banking

Taking a view of the banking sector

Having worked in the banking industry for more than 30 years I have seen many changes to the operations and ethos of this sector. I originally joined Williams & Glyn’s when I left school and was thrust into the world of high finance. Those were the days when banks opened at 9.30am and closed at 3.30pm and cash machines only distributed £20 at a time. However, we all survived. Today is very different, the crash of the financial sector in 2008 highlighted that whilst significant progress had been made in terms of products and services, this all came at a cost. The Banks had changed their culture from service to sales. Staff were encouraged to cross sell to their customers, which meant they achieved their sales targets and were paid bonuses. However, this culture caused the banks issues as they fell foul of this practice due to potential mis-selling in some but not all cases, which has resulted in the hedging scandals, the payment protection issues and now the question of how many businesses were unnecessarily placed into administration. Massive contingencies have been made for compensation to both past and current customers as we see investigations progress. We have seen both Barclays and Lloyds Banks return to profit recently and both have chosen to pay a large proportion of this to their staff as bonus payments. Antonio Horta-Osorio, the Chief Executive of Lloyds Banking Group, will accept a £1.7m all-share bonus for 2013 as the taxpayer-backed lender reported a pre-tax profit of £415m. The admission came as Lloyds reported its full-year results for 2013, which showed a statutory profit of £415m, compared to a loss in 2012 of £606m. As well as Mr Horta-Osorio’s own bonus, Lloyds confirmed it had put aside an overall staff bonus pool worth £395m, equating to an average payout to each of the bank’s staff of £4,500. Barclays is not owned by the taxpayer and their boss, Anthony Jenkins, has chosen to give up his bonus of £2.7m, for the second year running. Lending is still a bone of contention with most individuals and businesses. The Banks are continuing to have a very cautious approach to providing any facilities, be it loan, overdraft, mortgage or working capital. The rise of the alternative route is apparent with crowd funding, business angels and pay day loans becoming very popular. The amount of bad debt on the Bank’s balance sheets particularly from property related businesses during the recession has made them wary of offering even secured facilities to established businesses, and therefore virtually discounting any support to start ups. However, from this chaos we have seen many new businesses created due to redundancies, and people have invested their money and faith in themselves. Family offices are also providing seed capital for start ups and people like myself who are ex-bankers are using their expertise to support new and growing businesses to succeed and finding capital from various sources for all manner of projects, large and small.

Sue Aldridge

CLM Capital Ltd www.clmcapital.co.uk