Tuesday, 4 October 2011

NAB to exit UK?

All the signs have been there for some time. Cameron Clyne, CEO of NAB, talking of NAB Europe dragging down the results of the Group, Lynne Peacock, CEO of Europe deciding to 'retire' just as NAB were claiming to be interested in the Lloyds Banking Group branches. Lynne Peacock, the CEO who had tirelessly changed the image of both Yorkshire Bank and Clydesdale Bank, built a real contender for the SME banking market with some really innovative approaches would hardly 'retire' if NAB was committed to take on the Lloyds Banking Group 632 branches, Intelligent Finance and Cheltenham & Gloucester would she? So NAB expressed an interest in the Lloyds Banking Group branches - wouldn't any self-respecting competitor like to have a look under the covers if they had a chance?

Looking at the situation from Melbourne, the logic about exiting the UK is clear for all to see. As the UK Government goes out of its way to make it more expensive and less profitable to operate as a retail bank, with the situation only deteriorating with the publication of the Independent Commission on Banking (ICB) recommendations, banks across Europe seeing their valuations plummet and the Euro environment only getting worse, when a well-funded organisation comes along and asks to buy your business, you'd have to be mad not to consider it, take the money and run back to Australia.

So if the logic is there for NAB is it there for NBNK? Certainly on paper there is sense to it. Acquiring the NAB businesses would give NBNK the advantage of no longer being seen as a new entrant which should reduce both the cost of capital and the amount that has to be retained. The acquisition of NAB should also reduce the funding gap (estimated to be £30bn) between the loans being sold and the deposits/current account balances. It would also give NBNK a set of infrastructure and platforms to migrate the Lloyds Banking branches and brands onto as well as giving it an additional 340 branches. It would also give NBNK an established FSA- approved team (though that could also be bought from Lloyds Banking Group).

Where the concern should be for investors in NBNK is the execution risk. The separation of the disposal from Lloyds Banking Group is undoubtedly one of the most, if not the most, complicated de-mergers to execute on in Europe. Separating it and leaving it still running on a copy of the Lloyds systems and infrastructure is difficult enough, merging it into the NAB infrastructure adds even greater complexity. That assumes that the NAB infrastructure is worth merging into given that NAB Europe has been starved of investment for many, many years. The increase in deal risk by bringing NAB into the mix for NBNK can't be underestimated, however it can be done, it is just a question of whether it should be. The emerging story of the largest de-merger in UK banking continues.

Update 04/10. Despite having suspended the NBNK shares while conversations were underway, the deal has fallen apart. The NAB Finance Director made it clear that with bank shares prices at the bottom and with uncertainty around regulation it would be a disservice to shareholders to sell the UK operation at this time. He reiterated the NAB strategy for the UK being that of organic growth. The cynics could have interpreted this as trying to negotiate the deal price up, however that doesn't appear to be the case, which leaves NBNK asking the question is NBNK on its own going to be sufficient to meet the requirements of the ICB that Lloyds Banking Group sell to a 'significant contender'? See  http://www.itsafinancialworld.net/2011/09/is-nbnk-alone-going-to-be-enough-for.html

Thursday, 29 September 2011

Resignation of Deanna Oppenheimer - the end of an era for branch banking?

The announcement of the resignation of Deanna Oppenheimer as Head of UK & European Retail Banking at Barclays marks the end of an era for branch banking much as the end of shoulder pads marked the end of the Thatcher era.

Deanna Oppenheimer, ably supported by her husband, John, with his background in hospitality, fundamentally changed the world's view of what a bank branch should look like. It was Washington Mutual where the first bank branches with coffee shops inside (Starbuck's) and play areas for children were seen. It was these branches where the screens came down, the decor brightened, the lighting changed and the desks went from rectangular to free form.  It was at Wamu where branches became 'stores' and the experience of visiting the bank became pleasurable rather than a chore. Wamu became unique for a bank in winning retailing awards. In 2003 US Banker recognised Deanna as one of the top 5 most powerful women in banking. Many banks tried to copy the Wamu 'Occasio' concept design, including Abbey National (prior to being taken over by Santander) with its Costa Coffee tie-up, but none managed to match it.

Deanna was hired by Barclays to re-create that Wamu effect with the UK retail bank and has, to a very large extent, achieved that. However the bank customer has moved on from that and so Deanna bowing out now makes a lot of sense.

