Showing posts with label RBSG. Show all posts
Showing posts with label RBSG. Show all posts

Friday, 9 November 2012

Are the regulators being realistic about Retail Banking?

Andy Haldane, the Executive Director for Financial Stability told a UK Parliamentary Commission on Banking that the UK banks should create a common technology platform for Retail Banking that would act as a public utility and spur further competition in the sector. This he said would make it easier for customers to swap banks and make it easier for both new banks and existing ones that are currently held back by "antiquated" technology.

The theory would be that all the customer bank accounts along with their numbers could be on a common system so that when a customer wanted to change their bank they wouldn't have to change their bank account number all they would need to do is have that account number point to a different bank. Instant switching with no hassle, no direct debits going missing, no standing orders not paid, no missing salary payments - what more could customers want?

The underlying premise behind Mr Haldane's proposal is that retail banking is an undifferentiated commodity  service and that therefore having an industry common platform makes sense since the only basis of competition is price. Whilst it could be argued that retail payments processing is an undifferentiated service e.g. the transmission of payments using the Faster Payments scheme is standard for all the banks, is that really true for all aspects of retail banking? Certainly Svenska Handelsbanken could successfully argue that the customer centric, branch-based banking service that they operate is very different from the Big 5 banks and is reflected in their success in winning customers from the other banks. The ability of their branch managers to make lending decisions without referral to head office is clearly a differentiator. Equally First Direct customers would argue that the service that they receive from their bank is quite different to that from other banks.

To counter this it could be argued that competing banks could still differentiate their service by overlaying a different customer experience over the top of a common utility platform which would hold all the customer accounts. However the fundamental question is how practical would it be to build a common utility platform?

As Mr Haldane argues the incumbant banks have 'antiquated' systems. This has been very publicly seen by the recent problems that RBS has had. It has also been stated as the reason that Santander walked away from the acquisition of the 316 branches that RBS is compelled to sell.  For a long time it has been obvious that the banks need to replace their core systems in order to keep up with the demands of customers for real time, mobile, digitally enabled experiences. Despite this none of the UK banks has embarked on a wholesale change of their core banking systems. Why? Because replacing the core banking systems is like a full heart, lungs and liver transplant where every vein and artery has to be individually unpicked.

Lloyds Banking Group spent just under £4bn to migrate HBOS onto the Lloyds TSB platform. This was the cost of bringing two banks together onto one of those 'antiquated' systems that Mr Haldane referred to. It has now spent a further £660m on simplifying the systems with more to come.

Commonwealth Bank of Australia has to date spent Au$4bn (£2.6bn) on replacing its core banking platform. That was one bank that is smaller and less complex than any of the UK Big 5.

Even if it was feasible to get the Big 5 banks to agree the specification for a common retail banking platform the cost including migration would be measured in tens of billions of pounds and would take a minimum of 5 years to implement.

The parallels with the NHS IT project where all the NHS records were to be on one system which could be instantly accessible whichever hospital or doctor wherever in the country a patient is are uncanny. The NHS IT programme cost over £6bn. Effectively nothing has been implemented and the programme is seen as an abject failure.

The British Bankers' Association (BBA) responded to Mr Haldane's suggestion by pointing out that the banks have committed up to £850m to produce a system that will make switching bank accounts far easier. This has been underway for some time. This will operate more like a mail redirection service. Clearly this is a far lower cost and far more practical approach than Mr Haldane's proposal.

What is concerning is that such impractical recommendations are coming from such a senior executive with the responsibility for ensuring financial stability. It raises the fundamental question of whether the regulator has taken sufficient time to understand the reality of the current state of retail banking.  This is particularly concerning since this is not a one off. The Bank of England governor-designate, Mark Carney, has, according to the FT,  said of Mr Haldane's views on simpler regulation as 'not supported by a proper understanding of the facts', this doesn't bode well for Mr Haldane's future at the Bank.

Friday, 19 October 2012

Do banks need to be IT experts?



The news that Santander is walking away from the acquisition of 316 branches from RBS (Royal Bank of Scotland) due to delays in  the IT project to deliver the branches and customers to Santander once again brings attention to the dependency of banks on IT. This comes hot on the heels of the problems RBSG had with providing customers access to their Natwest and Ulster Bank accounts, the loss of access to ATMs that Lloyds and Halifax customers had recently and similar  periodic outages that Australian banks have continued to have over the last eighteen months.

