In a Val Doonican-esque session, Archie Kane, Lloyds Banking Group’s most senior director north of the border, recently stressed that his bank is committed to Scotland. In the opulent surroundings of Edinburgh’s Signet Library, in front of an audience of business bigwigs, Kane stressed that the enlarged group would stand by its customers through “thick and thin”.
However, Kane, who was accompanied by Alistair Darling, the most powerful man in UK banking, seems to have a strange way of showing it.
A senior representative of CBI Scotland told me on Friday that his organisation’s members are complaining that, although certain types of credit have become more available, banks have in recent months been hiking up the cost of borrowing.
This is clearly easier for the banks to get away with following the post-crisis lessening of competition in their sector.
One business complained that, whereas it was paying 2 percentage points above the London interbank offered rate (Libor) last year, its bank is now charging seven percentage points more, a massive increase that has eliminated any benefits from interest rate cuts.
It may not have been Lloyds or HBOS that ratcheted up rates in this way, but it is indicative of the behaviour in the banking sector. The part-nationalised banks are awash with conflicting motives at the moment.
Of course, they have expensive, even usurious, government loans to repay. They are also striving to repair their tattered balance sheets in the hope of returning to the private sector as soon as possible. The risk of loans turning sour, coupled with the uncertain depth and duration of the recession, means they have to set aside increasing amounts for provisions. However, one wonders if this sort of tightening really constitutes supportiveness?
Strangely enough, at his May 15 “love in”, Kane was silent on the job losses that Lloyds is going to be making. Most commentators believe that, if it is to have any chance of achieving promised cost savings of £1.5 billion a year, Lloyds, which is is still suffering indigestion after swallowing HBOS in January, will have to axe between 30,000 and 40,000 jobs across the UK. Of these, 5,000 to 7,000 are likely to be in Scotland.
But rather than admit any of this, the bank prefers to pursue a disingenuous policy of death by a thousand cuts. So it announces a few hundred job losses here, a few hundred there, rather than revealing the overall picture.
The trade union Unite is furious about the approach and last week called for greater transparency from the ill-starred superbank. The union said that Lloyds “must, as a matter of urgency, tell staff of its long-term plans for the workforce”.
The way in which it emerged last week that the group intends to axe up to 300 “relationship managers” across its business banking network in Scotland was typical of the approach. The move, which will mean business customers have to start liaising with managers in remote call centres, has already been attacked by business organisations.
Kane acknowledges that the banking sector has taken some blows and will have to work to rebuild its reputation.
But Lloyds does not have a chance of rehabilitating itself unless it recognises that openness and honesty are virtues and ensures that its left hand knows what its right one is doing.
Unforeseen delay
The Dutch ferry company Norfolkline’s service from Rosyth to Zeebrugge was launched last week with some fanfare.
Unfortunately, the inaugural service was delayed after the ship’s captain, Antonio Arbilli, suffered a heart attack (he has since had surgery and is said to be in a stable condition.)
I don’t know about seafaring superstition, but I hope this does not bode ill for the future of this economically vital service, which has been in abeyance since the withdrawal of the Greek operator Superfast last September.
Labour used the launch to call for additional ferry services from Rosyth to other continental destinations. In a globally interconnected economy, such services would be of huge economic benefit to this country, located as we are on the northwest fringe of Europe. Alex Salmond’s SNP ought to give the proposal some serious thought.
Don’t bank on help
A BBC News investigation with which I have been involved will explore Bank of Scotland Corporate’s unorthodox approach to troubled corporate customers, particularly in the southeast of England.
Most banks’ “intensive care” units make it their mission to nurture their so-called high-risk customers back to health. However, at HBOS the actions of one senior manager at the high-risk department are distinctly puzzling. In some companies where the bank’s favoured firm of management consultants became involved, the businesses suffered. And it was disastrous for the bank. The story will be told on BBC Radio 4’s File on 4 at 8pm this Tuesday and repeated next Sunday at 5pm.
This Scottish Agenda column was published in the Sunday Times on 24 May 2009
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