The era is coming to an end because customers have changed what it is they want from a bank. Almost since banking was invented the branch has been the most powerful channel for banking. This is where the investment funds have been focussed on. Where the money was came the power. Whoever was in charge of the branches was the most powerful person in the retail bank. However with a decline in the use of the branches, whatever Metro Bank might say, the power and the investment is moving away from the banch network and the branch-focussed directors and mangers are losing their influence and ability to drive the direction of retail banking. No longer does it make sense to invest millions of pounds and dollars in having the smartest and coolest branches - often a case of style over substance. There is a recognition now that the investment needs to be in the substance - providing a far better customer experience whether it is digital, contact centre or face-to-face, and recognising that increasingly the physical experience is far less important than it used to be.

Deanna Oppenheimer is just the last of the branch-centric powerful  female retail bankers to leave the UK industry. Over the last year the UK retail banking industry has seen Helen Weir (Lloyds Banking Group), Lynne Peacock (National Australia and formerly The Woolwich) and Joy Griffiths (Lloyds Banking Group, Wells Fargo and Westpac) all depart.  On top of this, with the sad premature death of  Terri Diall, formerly head of the Retail Bank at  Wells Fargo, Lloyds TSB (where she changed 'branches' to 'stores') and subsequently Citibank, it really is the end of that era.

Emerging to replace these phenomenal women are a cadre of women, and men, who really understand what it is to serve customers digitally. They will become the Deanna Oppenheimers of the digital banking world.

Monday, 26 September 2011

Is NBNK alone going to be enough for ICB?

When the Independent Commssion on Banking (ICB) Report was published earlier in September very little detail was given as to their recommendations for creating more competition in retail banking, however they did specifcially refer to the Lloyds Banking Group Verde deal (selling the 632 branches including the Lloyds TSB Scotland branches, Intelligent Finance and Cheltenham & Gloucester) and said that  'The Commission therefore recommends that the Government seek agreement with Lloyds to ensure that the divestiture leads to the emergence of a strong challenger bank.' The Commission stated that it felt that the 4.6% share of the personal current account market along with the funding challenges of the existing deal  was insuifficient to meet this criteria abd that the deal needed to change, but did not prescribe how.

When NBNK announced that they were in discussions with National Australia about buying their UK operations a solution appeared to be emerging, however following comments from NAB to the effect of why would they sell their assets as the bottom of the market, it looks increasingly likely that this opportunity to increase the share of personal current accounts and the easing of the funding requirements (by virtue of the NAB UK deposit base) has gone away.

Whilst NBNK argues that they have improved the attractiveness of their proposition by including a major IT organisation in their syndicate, it would be extraordinary if this was seen to compensate for the loss of an existing bank to their offer.

Certainly any new entrant to the retail banking market would not wish to inherit the legacy Lloyds Banking Group systems for any length of time, since they have been built over twenty to thrity years and as the often quoted Irish joke goes 'you wouldn't want to start from here'. Any new entrant in order to be competitive would be wise not to own all the infrastructure and IT applications but rather buy services from an  organisation who's core business is IT and who can manage the peaks and troughs of demand whilst ensuring the lights are kept on.

However this does not address the demands of the Independent Commission on Banking on whoever acquires Verde. Indeed this leaves the ICB's preferred option being the flotation of Verde with a different mix of current accounts and deposits. See http://www.itsafinancialworld.net/2011/06/flotation-most-likely-outcome-for.html

The question that should be generated in the minds of the general public and the Government, as shareholders in Lloyds Banking Group,  by the NAB decision to withdraw from disucssions with NBNK is whether the haste with which Verde is being pushed through is in the best interests of either the shareholders or consumers. Selling a bank at a time when bank prices are at an all time low and encumbering a new entrant with excessive debts may not be in anyone's best interests.

Thursday, 15 September 2011

Lloyds Banking Group celebrated September 11th

No Lloyds Banking Group hasn't gone to the dark side, despite what many people think about the banks. It isn't the destruction of two towers that the bank celebrated on September 11th, but the bringing together of two giants - Lloyds TSB and HBoS. For September 11th marked the formal end of the integration of the two banks three months early, below the original cost and with higher synergies achieved. However Mark Fisher, Director of Group Operations, didn't make the George W. Bush mistake of saying 'Job Done' on September 11th, even though he and his team are entitled to receive significant bonuses for delivering Integration early, as he knows that there is still Simplification (the delayering, streamlining and further platform consolidation of Lloyds Banking Group) and Verde (the separation of the 632 branches, Intelligent Finance and Cheltenham & Gloucester from the mother ship and transfer to the acquirer or floatation) still to do. However Integration is something to celebrate.

