N M Rothschild & Sons Limited

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N M Rothschild & Sons Limited

New Court, Saint Swithin’s Lane
London EC4P 4DU
United Kingdom
Telephone: ( + 44) 171 280 5000
Fax: ( + 44) 171929 1643
Web site: http://www.nmrothschild.com

Wholly Owned Subsidiary of Rothschilds Continuation Holdings AG
Incorporated: 1799
Employees: 725
Total Assets: £7.22 billion ($10.38 billion) (2000)
NAIC: 523110 Investment Banking and Securities Dealing

United Kingdom banker N M Rothschild & Sons Limited is one of the last remaining of the great family-controlled banking dynasties established in the 19th century. Dwarfed by its larger, public rivals, Rothschild nonetheless remains a mythical name in the banking world. N M Rothschild provides banking and treasury financing services, treasury metals, and resource banking, including a central position in the world bullion markets, investment banking services (together with its joint-venture partnership with ABN AMRO), and risk management services. Since the 1990s, N M Rothschild has been taking steps to consolidate the operations of the various and far-flung Rothschild financial operations, most of which operate as subsidiaries under the Rothschild family-controlled Rothschild Continuation Holdings AG, established in Switzerland in the early part of the 20th century to protect the family’s ownership of its banking empire. N M Rothschild has also been working in close cooperation with the—independent—Paris branch of Rothschild banking interests, Rothschild & Cie, led by David de Rothschild, who also functions as deputy chairman of N M Rothschild and is the heir-apparent to chairman and long-time leader Evelyn de Rothschild.

Founding a Banking Dynasty in the 18th Century

The Rothschild banking dynasty began in Frankfurt, Germany’s, Jewish ghetto in the mid-18th century when patriach Meyer Aemschel Rothschild set up a small antiques business. Rothschild’s interests quickly expanded to include textiles, and then financial interests. Among the Rothschild family’s clients was the Elector of Hesse-Cassel; providing asset management services to the Elector was to give the family the capital to develop itself as one of the world’s great banking families. As the century drew to an end, the now-wealthy Rothschild sent four of his five sons (the oldest remained in Frankfurt) to settle in Europe’s capital cities to develop the family’s fortunes.

Nathan Rothschild traveled to Manchester, England, where he set out to develop the family’s textiles business. Born in 1777, Nathan Rothschild grew to become the main force behind the growth of the Rothschild dynasty—even his brothers referred to him as the “commanding general” of the family’s interests. Rothschild quickly built up a successful commercial trade, expanding from textiles into a variety of products. At the same time, Rothschild began operating as a moneylender, and it was this latter activity that captured his greatest interest. By 1806, Rothschild decided to set up a full-fledged financial services firm in London and opened his first offices in that city in 1808. The following year, N M Rothschild opened at its New Court location, which remained the firm’s home into the 20th century. By 1811, Rothschild sold off his Manchester operations to concentrate fully on his banking interests.

The Rothschild brothers remained a close-knit family, cooperating extensively as they built the different branches of the family’s empire. A primary factor in the Rothschild’s success was Nathan Rothschild’s inauguration of a private courier service. The ability to share information quickly among the major European capitals was a distinct advantage to the Rothschilds, particularly given the great political and industrial upheavals of the period.

The Napoleanic Wars provided Nathan Rothschild with the foundation of the dynasty’s wealth. By providing funds to the allies and funding Wellington’s army, Rothschild became largely responsible for the victory at Waterloo. The brothers’ courier service operated so efficiently that Nathan Rothschild received news of Napoleon’s defeat a full day before the British government. The family’s financial backing of the war effort led them to become the official bank for many European governments and royal families—the family’s financial clout even extended to the Vatican, which turned to the Rothschilds for a loan in 1830. N M Rothschild came to the British government’s aid again in 1825 when it provided a loan to the Bank of England that prevented the collapse of the entire British banking system. At this time N M Rothschild also began pursuing interests outside of the United Kingdom and Europe, establishing operations in Brazil. Less successful for the family was its attempt to enter the United States; the lack of a significant Rothschild presence in North America was to come to haunt the company in the 20th century as the balance of financial power shifted to the United States.

The next generation of Rothschilds—which had by then been granted noble status, adding the “de” to the family name—took over the family empire in the mid-1800s. Nathan Rothschild himself had died in 1836. The family came to play a primary role in the building of Europe’s railway system, transforming the continent and the United Kingdom and driving the Industrial Revolution. With N M Rothschild providing much of the financial backing, the Rothschild brothers helped inaugurate the railway systems of Austria, France, and Belgium. Highlighting the banking group’s importance to the British government was the appointment of N M Rothschild as head of the Royal Mint Refinery in 1852, a position the company held for more than 100 years.

