Ever since the Italian Renaissance in the 15th century when the wealthy Medici family started to build an art collection in Florence that grew into one of the greatest art galleries on earth, there has been a symbiotic relationship between artists and financiers.
And modern banking is no exception. But as investment banks grapple with billions of dollars in losses and struggle to value complex assets on their balance sheets, they are facing growing pressure from shareholders and the taxpayers who have bailed them out to justify their often sprawling art collections, worth, in many cases, hundreds of millions of dollars.
Stacey Gershon, a New York-based art adviser and former senior curator of the JP Morgan Chase art collection, said corporate art has a perception problem. “It just does not jibe with the new lean-and-mean attitude on the street,” she said.
Charles Thomson, co-founder of the art movement known as Stuckism, believes it will not be long before clients and staff start to question the point of hanging a small fortune on the wall. Thomson said: “If banks have been and are being bailed out by the Government, it seems superfluous and insensitive to hoard art collections worth millions.
Maybe a bank thinks it is keeping up morale and the appearances of a healthy balance sheet by showing off expensive art on the walls, but if I were a client, I wouldn’t be fooled. ”
Deutsche Bank, which last week reported its first annual loss since the Second World War, has one of the largest corporate art collections in the world, owning 53,000 works.
The collection was last publicly valued at more than £75m in 2004 and is now likely to be worth “far, far north” of that, according to one expert, despite the collapse in the contemporary art market in the past six months. Deutsche Bank, which lost €3.9bn ($5bn) last year, does not put a value on its collection in its accounts and declined to comment on its estimated value.
UBS has a collection of 45,000 works worth at least $150m (€117m) with big name artists such as Lucian Freud, Roy Lichtenstein, Candida Hofer, Edward Ruscha and Julian Schnabel hanging on its walls in Zurich, London and New York.
But the Zurich-based bank’s share price has gone into free fall since early 2008. So acute are the problems at UBS that the bank’s management have had to go cap in hand to the Swiss Government for a bailout package worth Sfr60bn (€40bn).
Barclays, Bank of America and Credit Suisse also have large collections and are suffering from financial difficulties associated with bad debts and deepening recessions. JP Morgan is in better shape and sold a large part of its art collection between 2004 and 2006, although it still retains 35,000 works.
Banks argue that their art collections maintain staff and client morale, and play a significant role in promoting the arts. But industry sources wonder whether public sector rescuers, hard-pressed staff and hard-up clients would really miss a nice painting or sculpture in the office. Banks are unlikely to be supporting the art market as strongly in years to come.
Some banks have already cut back. Annabel Fell-Clark, chief executive of insurance provider Axa Art, said: “In recent years some banks have divested themselves of any large art collections as it has not been considered as adding value by shareholders. Back in the 90s it was the Japanese banks that had to sell a load of art because of their own economic crisis.”
When Jamie Dimon took over as chief executive of JP Morgan in 2004, he sold about 20,000 pieces of art as part of the “waste-cutting” scheme, according to a source close to the bank. This programme also included cutting corporate credit cards and forcing managers to reclaim their own expenses. It now has about 35,000 pieces, many of which are antiques – including the world’s first dollar bill and the mahogany desk of the bank’s founder John Pierpont Morgan.
Lehman Brothers and its former chief executive Dick Fuld owned several works of art at the time of the bank’s collapse. Around $13.5m worth of its art was sold through auction house Christie’s in New York last year. A spokesman said the 16 post-war drawings sold were part of Fuld and his wife Kathy’s private collection.
At an earlier Christie’s auction in Manhattan last May, one of the first signs of the collapse of £2bn property-to-financial-services empire Dawnay Day was the sale of Lucian Freud’s Benefits Supervisor Sleeping. The 1995 painting of the 20-stone nude, which was sold to Russian oligarch Roman Abramovich for $34m, was put under the hammer by the firm’s chairman Guy Naggar in a desperate attempt to raise cash.
Sources at a London-based auction house say it is unlikely banks will put large parts of their collection on the block, credit crunch or not. But the removal of buying support from the banks will not help the market as galleries cut back and distressed vendors appear. Sotheby’s, Christie’s and Bonhams season-opening auctions this month have been halved in terms of number of lots compared with last year, to try to encourage bidders by increasing the rarity value.