The integration of  Lloyds TSB and HBOS was the largest  banking integration in Europe. To have achieved it ahead of time, under budget and having over-delivered on the synergies is no mean feat. To give an idea of the magnitude of the task this involved bringing three brands Lloyds TSB, Halifax and Bank of Scotland (and you could argue Lloyds Bank Scotland) onto a single set of IT platforms, moving 8000 ATMs and 3200 branches onto a single coherent set of systems. Training all the staff to use these systems and new processes and to do this without interrupting service to customers represents an enormous success. When it is considered that during the period of integration Commonwealth Bank (a much smaller bank) has not still not managed to fully move onto a new banking platform nor has Nationwide Building Society, though both have been trying, gives the magnitude of the achievement some context.

This massively complex programme has been achieved at significant cost to the staff of Lloyds Banking Group, not only in terms of the long hours and weekends spent (for the window for testing much of this in the live environment is only when the banks are closed) by hundereds of staff, but also the numbers of staff who have lost or will lose their jobs as a result of the integration. However the number of staff put out of work would have been far greater if HBoS had been allowed to fail.

So should Lloyds Bankig Group  have been allowed to celebrate September 11th? Absolutely!

Footnote: Some of the gloss was taken off when some Halifax and Bank of Scotland online customers could not see the full details of their accounts following the September 11th weekend, but in the grand scheme of things this was a minor hiccup.

Monday, 5 September 2011

Should basic bank accounts be subsidised?

Nationwide, the UK's largest building society, has entered the fray about the recent announcement by RBS that basic bank account holders will only be able to use RBS ATMs. See http://www.itsafinancialworld.net/2011/08/one-more-step-towards-end-of-free.html  RBS followed Lloyds Banking Group who made a similar move for their basic account holders. Mark Renison, the Group Finance Director has said that  the company was “very concerned” by the move which will create an “unsustainable position” for cash-machine users.

Citizens Advice Scotland CEO has also commented  “This is an extremely worrying development. Basic bank accounts are used by people who have difficulty managing their money. That’s the whole point of these accounts. It is still only three years since the banks were bailed out of their own self-inflicted mess by taxpayers’ money."

The concern is that some people with basic bank accounts will have to travel some distance to find an ATM that is operated by their bank. This is, of course true, particularly those living in more rural areas. What this does bring once more into focus is the role that the banks play in society. Are they commercial organisations or are they part of the social services fabric of this country?

With all the furore following the financial crisis there is both a call for the banks to be standalone profitable businesses with no call on government funding and to have greater clarity over the fees they charge for providing services, but also to be part of the social system subsidising the low-paid and providing bank services in unprofitable rural and urban areas. Clearly these two requirements are not fully compatible.

This then leads to the vocal extreme to call for all banks to be nationalised or mutualised, which of course makes no sense, but as the Independent Commission on Banking puts the final touches to the report coming out on September 12th 2011, it would be hoped that amongst the 350 plus pages they go some way to addressing what the role of retail banks should be in the future and how this is compatible with being commerciallly attractive businesses.

Monday, 22 August 2011

Capital proposal doesn't go far enough to make LBG disposal attractive

Whilst the discussions that Lloyds Banking Group are having with the Regulator, if successful, about easing the capital burden for whoever acquires the 632 branches it is disposing of would help they still don't go far enough to make this an attractive deal for shareholders nor give the purchaser the chance to be a real contender in the short term. The argument that Lloyds Banking Group is putting to the regulator is that because whoever acquires the business will get a senior and experienced banking team the risk should be lower and therefore the need to hold more capital than existing banks should not be necessary. Whilst this might reduce the amount of core capital the new bank would need to hold by around £1.5bn this is a mere drop in the ocean in comparison to the £25-30bn bridging loan that the buyer will need due to fund the gap between the deposits and the loans that the buyer will acquire.

The impact of having such a mismatch between the loans and the deposits is that the increased cost base to service the bridging loan will put the new bank at a significant disadvantage to the incumbants, so the aim of creating a new challenger to the Big 5 banks may well not be achieved.

To overcome some of this challenge Lloyds Banking Group could look at persuading the EU that either the timescales of the transfer of the loans be extended so that initially there is more balance between loans and deposits and also a slower ramp up of the need for wholesale funding, which could result in the cost of that funding being lower, or argue that in the interests of making the new bank more competitive less loans should be transferred. The danger with making these proposals to the EU could be that it would backfire on Lloyds Banking Group and the EU could insist that more deposits are transferred to the purchaser to significantly reduce their funding needs; something  Lloyds Banking Group would not want to do.

