On 2 June, the gentleman banker Lambros Varnavides will stand in the foyer of the Yacht Club of Greece, high above Piraeus Harbour, and lead the reception line for some of the world’s top shipowners.
It is where he has stood every two years since the Royal Bank of Scotland elevated him to director of shipping in 1998, and he had a place in the line well before that through an RBS career that stretches back to 1974. The star-packed luncheon with sweeping views of sparkling Aegean waters is one of Posidonia’s premier events, and it is where Varnavides will in effect close a stellar 40-year career.
In many ways, what could be more perfect? Although a maritime lender for hundreds of years, RBS probably reached its pinnacle as the world’s top shipping bank on Varnavides’ watch. And its biggest business was always here in the Greek market — right here in Athens — with the sort of people filling this majestic yacht club on this day.
So perfect. And yet who could have predicted that dark day in October 2008 when the global financial system teetered on a knife-edge. And when RBS — 254-year-old RBS — couldn’t be sure it would make it to the end of another business day.
The system survived, and so did RBS, but not without a massive UK government bailout. The bank hasn’t been quite the same since. Nor has its ship-finance business, caught up in a vortex of risky lending practices that had little or nothing to do with Varnavides and his staff.
And so Varnavides has spent his final RBS years not taking a well-earned victory lap, but answering questions. How much of what was once a $30bn shipping portfolio must be sold off? Which loans are going into RBS’s “bad bank?” Is RBS really still lending to shipowners? Is RBS about to lose its lead in the Greek market? Is it really Varnavides’ choice to retire from the bank on his 65th birthday?
This is the bitter-sweet reality of the gentleman banker’s last Posidonia, hovering like a stray brooding rain cloud in a clear Mediterranean sky.
“I kind of feel badly for him,” says a competing banker who asks not to be identified. “Lambros deserves to end his career on a high note. This is not a situation like [Germany’s] HSH Nordbank. The problems at RBS were not of his making, not to do with the shipping portfolio. “Sure, he had a bad loan or two, as we all do. But overall, he’s done a good job. Certainly under his hand RBS for many years dominated much of the Greek market, which is something Lambros will be remembered for.”
On a late-winter day in London, Lambros Varnavides seems at ease in a power-lunch restaurant near RBS’s offices in the City. It probably doesn’t hurt that the place is, as he happily mentions, a former bank.
The view many people hold of bankers went from merely unloved to outright villainous through the 2008 financial crisis. The stereotype: brash, arrogant, vain, reckless — and worse. But spend five minutes with Varnavides and that typecasting vanishes. As ever, he is elegant, courtly, thoughtful and almost understated in manner. He is outwardly no different from when we met in 2007, in what were still salad days for shipping and banking, or in 2009, when RBS was under the thumb of government minders.
And so when the question is put to him about bowing out with RBS and ship-lending at less than full throttle, does he feel frustrated? His words are carefully chosen but not defensive.
“I feel I’ve been lucky to have the career I’ve had,” he says. “I’ve had far more good times than bad. Of course it would be nice if there were no bad times. What I’m pleased about is that the bank has remained in shipping through the period and remains in shipping now.
“We could have become a Commerzbank and exited, but we didn’t. Would I have liked to do more business last year and the year before? Of course I would. But I did some very good business.
“I’m grateful for the good times I’ve had, and for that, I will accept a few bad times.”
His words are a reminder: with all the focus on what RBS can’t or won’t do since it was rescued by the Bank of England, it is easy to lose sight of what Varnavides did do over four decades.
“I would rate Lambros as one of the top two or three shipping bankers active in the last 30 or 40 years,” says Morten Arntzen, the former Overseas Shipholding Group chief executive who had an earlier career as a banker.
“He is extraordinarily knowledgeable and client-focused. He didn’t do a whole lot of dumb deals. He has been a really polished shipping banker whose word you could rely on.
“If you ask 20 prominent shipowners across the globe, I think you’d find uniformly high marks. He is the quintessential traditional shipping banker, in addition to being a very nice guy.”
Varnavides admits he knew little about shipping when he joined a bank called Williams & Glyn’s in 1974, fresh out of the London School of Economics. The bank, which had a strong Greek shipping practice, was folded into RBS in 1985.
He took no shortcuts, starting as a shipping analyst, then becoming a shipping credit officer. He’d been at the bank a decade before he was promoted to the role of relationship manager. “It was a steep learning curve,” he recalls. “It wasn’t overnight. I did work for very good people, and they involved me in many meetings. I was well trained for it by the time I assumed relationship responsibilities.”
Varnavides gradually rose to deputy head of shipping under Rex Harrington, and then to global head when Harrington retired in 1998. Given the heavy Greek focus of Williams & Glyn’s and then RBS, did being a Greek speaker with a name like Lambros Varnavides help ease the way?
“It was not a disadvantage,” says Varnavides, the son of Cyprus-born parents who moved to London. “I never went to a Greek school, and in the house we spoke English. But when I went to university, I met a lot of Greek speakers and they improved my Greek.”
