Bottom Line: Scots make paper clips count

BANK OF SCOTLAND counts the paper clips, the printing bills and the forms in its branches with an eagle eye. A dozen styles of paying-in slips have been reduced to two, while multi-layered clerical documents costing pounds 3.50 each have been replaced with paper-work costing 17p. The bank is particularly proud of a new high-speed printing machine that saves pounds 17,000 a month on the cost of statements.

This mind-set, saving thousands so the millions can look after themselves, is largely responsible for the single most striking figure in its results: the ratio of the costs of running the bank to the income it made, the best benchmark for comparing efficiency.

Dull the number may be, but it is as important to Bank of Scotland's share price as the glamorous Direct Line insurance investment is to Royal Bank of Scotland.

Bank of Scotland's cost/income ratio fell from 54.7 per cent in the first half to 48.8 per cent in the second, the first mainstream bank to approach the level of that star of the sector, Abbey National, which is still a quasi-building society.

Bank of Scotland has hopes of getting the ratio a lot nearer to the building societies, of which the most efficient is Cheltenham & Gloucester, at about 30 per cent.

Even the present Bank of Scotland level shames the bigger clearing banks, which typically have ratios well over 60 per cent. Royal has made a brave start on improving efficiency, with the ratio coming down over the past year from 66.2 per cent to 61.8 per cent, but it has a long way to go to catch its Edinburgh rival.

One important reason for Bank of Scotland's falling costs is that it has built its English business without a large branch network. This has drawbacks, since it seems the nearer customers are to a bank manager the less likely they are to default. Bad debt provisions are worryingly high in proportion to the bank's size, and went up in the most recent six months, while Royal's went down. But they are not as bad as once feared, which explains the recent recovery in the share price.

Apart from the fact that their year-ends are five months apart, the two Scottish banks are increasingly hard to compare as their business styles diverge. With bid possibilities as well as Direct Line to boast about, Royal is on a more demanding earnings ratio, despite its belated attack on costs. But with the shares at 137p, down 1p, Bank of Scotland is a safer bet for the long haul. There is a lot to be said for people who switch out the lights when they go home.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers