Defections hit Tokyo operations

BY JOHN EISENHAMMER

Financial Editor,

Barings' new Dutch owner was trying to rally staff morale yesterday as the first mass defections devastated the merchant bank's Tokyo operations.

There were also growing reports from rival asset management houses that they have been approached by fund managers looking to switch their investments away from Barings.

Smith New Court, the stock broker, announced yesterday it has hired a team of 11 research analysts in Japanese stocks from Barings' Tokyo office. The announcement came just a day after ING, the Dutch financial giant, finalised its £660mn purchase of Barings. The poached research team was reputed to be one of the best foreign analyst operations in Tokyo.

In an effort to prevent just these haemorrhages, ING had pledged to pay nearly all staff bonuses for 1994, totalling some £95m.

Although only published yesterday, the stockbroker's announcement was dated 5 March, indicating the poaching was done before the ING purchase. The 11 departures are the first mass defections since Barings collapsed into administration with huge losses from derivatives speculation 10 days ago. From that moment headhunters have been circling the bank. Smith New Court only received a full licence on Monday to operate on the Tokyo and Osaka exchanges.

In a frantic rush to put an end to the hiatus at Barings ever since its activities were frozen by administration, lawyers from ING were working with the administrators Ernst and Young late last night to settle the details of the purchase in time for Barings to resume full operations when the Far Eastern markets opened at midnight London time.

ING said Barings Futures operations in Tokyo and Osaka will resume trading, but the Singapore office, where Nick Leeson conducted his disastrous speculation, will remain closed for the time being.

IBCA, the European credit rating agency, confirmed its A1+ short, and AA long term rating of ING following the purchase of Barings.

The agency expected the acquisition to have only a minor effect on ING's capital ratios, saying it appears to complement the Dutch bank's existing activities.

Holders of bonds in Baring plc, the holding company excluded from the ING purchase, continued yesterday to protest. Holders of £100m in subordinated perpetual bonds issued by Barings plc in January 1994 said they feared losing all their investment, despite an offer by ING to pay 5 per cent.

ABN Amro, which arranged the bond issue, and also lost out to ING in the contest to buy Barings, was last night angry at the treatment of the bondholders.