Terry Murden: ‘Forgotten’ bank must sell itself

Sainsburys was the first major British supermarket to open a bank, commencing trading on 19 February 1997. Picture: ContributedSainsburys was the first major British supermarket to open a bank, commencing trading on 19 February 1997. Picture: Contributed
Sainsburys was the first major British supermarket to open a bank, commencing trading on 19 February 1997. Picture: Contributed
IT HAS been a long time coming, but at last the “forgotten” Scottish bank has come out of hiding and is readying itself to take on the opposition.

Sainsbury’s Bank is based in Edinburgh and by the end of this year it will employ close to 500 staff at the Gyle. It is profitable, has won awards – including best buy awards – yet it remains largely an unknown quantity, so much so that only a fifth (22 per cent) of Sainsbury’s supermarket customers know that it has a bank.

In fact, it was the first supermarket company to launch a bank – 17 years ago this month – and has been working away building a foothold in financial services.

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Last week, chief executive Peter Griffiths, who has been in post since November 2012, spoke publicly for the first time since he moved to Scotland from Principality, Wales’s largest building society.

The timing of his briefing coincided with the formal ending of the company’s joint venture with Lloyds Banking Group, which will allow him to focus on building a standalone institution. He is hiring staff to cope with steady growth in business and to take on functions that have been provided by Lloyds in disciplines such as treasury and risk. Some £200 million will be invested in developing an IT system.

That means a lot more behind-the-scenes work is still to be done, but the front-end business of marketing the bank and building its customer base will now take off. Griffiths admitted the bank is Sainsbury’s “best-kept secret” and “raising awareness” is his single biggest challenge.

Given the lack of awareness among the parent group’s customers he has plenty of work to do, although that also presents an opportunity. His bank has 1.5 million account holders, but they represent just 5 per cent of the group’s 23 million customers. If Griffiths can emulate Tesco Bank’s 12 per cent penetration he would treble the size of his business.

Even with 8 per cent growth per year, the Welshman seems to be assuming modest ambitions, telling me he does not regard Sainsbury’s as a so-called “challenger” bank. The established banks are offer a wider range of services than his own bank. He has no plans to launch a current account, although he did say that mortgages were a realistic option. The bank has amassed £3.5 billion of deposits and needs to do something with the money.

The likelihood is that Sainsbury’s Bank will offer an “add-on” service. Its customers will have their main accounts with another bank, leaving Sainsbury’s to entice them with loans and insurance.

This differentiates it from Tesco Bank – also based in Edinburgh – which has set out a more determined intention to compete with the big boys. It will launch its current account in the first half of this year and already offers mortgages alongside other products. Tomorrow it is expected to announce another milestone in its growth as it establishes a full range of retail banking services.

Supermarket banking is certainly coming of age, and probably at the right time, as competition is encouraged at all levels. They have strong capital cushions and the levels of investment being committed by the parent groups suggest there is no going back.

Fighting ‘posh Tory boys’ hinders independence debate

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AT LAST the indy referendum debate is warming up and getting interesting. The currency union argument has captured the public’s imagination in a way that is hugely encouraging considering the complexities of the issue.

But what is also becoming clear is that the debate is fragmenting into many different arguments, some of which are dangerously close to obscuring the main issues.

The referendum is about Scotland’s ability to run its own affairs and how it goes about it. It is not a general election. Those claiming that Labour shames itself by hitching its wagon to the Tories on currency union are missing the point.

Some see the campaign as little more than an opportunity for another round of Tory-bashing. They are re-living the eighties battles with Mrs Thatcher and the poll tax. These may have been big factors in fuelling the desire for independence in the first place, but those who are now fighting “posh Tory boys” are introducing irrelevant and insulting personal prejudices and putting party politics ahead of the important calculations on whether constitutional change is desirable and can be made to work.

Even under an independent state the governing party will not be universally popular. Hey, at some point in the future it might even be a Tory-led one. Well, you never know. Who would have thought even a decade ago that the Lib-Dems, the once-disregarded also-rans of British politics, would be running the UK?

As an acceptable degree of patriotism lurches worryingly towards jingoism, business opinion for the most part remains level-headed and focused on the practical implications of constitutional change. Even so, the No campaigners would probably welcome a little more excitability among businesses which largely sit in their camp but prefer to stay silent. «

Twitter: @TerryMurden1