Teresa Hunter examines the impact of bank mergers on customers
THE first bank to serve simple savers was started by Henry Duncan when, in 1810, he opened the Trustee Savings Bank for his poorest parishioners in Dumfriesshire. Yet soon the TSB brand will disappear completely from Scotland's high streets following the merger between Lloyds and HBOS.
This is only one of an avalanche of changes, which will leave our high streets unrecognisable as we look back on this recession. And it's not just the likes of Woolworths that will be gone for good. Iconic names, such as Abbey, Bradford & Bingley, and Britannia, which generations of families trusted with their savings, are among those annihilated so far by the contagion eating away at the banking sector. Who knows which might yet follow?
Before the credit crunch there were ten major banking brands on UK high streets. We will be lucky to escape this recession with five left standing.
The picture is much the same among building societies, where seven of the top 15 have crashed and burned. Many of the dozens of tiny mutuals are expected to run for the cover of a merger in the months ahead.
This weeding out of weaker organisations, along with the closing of Post Offices, will drastically reduce diversity on our high streets. The much talked-about consolidation will finally have come to pass at the point of a gun. These shotgun weddings will leave financial services dominated by a few mega brands, such as Santander and the Co-operative, in the same way Tesco, Sainsbury's, Asda and Morrisons dominate food retailing.
The jury is out over the future of the Royal Bank of Scotland and Northern Rock brands, with some analysts questioning their future viability given they have become so badly tainted. Cutting costs will be a particular priority for businesses, partly or wholly owned by the taxpayer, such as Lloyds TSB, Royal Bank of Scotland and Northern Rock, because of the burden of public debt. There will be pressure to restore profitability as soon as possible, so they can be sold off and the debts wiped out.
Killik's Jonathan Jackson says: "We hear a great deal about the death of the high street, but what normally happens with bank or building society mergers, is if they have two offices nearby, they close one."
Brewin Dolphin's Bryan Johnston agrees: "As more people shop and bank on the internet the need for branches would be diminished anyway. But an equally big problem for the banks is the lack of capital. They need capital to lend otherwise they are not doing any business, and if they are not doing business then they do not need so many branches."
So if we take a fictitious walk along the high street of 2012 what will we see? How will this hit our services and how safe will our money be?
The rise of Santander
By the middle of next year Abbey and Bradford & Bingley branches will be renamed Santander, to be joined by Alliance & Leicester outlets by the close of 2010. The Spanish bank will dominate our high streets with 1,300 branches.
From the end of next month, any Abbey, B&B or A&L customer applying for a credit card will get one branded Santander as will anyone whose card comes up for renewal.
Statements, cheques and so forth will also be rebranded over time.
Security: Until the end of 2010, the group will hold two banking licences – one covering Abbey and B&B customers, and another for A&L. Abbey and B&B customers will only be eligible for 50,000 compensation if the group was to collapse, as this is the maximum paid out per banking licence. Yet an Abbey and A&L saver could receive maximum compensation of 100,000. This may change in 2011.
The demise of TSB and Halifax
In Scotland, all Lloyds TSB branches and Halifax Bank of Scotland branches are to be rebranded Bank of Scotland, leaving the group with 490 branches north of the border, compared with Lloyds' previous 180 outlets.
The group is currently working out a strategy to merge operations. The size of the branch network, the areas of overlap and the numbers which must be cut, is part of this process.
Security: Lloyds TSB Scotland customers are protected by their own banking brand, as are those of its subsidiary Scottish Widows Bank. If you had money in Lloyds TSB and the Widows Bank, you could claim maximum compensation of 100,000.
Security: Halifax savings brands are all covered by the same licence which means they will only pay out a maximum 50,000 in the case of failure. These include, Halifax, Bank of Scotland, Intelligent Finance, Birmingham Midshires, Saga and the AA.
Disappearing building societies
The building society sector has also been hit by a wave of emergency mergers, with the Nationwide rescuing the salvageable bits of Dunfermline, and launching a lifeboat for Derbyshire and the Cheshire. The Scarborough has merged with the Skipton, and the much smaller Catholic with the Chelsea.
Other mergers are anticipated as the remaining strong regionals are expected to swallow smaller rivals to bolster their strength.
Nationwide in the ascendancy
Britain's biggest building society has pledged to maintain the Dunfermline, Derbyshire and Cheshire brands and branches, for the time being, but admits this is an experiment.
However, there are no guarantees that after a trial period these branches will not simply be rebranded as Nationwide. As the society fights to protect its pre-eminent position to take on the likes of the new mega Santander, and the gargantuan Lloyds Group, Nationwide will be the brand it invests in most heavily.
For the time being, the newly acquired societies are maintaining distinctive accounts and products. But this is an expensive way to operate and money could later be saved by rationalising across the group.
Security: Building societies are only allowed to hold one banking licence. As an interim concession, the Financial Services Authority is permitting the separate brands to maintain their individual licences for the protection of cash within existing accounts. This will be reviewed in September, and does not in any event cover new openings.
Britannia and the Co-op
Britain's second biggest building society is set to merge with the Co-op bank on August 1, and although no decision has yet been confirmed about renaming of either business, the Co-op is currently undergoing a major rebranding across all its businesses in the group, to create a new mega brand.
A Co-op spokesman said: "The Co-op has more retail outlets than McDonald's and Tescos put together, yet this isn't the public perception, because local Co-op's all have different shop fronts.
"So we are bringing our master brands together for greater impact. They will all be branded the Co-operative, but the food business is "the Co-operative, Food, with a green banner; travel is the Co-operative, Travel, with an orange banner, and funerals are the Co-operative, Funerals in light purple."
Against this background, it seems likely that Britannia could be renamed the Co-operative Bank, hopefully with a blue rather than a red banner.
Security: For the time being, Britannia and the Co-op Bank will continue to operate with two separate banking licences, although that could change.
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