Making an impression
One of the main arguments banks use to justify their art collections is that many of their clients – both corporate and private – have an interest in art, and a display of quality art is a draw for new customers.
Walk into Deutsche Bank’s headquarters at Winchester House in London and you are greeted by an enormous stainless steel sculpture by Anish Kapoor, Turning the World Upside Down II, and a 4m x 3m spot painting by Damien Hirst called Biotin-Maleimide.
Down at Canary Wharf, Citigroup’s atrium has a 50m-high mobile consisting of more than 1,000 multi-coloured aluminium panels by English artist Bridget Riley. Given that even the smallest Riley prints sell for between £1,000 and £10,000, the installation is, to all intents and purposes, priceless. At the Tate Modern gallery on London’s south bank, UBS fills two entire floors with its artwork.
Deutsche Bank, which also sponsors the annual Frieze Art Festival in London and has a joint venture with the Guggenheim museum in Berlin, says many of its private clients have an interest in art and collect it. Through Frieze, and other initiatives, the bank has encouraged young talent to step forward and engage with its clients.
The bank has an advisory service headed by Alistair Hicks, who is also responsible for buying art for the bank. He bought between 20 and 30 pieces in last year’s Frieze Art Festival in October, mainly from emerging artists.
The bank does not publish its budget for purchasing art, and does not include a valuation of its art collection in its annual report. However, in 2007, when the bank made net profits of €6.51bn, it spent €24m on exhibitions and art purchases, according to its annual report. Typically, the works the bank buys cost between $800 and $15,000 each.
Intangible value
Germany’s largest bank said its motive for having a large art collection is twofold. “Deutsche Bank buys art globally to enrich its working environment for colleagues and clients, and support contemporary artists around the world,” said a spokeswoman.
She added: “Deutsche Bank chooses art not for investment, but for involvement. Aiming always to support working artists directly and to buy from both established and emerging talents, our collecting underscores the bank’s commitment to the communities in which it does business.”
Bank of America in 2007 put several of its pieces on the block to raise money for local charities. At the time, Rena DeSisto, head of arts and culture at Bank of America said: “We view our art collection as an asset to be shared with our customers and the communities we serve.”
Other banks argue that the value of their art is but a fraction of their assets under management, and even if they were to sell it the difference it would make to a balance sheet would be minimal.
A spokesman for UBS said: “Although the value of the collection has increased over time along with the art market itself, the financial value has never been a motivating factor for the collection. The value of the collection is fully written down in our financial accounts. With our professional leadership we ensure that the value of the collection is preserved and managed in the best interest of all the firm’s stakeholders.”
UK private bank Coutts takes a different approach to art. Most of what the Queen’s bank has in its offices is on loan from the Full Circle Art Consultancy and is for sale to clients.
Banks can also argue that art prices have soared in recent years, as a result of which their collections are still worth more than they paid for them. The UK Railways pension fund was frequently criticised for its investment in art in the 1980s but, on selling the works, it was able to argue that the prices kept pace with inflation, just as planned.
Forced sellers?
If banks did want to sell their collections to raise capital, finding a buyer could be a struggle. Sotheby’s season-opener, the Impressionist and modern art sale last week fell short of its lowest estimate, raising £32.5m after an estimate of £46m to £56m for 29 lots.
Christie’s sale the night after raised £63m, around half what it made last year. Auction houses are prizing rarity and are pushing out “tightly edited sales”, according to Melanie Clore, co-chairman of Impressionist and modern art at Sotheby’s.
Nowhere was the symbiosis between banking and art more publicly on display than in the collapse of the contemporary art market in the fourth quarter of 2008. On September 15, the same day Lehman Brothers collapsed, British artist Damien Hirst raised £111m in an unprecedented direct auction of his works through Sotheby’s, with a record number of pieces selling for more than £1m.
Within weeks, however, works by Hirst were failing to sell at auction in the US, as the artprice.com contemporary art index fell 20% in less than six weeks.
It looks like it could be as difficult to value the huge dot painting by Hirst in the lobby of Deutsche Bank’s London offices as it is to value many of the other assets on its balance sheet.
9 February 2009 - Tara Loader Wilkinson
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