Comment: Clydesdale cuts | Lloyds sale

The statement yesterday from Clydesdale and Yorkshire Banks was headed “Building a better bank”, a positive spin on news that 28 branches are closing.

Arguably it was also an acknowledgement that the business has been operating below par and needs to change. The ratings agency Moody’s seems to think so as it issued a statement of its own downgrading some of the banks’ bonds.

To be fair, the branch closures – 16 are in Scotland – are part of a programme of reshaping Clydesdale and Yorkshire to suit customer demand and to improve efficiency. All banks are reassessing the way they operate and it is obvious to everyone that fewer customers use branches, or else use them less often. Clydesdale and Yorkshire say that use of its branches has fallen by 30 per cent in the last three years with a 40 per cent rise in internet and mobile banking over the same period.

The £5 million saved by the closures will be reinvested in the remaining network as part of a £25m branch investment programme which followed £20m invested in other services such as internet banking.

According to the statement no frontline jobs will be lost with staff being offered alternative roles. Of course, that creates another problem if “redeployment” means “relocation” and an inconvenient commute.

What is undeniable is that the industry is going through a transition, some of it forced by the banking crisis, but also because of technological developments which are both a cause and a response to changing customer needs. As part of this process, hundreds of branches will close across the sector.

Some people, however, still want to use bricks and mortar branches and may worry that they will be left without a bank in their community. Clydesdale offered some reassurance that these customers can access bank services through a Post Office branch and that no customer will need to travel more than 500 yards from the site of a closing branch to a Post Office in order to use the counter service.

This assumes, however, that Post Offices remain open.

Lloyds sale gives Osborne options

George Osborne must be feeling like a gambler on a lucky streak. After the upgrades on economic growth issued last week by the Office for Budget Responsibility, he was able yesterday to announce the sale of more shares in Lloyds.

The offloading of another 7.5 per cent takes the government’s share down to 25 per cent and a step closer to seeing the bank fully privatised.

The placing is yet to be priced, but if the shares were sold at a slight discount to 
yesterday’s close they would be at about their break even level of 73p, or a profit at the government’s preferred break even of 61p.

One way or another, the Chancellor will clawback about £4 billion of the bailout money, providing him with a bit more wriggle room.