The systems breakdown at TSB is not (yet) the worst UK bank computer cock-up of all time: that prize is held by RBS, whose problems in 2012 afflicted customers for a month and attracted a £56 million fine. But the failure of TSB to migrate four million customers’ accounts from systems bequeathed by its former parent Lloyds to a streamlined IT structure, designed by new Spanish owner Banco Sabadell, is surely the fiasco that has been longest foreseen.
It dates from 2009, when Brussels insisted that Lloyds dispose of part of its branch network as a condition for the bailout that followed its acquisition of HBOS during the financial crisis. This was ‘Project Verde’: the plan was to rebadge 632 former Lloyds TSB and Cheltenham & Gloucester branches as ‘TSB’ and sell them to the Co-operative Bank — which turned out to have such troubles of its own that it was incapable of completing the deal. Instead, TSB floated on the stock market in 2014 under the slogan ‘Welcome back to local banking’ — but fell without protest to Sabadell within a year.
All the while, TSB accounts were ‘hosted’ on the Heath Robinson contraption that was Lloyds’ legacy computer systems. A lesson was offered by RBS, which scrapped plans to complete a similar separation of branches rebadged as Williams & Glyn — the cannier Spanish bank Santander having walked away from buying them for fear of systems incompatibility. But late last year, TSB chief Paul Pester announced the launch of a whizzing new platform, cloned from Sabadell, which would herald ‘the humanisation of digital’ and offer ‘unheard-of’ speed and flexibility. Now all he can do is grovel. Scanning a growing field of user-friendly, digitally-driven ‘challenger banks’, we might conclude that it’s easier and wiser to build one from scratch than buy a cast-off.
Nailing Tesco’s coffin
I’m finding it hard to get excited about a Sainsbury’s-Asda merger, since I rarely shop at either. If I had to close my eyes and name products associated with them, I’d say ‘reliable own-brand food items’ for the former and ‘dirt-cheap clothes from third world factories’ for the latter — so I suppose that constitutes a kind of synergy.
What can be said is that the deal hastens the long-term decline of Tesco, which will lose the top spot in UK market share if it goes through. It will put even more price pressure on suppliers, be they British farmers or Turkish manufacturers, but it won’t dent shoppers’ enthusiasm for bargains at Aldi and Lidl, which is the driving force of the current retail scene; and its success will depend on a marriage of cultures and technologies, including online shopping and delivery logistics, that will be phenomenally difficult to manage on such a scale. If I were one of the major shareholders — Walmart in Asda and the Qataris in Sainsbury’s — I might be looking for a timely exit.
News from Barclays ahead of its AGM on Tuesday was that ex-Treasury official Sir Gerry Grimstone has ruled himself out as a candidate to succeed John McFarlane as group chairman. Grimstone will focus on chairing the ‘non-ring-fenced’ corporate wing of the bank, while former Kingfisher retailer Sir Ian Cheshire chairs the ring-fenced retail branch operation.
Enough chairmen already, you mutter, but if I had to pick one of Barclays’ other non-execs to keep the peace between these big beasts while also holding activist investors such as Edward Bramson at bay, I’d go for the feisty Zambian economist Dambisa Moyo. Her recent book, Edge of Chaos, analysing the tendency of modern democracies to elect bad populist leaders, proposed that the votes of ‘highly qualified individuals’ (judged by education, job or quiz score) should carry more electoral weight than those of the ill-informed: perhaps she would apply that to shareholder votes too. But if the board prefers to fill the vacant chair with a more presidential figure who also happens to know where most of Barclays’ bodies are buried, then — with a show of modest reluctance — I’ll pop my CV in the post.
From Jermyn St to North Korea
The UK economy grew just 0.1 per cent in the first quarter, says the ONS, reflecting low construction activity, sluggish manufacturing, squeezed consumers, Brexit uncertainties and bitter weather. That’s the worst quarter since 2012 — so no wonder I had such a feeble response to my call a fortnight ago for evidence of feelgood. Two readers broke through the gloom, however.
The first is a veteran banker who lends to small-to-medium UK corporate borrowers and describes himself as ‘miserable, cynical and pessimistic’ by nature and experience. But ‘to my pleasant surprise we’re seeing strong demand from a variety of businesses with one thing in common; they have thrived in spite of macroeconomic conditions and are universally positive about the outlook. They have sound plans, good track records and all the attributes necessary to support their lending proposals.’
The second is Jermyn Street shirtmaker Emma Willis: ‘Trade has never been better… Manufacturers like us are now able to communicate with customers at the other end of the world through technology which is a powerful, cheap marketing tool.’ As for the supposed shortage of skills, ‘We have no problem attracting young fashion graduates and college leavers to our Gloucester factory to learn to sew and cut to a very high standard; there’s no longer a strong draw to London, which has become unaffordable to many. My main aim is to create as many jobs as possible and grow our manufacturing through the international appetite for high quality, authentic, British-made product. We’ve been approached by potential agents in China and South Korea — maybe soon to include the North too!’ Kim Jong-un in Jermyn Street shirting? Now there’s a reason to be cheerful.