Scots businessmen in bid to resurrect TSB

Published on Sunday 1 November 2009 21:13

A GROUP of Scottish businessmen is in talks to buy the TSB business from Lloyds Banking Group when it is sold as part of the planned break-up of the company.

The Scotsman has learned that high-level talks are taking place between the businessmen, senior politicians, the Treasury and European Commission officials aimed at relaunching TSB Scotland as an independent Scottish bank.

The development came as Chancellor Alistair Darling announced that the state-controlled banks would be broken up for sale in an effort to improve competition and recoup taxpayers' cash from the bail-out of the sector.

The Chancellor said he wanted to see three new high street banks created within the next few years as Northern Rock, Royal Bank of Scotland and Lloyds Banking Group are broken up. Reports yesterday said the new banks could include the return of TSB and Williams & Glyn branches to the high street, as well as a so-called BankCo created out of the "good bank" part of Northern Rock.

The "viable" part of the completely nationalised Northern Rock could be sold off by the end of this year, Mr Darling said.

Private investment was also being sought to reduce the taxpayers' exposure to RBS and Lloyds, which are both majority-owned by the state.

Last night a source told The Scotsman: "There are people in Scotland looking into the TSB proposal. The idea is to resurrect TSB Scotland. They want the right to use the TSB name nationwide."

The Scotsman understands the bid may be headed by Ben Thomson of the Noble Group, an investment bank. No-one from the group was available to confirm this last night.

The new bank would effectively take over the 185 branches of Lloyds TSB Scotland that Lloyds is expected to forfeit as one of the conditions for accepting state aid.

A source said that senior politicians and officials had been alarmed by an article in The Scotsman last week detailing Lloyds' plans to switch its Scottish customers over to Bank of Scotland, fearing this would devalue the Lloyds TSB Scotland business that they want the banking group to sell.

As a result, the European Commission is understood to be considering appointing an official to oversee the Lloyds TSB operation and head off any effort to hive off the Lloyds customers to Bank of Scotland.

TSB was launched in Scotland in 1810 and in 1995 was acquired by Lloyds in a controversial takeover that prompted a campaign of opposition. Lloyds included the TSB name in the parent group's title, ensuring it lived on.

Officials and politicians steering the break-up talks are believed to be leaning towards allowing two non-banks and one established bank – probably National Australia Bank, which owns Clydesdale – to come into the market to improve competition.

An announcement on the future of Lloyds Banking Group is expected tomorrow. The Scotsman has learned that the European Commission will appoint a trustee to oversee Lloyds TSB Scotland and ensure its sale is not hampered by any running down of its business.

The trustee, described as a "banking policeman", will protect the assets of the bank.

Mr Darling's acceptance of the move by the EC to increase competition in Britain's banking sector appears to be a change of heart from last year when he forced through the sale of HBOS to Lloyds, with the new superbank then being mostly taken over by the government. Competition laws were overruled to allow the merger and there was fierce criticism over the dominant position the new Lloyds Banking Group would have in the market.

Under the proposals set to be announced by Mr Darling this week, RBS looks set to lose its English branches which would be renamed Williams & Glyn, a bank that was taken over in the 1980s. RBS would also lose its NatWest branches.

RBS's insurance arm, which includes the Churchill, Direct Line and Green Flag brands, would also be put up for sale.

This has raised questions about up to 1,600 jobs in Glasgow where RBS's insurance business is mostly based.

Lloyds is set to lose TSB, Cheltenham & Gloucester and Intelligent Finance.

Mr Darling insisted that there would be "no fire sale" of banking assets and that he expected the parts to be sold off in the next three to four years, maximising the return.

He also indicated that he did not want existing big players such as Barclays or HSBC to buy up the released assets, expecting newcomers in the market.

He did not rule out bids from Tesco's new finance arm, Virgin Money or the National Bank of Australia, which currently owns the Clydesdale Bank and has emerged as a strong contender. Other bidders may come from the United States and Middle East.

There is speculation that Tesco would buy up BankCo from Northern Rock, while Richard Branson's Virgin would take on Lloyds' Cheltenham & Gloucester and Intelligent Finance operations.

Mr Darling said: "What you really want to do is to have quite a substantial divestment, perhaps branches or perhaps particular institutions that they own, made available to other people.

"Because unless we get competition, we are going to end up with half a dozen big providers which would be a big reduction in choice and that would not be acceptable."

He added that he wanted to see more "boring banks" run by "Captain Mainwaring" type bank managers and an end to the "exciting practices" which led to the recent crisis.

With a timescale of sales over the next four years, the decision could finally rest in the hands of a new Conservative Westminster government.

Shadow financial secretary Mark Hoban said: "It is vital that the government does not simply sell off the taxpayers' shareholding to the highest bidder without considering the wider implications for a competitive, healthy banking sector."

John McFall, the Labour chairman of the Commons Treasury select committee, warned the government must take its time to ensure it got the best price and leave itself with enough time to change the culture of the institutions from the destructive risk-taking which led to the banking crisis.

Holyrood finance secretary John Swinney said the Scottish Government's focus was on maximising jobs.

Both RBS and Lloyds have refused to comment on the latest developments. However, the British Bankers' Association, which represents high street banks, said the announcement was "neither unexpected nor surprising".

A spokesman said: "The UK has a highly competitive retail banking sector already offering greater customer choice than in many other countries. The BBA has always welcomed competition for high street banking services and choice for customers."

HISTORY OF NATIONAL INSTITUTION

THE Trustee Savings Bank, or TSB, was a British financial institution which specialised in accepting savings deposits from the poor.

The first trustee savings bank was set up by Reverend Henry Duncan of Ruthwell in Dumfries-shire for his poorest parishioners in 1810.

By 1818 there were 465 savings banks in Britain, including 182 in Scotland.

The Trustee Savings Bank Association was established in 1887 to help the individual banks co-operate and to advise on common matters.

Between 1970 and 1985, the various trustee savings banks in the UK were amalgamated into the TSB Group Plc, which was floated on the London Stock Exchange.

In 1995, the TSB merged with Lloyds Bank to form Lloyds TSB, at that point the largest bank in the UK by market share. In 2009, following the acquisition of HBOS, Lloyds TSB became Lloyds Banking Group.