New glory came to the family after it helped organize the early repayment of France’s indemnity to Prussia after the Franco-Prussian war in 1871. NM Rothschild in turn proved central to Britain’s foreign interests when it provided a £4 million loan to the government to acquire a controlling share of the Suez Canal. In South Africa, Rothschild helped cement the De Beer family’s control of the world’s diamond interests; the bank also provided funding for Britain’s first telephone companies in the 1890s.

Fading Fortunes in the 20th Century

If the Rothschild name had become synonymous with European finance in the 19th century—and remained one of the leading financial names worldwide—N M Rothschild was nevertheless to lose much of its prominence during the 20th century. Its inability to establish a strong position in the United States market, the appearance of new, larger rivals and the lack of cohesion of succeeding generations placed the company in a more marginal position. Losing out to its United States rivals during World War I, the family was devastated during World War II, which saw much of its operations captured by the Nazi regime. By then, the family had already moved to protect most of its assets, setting up the Switzerland-based holding company, Rothschild Continuation Holdings. With 75 percent controlled by the Rothschilds (with the N M Rothschild branch holding some 50 percent), Rothschild Continuation Holdings was later to provide an umbrella for the gradual consolidation of the various Rothschild family interests, begun at the close of the century.

Although unable to regain its former glory as a financier to kings, Rothschild remained a force in the financial world, redefining itself as a quality financial services partner rather than emphasizing quantity. Rothschild continued to play a leading role in industrial development, such as its creation of the British Newfoundland Corporation, which was formed in 1852 to develop timber, mining, and hydroelectric power interests in a 60,000-square-mile area in that Canadian province. N M Rothschild continued to expand its international operations, opening subsidiaries in Australia and in Guernsey in the 1960s, and then in Hong Kong, Singapore, and Chile in the 1970s.

N M Rothschild restructured itself as a private limited company in 1970. The Rothschild family’s interests then came under the leadership of Evelyn Rothschild, whose guidance of N M Rothschild continued into the 20th century. Often criticized for his conservative leadership of the banking firm, Rothschild nonetheless helped prevent the company from investing too heavily in the South American markets and maintained a cool head during the frenzied British financial market of the late 1980s. The company also carefully avoided the diversification moves—granted during the British financial reforms in that decade—that brought about the downfall of many of its fellow family-owned financial firms. Indeed, by the mid-1990s, with the collapse of Baring and Warburgs, N M Rothschilds remained one of the last of the world’s great independent, family-operated financial firms.

Consolidating for the 21st Century

N M Rothschild found plenty of work in the great wave of British privatization that swept the country during the late 1980s. The company was involved in a number of the country’s most ambitious privatization programs, including the £5.6 billion privatization of British Gas in 1986, the exit of the British government from British Petroleum in 1987, and the privatization of the United Kingdom’s water and sewage industry in 1989. At the same time, N M Rothschild, while remaining true to its family-owned and independent status, nonetheless made moves to establish itself as a globally operating entity capable of competing with the financial industry’s heavyweights. As such N M Rothschild bolstered its international presence, consolidating its United States operations under the single Rothschild Inc. entity, based in New York, in 1981 and establishing separate Canadian operations with its Rothschild Canada Inc. subsidiary. The firm also opened offices in Germany and Italy at the end of the decade.

Company Perspectives:

N M Rothschild & Sons is committed to the pursuit of excellence and for this reason concentrates on sectors and markets in which commitment and expertise are more vital than numbers. Where it chooses to compete, the bank ranks with the very best Its influence and reputation flow from the quality of its people and the standing of its clients. This, combined with a culture that values pragmatic innovation, integrity, and intellectual rigor above all else, has resulted in a reputation for ground-breaking ideas that are functional as well as imaginative.

During the 1990s, N M Rothschild began making stronger moves to draw together the various elements of the Rothschilds’ empire. One of the last of these was the highly successful Paris-based banking arm, Rothschild & Cie., which retained its independent status. This business, led by David de Rothschild, had been created in the mid-1980s as France’s banking industry shrugged off the ill-fated nationalization of the country’s commercial banking system under the Socialist government in the early 1980s. The former Banque de Rothschild had been nationalized in 1982. Two years later, Baron Guy de Rothschild and son David took the compensation they had received—about 80 million—and started a new investment banking firm, Paris-Orleans Finance. It was not until 1986, however, that the French Rothschilds were granted a new banking license and the right to restore the family’s name to their bank, as the French banking industry once again became privatized.

