Playing the battle of the brands

Published on Sunday 16 May 2004 01:00

IT IS said that you cannot buy a view; maybe it is also difficult to sell one. When the board of National Australia Bank visited the Clydesdale Bank’s sixth floor Plaza offices in Edinburgh they were overwhelmed by the vista of the castle on the rock and the panoramic views down Princes Street. Enough, possibly, to persuade them it was not worth forfeiting.

David Thorburn, chief operating officer at the Clydesdale, has become used to the rumours that his Melbourne-based bosses want to offload their troublesome European operations and concentrate on getting their own house in order. The speculation is hardly new, however. Even before the rogue traders scandal earlier this year that cost NAB A$360m, the future of Clydesdale, Yorkshire, Northern (in Northern Ireland) and National Irish (in the Republic) was a regular source of banking gossip.

John Stewart, the Edinburgh-born group chief executive of NAB, now charged with trying to reverse losses and restore the reputation of Australia’s biggest bank, last week ruled out a disposal and committed more investment to the 50m already poured into the European division.

With first-half operating profits worldwide down 9% and those for the European banks by 25%, it was easy to see why Stewart was coming under more pressure. His task has not been made any easier by the soaring success of the Royal and HBOS which have pulled far ahead of Clydesdale in the profits league and left the Glasgow bank to find a new role.

NAB paid Midland Bank 472m for Clydesdale, National Irish and Northern Banks in 1987. Three years later it bought Yorkshire Bank for 893.5m. But critics say it has struggled to find any cohesion that binds them.

Thorburn has witnessed first hand the speculation that NAB would sell since he took on his current position two years ago, but he is no longer in denial. The figures speak for themselves and he is prepared to admit to "weak spots" such as not having a single manufacturing platform, jargon for not sharing things such as operating systems and cheque clearing processes. There will be more merging of back-office functions, to move towards what Stewart described as "one kitchen serving four dining rooms".

As a company man since joining the bank as a graduate trainee in 1978, Thorburn is determined his stewardship will not be marred by perceptions of the bank being in decline or in a state of confusion over its strategy, two painful accusations hurled at it in recent years. The added speculation about NAB wanting to sell up fuels a sense of uncertainty.

"I have been around the block often enough. It doesn’t worry me but it is unsettling for the staff," he says.

"We are under no illusions about the challenge to make this turnaround happen. I am optimistic by nature but tinged with a lot of caution. The exciting thing for us is that we are dealing with things we have been criticised for and we are investing in the business."

A lack of investment over the years has been a central criticism of NAB’s policy towards its European subsidiary. Without sufficient firepower the Clydesdale in particular has watched as the Royal and HBOS have become multibillion-pound concerns with huge marketing spends. For the first time in a while, Clydesdale is now back on television screens.

There is to be a further roll-out of its financial centres in the south of England following the success of what Thorburn called a "laboratory" in some commuter belt towns. They are aimed at small and medium sized companies and cater for a businessman’s every need - his business and personal banking. Research showed that the experience of businessmen in the south when they came into contact with the Clydesdale was positive. Thorburn says he was surprised at just how positive, but it encouraged him to push for expansion.

He believes much of the speculation about Clydesdale’s problems are put about by its rivals who clearly have something to gain from doing it down. "We are clear about what we want to do and my task is to make that happen," he says.

But critics would say we have heard it all before and point to the number of senior executives who have passed through the bank in quick succession - Steve Targett, Stuart Grimshaw, Grahame Savage. He accepts it has given rise to a perception of turbulence - which critics say is self-imposed - but says the management team across the board is stable.

Despite his claims that his rivals are out to get him, he also believes Clydesdale benefits from their success and that the achievements of the Royal and HBOS in recent years means Scottish banking generally is on a high. "There is a halo effect - the other banks’ success means there is some benefit for us."

But Clydesdale, he maintains, is still able to plough its own furrow and create a niche both north and south of the Border. "We have been sitting on a goldmine in terms of the potential that exists for us down south, but we have not made the most of it.

"As for Scotland, our market share [of business banking] is a whisker short of 21% and has shown growth."

Since the middle of last year it is up from 20.3% to 20.6%, he says, notably declaring precise figures that were once difficult to prise from any of the banks. The growth may be small, but in a mature market, significant. It also puts a lot of distance between Clydesdale and Lloyds TSB with a 4% share. Thorburn says: "We are punching above our weight from the corporate to the one-man band."

Thorburn wants the plan to succeed as another setback would only bring even more venom on the bank’s prospects. He has earned his spurs after time spent in business and corporate banking at a number of locations. He helped to establish Clydesdale’s structured finance unit before being appointed district manager, running the northeast branch network.

In 1999 he completed the Advanced Management Programme at Harvard Business School, returning to Clydesdale Bank as head of business financial services for Scotland West and London. He was general manager, business financial services, for Clydesdale and Yorkshire banks, before taking up his current job. He is a board director of Clydesdale, Yorkshire and National Europe Holdings (GB).

He is senior vice president of the Chartered Institute of Bankers in Scotland, and a board director of Scottish Financial Enterprise. He was chairman of the advisory board at Strathclyde Graduate Business School, and is currently a member of the resources board.

On Friday he was playing his dual role as banker and a council member of the CBI Scotland, whose annual lunches are supported by Clydesdale. With Digby Jones, director-general of the CBI, as guest speaker, he attracted a good attendance to the Roxburghe Hotel in Edinburgh. No doubt, he was also hoping to provide a few positive vibes about the bank, and pick up some spin-off business.

"We’re trying to build up the brands," he says. NAB will let him know if he has succeeded.