In terms of shareholders, given how low bank valuations currently are, given the funding issues and the lack of serious competition to buy the branches rushing through the sale at this time will not result in the best price being paid and in the long term does not represent good value.

Thursday, 18 August 2011

One more step towards the end of "free banking"

The announcement by state-owned RBS (Royal Bank of Scotland) that it would join minority state-owned Lloyds Banking Group in restricting the access of its basic bank account customers to only its own ATMs is yet one more step on the road to the end of so-called "free banking" in the UK.

Basic bank accounts are, as the name implies, a checking account where no overdraft is allowed and only a debit card can be used. They were introduced as part of a government initiative to reduce the number of unbanked and all the major banks were leant on to provide them as part of their contribution to society. Without access to more profitable products such as loans and overdrafts and amongst the high users of branches for transactions (attracting further costs for the banks) these are unprofitable accounts for the banks to run and have little potential to move towards profitability. In a pure commercial world these are the types of customers that banks would encourage to join other banks. It is therefore no surprise that neither RBS or Lloyds Banking Group would not want to incur interchange fees for these customers using non-RBS or Lloyds Banking ATMs, particularly as they are not able to pass those costs on to their customers.

With the increasing clamour for more transparency around bank charges it is almost inevitable that the concept of so-called 'free banking' will end and it will be the less well off, such as basic bank account customers, who are currently subsidised by those who hold large balances in their current accounts, will be disproportionately impacted by the introduction of fees.

As the Independent Commission on Banking finishes off its report they need to be aware of the implications of getting what they are asking for, particularly on the least well off.

Monday, 15 August 2011

Why Northern Rock is the smart option for Virgin

With both the Lloyds Banking Group 624 branches and the Northern Rock 70+ branches on offer, the Northern Rock option seems the smarter move for Virgin Money.

The key difference between the two deals is the amount of capital that will be required to make the deal work and the time it will take to break even.

With Verde there is a misbalance between loans and deposits, with far more loans than deposits. This means that whoever gets the deal will need to find somewhere around £30bn of bridging capital. With capital costing an all-time high this could prove to be very expensive and, as a result, significantly extend the payback period for the deal.

With Northern Rock the misbalance is the other way round with more deposits than loans. For a business that is focussed on lending, as Virgin Money is, this is the perfect situation. Having access to low cost funding, i.e. customer deposit balances, will enable the acceleration of the growth of loans. In addition Virgin Money would get 70 branches, which is sufficent to provide a high street presence, but not such an overhead as 624 branches. Ultimately not having too many branches is going to be an advantage since the fall off in both sales and servicing through branches is continuing to accelerate due to greater use of internet banking, call centres and mobile banking. As branch-based servicing and sales drops then branches become increasingly expensive to run, increasingly irrelevant and more importantly a drag on the business.

Whoever acquires Northern Rock is going to have to invest significantly in the Rock's digital presence. The current internet offering is basic and outdated at best, and does not provide a good customer experience. This is where Virgin has real strengths with both its focus on delighting customers across all its brands and its investment in new technologies including the internet and mobile. By combining the assets and experience of Virgin Mobile, Virgin Media and creating a rewards programme based around the other Virgin offerings, such as Virgin Atlantic, Virgin could be position itself as a truly different alternative to the traditional banks, particularly as there is increasing convergence between the banking, telco and payments industries.

Whilst much has been spoken and written about the airline-style branches that Virgin will open, it will be the creation of this experience in the digital world that will increasingly be key to the success of Virgin Money as a bank. Having a differentiated digital strategy for the bank defined including what the digital  experience with the human touch is going to be is going to be critical to compete.

A second critical requirement will be speed of execution. The buyer of Northern Rock will have significant  potential time advantages over the buyer of Verde, which will need to be exploited. Verde is undoubtedly far more complicated to execute with the separation from Lloyds Banking Group and the integration into the buyer's infrastructure. This will be a multi-year, complex programme. For the buyer of Northern Rock, there will be no mother ship to separate from , it is a far simpler organisation and therefore, whilst not being completely straightforward, it provides the opportunity to be out in the market with the new differentiated offering for some considerable period of time before the new Verde can be launched.