There is no doubt that banks are hugely dependent upon technology to deliver services to their customers, however there are significant differences between banks as to how they address this need.

Santander for many years has been clear that having ownership of world class IT competencies is critical to the success of the bank and has underpinned the growth of their business. As the Executive Vice-President Operations and Technology at Santander CIO, Jose Maria Fuster, has said “At Santander, technology has always been considered a competitive weapon". In the early 2000s Santander put in place what is effectively their own internal IT company called Isban, which was responsible for building their core banking platform, Partnenon, and their core front end, Alhambra. These two platforms that have enabled Santander to deliver the synergies from acquisitions across the globe including in South America, and Abbey National, Alliance & Leicester and Bradford & Bingley in the UK. The strategy of having a single global platform for all their banks across the globe, whilst it has had its challenges, has enabled Santander to be one of the most efficient banks in the world. Others have tried to emulate this, HSBC and Citibank amongst them, but none have achieved it to the extent of Santander. The customers of RBS associated with the 316 branches would have been migrated onto Partnenon had the deal gone through to completion.

A bank that is taking a radically different approach to Santander is National Australia Bank. Gavin Slater, Chief Operating Officer, says "While we are an information technology driven company, we aren't an IT company". Banks today "do not have the expertise or R&D budgets" to invest in building its own systems. "I don't want to be owning boxes, I don't want to be owning networks, switches, software," NAB instead wants to be an orchestrator of technology services and introduce variability into its cost base by only paying for what it uses. Not only does NAB not own the kit sitting in its datacentres or the network infrastructure, but NAB looks to suppliers to carry out the systems integration.

The model that NAB has implemented changes fundamentally the role and the competencies required of the IT function. For a start it means that the CIO  should be able to spend far more time focussing on understanding the businesses requirements and both how technology can enable them as well as provide new opportunities for the bank. It also means that the CIO has to have exceptionally strong supplier management skills. The IT function will be dramatically different from that of an organisation such as Santander. It will be a far slimmer organisation with the principle competencies being relationship management (both internal business and external suppliers), enterprise architecture and innovation.

Santander and NAB are at two extremes of the models for IT for banks. Barclays went through the process of outsourcing significant parts of its application maintenance competency to Accenture only to bring it back in house again. Lloyds Banking Group has outsourced a large proportion of its application development and maintenance competency to a set of competing Indian offshore organisations. HSBC is more akin to Santander seeing IT as a core competency that it wishes to keep in house but, unlike Santander, largely offshore.

Whilst it has been accepted wisdom that IT is a differentiator for banks and that the intellectual property encapsulated within the software should be guarded and treated as top secret not all banks agree. With the increasing use of free and open source software banks such as Deutsche Bank and Credit Agricole have announced initiatives to share their software and their APIs with competitors and external software engineers much as Apple encourages programmers anywhere to develop apps for its App Store.

Deutsche Banks' Lodestone Foundation's aim is to “quickly and convincingly build the go-to non-profit open source foundation for financial markets”. That would mean attracting developers who are able to write software that can then be used by the whole industry. Sharing market software, Deutsche says, will save it and other big global banks some of the billions of dollars and euros that they would otherwise have spent building or improving on individual technology systems.

Credit Agricole has launched its CAStore where software engineers can download Credit Agricole APIs, build apps which customers will then be able to download. An example of crowdsourcing for application development.

As increasingly the major banks across the globe find their ancient systems creaking, failing and in need of replacement while at the same time the demands for technology-enabled solutions largely driven by the rise and rise of digital grow, the question bank CEOs and COOs need to be asking is whether the existing model for delivering IT is sustainable. As Gavin Slater of NAB points out when is a bank ever going to compete with the $2.5bn investment in R&D that the likes of Oracle makes?

Is NAB right? Is the Santander model no longer cost effective? Only time will tell, but one thing is sure banks across the world are watching and waiting to see what lessons they can take and apply.

Saturday, 23 June 2012

RBS pays the price of underinvestment as systems fail



It was for good reason that Fred Goodwin, the former CEO of Royal Bank of Scotland, was nicknamed Fred the Shred. Slashing costs and running a lean bank was what he was famous for. However the retail bank was not just lean, it was positively anorexic. RBS was very proud of the way that the merger with Natwest was delivered on time and below budget. They were also very proud of the fact that they had the lowest cost:income ratio amongst Western banks. However it is not difficult, in the short term, to have a good efficiency ratio if you starve the business of investment. In the longer term this lack of investment will come back to bite the organisation.

