Comment: Root and branch review for RBS customers

Terry Murden. Picture: Phil Wilkinson
Terry Murden. Picture: Phil Wilkinson
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MAKE no mistake, Ross McEwan has you in mind. Royal Bank of Scotland’s new chief executive is so keen to focus on the customer that he used the word 42 times during his address to the Scottish Parliament on Friday.

However, the customer will be served differently in future. And that implies a need for fewer branches, or at least a change to what they do. RBS has a long-time commitment to its branch network, but times are changing and sentimental attachment to bricks and mortar has no place in the digital revolution.

McEwan’s predecessor Stephen Hester tackled the major balance sheet issues at RBS, offloading assets and shrinking the investment bank. His successor now has to restructure its high street presence while convincing the customer that it won’t mean any erosion of service.

It was no surprise that McEwan chose not to be upfront about the impact his review of the bank will have on the 700-strong branch network. He was never going to announce his plans to a public audience before informing staff of the plans he will unveil in the new year.

Instead, he dropped strong hints by talking of “fundamental change in the way we do our business”, by which he also meant the way you do yours. Branches are becoming places which some customers never visit. In-branch transactions across the estate have fallen by 30 per cent in three years.

McEwan outlined the way in which modern banking is now driven by online access. On top of that, the customer wants do more for him and herself. He referred to this “empowerment” and how the bank had to find smarter ways of allowing customers to undertake a range of transactions without the need for staff involvement. Hence, a £30 million investment in a new generation of hole-in-the-wall machines that will do more than dispense cash and check account balances.

So, technological change is driving branch closures. But so is the high cost of running them. At a time of low interest rates, income is weak and customers are looking elsewhere to deposit their cash. Branches are therefore expensive to run and banks see closures and staff cuts as a way of reducing their overall cost to income ratios, a measure of operational efficiency.

About 350 branches closed last year. Barclays recently warned that 1,700 branch staff would be axed and that branches would shut. Expect other banks to follow suit. It will be interesting to see how many of those being acquired by other institutions – TSB, Virgin and Williams & Glyn’s – survive the revolution.

Miller Group looks poised for flotation

MILLER Group, the Edinburgh housebuilder, has long been tipped for a public flotation, a process that became a live option a couple of years ago when majority control of the family firm passed into the hands of private equity firm Blackstone.

A “beauty parade” of financial advisers followed earlier this year as a number of property firms came to market, although the company insisted it was looking at all options.

Yesterday, The Scotsman revealed that John Richards, Miller’s long-standing finance director, had departed. He went earlier in the week and the company ushered in Richard Hodsden, who has experience of leading a flotation at the self-storage company Safestore.

Chairman Sir Philip Bowman, who arrived in April last year, was instrumental in the sale of Allied Domecq, Coral and ScottishPower and it looks like he is readying Miller for another change.

Twitter: @TerryMurden1