The undue haste with which the Northern Rock sale is being rushed through, in parallel to the Verde disposal, also makes the deal better for the buyer. With bank valuations having crashed and two eager sellers it is a buyer's market, so whoever buys Northern Rock is going to be able to purhase it at a keen price and is unlikely to pay any more than £1bn, around two-thirds of what the Government had been expecting to receive.

Of course Virgin Money is not the only organisation seeing the true potential of the acquisition of Northern Rock . JC Flowers, backed by funding from CIC, the Chinese state investment fund, is a serious contender. With Kent Reliance Building Society as their foundation for financial services in the UK, JC Flowers does have experience of the UK market, however, on the face of it, is not as well placed as Virgin Money to compete against the Big 5 banks should they win. However JC Flowers is no pushover when it comes to doing deals. It should be an interesting contest with a lot to play for.

For Virgin Money buying Northern Rock could be the transformational deal that could turn it into a real contender.

Wednesday, 10 August 2011

HSBC withdrawing from US Retail - another UK business sturggling with the US

HSBC announcing that it is to sell its $30bn US cards book to Capital One comes hot on the heels of its annoucement that it has sold 195 branches to First Niagara Bank. The new CEO Stuart Gulliver in his strategy statement had made it clear that he would either sell HSBC's US Cards and Retail Services business or close it down. He has chosen to do the former.HSBC will continue to grow its Premier retail banking business in the US, for the meantime.

Indeed it was Midland Bank's disastrous acquisition of Crocker Bank (perhaps the name of the bank should have been sufficient a hint) that weakened its postion to such an extent that it resulted in HSBC acquiring Midland Bank, so the lessons were there for HSBC to see, however they were not heeded.

HSBC acquired Household in 2003. At that time Household was renowned for being a subprime lender and had had several legal cases to answer for scalping (charging exorbitant interest rates). At the time the Chairman of HSBC, John Bond, reassured investors that Household's questionable history was behind it and that it was moving up into prime lending. One of the reasons that HSBC gave for acquiring Household was for the risk modelling tools, that were regarded as being market leading and would ensure Household had superior low default levels. This could be seen as a Gordon Brown moment (the end of boom and bust) for HSBC, particularly in retrospect when the billions of bad debt that has had to be written off as a result of Household are taken into consideration, for Household had not given up on the subprime market and continued to sell into that market for the high margins that could be charged.

HSBC is not the only UK bank to have had a painful lesson trying to become a major retail banking player in the US. Both Lloyds Bank and Barclays have had their fingers burnt in the past and neither seem keen to re-enter the US  retail banking market.

NatWest (now part of RBSG), racked up $1bn of losses on bad property deals when it acquired Bancorp in 1979 selling the business in 1995 to Fleet. RBSG went on to acquire Citizens Bank and Mellon under the leadership of Sir Fred Goodwin. Whilst the merged US operations have been seen to be slightly more successful, there is general agreement that the price paid for both of these was too high. It is also interesting that these two banks are more focussed on business than retail customers.

HSBC is just the latest of many UK businesses that have struggled to make it in US. Marks & Spencer acquired Brooks Brothers selling the business in 2001 for a third of the price it paid for it in 1988. Tesco, the UK's most successful retailer continues to struggle with its Fresh & Easy brand in the US having lost £800m since its loss in 2007.

So what is it with UK businesses and the US? As George Bernard Shaw observed the US and the UK are "two nations divided by a common language". This is as true now as it was when he said it. The challenge for British firms going to the US is that they are led into the false assumption that because the same language is spoken that what customers want, how they purchase andhow the markets work are the same as the UK. This is simply not true for retail or for retail banking. In banking the regulations vary from state to state, there are far more constraints on what retail banks can do, there is far more competition and the whole approach to securitisation of mortgages, as well all know now, is so very different from that in the UK.

It seems that when UK businesses go to the US, unlike if they were going to a country that they were unfamiliar with, they leave their commonsense on the airbridge before they go through immigration.

Monday, 8 August 2011

Bank strategies are all the same - execution is the difference

With the relatively recent changes of leadership of Santander (UK), HSBC, Barclays, Lloyds Banking Group and even RBSG (though Stephen Hester has been  in the role longer than his peers) and with a relatively dismal set of interim results to publish, all the CEOs  have been to keen to lay out to investors and the wider audience what their strategies are for their businesses and where they will be in five years time.

The strategies are remarkably alike and with few surprises. Indeed it would be a good party game for the very sad to strip the brand names out of each of their strategies and see whether anyone can guess which bank the strategy belongs to. We can only hope for shareholders' sakes that none of the CEOs spent large amounts with highly paid Strategy Consultants to put these strategies together, given that they are so alike.