The impact of the lack of investment is being realised at RBSG (which owns the RBS, Natwest and Ulster Bank brands) as the bank has had one of the worst customer visible, publicly embarassing technology problems a UK bank has had in recent times. Many customers have not been able to access their accounts online and balances have not been correct due to 'technical problems'. Branches have had to extend hours both at the beginning and the end of days and even, shockingly, opening on Sundays. It couldn't have happened at a worst time of the month as this is the time when many salaries are being paid in and bank balances are typically at their lowest.

RBS, Natwest and Ulster Bank share the same systems. This was a significant part of the business case for the merger of  RBS and Natwest. The merger was based on migrating the Natwest systems onto the RBS platform. One of the reasons that the merger was completed on time and below budget was because of the no arguing approach that regardless of whether the Natwest IT was better it would be migrated onto the RBS platforms. This reduced costs which could have resulted from extended debates between the two banks as to the virtue of the systems. This philosophy came about following the Lloyds Bank and TSB merger where, after lengthy debate and two years pursuing a strategy of migrating onto Lloyds Bank's platforms, the decision was reversed and the Lloyds' platforms were migrated onto the TSB ones, which were far more modern and flexible than Lloyds'. The RSB management were determined not to make the same mistakes as Lloyds TSB had made.

The consequences of RBS, Natwest and Ulster Bank all being on the same platform is that the technical problem has impacted all three banks, albeit Natwest has been hit the most. The extent of the impact is further evidence of the lack of investment in re-architecting what are very old systems to give them greater resilience.

The impact of the lack of investment in RBS systems has not only caused the very public problems for customer service but also major delays in the handing over of the branches that Santander has acquired from RBS as a consequence of the forceed sale that RBS was required to make following taking state aid to stop it going under. Where the transfer of the branches was meant to take place in 2011 it is now projected to be completed in 2013. Not only is RBSG going to incur signifcant additional project costs for the separation, but also the amount that Santander will eventually pay for the branches will be substantially reduced due to the fall in bank valuations in the meantime. Separating the set of branches from the mothership has proved to be far more difficult than expected due to the archaic nature of the systems. These systems, many of the designers of which retired some time ago, were designed in a monolithic fashion rather than in a modern, modular way, meaning that it is the equivalent of removing a part of a limb from a live body nerve by nerve, vein by vein.

RBS is not alone in facing the symptoms of having creaking, old, underinvested systems. Nab (National Australia Bank) and CBA (Commonwealth Bank of Australia) have had a number of very public systems failures over the last couple of years, see http://www.itsafinancialworld.net/2011/04/deja-vu-as-nab-systems-down-once-again.html , however the difference is that both Nab and CBA have had major programmes underway for several years to replace their core ageing systems. Neither of these replacement programmes have gone smoothly, both are significantly late and over budget, but they will emerge with better systems, designed for the 21st Century and able to deliver a customer service designed with the digital age in mind.

The reality is that most of the major banks across the globe are facing the same problem of ageing systems and a reluctance to spend the money necessary to replace them. These are major programmes and for many CEOs will take longer than their tenure at the top of the bank, so there is little incentive for many CEOs to do anything about it.

Antonio Horta-Osorio, the Lloyds Banking Group CEO has recognised the challenge. On completing the merger of Lloyds TSB and HBoS he immediately kicked off a major simplification programme. He recognised that having all the brands on a single set of applications was only the first step towards making the bank ready for the 21st century. However simplification is not a core banking replacement programme, which is actually what is needed. It could make some difference. However it could simply be an exercise in rearranging the deckchairs on the Titanic. Simplification is like putting a patient with chronic coronary heart disease on a better diet and exercise routine rather than giving them the heart transplant they require.

Horta-Osorio came to LBG from Santander where the importance of the core banking system is recognised as being key to delivering the bank's strategy. Santander has its Partenon platform that has been instrumental in enabling the success of many of Santander's takeovers of banks across the globe including Abbey National, Alliance & Leicester and Bradford & Bingley.

Out of the public humiliation of RBS and the financial impacts of the delay in transferring the sold branches to Santander it is to be hoped that some good will come. Stephen Hester, the RBSG CEO should take this opportunity to take a long hard look at the investment that is needed to get RBS the banking systems that it needs to service its customers in the 21st century.

