Any bank that likes to say yes is asking for trouble. Unfortunately, there is nobody left at TSB to explain to its enthusiastic CEO, Paul Pester, what happened last time this bank had more capital than it needed. Like nearly all other clearing banks since, it plunged into the exciting world of investment banking. It bought Hill Samuel, and the pain was such that it wasn’t long before the TSB was saying yes to Lloyds, where it has resided quietly ever since.

Until now. The offer of shares will be aimed squarely at those who either bought, or wish they’d bought, Royal Mail, and hope for the same instant profit. After all, this is a nice clean bank, a sort of mini Lloyds as it would have been without the horrors of HBoS, with low-risk mortgages financed by consumer deposits, and a socking £21.60 in equity for every £100 of liabilities.

This is such a fat cushion that there’s no hope of earning a decent return on the difference between mortgage and deposit rates, which is one reason why there’s no dividend until 2017. The other is Mr Pester’s ambition to grow by as much as a half  (sensibly, he doesn’t say how fast), winning market share from banks old and new. He might even buy one of the newcomers, but of course there’s no question of going into investment banking, no sirree.

TSB seems likely to be priced at a modest discount to net asset value, so Lloyds shareholders are giving away far less than they would have done with the disastrous Co-op deal. Despite the summer ennui towards new issues, TSB is likely to get away. The 5 per cent bribe to retail shareholders if they hold on for a year looks curious considering that Lloyds will be a forced seller of its remaining shares soon afterwards. Curiouser still is the decision not simply to give TSB shares to Lloyds shareholders and let the market price both. Nothing to do with the fees paid to the investment bankers, surely.

More light, please

David Blake at the Pensions Institute reckons that the disclosed fees on pooled funds can be as little as 15 per cent of the true cost to the investors. He’s pressing for better, if not full, disclosure of the real amounts that punters pay to have their money managed by others.

This is a thoroughly laudible aim, and the Retail Distribution Review has already forced reductions in management fees, but claiming that 85 per cent of the true cost remains hidden requires some heroic assumptions about the return on spare cash, the bigger spread on large trades and the rate of churn in the portfolio.

The RDR has turned the spotlight onto a dark, and highly lucrative, corner of the City, while the Financial Conduct Authority’s push for fuller disclosure continues. The true rewards enjoyed by those managing other people’s money, often for mediocre performance, are only starting to become apparent, and as they do, more individual investors are likely to decide that they can (mis)manage their own affairs just as well, and save themselves the fees.

 

Alternative Asset Class

Go on, you’ve always wanted your own steam train. Now’s your chance. Lovingly maintained, cleared to run on Swiss railways (in other words, everywhere) it’s yours for…oh, probably not very much. The vendor of the magnificent locomotive prosaically-named 141R568 is, curiously enough, Andrew Cook, co-author of Coal, Steam and Comfort, and better known as the boss and proprietor of  William Cook Holdings, makers of precision steel castings.

Mr Cook hardly comes across as sentimental, having successfully steered the family business through 32 years which have done for so many Sheffield steel businesses. The buyers of complex, reliable, mission-critical parts are not that worried about the price. The buyer of 141R568 shouldn’t be, either. He will find that the purchase price is merely the down payment, as romantic buyers of the Flying Scotsman discovered as their money disappeared into the black hole of maintenance. Still, with imagination, 141R568 could be promoted as a 2-8-2 Alternative Asset Class loco, with dividends in the form of trips through the Gotthard Tunnel. Don’t all rush.

This is a corrected version of my Saturday FT column.

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