Tesco bank chief Higgins raids crisis-hit rivals to fill top positions

Published on Saturday 15 November 2008 13:24

BENNY Higgins, the new chief executive of Tesco Personal Finance, has poached senior names from crisis-hit Royal Bank of Scotland and HBOS, his former employers, with more expected to follow.

As the meltdown at the big two Scottish banks continues, Higgins has hired five big-hitters from across the banking spectrum and unveiled ambitious expansion plans, predicting that an independent Tesco bank would double profits in the next four years.

Speaking for the first time since his controversial departure from HBOS in August last year, Higgins called the banks' lending policies "irrational".

He left amid speculation that he was taking the blame for HBOS losing market share in the mortgage market.

But in a barely concealed snub to HBOS chief executive Andy Hornby, he made no reference to him when asked who in the banking world he admired. He said he did not expect Hornby to reappear in a public-facing role at another bank, though he felt Sir Fred Goodwin, who quit this month as chief executive of Royal Bank of Scotland, would return in a high-profile position.

Higgins led the 950m deal for Tesco to buy out RBS's 50% stake in the supermarket bank. The transaction was completed in July when Higgins' appointment was announced, but he had been brokering the deal – Tesco's biggest ever – behind the scenes since February.

He has now appointed a number of senior figures as he attempts to strengthen the supermarket chain's position in the banking sector.

Shaun Doherty, former HBOS retail operations director, has been brought on board as operations and IT director.

Julie McLelland, former head of banking and savings operations at HBOS, becomes operations director, and Paulette Rowe, former managing director of NatWest retail, is hired as marketing and commercial director.

He has also poached Iain Clink, who was RBS head of credit cards, as finance and international director, and Ian Tyler, previously head of group capital at RBS, as treasurer.

Higgins told Scotland on Sunday: "I've recruited some of the very best people I've ever worked with. They joined because they wanted to be part of this operation.

"I'm sure we'll hire more people who will want to move because of the current circumstances at the banks."

Tesco PF has committed to building its bank in Edinburgh, having just taken a 15-year lease on a new building at Haymarket to house up to 400 employees.

Despite the financial crisis that has crippled RBS and HBOS, Higgins is confident that Tesco PF can at least double its profits from 250m over the next four to five years as it launches new products and expands overseas.

He said: "It's a matter of when, not if, we launch our two big strategic products: mortgages and current accounts."

The time will be right to launch mortgages over the next year or so as the market improves and risks reduce, according to Higgins.

He made a shock exit from his position as HBOS head of retail as commentators claimed he carried the can for the sharp decline in the bank's share of the mortgage market. He told Scotland on Sunday last week that the reward and risk in the mortgage market did not balance up at that point.

"Organisations were lending up to 120% loan-to-value and margins were barely there," he said. There was a lot of very aggressive short-term pricing that relied on customers staying on beyond fixed rate, but many were promiscuous and moved on. That sort of irrational pricing couldn't last."

He said the issues that HBOS is now facing stem partly from the scale of its funding gap last year being bigger than that of the other banks added together, and its overwhelming concentration on property.

As well as launching products, Tesco PF is planning to expand into new markets such as China and South Korea, and is exploring how it can offer a banking service to small businesses. The company is piloting an in-store bank branch at the Tesco store at Silverburn in Glasgow and is likely to roll this out to other locations.

Tesco PF has five million customer accounts and Higgins believes it can benefit from the credit crunch that has seen customers withdraw their money from struggling rivals. In October it received more applications to open savings accounts than during the whole of 2007.

He said: "Customers trust us and our focus is on putting more of the Tesco DNA into our personal finance business. There's no doubt that an organisation willing to be transparent, keep products simple and reward loyalty rather than punish inertia will be different from what the banks have been offering.

"We'll run the business by standing by the value that no one tries harder for their customers."

Before being poached to join HBOS in 2006, Higgins had been with RBS for 10 years. HBOS was triumphant at the time of his appointment, which was seen as a major hiring.

During his time at RBS he had a stint running Tesco PF, before becoming chief executive of retail banking at RBS.

Before RBS he rose through the ranks to become general manager of sales at Standard Life at the age of 35, making him the youngest executive in a top role at the company. He left abruptly in June 1997, just three months after his promotion from deputy general sales manager, when stories appeared in the press about his private life.

Reports at the time said he left for "personal reasons", but these were never explained by Higgins or Standard Life. It was claimed in the press that he "resigned over alleged misconduct" but there was "no question of any financial or managerial misdemeanour".

Last week he told Scotland on Sunday: "That departure isn't too significant. I've moved on. I still think a lot of Standard Life and held Scott Bell, the chief executive at the time, in the highest regard."

He said he considers himself lucky to have worked with good people in his career, citing Bell, who died last year, Sir George Mathewson and Goodwin, the former chief executives of RBS.