The more important lessons were what he learned about shipping markets. Tankers were in a deep depression in 1974 and bulkers not doing well.
“It was a good time to join the bank. I always think that bankers should start in bad markets, not good. You’ve got to see the effects.”
Reflecting on his beginnings, he notes that both banking and shipping were much less regulated than today. “Banks have become far more bureaucratic, largely due to the regulators In the old days, things were more laissez faire. You could try your hand at more things more quickly. On the other hand, it was less rigorous. Now there’s sophisticated modelling and a hell of a lot more information. Remember, it was pre-fax when I started.
“Shipping has also become a lot more regulated. It’s very difficult for someone to break in. Back then, the old captain would start his own fleet. Now capital demands are huge. Regulatory and legal demands are huge.”
As Varnavides learned the business, soon others were learning from him. Former Eagle Bulk chief financial officer Alan Ginsberg recalls meeting Varnavides and Harrington in 1989 while with New York- based Kedma Shipping. Kedma became RBS’s first US-based client.
“Kedma was my first job as a CFO and RBS was the first bank I came into contact with,” Ginsberg says. “If I learned the right way to do business in shipping, it was due in part to my contact with Lambros and his team.”
RBS was a significant player in global and Greek shipping loans when Varnavides took over from Harrington, but expanded significantly on his watch. In a 2004 interview with TradeWinds, Varnavides cited a five-fold expansion in the previous five years as a “golden era” for the bank’s shipping practice.
Boosted by a surge in Greek newbuilding orders and business gained as JP Morgan left the market, RBS boasted an overall portfolio of $10bn, with its $6bn in Greece more than twice as much as its closest competitor. By late 2007 its book had grown to $23bn, with roughly $11bn in Greece. And this did not count $6bn in shipping paper coming from its acquisition of ABN Amro. Unfortunately, the ABN Amro portfolio outside of shipping also contained some of the toxic assets that would nearly sink RBS in 2008.
RBS has been under mandate to shrink its shipping book since the government bailout. It is about $10.5bn today, with $8.8bn in Greece, according to one survey. That still left it Greece market leader with a 14.4% share.
Outside critics who imply that new lending by the bank has virtually come to a halt in recent years are ill-informed, Varnavides says, although he concedes there has been a drop-off.
“If you take the last two years, 2012 and 2013, we’ve done between $1bn and $2bn a year, while in the best years it would have been about $7bn. But that isn’t a very good comparison because you have to factor in the decline in ship prices.”
He projects that RBS will remain the leading lender to Greek shipping, while conceding that there have been some client defections.
“It’s going to be business as usual,” he says. “We see that as our main market. We’ve lost some clients — it would be nonsense to say we haven’t. But every bank loses clients over a cycle.
“I think some clients saw the impact of the banking crisis, and not just on RBS but the wider crisis. They’ve also seen the Commerzbanks and Deutsche Schiffsbanks. They’ve become more anxious to diversify their banking risk.”
Even admirers such as Arntzen aren’t sure, however, that RBS will be the same without Varnavides, in Greece or elsewhere.
“I think Lambros’ ability to operate as he’d always done changed as the fortunes of RBS changed,” Arntzen says. “With RBS being taken over by the Bank of England, new people were calling the shots on commitments and other matters.
“The reality is that under Lambros, RBS was primarily a direct lender, not a syndicator. They made loans and kept them on their books. To execute that kind of strategy, you have to have really good people who know the business through its cycles.
“It’s not easy to replicate, and it can be very difficult when you’re in a mode like RBS is in now, trying to sell off loans as it can. It’s very hard to hire quality people when a bank is in that mode.”
The RBS retrenchment in shipping has had nothing to do with Varnavides’ retirement at the end of June, he insists. That has been the plan since 1975, when he pledged to exit at age 65 even as the bank was lowering the cutoff to 60.
“Now I could have stayed on, and the bank wanted me to stay on,” he says. “But I think it’s always a good idea to go when people want you to stay. It’s time to let someone else take over.”
Companies have offered various board seats, including one opportunity to chair a listed vehicle. But he has chosen not to work for profit, instead targeting charity roles and academia. He also is publishing a postgraduate-level book on maritime economics with retired professor Elias Karakitsos.
Varnavides suggests that either Andy Georgiou, who runs the Greek business, or Robin Perkin, his non-Greek counterpart, will become his successor. But not until after one more Posidonia.
“I think it does seem fitting,” Varnavides says. “It’s a major global shipping gathering and it’s also in Greece. I’m proud that we built a very good business in an area that allowed me to have a very interesting job. Shipping is very exciting. By and large, you are not dealing with anonymous corporations but individual entrepreneurs.
“I built many relationships with capable, interesting people. I can’t take credit for the Greek business when it started more than 100 years ago. But we did expand it and we had a good position,” he says with typical humility. “I think it’s been good for the bank and good for the clients. I think both sides have gained.”
