Post by Diarist on Oct 28, 2015 15:31:00 GMT 1
The London and Midlands Bank is the largest bank in the world. It was founded in Birmingham in 1836 but some of its acquisitions date back to the 18th century. It has expanded nationwide then worldwide. It also owns many holdings in the non-banking sector.
Early history
Midlands Bank was founded by Charles Mitchell, its first manager in Union Street, Birmingham, England, in August 1836. Mitchell had formerly worked at the Bank of England; he secured the business support and capital backing of leading merchants and manufacturers in Birmingham.
In the 1830s and 1840s, Midlands occupied an important niche in Birmingham business, particularly in the discounting of bills of exchange for its customers. Links with local industrial and commercial concerns were especially strong and, by the 1850s, the bank’s customers included railways, iron founders and engineering concerns, utilities and municipal corporations.
Midland acquired Stourbridge Old Bank in 1851 and Nichols, Baker and Crane of Bewdley in 1862. Both firms had been pioneers of banking in the West Midlands: the origins of the Stourbridge bank can be traced back to 1762 and the Bewdley bank dated from 1777.
Acquisitions and development in later years
From the 1880s, it expanded its customer base by opening new branches and acquiring other banks. In 1891 it acquired the Central Bank of London (which gave Midlands a seat in the London Clearing House) and, in 1898, it bought the City Bank (which provided a London head office). It became the London and Midlands Bank, (L&M).
By 1918, with deposits of £335 million, it ranked as the largest bank in the world. Edward Mitchell led the bank at this time first as Managing Director from 1898 to 1908 and then as Chairman and Managing Director from 1908 until his death in 1919. He oversaw more than 20 bank amalgamations between 1891 and 1918, and opened new branches throughout England and Wales.
Edward Mitchell also expanded overseas; it was the first British bank to set up a foreign exchange department and, by 1919, it was acting as London bank to some 650 correspondent banks throughout the world. From 1907, these correspondents included The Hongkong and Shanghai Banking Corporation.
In 1900 it started a strategic partnership with the newly reorganized J.P Morgan and Company of New York, eventually exchanging stock to cement the relationship. In August 1914, Henry P. Davison, a Morgan partner, travelled to the United Kingdom and made a deal with the Bank of England to make J.P. Morgan & Co. the sole underwriter of war bonds for the UK and France. The Bank of England became a fiscal agent of J.P. Morgan & Co., and vice versa. Over the course of the war, J.P. Morgan loaned about $1.5 billion to the Allies to fight against the Germans. The company also invested in the suppliers of war equipment to Britain and France, thus profiting from the financing and purchasing activities of the two European governments.
Post-war activites
Prior to the war the bank was already involved in transactions which today reflects in its huge role in the British arms industry. It funded the formation of Rolls Royce Limited in 1906 for a 25% stake in the firm which gradually increased as more money was required to expand. They gained full control when Rolls and Royce later died and their assets were passed on to the bank. The bank also funded various firms in the engineering, shipbuilding and armaments sectors.
After the Great War, the leading British banks entered an agreement with the government that they would not attempt further amalgamations without Treasury approval. As a result, Edward Mitchell Jr. turned his attention to expanding its branch network, adding new banking services, mechanising its systems (from 1928) and advertising its activities. This agreement natural didn't apply to its American partner J.P. Morgan.
Glass–Steagall and J.P. Morgan
In 1933, the provisions of the Glass–Steagall Act forced J.P. Morgan & Co. to separate its investment banking from its commercial banking operations. J.P. Morgan & Co. chose to operate as a commercial bank, because after the stock market crash of 1929, investment banking was in some disrepute and commercial lending was perceived to be more the profitable and prestigious business. Additionally, many within J.P. Morgan believed that a change in the political climate would allow the company to resume its securities businesses but that it would be nearly impossible to reconstitute the bank if it were disassembled.
In 1935, after being barred from securities business for over a year, the heads of J.P. Morgan made the decision to spin off its investment banking operations. One of J.P. Morgan's partners, Henry S. Morgan (son of Jack Morgan and grandson of J. Pierpont Morgan) and Edward Mitchell Jr., founded Morgan Mitchell on August 16, 1935 with $6.6 million of nonvoting preferred stock from J.P. Morgan and L&M partners. Morgan Mitchell's headquarters are at 2 Wall Street, just down the street from J.P. Morgan, and Morgan Mitchell bankers routinely used J.P. Morgan when closing transactions.
Excerpts from Wikipedia - en.wikipedia.org/wiki/Midland_Bank and en.wikipedia.org/wiki/J.P._Morgan_%26_Co.