Broadly speaking all the strategies focus on improving return on equity (ROE) for the banks and their individual business units to between 12-15%, getting the cost:income ratio down below 50% ( "positive jaws" now slipping into the common vernacular to the point where even children can explain what it means), selling/closing down business units that are non-strategic i.e. markets or segments that the bank cannot or doesn't want to dominate, focus on corporate banking which supports global trading along the primary and emerging ttrading routes, reduce customer complaints, rebuild customers' trust by improving the customers experience so they buy more, whilst driving out costs (mainly by laying off staff). Of course on top of that each of the banks in their strategy will emphasise the need to meet both international and local regulation, which will mean further rises in costs, which in turn will mean further reductions in staff.

So with all the banks pursuing fundamentally the same strategy (which raises the question of whether more players in the market will actually make customers feel there is more competition or just more of the same) the opportunity for differentiation is all in the execution. The bank that can execute on this strategy the fastest (assuming that each of the banks will execute it to the same standard) should come out as the winner.

However to execute on these strategies quickly and effectively will require a fundamental change to the way that banks organise and go about delivering.

The leadership of banks needs to fundamentally change. (see http://www.itsafinancialworld.net/2011/01/why-leadership-of-banks-needs-to-change.html ). From a culture of hierarchy and fear, where making a mistake results in  instant dismissal to a far flatter organisation where employees are encouraged to take more risks. It is ironic that at a time when the banks have been castigated for taking too many risks that to arise from the ashes the banks need to encourage their employees to take risks. Not financial risks, but more with the rapid pace of change in our society, brought about by the internet and for ever faster communications, the culture of banks of only releasing something to the customers when it is perfect and complete has to be changed to one where getting something out into the market and learning from it (even if the learning is that it wasn't a very good idea) has be part of the culture of the winning banks in the future.

This change of culture requires a different type of leader, particularly to breakdown the barriers that traditionally exist between the business and IT. Whilst Barclays has made the first step, by making the COO and the CIO of their businesses jointly responsible to the CEO for the business (see http://www.itsafinancialworld.net/2011/05/barclays-cooscios-joined-at-hip.html ), ultimately banks need to rcognise that their dependency on IT is total and every executive should understand the language of IT just as they understand the language of banking, and IT-literate COOs, CMOs and CROs will run their business with a much smaller, probably outsourced IT function. To be more radical CIOs should not have a seat at the table, there should be no CIOs. What the banks should end end up with is a small team of IT experts who are commercially and technically savvy who manage the relationships with the organisations (that has as their sole focus IT) who supply the IT services to the bank, and report to the COO.

Antonio Horta-Osario, the CEO of Lloyds Banking Group in his strategy statement has declared his intention to de-layer LBG, and he is to be praised for this, however there is even more radical change that is needed. It is not just the horizontal layers that need removing, but many of the vertical boundaries. With increasingly more business and transactions coming into banks not through the branches, the structure where the bank is structured by channels, where the branch typically has the largest budget and the loudest voice needs to be abandoned and replaced by a structure based around customer segments or brands. Product organisational units need to be either blown up or significantly shrunk as increasingly products are just subcomponents of a customer proposition. To be excellent at delivering change organisational barriers need to be literally brought down and far more co-location brought into play.

The concept of having standalone businesses based around products such as mortgages or cards needs to be abandoned given the stated intent of the CEOs to provide customers with a single, joined up view of their relationship with the bank, as well as by so doing releasing huges amounts of cost locked up in preserving the separation of the product businesses.

Product or proposition launches need to have their lifecycles shortened dramatically. When you look at what Zara has done to the fashion industry (moving from Catwalk to high street in 15 months to 6 weeks), then the banks need to be aware that if they don't address their time to launch then someone else will. With retailers such as Tesco coming into the market that retail mentality is not far away. This requires a fundamental shift in the ways that the banks operate internally with far more collaboration between the brands, marketing, operations, the channels, risk and compliance than is seen today. What is required is a fundamental shift toward a far more incubator mentality approach to product development - something that requires a fundamental cultural change for banks today.

The bank that has the courage to think and execute on fundamental change will ultimately come out as the winner. Some banks are better positioned to do this than others. Some banks are distracted by government shareholdings, forced disposals, crises overseas, etc. but these distractions will not always be there, so the question is whether there is the leadership in the banks who are ready to grab the opportunity and create clear blue water between themselves and the competition.