankers worth?’
Well let me tell you. Bankers have created the second largest company in Britain – HSBC. Second only to Shell. In fact bankers have created five of the largest British companies in the FTSE 100. (Barclays, HSBC, Lloyds, RBS, Standard Chartered).
These companies they created are worth as much as £100 billion in the case of HSBC. That is value to the shareholders, often pension funds. Indeed, in the case of HSBC it has tripled its share price in 15 years – again a bonus to its shareholder pensioners. And that is before paying dividends to them.
Their most recent UK corporation tax bills came to £3bln (Barclays), £3 billion (HSBC), £539m (Lloyds), £634m (RBS) and £1bln (Standard Chartered). That excludes payroll taxes and the tax of employees and tax in other countries.
And if you want to know jobs they create: Citigroup employs 200,000 people. Barclays employs 140,000 people. The profit generated per employee of Barclays, assuming they all worked out of their UK company, comes to £40,000 each. That in a sense is what a banker is worth. So should they be getting paid more or less? Those at the bottom as a receptionist didn’t create that much? So they should not be on £40,000 should they?
What is a banker worth? In the case of Barclays, who paid total tax globally of £6 billion pounds it is someone who gave rise to a company that generates £40,000 in tax on average across every single employee. I bet the ‘Occupy’ protestors don’t add that much value to society.
So is the CEO Bob Diamond overpaid? Well what if we linked bonuses to the tax your company pays? The more tax the company you run pays, the more pay you can award yourself. If Barclays did that, would you say the CEO is worth 1% of the annual tax his company pays? If he was his salary including bonus would have been 10 times higher. In fact his £6m salary, represents 0.1% of the company’s tax bill.
What about looking after poor shareholder pensioners? HSBC pays more in dividends for every £100 of stock you hold than BP does to its shareholders. Price of oil is so high – don’t hear anyone complaining there. They pay more than BT does – price of your phone bill sky high? Pay more than BskyB pays its shareholders – complaints about Murdoch anyone? They pay more than Diageo – binge drinking Britain a complainer?
Anyway, it’s a business – what business is it of the Government to argue whether they should get more or less. If you don’t like it, you have three choices – become a banker, become a shareholder, or move your custom elsewhere. Oh, or become a dictator.
And for those wanting to break up British banks into tiny units I say this. It is a competitive world and for your information HSBC is only the 9th largest bank by assets in the world. Despite being Britain’s second largest company. ($183billion in assets compared to JP Morgan’s $1.8 trillion) – so stop trying to make Britain tiny.
Oh, economic damage caused? The Dow Jones Industrial Average is around pre-credit crunch levels of 2008. So your pension which owns these companies has recovered. It took one year of the market dropping ie 2008 and then since January 2009 – the market has risen and risen – including bank stocks. During the dot-com bubble, the market fell for three years (2000 to 2003) and took four years to get back to pre-fall levels. Don’t hear anyone saying Mark Zuckerburg’s worth too much do you? Social utility of Facebook? Well costs hundreds of hours in wasted work time and lack of productivity as employees play around on Facebook.
What of social utility? Barclays serves 48 million people in 50 countries. Not really unwanted by society is it?
Sticking with Barclays, they also in one year:
Delivered £43.6bn of gross new lending to UK businesses, including £14.7bn to SMEs; Provided over £230bn in credit facilities to businesses globally, raised over $1tn of funding for corporate clients including $388bn for governments and public sector entities; Supported almost 1m home owners, including over 10,000 first time buyers. Oh, and pretty much doubled their share price since December too.
Alpesh Patel
Founder: www.investingbetter.com
Political Animal 
Good article… would like to see a similar version for IT companies, given that Apple is nearly worth $500bn, i.e. more than all of our banks combined.