The new banking hierarchy - and a question for Barclays
Now that we've had the 2009 results from all Britain's banks, it's as well to note that the hierarchy of British banks has been shaken up quite considerably by the credit crunch and worst banking crisis in almost 100 years.
Or at least that's true in respect of their size as measured by the stock market, if not to the same extent their respective revenues and shares of the banking market.
The ranking three years ago and for most of the preceding few years saw HSBC as the biggest bank, Barclays and Royal Bank of Scotland chasing its tail, Lloyds some way behind that and Standard Chartered as the enthusiastic, fast-growing puppy.
Today HSBC isn't just the biggest British bank. Its market value of more than £120bn is more than that of all the other four added together. It's in a league of its own.
So if you're one of those who believe an executive's pay should be correlated with the size of his or her organisation, you can see why HSBC's non-execs want to give its senior directors a pay rise (although most astute owners would say that size isn't everything; return on that investment is rather more important - and there are critics of HSBC who don't believe it's managed or constructed to optimise the return).
The other super soaraway success has been Standard Chartered - which has today produced a set of apparently excellent figures, that show very little evidence of the malaise afflicting the likes of RBS and Lloyds.
How so? Well Standard Chartered has next to nothing in the way of direct exposure to over-borrowed Britain or the bloated, leveraged US.
Its heartlands are Asia, the Middle East and Africa. So in reporting a 13% rise in pre-tax profits to $5.1bn, it also disclosed that five different countries each generated more than $1bn of income for it.
And the respective operating profits of both India and Hong Kong surpassed $1bn.
Thanks to their origins in Britain's colonial past, Standard Chartered and HSBC are fortunate to be located where today's more vigorous economic activity is occurring - and aren't trapped in the inherently lower growth economies of Europe and the US.
This has a double benefit. Most obviously, as China, India and other parts of Asia have weathered the global recession far better than the old West, profits of HSBC and Standard Chartered have proved much more resilient.
But there was a second advantage, which may have been even more important. Growth was on their doorstep. So they didn't have to manufacture it by taking ill-judged risks both in the way they funded themselves and in the way they expanded their assets.
So neither Standard Chartered or HSBC became dependent on flighty wholesale markets or unreliable securitisation to raise finance for lending and investing. And neither of them loaded up with AAA collateralised debt obligations and other spurious investments - which as we now know were pretty good poison - as a way of pretending to their owners that they could grow like the best.
I would have added that these two steered clear of toppy US and UK residential and commercial property markets. But that wasn't true of HSBC, whose American sub-prime exposure was huge (though bearable, for it).
Or to put it another way, they mostly steered clear of the kind of lending and funding risks that has caused so much damage to Royal Bank, HBOS (now part of Lloyds), Lloyds itself (though it would be in better shape today if it hadn't bought HBOS) and (to a lesser though still significant extent) Barclays.
What's the final score?
Today the market value of Standard Chartered, at an almost unbelievable £32bn, is only £2bn less than Lloyds' and £5bn less than Barclays. And it is £11bn more than RBS (although that's to ignore all the "B" shares that RBS has flogged to taxpayers).
There are some lessons here. And I guess the most important one is that we'd have all been much better off - and I do mean all of us, given the taxpayer cost of bailing out the banks - if British banks with largely British operations had been more at ease with what they really are: which is privileged organisations with large market shares in a mature economy; NOT fast-growing financial services groups, motivated to grow profits in a dangerous way as fast as possible.
There's no great secret about why they took these excessive risks. Fast growth in size and profits generates fast growth in executives' pay and bonuses - at least for as long as the growth is sustained.
Which is why the argument that bankers were paid too much for doing the wrong things isn't sour grapes: it's central to any serious debate about how to put the banking system on a firmer footing.
These days, the pay issue is most relevant to Barclays, simply because it owns the biggest investment bank of all the British banks, and pay is most closely aligned to short-term performance for investment bankers.
Now what I find slightly odd in all the hullabaloo about whether Barclays and other so-called universal banks should be broken up - or whether it's healthy for the British and global economies that investment banks and retail banks should be part of a single organisation - is why shareholders haven't weighed in.
Because Barclays share price appears to be deriving almost no benefit from its ownership of one of the world's very biggest investment banks.
Here's the thing. Barclays recently announced pre-tax profits well over £5bn, ignoring the huge gain made on selling its fund management business, Barclays Global Investors.
That profit of more than £5bn compares with a huge loss at Lloyds. But Lloyds' market value is just £3bn less than Barclays'.
What's going on?
Well arguably investors are valuing both Lloyds and Barclays on the basis of their substantial enduring shares of the British retail banking market. These are annuity operations that will yield very substantial, stable profits once interest rates rise a bit and once bad debts subside.
They will be fantastic businesses again when economic conditions are more benign.
It's also plausible to say that Barclays' retail and commercial banking operations are intrinsically more valuable than Lloyds', because they remain profitable (even if profits have tumbled) and they weren't tarnished by being semi-nationalised.
If that's right, then Barclays' share price and market value is deriving very little benefit from the £2.5bn of profit generated last year by its investment bank, Barclays Capital.
So here's what Barclays owners have to ask themselves. Does Barclays own Barclays Capital for the benefit of its shareholders, or for the benefit of its highly-paid executives?