Friday, 18 May 2012

RBS forced to go down under for Retail Banking chief



RBS has announced that its new head of Retail Banking will be Ross McEwan. Despite the Scottish name, which undoubtedly is helpful at RBSG, Mr McEwan is from down under. He replaces Australian Brian Hartzer who is returning to his homeland to take up a similar role at Westpac (see http://www.itsafinancialworld.net/2011/11/wanted-ceo-for-uk-retail-bank.html ). It is not only native Australians that are making the journey down under, but there has been a flood of banking executives working in the UK who have decided to up sticks and move to the Southern Hemisphere (see http://www.itsafinancialworld.net/2012/01/trickle-becomes-flood-as-bankers-leave.html ).

Whilst a number of UK banking executives were approached and interviewed for the role that Ross McEwan will fill none of them were interested. This has to raise the question why? Certainly for executives with successful careers at banks free of government shareholdings such as HSBC and Santander there are clear reasons why a move to RBSG may hold little appeal. Given the turgid time Stephen Hester has had with his compensation and personal life discussed very publicly in the press and in Parliament to the point where even he considered resigning, why would anyone put themselves into that position when they don't need to? With the level of government implicit and explicit interference in the running of RBSG, there have to be better places to work. For the ambitious executive who sees heading Retail Banking at RBS as a career stepping stone the question is what would be the move after that? Almost certainly not into the CEO role of one of the UK banks as RBSG is a damaged brand and there are no obvious CEO roles coming up at the UK banks in the next few years. The probability is, as evidenced by Brian Hartzer, that the next move after heading up Retail Banking at RBSG would most likely be a CEO role in Australia. Not all UK banking executives or their families would see that as attractive.

With the Vickers ICB (Independent Commission on Banking)  recommendations coming into law including the ring-fencing of retail banking, the increased scutiny of bankers' compensation and the antagonistic attitude of British politicians towards bankers, the UK Government has made a career in UK banking very unattractive. For the state-backed banks, RBSG and Lloyds Banking Group, this has been made even more unattractive which means that these organisations are finding it even more difficult to attract top talent. The time it has taken for Lloyds Banking Group to find a replacement for Truett Tate, the head of Wholesale Banking is just one example of this.

Yet it needs to be recognised that to turn around these banks top talent is needed because these are some of the toughest challenges.

RBSG and Lloyds Banking Group are not alone in struggling to hire and retain top talent, it appears that having recruited Rumi Contractor from HSBC to become the UK Retail  and Business Banking COO in January that they have already parted company.

With HSBC CEO Stuart Gulliver suggesting that, with the increased cost of conducting retail banking, that pulling out of the UK is a real possibility, resulting in significant layoffs, reducing the number of  quality UK banking executives dramatically, there is a serious threat to the sector.

For the UK to retain its position as one of the key the Financial Services centres of the world, the sector needs to be able to attract the right talent. This is critical to the recovery of the UK economy. Isn't it about time that the politicians took the lead and put an end to the relentless bashing of the banks?

Monday, 12 March 2012

Why the culture of banks has to change



With the FSA (Financial Services Authority) report on what went wrong at HBOS (Halifax Bank of Scotland) before the bank had to be rescued by the UK Government and Lloyds TSB clearly showing that the issue was one of governance, there has never been a time when the need to change the culture of the banks has been clearer or more urgent.

The FSA report demonstrates that the corporate lending division of HBOS had a far riskier book than any of the other UK banks. HBOS continued to win deals in both the commercial and retail property markets in the UK, Ireland and Australia at lower margins and higher risks at a time when all the other banks were reducing their exposure to the sector or no longer pursuing new business. HBOS proudly proclaimed their success and growth in the market, not recognising that they alone were doing this. It doesn't appear to have crossed the minds of the executive that they were winning business that no one else wanted, or at least no one wanted at the rates that HBOS were offering. When the Head of the division proposed a growth of 10-12% in commercial lending not only was this not challenged he was told by the CEO of HBOS that this needed to be increased to 22%.

How could this situation have arisen?

