Comment: Challenger banks are the new normal

AT an Institute of Directors dinner this week, the question arose as to when the banks would once again be operating “normally”. No-one, of course, could provide a definitive answer.
Terry Murden. Picture: Ian Georgeson/TSPLTerry Murden. Picture: Ian Georgeson/TSPL
Terry Murden. Picture: Ian Georgeson/TSPL

However, it is clear that the “new” banks are beginning to make their mark and that the established names must be quickly restored to health to avoid an erosion of their core customer base.

Patience is wearing thin over bonus payments, mis-selling, IT breakdowns and big losses, and the public are more in the mood to do what they have ­resisted for generations: move their ­accounts.

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The new banks are, by any measure, minnows in the sector, but they have the advantage of being backed by big names. Tesco, Sainsbury’s and Virgin have made it clear that their first steps into this most hostile of environments will not be their last.

It will please the politicians too that “challenger” banks are making progress. Although Sainsbury’s Bank chief Peter Griffiths does not see his bank in those terms, he has unveiled plans to move up a gear and eventually to launch into the mortgage market.

Tesco Bank now has a current account to add to a portfolio of services that will see it make a serious assault on the retail customer base of its high street rivals. And Virgin has made its first underlying profit and is testing a current account that it hopes to launch in the summer.

Virgin has long talked about a flotation. It won’t happen for a while, but when it does it will underpin its commitment to financial services, probably around the same time that Santander UK also comes to market. TSB, spun off from Lloyds, will be first to join the stock market, followed by Williams & Glyn, which is being carved out of Royal Bank of Scotland.

What will be a worry for the latter in particular is that, as its rivals grow, it is heading in the other direction in a deliberate downsizing that will simplify its operations but also make it considerably smaller than the global giant that former boss Fred Goodwin built.

There is talk of it reverting to the NatWest brand in England and Wales, leaving the rump RBS only in Scotland. That would be some transition. But is it the best solution for this once-proud institution?

Scotland needs its companies to grow, not shrink, and while there are special circumstances around RBS it must at some point be allowed and encouraged to scale up in order to compete. Stephen Hester, its former boss, knew this – it must be hoped that if one day an acquirer picks it off, Hester doesn’t return to remind us of his warning.

Big chance for food and drink to join the feast

the food and drink sector is undeniably a success story for Scotland, defying all the jokes about deep-fried Mars bars and even the generally-held view that Scots have a poor diet. Scotland’s larder is stuffed with gems from fruit for fabulous jam to salmon. No-one can be excused not eating well in Scotland – and it need not cost a fortune.

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But the figures hide the fact that most food and drink sold is down to one product – whisky – and a campaign launched yesterday aims to correct that imbalance. With industry and government working together in this year of high-profile Scottish events, they will never have a better chance.

Twitter: @TerryMurden1