BANKING: BRAND ON THE RUN
IT was launched with much razzmatazz by local hero Jim Spowart at after the doctom bubble had burth. Analysts attended a spectacular launch in November 2000, in HBOS’s Old Broad Street London base, where dry ice and Fatboy Slim music blasted out.
Intelligent Finance — as the new operation was named — was an Edinburgh invention, proudly headquartered in Edinburgh Park, which promised to lead a revolution in banking, exposing the poor value offered by the “Big Four” banks.
Its value-for-money “offset” mortgage proposition was supposed to save customers millions of pounds through lower borrowing costs and a lower tax bill. A £7 million advertising campaign reinforced the message that this was “The way all banks will be”.
But as it approaches its fifth birthday, the HBOS subsidiary is seen as having failed to live up to the hype by bank analysts.
As HBOS struggles to get a return on its estimated £430m investment in a more competitive offset mortgage market, IF has quietly trimmed back its headcount from a peak of 2,500 in 2003 to around 1,500 today.
IF has asked 70 deputy managers to seek alternative roles, and job losses on the customer services side are feared to be next.
One of the affected managers told the Sunday Herald: “My guess is that around 10 to 20 of the 70 will seek voluntary redundancy, and that around 50 to 60 will take displacement to other roles within HBOS group.”
Those affected had their options explained to them by IF executive director Ian Barnett at a meeting on 14 September. They now have until 6 December to decide whether to go for voluntary redundancy.
The manager added: “There’s a lot of disgruntled and stressed-out people within this organisation who fear their job might be next.”
IF quietly closed its Edinburgh Park headquarters in August 2005, and the building has been reassigned to Bank of Scotland’s corporate and wealth management arms. The IF executive team and IT staff who worked there were relocated to IF’s surviving sites at Livingston and Rosyth.
One member of staff said: “The impression people have of [IF managing director] Nick Robinson is that he is prepared to sacrifice other people’s jobs in order to preserve his own.
“His remit is to make IF profitable and he’s looking at any area where he can cut back. First came the staff losses and the white labelling of personal loans and credit cards, then the site rationalisation and now it’s manager rationalisation.”
The moves are surprising given that, four years ago, HBOS chief executive James Crosby said: “It’s the number one new generation bank and it will be worth billions in years to come.” However, analysts believe the operation, which is struggling to break even, is not worth anywhere near that.
Edward Firth, banking analyst at Societe Generale said: “IF appears to have delivered very little. It started as an attempt to take on the big banks, but it has ended up being little more than a tack-on mortgage brand.”
And Justin Modray, investment adviser at IFA BestInvest, said: “It would be cruel to say it has flopped, but it is definitely not taking the market by storm as HBOS may have anticipated.”
He said the end of “lock-ins” in the mortgage market — penalty charges paid by borrowers to move their loans — has not helped IF, adding the brand’s impact had been “fairly modest” in the critical south-east England market.
“If I was HBOS I would be worried I would struggle to get a decent return on that investment, “ Modray added.
But IF’s Robinson said: “We do not measure our success by headcount, rather we measure it through the quality of our people, the quality of our products and the quality of our service. Our success was further underlined last week when we scooped the prestigious Best Offset Mortgage Provider at the Your Mortgage Awards.”
Within a year or so of launch, IF had attracted £8.9 billion in balances, 500,000 accounts and a 10% share of the UK mortgage market. But current figures are unavailable, as they have since 2003 been subsumed into HBOS’s results.
The company — whose main competitors are RBS’s Virgin One, Barclays’s Woolwich and HSBC’s First Direct — claims to still be in the top three offset players by market share.
Published in the Sunday Herald on 20 November 2005