The CEO of HBOS, Andy Hornby, had arrived at HBOS triumphantly from ASDA, part of the Walmart Group. With no background in Financial Services but having graduated top of his course at Harvard and having had a successful career with the strategy consultancy, Boston Consulting Group prior to ASDA, he was seen as the person who would shake up the sleepy financial services industry. He surrounded himself with people who agreed with his position. Those who didn't agree with him got short shrift. Benny Higgins (currently CEO of Tesco Financial Services), had joined from RBS, where he had had a very successful career, to lead the HBOS retail banking business. He left after only a very short while when he fell out with Andy Hornby over strategy.

What this meant was that no one was there to challenge the strategy and the decisions that the CEO of HBOS was taking. Not dissimilar to the situation that was described in the recent report on what went wrong with the corporate governance at RBSG under the leadership of Fred Goodwin.

It is undoubtedly for this reason that the FSA is asking for a change at the Co-operative if they wish to push ahead with the acquisition of the Verde branches from Lloyds Banking Group. The FSA are insisting that the board of the Co-op must have much more experience of Financial Services and be able to challenge the executive leadership of Co-operative Financial Services. This could be such a significant challenge for the Co-op to make them question whether they will continue to pursue the deal. Finding people who the FSA will approve to run or sit on the board of a bank is increasingly difficult. It took Tesco over two and half years to get approval to set up their bank. The FSA has an increasingly large backlog of people to be approved to work in senior roles for banks and it now takes months to get approvals for an individual, even if that individual has already been approved for a similar role at the bank or a rival bank. Such a delay in being able to pushed forward with Verde could make the deal so unattractive to the Co-op that they walk away from it. However given what went on at HBOS and RBSG it is not difficult to understand why the FSA is pushing for this.

The culture of banks where the CEO's and other executives' words are final and unchallengeable is not something new and has always been dangerous.

A recent example of this is the fine raised on RBSG for complaints. The fine was not for the poor service that RBSG was giving its customers but for the fact that the complaints received were modifed by staff before being submitted to the Banking Ombudsman. The reason given being that the staff were afraid of the consequences for their careers of the complaints being upheld. What does this say about the culture at RBSG today, many years after Fred Goodwin left?

A further example that illustrates why the culture needs to change is that of the misselling of PPI (Payment Protection Insurance). It was known throughout the banking industry that both personal loans and mortgages were being sold at prices below cost and subsidised by the excessively high margins on PPI policies, which were very hard to claim on. Yet because it was so profitable no one spoke out and the number of PPI policies that were sold grew exponentially. Why did no one speak out? Surely the hierarchical, command and control culture of the banks has to be key to this along with the pursuit of short term profits at the cost of the customer.

The £8.75m fine imposed on Coutts, owned by RBSG, for not putting in adequate measures to ensure that the money-laundering wasn't taking place or that they were doing business with PEPS (Politically Exposed Persons). One of the reasons cited by the FSA for this behaviour was that staff were incentivised to add additional customers and balances with no measure about the quality of the balances or the customers, is yet more evidence for the need for a fundamental shift in the culture enforced by alignment of incentives with the values that the banks should be upholding.

Without a fundamental change to the culture of banks, where both independent, experienced voices are listended to and encouraged to challenge the exexcutive of banks and with CEOs and senior executives who encourage their staff to challenge their thinking without fear of reprisals then another HBOS, PPI misselling or the latest misselling of derivatives to SMEs is inevitable.

Thursday, 5 May 2011

PPI - A sign of the mad, bad world

The announcement that Antonio Horta-Osorio, the new CEO of Lloyds Banking Group has decided to draw a line under the sorry PPI (Payment Protection Insurance) situation, take a reserve of £3.2bn and withdraw from the BBA (British Bankers' Association) appeal against the recent judgement should be welcomed as a sensible, pragmatic move and hopefully bring a close to the mad, bad world that was operating at the time that the misselling was taking place.

When the sale of PPI was at its peak the banks and finance houses were working in a market where personal loans were being sold at a loss as competition had driven the prices down and demand for funds driven the wholesale prices up. Banks and Finance Houses were prepared to sell these loans at a loss because they were able to sell Payment Protection Insurance at such a high premium, with very little chance of a claim against them due to the convoluted terms and conditions. Staff were heavily incentivised to sell PPI because that was where the profit came from and as a result hard-selling took place.

Consumers actually got loans at lower interest rates than they should have, so a good proportion of customers (primarily those who didn't take out PPI) were getting a good deal, so it wasn't all a terrible rip off for bank customers.

