COVER FEATURE
20
Let’s hope Lloyds backs brokers
‘‘
It’s clear from the
City’s reaction that
the rationalisation
of brands makes
economic sense
ANDREW MONTLAKE
DIRECTOR
CORECO GROUP
The announcement about Cheltenham &
Gloucester is a landmark. To see great names
such as Cheltenham & Gloucester, Abbey,
Alliance & Leicester and Bradford & Bingley
disappearing from our high streets is sad.
But there are some harsh realities in play and any
business would struggle to rationalise the fact that it has
several brands on the same high street competing for the
same customers, especially in a market where the
availability of finance has changed beyond recognition
and consumers do not use lenders’ branch networks in the
way they used to.
I have nothing but sympathy for the employees who
are being displaced during this process but it’s plain from
the City’s reaction that the move makes economic sense.
The same applies to the much anticipated changes
elsewhere in the group. These were tough decisions that I
know were not taken lightly – they were taken so the
company could compete effectively and move ahead.
Our thoughts are primarily with those on the frontline
who will bear the brunt of these changes but perhaps we
should also spare a thought for the decision-makers who
have been forced into this position by the economic
environment and arguably the actions of their
predecessors.
I know union officials will disagree but from a broker’s
view, I think the change has been handled as well as could
be expected. Regarding timing, we had the inevitable
early morning leak on branch closures but Lloyds group
did the right thing and refused to be drawn from its
timetable.
By afternoon we had an email explaining the changes
as well as a Q&A document. It was not perfect but at least
it showed the move was carefully thought through.
As brokers we now have four big brands to deal with –
Halifax, BM Solutions, Cheltenham & Gloucester and
Scottish Widows Bank. All great names.
Bank of Scotland was the biggest shock and the
biggest loss. In the past 15 years everyone I have come in
contact with from the lender has been helpful and friendly.
But times change and as brokers we must respect these
decisions and work with what we have. We must hope
Lloyds group is true to its word in that it sees brokers as an
integral part of its future. We’ll know when we see how it
handles dual pricing and proc fees.
Trust in banks is at an all-time low and lenders need us
more than ever. Branch footfall will continue to decline as
new generations of consumers become comfortable with
technology, lenders’ systems become more efficient and
more people demand independent advice.
Fewer brands means less choice which is not in
anyone’s interests, but all we can do is hope the doors of
the lending stable open sooner rather than later.
“We were slightly surprised to hear of Bank of Scotland being
withdrawn from the broker market as it had been a good provider in
the past few months. Now we’re just hoping that the remaining
brands seek to attract different business rather than competing with
each other.”
James Harries, sales and marketing director at Manor Mort -
gages, also says it is a significant step having an organisation such
as the Lloyds group reaffirm its commitment to the broker market.
“We could look back at this moment in a few years’ time and see
it as a turning point,” he says.
For many in the market, the reasons the lending giant chose to
close certain brands are clear.
“If you look at the brands that have gone they were all ones where
there was a crossover,” says Fahim Antoniades, partner at Quantum
Money. “Also, the brands that have disappeared are the ones with
the weakest direct distribution. I think market pro fessionals can
draw their own conclusions from this.”
He says the restructuring will ultimately leave less choice for
consumers in term of products.
“The fact that there is dwindling competition between lenders as
more cease to trade means that consumers will pay through pricing
as well – in other words, less competition means higher prices,” he
says.
“As for brokers, it’s interesting to see that the brands that will
cease trading – Bank of Scotland and Intelligent Finance – are those
whose reliance on broker-sourced business is greatest. It may be
cynical of me to say so but it seems this move signifies that the
Lloyds group strategy is to keep pushing through those brands that
have a strong high street presence, and thus plenty of direct
distribution opportunities.
“And where there has been crossover, such as with Cheltenham
& Gloucester and Halifax, the group has opted for the stronger
distribution channel – Halifax,” he adds.
Alan Cleary, managing director of Exact, believes Lloyds group’s
move was necessary to match the amount of funding available.
“This was to be expected,” he says. “You have two massive players
pushed together resulting in eight or nine mortgage brands in a
market half the size it was at its peak. It’s no surprise the new
company has rationalised to make savings.
“Intelligent Finance never made money from the day it was
created. And Bank of Scotland’s arrears have probably not looked
good, which has led to the demise of
● We could look
back at this
moment in a few
years’ time and
see it as an
important
turning point
in the market
new business.
“BM is a strong brand with good
technology and Halifax is the best
and most recognised brand in the
mass market,” he adds.
Cleary says the group had to take
action to cut costs and believes that
more changes could be in the
pipeline.
“This won’t be the only part of
the business that is rationalised,” he
says. “I should think a similar
process will now take place across
the business. The most important
point of a large scale merger is to focus on duplicated costs. The
group will now be looking to le verage its branding.
“The merger should never have been allowed to take place on a
purely competitive basis, but was waved through because of extra -
ordinary market conditions. The group will be a serious force to be
reckoned with when the dust settles.”
Brian Murphy, head of lending at Mortgage Advice Bureau,
agrees the cuts were no surprise.
“Following the announcement of the takeover agreement be -
tween Lloyds TSB and HBOS the issue of duplication of product
provision, premises, staffing and the positioning of a multitude of
brands was likely to lead to significant change,” he says. “The idea
must be to generate the cost and synergy savings the takeover was
designed to achieve.
“In terms of what it will mean for the bank, it’s likely to lead to
MORTGAGE STRATEGY June 15, 2009
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.