View from City Road: Smith's strategy pays handsomely

Where have all the jobbers gone? Clearing and investment banks took them over, every one. Except, of course, for Smith New Court, one of the very few pre-Big Bang firms that survived alone, with a little help from NM Rothschild. As yesterday's near pounds 100m profit shows, Smith New Court is thriving in the new environment.

As jobbers, SNC people lived by the deal and had a strong trading culture. They were never big league like Wedd Durlacher and Akroyd & Smithers - remember those names? - but they survived in the new markets by learning unaccustomed skills.

Dealing directly with investing clients was strange for a breed only used to talking to market professionals on the floor of the exchange. Hiring analysts to look at company balance sheets was a novelty for people who traded by gut feeling.

In the event, it turned out rather easier for jobbers to learn broking than for gentlemen brokers to dirty their hands by becoming barrow boys like SNC. Indeed, the broking and jobbing firms absorbed into clearing banks such as Barclays spent so much time fighting each other that they took their eyes off the ball; it was years before they recovered.

SNC had some tough times too, and its profits have been volatile over the years, as you would expect from a firm that lives on its wits. But yesterday's results should have buried any lingering doubts about the strategy of painstakingly adding new skills and territories while keeping trading at the centre of the business.

This year, too, has been good to SNC since its strength in equities and relative weakness in bonds set it apart from conventional investment banks, whose large bond positions took a hammering in the first quarter. As a trader, SNC takes risks, but only as part of its dealings and not as a big punter in its own name. Sir Michael Richardson's remarks about this year and longer-term prospects make a refreshing contrast to the boom to bust message coming from the big proprietary traders. Sometimes sticking to your last does pay.

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