Hopefully the other banks and Finance Houses will follow the lead set by Lloyds Banking Group and draw this sorry episode to a halt. (UPDATE: All the other major banks have followed suit with RBSG writing off £850m, Santander £538m, Barclays £1bn and HSBC £270m or a total just under £6bn). That doesn't mean that everyone who claims should get their money back, because there are a surprisingly large number of claims being made by people who either didn't take out PPI or worse still didin't even take out a loan. The process of weeding out the fraudulent claims and processing the valid claims will undoubtedly take some time.

What should happen now is that loans and credit cards move to being priced realistically, based on the wholesale market prices and with a reasonable risk-adjusted price. This may be a shock to customers, but at least it will represent a fair price.

The fall out from the financial crisis is that retail banking needs to change, but the changes and expectations need to be not only on the banks' side but also the consumers.

Wednesday, 4 May 2011

Why the Big 5 banks should be pushing for the end of 'free banking' (and the government shouldn't)

With the ICB (Independent Commission on Banking) looking at increasing competition in the retail banking sector, examining the market share of the big banks and overall looking for greater fairness and transparency in charging, strongly supported by the likes of Vince Cable and other politicians, increasingly it looks as if the end of 'free banking' is in sight. Of course 'free banking' doesn't really exist, rather it is a mirage in that rather than paying directly for the services provided, consumers are made to pay by low or no interest rates for money deposited in current accounts, low interest rates in deposit accounts, high mortgage rates and even higher overdraft charges. As consumers baulk at the costs charged for loans and going overdrawn and politicians continually call for fairer, transparent charges, the inevitable conclusion is a banking system where customers pay for the services they use.

Being able to charge a direct amount for the services they provide would bring some significant advantages to the big banks in the heavily regulated environment that they are increasingly operating in. When there is more focus on the market share that each of the banks has, and where more market share is seen as bad, then the banks will want to focus not on the absolute market share but the quality of the market share.

All of the big banks today have customers that they don't make any money from. These will be the types of customers that open a current account for their household money, for their book club, for their children, where the balances are low, transactions sizes are small and they have only one product. If market share is going to be restricted then these are the customers that the banks are going to want to be shot of. The problem is that in today's banking environment it is very difficult for a bank to fire customers. However if customers were made to pay directly for the services that they use then it would be far easier for the banks to adjust their charges to either makes the low balance/low transaction value customers profitable or, better still for the banks, to encourage those customers to take their business elsewhere.

With four out of the five big banks now being run by investment bankers not retail bankers, and Barclays, HSBC and Lloyds Banking Group focussed on a strategy of raising their Return on Equity (ROE) up to at least the 14-15% range, then there is clear evidence that making customers pay directly for the services they use can help achieve this. In Australia where this model has existed for many years, The 'Four Pillars' (National Australia, Commonwealth Bank, WestPac and ANZ), have in the past enjoyed ROEs of 20+%. Even with tougher regulation they are each expecting ROEs of around 16%, significantly higher than any of the UK banks.

However whilst this all sounds very attractive for the big banks, it is not great for the new entrants, who will struggle to compete with the scale advantages that will allow the big banks to make their charges attractive for the customers they want. It also raises the big question of who will provide the banking services to the customers that the big banks don't want? It has the potential to significantly increase the number of the unbanked. As the likes of Vince Cable continue their crusade against the banks and push for ever more transparency of charging for banking services, the politicians need to be wary of the consequences of getting what they wish for.

Friday, 25 March 2011

RBS to provide insurance to Sainsbury's

Sainsbury's is in talks with RBS  to provide insurance to the supermarket's customers for the next five years. The deal is expected to be announced in June.

This is an interesting move on the part of Sainsbury's since RBS has to dispose of RBS Insurance as part of the price for taking state funding due to the financial crisis. RBS Insurance has been on the market for some time, but there are no indications of a deal any time soon. This is hardly surprising at a time when personal lines insurance, and particularly motor, is proving to be so unprofitable for insurers with the increase in claims for injuries fuelled by the no-win, no fees, ambulance-chasing claims companies. Whilst a few years ago RBS Insurance business, including such well known brands as Direct Line and Churchill, would have sold for a significant premium, now it would be quite the opposite.

Sainsbury's is obviously demonstrating confidence in RBS Insurance being around for at least the next five years, so presumably with so little interest from acquirers RBS must be exploring the idea of a flotation for the business.