`Pete the Pirate' Tells U.K. to Steer Clear of Banker Shipmates
Britain’s new coalition government said last month that it plans a cut-price sale of bank shares to the public to foster what Prime Minister David Cameron termed “popular capitalism.” Photographer: Christopher Furlong-WPA Pool/Getty Images
Gordon Dickson learned something during his transformation from Bank of Scotland Plc risk officer and sterling millionaire to “Pete the Pirate,” an eyepatch- wearing children’s entertainer -- don’t invest in banks.
The 62-year-old Glaswegian, also known as “Mr. Giggles,” lost a million pounds ($1.52 million) when the bank shares he’d bought over three decades collapsed during the financial crisis. Now he advises fellow Britons to shun the government’s proposed “People’s Bank Bonus,” the sale of taxpayer shares in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.
“Banks need to demonstrate their goodness before it’s safe to buy again,” he said in an interview at his suburban home in Renfrew, Scotland. “I wouldn’t buy bank shares at the moment” and other people should also steer clear, because share values won’t rise “for a long, long time,” he said.
Britain’s new coalition government said last month that it plans a cut-price sale of bank shares to the public to foster what Prime Minister David Cameron termed “popular capitalism.” Government figures show that the proportion of quoted shares held by private individuals fell to a record low of 10 percent at the end of 2008 from around 20 percent in 1990, when Margaret Thatcher was displaced as premier.
“Banks, as we have found over the last few years, are very volatile investments,” said Colin Morton, a fund manager at Rensburg Fund Management in Leeds, England, who does not own Lloyds or RBS shares. “The idea of encouraging people to invest in one bank, even at a discount, is very risky. Who is to say that we will not go through another downturn?”
Dividends Halted
RBS, which reported losses of 28 billion pounds in the last two years, said it plans to return to profit in 2011. Lloyds said in April it reported a quarterly profit for the first time since 2008, without disclosing how much.
The credit crisis inflicted damage to the wealth of British bank investors on two levels. Firstly, share values plunged, with the FTSE 350 Index of Britain’s biggest banks losing 211 billion pounds of market capitalization between its February 2007 peak and March last year. Secondly, banks like Lloyds halted dividend payments in 2008 and the U.K. lender has not yet resumed them to its 2.5 million individual shareholders.
As the crisis developed, Dickson suffered months of depression and an end to his early retirement as dividends dried up. In 2008, he turned to “Pete the Pirate,” a children’s party character he’d created as a hobby, for a way out of the bind.
Magic and Puppets
The pirate charges about 200 pounds per event, works as many as seven days a week and enjoys his job, Dickson said. He’s hired at a range of events, including this month’s Scottish Open golf tournament at Loch Lomond, where he entertained the players’ children with a mixture of magic tricks, puppet shows, games and dancing.
“I am ashamed to be known as a banker, I am much happier being known as ‘Pete the Pirate,’” said Dickson, a married father of two whose home is littered with pictures of his daughters. “The bankers of old were very decent people, very cautious people. We looked after other people’s money, we didn’t speculate with it.”
Dickson joined Bank of Scotland in 1965 when he left school and ended his career as a senior risk officer a year before the merger with Halifax Building Society created HBOS Plc in 2001. The combined entity came close to collapse in 2008 after other banks refused to lend it money and was taken over by Lloyds. HBOS had a dividend yield of 6.97 percent at the end of 2007, Bloomberg data show.
‘Lost Focus’
“Somewhere along the way banks have lost their focus,” said Dickson. “The banks need to rebuild the trust. It is like virginity. Once it has gone, that’s it forever.”
Dickson says he is still in shock at the collapse of HBOS, in part because its predecessor, Bank of Scotland, was founded in 1695 and survived every previous crisis except the occupation of Edinburgh by Bonnie Prince Charlie’s army in 1745, when it was forced to close its doors.
The government has about 71.5 billion pounds invested in bank stock after rescuing RBS, Lloyds and Northern Rock Plc during the financial crisis. That equates to about 3,000 pounds for every household in Britain, according to U.K. Financial Investments, which manages the taxpayer stakes.
Ministers announced the deepest spending cuts since World War II last month to reduce a budget deficit standing at 156 billion pounds at the end of May. RBS Chief Executive Officer Stephen Hester said in April the sale of the bank’s shares can make a “very big dent” in the deficit.
‘Special Offers’
In return for taxpayer support, Britons “would have the chance to buy shares in the state-owned banks at a discounted price,” the Conservatives said in February. “Special offers would encourage younger people and those on modest incomes.”
The public sale would be one of several ways in which the government’s 83 percent stake in RBS and 41 percent holding in Lloyds are returned to private ownership. There is no timetable for the sell-offs.
Opposition Labour party politicians have attacked the “People’s Bonus” policy as a gimmick, warning the plan offered a poor return to the taxpayer and describing it as an attempt to buy votes.
Britons taking up the offer will be those willing to accept high risk, according to Tom Kirchmaier, who lectures on finance and corporate governance at the London School of Economics. Those who have already lost money through bank shares “will probably need a lot of convincing to do so again.”
Dickson accepts that as a risk officer he should have spread his investments across more sectors.
‘Terribly Sad’
“A lot of it was my own fault, having so much trust and faith in the organization and not realizing life had moved on,” said Dickson.
He and other savers should have been more alive to the dangers, according to Kirchmaier. While it’s “terribly sad” that people lost their savings during the financial crisis, “everybody who invests in shares should know that it’s risky.”
Dickson says he ignored advice from family members that the bank was in trouble and only woke up to the danger when lying on a deck chair on holiday in Tenerife, the largest of the Canary Islands.
“I happened to look over at this person who had a newspaper opened up that said ‘HBOS collapsed,’” Dickson said. “I couldn’t even wait to buy a newspaper. I went over to this guy and said ‘Excuse me, can I have this paper for a minute?’ And that’s when it became apparent.”
To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net
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