HBOS, the company formed out of the merger of Halifax building society and Bank of Scotland, plans to squeeze the big four high street banks until the pips squeak. I'm not sure that its new, cash back, debit account, billed as the next big innovation in current account banking, turns the screw very far.
Admittedly, the new account is quite a bit better than the the laughable 0.1 per cent of interest that the Big Four typically pay on their current accounts. This is a rate of interest which is close to usury, and anything that improves on it is a welcome advance. Yet like a lot of Halifax's Big Four busting initiatives, what's being offered is more marketing hype than bargain of the century.
The account pays £1 back for every £100 spent on the debit account. Moreover, it pays 0.5 per cent interest on credit balances and its authorised overdraft rate is "just" 13.9 per cent, which in itself is as good as or better than any rival apart from HBOS's own "high interest" bearing current account. On the other hand, utility bills paid by direct debit don't qualify for the cash back and you need to be depositing at least £1,000 a month into the account to get the benefit.
For HBOS, the new account will be a banker from day one. The effective 1 per cent interest rate on debit card transactions in combination with the 0.5 per cent rate of interest on credit balances may make it less expensive to service than the existing high interest rate account. In addition, the bank gets an 8p interbank charge, paid for by the retailer, on every qualifying transaction. The requirement to deposit £1,000 a month also reduces the credit risk of such customers to virtually nil.
Whether the account succeeds in taking great chunks of market share away from the big four, as HBOS hopes, is on the other hand anyone's guess. Experience in the United States with similar products suggests that moneyback can be a highly effective marketing tool. Furthermore, Halifax is plainly beginning to have a quite marked effect on rivals with its more keenly priced offerings. All four of the big clearers will announce record profits this year, yet look beneath the headline figures and British retail banking profits are either flat or falling. The growth is coming from overseas, from corporate banking and from capital markets activity.
HBOS promises many more initiatives to attack the soft underbelly of the big banks, but the pips, though squeaking a little, aren't quite popping yet.
Failure at the LSE
Angela Knight, chief executive of the Association of Private Client Investment Managers and Stockbrokers, laments the fact that the London Stock Exchange - a unique brand with global recognition - should find itself a target in the consolidation of national stock exchanges rather than the bidder. She is not alone. I've been inundated over the past few days with e-mails complaining of exactly the same thing.
I know it's fashionable to argue that it doesn't matter who owns the City's businesses and institutions providing they continue to operate and thrive here, but plainly the LSE touches a raw nerve. The exchange's likely takeover by either the German or French exchanges has revived the debate about why Britain seems incapable of producing a world class securities business, this despite the fact that it houses the biggest international financial centre in the world. The LSE's present predicament has offended national pride anew.
On one thing all the emails are agreed. The LSE only has itself to blame for this failure, which is largely one of management and vision, or rather the lack of them. Ever since I've been in financial journalism, the Stock Exchange has stumbled, as if sleep walking, from one cock-up to the next. At almost every stage it has failed to foresee and respond to change. Rather it has had to be dragged kicking and screaming into each new phase of City development - nearly always following, very rarely leading.
This was most visible in the Stock Exchange's refusal to accept deregulation. The protectionism for members that the exchange insisted on trying to preserve right up until the mid 1980s made them almost wholly unprepared for the maelstrom of change that hit the City when the Thatcher government finally took matters into its own hands. The quote-driven electronic trading system the exchange adopted was out of date even by the time it was launched and the eventual introduction of an electronic order book was botched.
The setting up of a computerised settlement system was so badly mishandled that in the end the Bank of England had to take control of the project. By that stage cowed into a state of near paralysis, the Stock Exchange failed even to put up a fight when the Financial Services Authority unilaterally decided to take control of the listing requirements, which was tantamount to an act of castration.
Much of this history of mismanagement is down to the fact that until quite recently the LSE was a snakepit of vested interest and waring factions. It was run more like a dysfunctional club than a business. Yet the vacuum in leadership has continued into the LSE's latest incarnation as a quoted company owned by investors. The LSE's failure to buy Liffe, London's fast growing derivative exchange, was a key wrong turn for which there is no reasonable excuse. From start to finish, the negotiation was mishandled with the result that Sir Brian Williamson, Liffe's chairman, instead sold to Euronext, the LSE's rival.
The decision to remain focused solely on equity trading, leaving settlement and clearing to others, was equally misjudged. Neither Deutsche Börse nor Euronext has been as purist in its approach, which today means that both of them are larger businesses better placed to play the role of consolidators. The LSE's only hope of independence now rests in flogging this point to death with competition regulator, yet shareholders won't thank its directors for so doing. Hiding behind regulators is what business losers do, which regrettably is rather what the LSE has become.
Hardly anyone noticed when Unilever paid £1bn for Slimfast, which was mainly because in a display of Fatifers and Thinifers the company also bought Ben & Jerry's ice cream on the same day. This was understandably viewed as a lot more newsworthy. To begin with, the Slimfast acquisition went swimmingly, so much so that when Atkins and other low carb diets began to hit the celebrity radar screen, Niall Fitzgerald, then Unilever's chairman, famously dismissed them as just a passing fad. How wrong can you be?
Slimfast's sales duly slumped, and today it is Atkins, not Slimfast, which is everyone's favourite way of shedding the pounds. Still, Unilever hasn't entirely lost its appetite for appetite suppressants. Yesterday brought news of a £21m deal with the natural remedies company, Phytopharm, which owns the rights to products extracted from the Hoodia cactus, a South African plant used for centuries by Kalahari bushmen to reduce appetite out on hunting expeditions. Unilever will be hoping it proves more effective than Phytopharm's supposed miracle cure for baldness, which turned out to be demonstrably worse at correcting the problem than E45 cream.
The omens, on the other hand, are not that good. Pfizer has already been there before Unilever but eventually decided its licensing deal with Phytopharm wasn't worth the candle. Unilever's approach, which would be to develop appetite reducing snack bars and other foods from the cactus, rather than an outright anti-obesity drug, may have more mileage, yet it's a curiosity, to say the least, for a food company to be trying to develop products that ensure we all eat less.
Obesity is a major challenge for the Unilevers and Nestlés of this world. Big Food is all at sea as to how to deal with it. The Phytopharm deal demonstrates that Unilever is at least beginning to move in the right direction, but ultimately there is no happy outcome to its conundrum. Eat less, eat local are not obviously welcome developments for the global food corporation.Reuse content