City fees

By THIS IS MONEY
Updated: 05:09 EST, 11 June 2010

The Daily Mail City team looks at the astronomical sums that investment banks extract from their clients.

Robinho? Adebayor?

Nope, nothing to do with the outlandish sums that Manchester City has spent on its vainglorious bid to break into the big time.

These fees are the astronomical sums that investment banks extract from their clients.

For what?

City banks provide their clients with a panoply of services, from simple loans and overdrafts to insurance against damaging lurches on the foreign exchange market.

The likes of Goldman Sachs keep a small slice of every transaction, which can add up to tens of millions of pounds a time.

But the colossal hit comes when a company wants to raise cash to fund a takeover.

How colossal?

Although its £25bn takeover of an Asian rival has crashed in a spectacular fashion, insurance giant Prudential is handing over £450m to a welter of City firms.

An estimated £66m will go to its financial advisers at Credit Suisse.

It's also having to pay more than £150m to a consortium of three banks for guaranteeing a £14.5bn rights issues that has been discarded.

Brass neck?

You could say that. But the office of Fair trading has launched an inquiry into the cost of rights issues.

There's mounting evidence that fees have risen sharply in the wake of the financial crisis, destroying competition in the City.