David de Rothschild quickly took the lead in rebuilding Rothschild & Cie, transforming it into a new French financial powerhouse and one of the driving forces behind many of the country’s largest business deals through the next decade. When Evelyn de Rothschild began to look toward consolidating the family’s banking interests, he tapped David de Rothschild to become N M Rothschild’s deputy chairman in 1992, establishing his younger cousin as his heir apparent. That position was reinforced in 1996, when N M Rothschild engaged in a restructuring of its global operations, reorganizing its businesses around five main product lines: resource banking and treasury operations; investment banking; asset management; development capital; and private banking and trust management services. At the same time the Rothschild operations set up a group investment banking committee charged with coordinating the global financial business of the Rothschild empire. David de Rothschild was named as head of the new committee. Also in that year, N M Rothschild established a joint venture with Dutch bank ABN AMRO to compete for contracts in the world’s equity markets. By 1999, that venture—ABN AMRO Rothschild—was completing deals worth more than $125 billion per year.

In the late 1990s, N M Rothschild’s client-intensive approach paid off as the group became an important player in the booming European market for mergers and acquisitions. The firm took part in such important deals as the launch of EADS, the European aerospace group created from the merger of France’s Aerospatiale, Spain’s CASA, and Germany’s DAS A. N M Rothschild was also an advisor on the massive restructuring of Deutsche Telekom, valued at more than $15 billion; the firm also backed England’s National Grid Group in its $8.9 billion takeover of Niagara Mohawk Holdings in the United States, while playing a supporting role in the takeover of Mannesmann by Vodaphone, worth more than $200 billion.

As the company celebrated more than 200 years of operations at the heart of the world’s financial markets, N M Rothschild continued to explore new frontiers. In 1999 the company announced its plans to extend the ABN AMRO Rothschild joint venture to cover the lucrative market for initial public offerings in the United States. Closer to home, N M Rothschild announced its intention to establish subsidiary operations in Birmingham, England, to bring the company closer to the region’s growing market of small and mid-sized companies. That subsidiary was expected to begin operations in early 2001.

Principal Subsidiaries

ABN AMRO Rothschild (50%); Banco BICE (Chile); N M Rothschild & Sons Ltd.; N M Rothschild & Sons (Australia) Ltd.; N M Rothschild & Sons (Hong Kong) Ltd; Rothschild Bank AG (Switzerland); Rothschild Europe BV (Netherlands); Rothschild GmbH (Germany); Rothschild Japan KK; Rothschild North America, Inc. (U.S.).

Principal Competitors

ABN AMRO Holding N.V.; AXA Financial, Inc.; The Bank of Tokyo-Mitsubishi Ltd.; Barclays PLC; Citigroup Inc.; Credit Suisse Group; ; Deutsche Bank AG; Dresdner Bank AG; The Goldman Sachs Group, Inc.; ING Groep N.V.; J.P. Morgan Chase & Co.; Lazard LLC; Lehman Brothers Holdings Inc; Merrill Lynch & Co., Inc.; Morgan Stanley Dean Witter & Co.; Salomon Smith Barney Holdings Inc.; UBS AG.

Key Dates:

1765:: Meyer Aemschel Rothschild establishes his business in Frankfurt, Germany.
1798:: Son Nathan M. Rothschild opens business in Manchester.
1808:: N M Rothschild opens a London office.
1814:: Rothschild provides funding for Wellington’s army.
1815:: Company backs the English, Dutch, and Prussian allies at Waterloo.
1825:: Rothschild provides backing to prevent collapse of Bank of England.
1871:: Rothschild organizes French repayment of war indemnity.
1875:: The loan for the British acquisition of Suez Canal is provided by Rothschild.
1931:: Company helps save the troubled Austrian Creditanstalt.
1941:: Rothschild Continuation is formed as a holding company to ensure continuity of family involvement in banking.
1967:: Establishes N M Rothschild & Sons (Australia).
1970:: Rothschild incorporates as private limited company.
1973:: Offices in Hong Kong and Singapore are opened.
1979:: An office in Chile is opened.
1982:: Company creates Rothschild Incorporated in the United States.
1986:: Rothschild backs British Gas privatization.
1989:: Offices in Germany and Italy are opened; Rothschild Canada Inc. subsidiary is established.
1995:: An office in Shanghai, China, debuts.
1998:: 200th anniversary of Nathan Mayer Rothschild’s arrival in England.