As tough acts go, Alasdair Gardner must be one of the harder ones to follow. After more than seven years shaping the commercial banking operation at Bank of Scotland, Gardner – who joined the lender in 1987 and had become a familiar face on the Scottish business scene – was made head of global corporates North America for parent Lloyds Banking Group last September.
Six months on, and his replacement, Nick Laird, finds himself leading a 130-strong team spread across Scotland and the north of England as their “mid-market” clients face an economic storm that few could have forecast just a couple of years back.
If he is apprehensive about what lies ahead, then Laird hides it well, putting a brave face on the prospects for the remainder of 2017 and beyond.
“It’s certainly been an exciting few months,” he quips. “It almost goes without saying that 2016 was a year of unprecedented change and uncertainty – quite a backdrop to step into this role really.
“Economic uncertainty has been cited as one of the biggest threats to business fortunes in the coming months, which is backed up by the conversations that I have had with clients and colleagues. That perceived uncertainty is almost becoming a permanent feature of the business environment.
“However, we have been very clear that we are a ‘through-the-cycle’ lender and that does not change amid the forthcoming challenges.”
No doubt that confidence is buoyed by the banking giant’s recent full-year numbers – the commercial arm trades under either the Bank of Scotland or Lloyds banner, depending on which side of the Border it operates.
Lloyds Banking Group last month attempted to draw a line under the financial crisis, reporting its highest annual profit in a decade and unveiling a special dividend for shareholders on top of a boosted regular investor divi.
Headline profits more than doubled to £4.24 billion in 2016 from £1.64bn in 2015. Although underlying profits at the commercial banking arm were flat at about £2.5bn, the bank saw lending to small and medium-sized enterprises (SMEs) and mid-market businesses increase to the tune of £2bn last year and provided UK manufacturers with more than £1bn of funding support.
Laird, who joined Barclays’ corporate banking business in 2005 on a graduate programme before moving to Lloyds in 2013, concedes that the banking industry’s reputation took a battering during the financial crisis – one that it is still struggling to rebuild. Lloyds has not been immune, taking a massive hit from the payment protection insurance (PPI) mis-selling scandal, for example, and being accused of offering complex “interest rate swaps” to small business customers who did not understand them.
February’s results revealed that the bank had taken a further £475 million provision in the fourth quarter for non-PPI so-called conduct charges, such as for packaged account mis-selling, taking its total conduct provisions for the year to £2.1bn.
“We are very clear what it is we are looking to be,” stresses Laird, who since taking on his current role has been based at the historic Bank of Scotland building on Edinburgh’s Mound.
“We are a low-risk, UK-focused retail and commercial bank and we don’t look to do all the other exotic activities and other geographies. Our purpose is to help Britain prosper in all of the guises that comes with.
“Quite significantly, we have published a transparent plan around what that means. We have a range of measures in there that set out what we are trying to achieve and the role that we have to play, whether that is the number of first-time buyers or the number of companies that we are looking to help with exports for the first time.”
Lloyds Banking Group is widely expected to return to full private ownership by the summer after the UK government recently sold down a further 1 per cent shareholding. UK Financial Investments, which manages the taxpayers’ stake in the group, trimmed its holding to just below 3 per cent.
The latest disposal means that more than £19.5bn has now been returned to Treasury coffers since the lender’s £20.3bn bailout at the height of the financial crisis. This includes some £500m in payouts to shareholders since Lloyds resumed paying dividends in 2014 as it has returned to profit growth in recent years.
Laird insists that both Lloyds and Bank of Scotland are “fantastic brands” with the latter having a heritage stretching back 322 years. Part of his remit has involved integrating the commercial banking operations covering Scotland and the north of England, while ensuring that they adopt a common set of values.
Laird admits that task has “had its challenges”, particularly in terms of how you bring consistency across a unified operation that supports businesses with turnovers ranging from about £25m to some £750m.
Since stepping into Gardner’s shoes, the father-of-two – whose second daughter only arrived in November – has spent a fair chunk of his time on the road. Speaking between jaunts to Aberdeen and Glasgow, Laird says that building strong client relationships is the “best part of the job”.
“Our colleagues are based in local communities supporting local customers across a wide range of sectors,” he adds.
“As all of the recent market events have unfolded the most meaningful interaction has involved just picking up the phone and speaking to clients to let them know we are still here and if they want to go ahead with this bit of business or that acquisition then we are here to support you. We had a real concerted effort post the Brexit vote just to offer that support.
“We are a relationship-led bank and there will always be a place for that but we also have to make sure we are embracing new technologies.”
That same digital revolution that has swept over the retail banking sector, putting millions in touch with their banking affairs via smartphone or tablet, while consigning hundreds of branches to history, is making itself felt on the commercial front.
“We are seeing our customers’ behaviour changing just as on the retail side of things,” observes Laird, who says the switch from Barclays to Lloyds was undertaken partly due to “an old mentor moving over” presenting an opportunity to work with him.
“On the commercial side, we have invested a huge amount of time and money into improving our digital capabilities. We have a commercial banking online platform that is now live and has more than 2,000 clients on it.
“As a group, we are actually the UK’s biggest digital bank with more than eight million mobile customers and 12.5 million customers online. Maybe we have not talked enough about that before.”
One of the many headwinds faced by the bank’s business customers is the slump in the value of the pound, although Laird says the collapse has offered a silver lining for some.
“Some of our agricultural clients in our SME business have seen a short-term boost as the subsidies are paid in euros and are now worth more. On the flip side, there are companies that are being hit by rising import costs.
“We are engaging with businesses in general over their ongoing risk management approach. Quite a lot of companies have hedged over these risks but that only helps for a certain period of time.”
He adds: “Our international trade portal has helped to demystify a lot of the complexity surrounding exporting. It has been a key driver in helping thousands of clients export for the first time.
“Our helping Britain prosper plans are having a genuine measurable impact. Our working capital management tool has freed up over £130m to go back into the Scottish economy over the last 12 months alone.”
A baptism of fire for the new mid-markets boss then? “With a young family and a second daughter in November there has been plenty of excitement on the home front as well,” Laird reflects. “The six months have flown by.”