Lloyds TSB chief lays into rivals

ONE of the most respected figures in UK banking yesterday launched a scathing attack on the tactics employed by most of his competitors.

Sir Brian Pitman, chairman of Lloyds TSB, claimed the supermarket banks were losing money on each customer and heaped scorn on Barclays' "disastrous" expansionary aims of the late 1980s. He also fired a warning shot to his high-cost competitors, saying the lower-cost banks could make their lives "unbearable".

The Lloyds chief said he was amazed by how few people in banking sat down and studied the market. The man who transformed Lloyds into the UK's largest bank, via the purchases of the TSB and Cheltenham & Gloucester, also criticised the belief that biggest is best.

Speaking at an Institute of Economic Affairs conference in Central London, Sir Brian said: "It's dead easy to increase market share. Just charge lower prices and/or take on more risk. Global market leadership is a cop- out for satisfactory return on shareholders' funds."

Perhaps the only banks to emerge unscathed from Sir Brian's speech were the Scottish institutions. Sir Brian held up Royal Bank of Scotland and Bank of Scotland as examples of companies that "produce outstanding results although they have a much smaller market share". He added: "Rightly or wrongly, the Scottish banks have an excellent reputation. Very few people come to me and say the Royal Bank of Scotland and the Bank of Scotland are awful."

The new savings accounts opened by many of the supermarkets also came under attack from the Lloyds chief. He said: "Every time you have pounds 10 on deposit at 6.75 per cent you make a loss. If customers take out their money tomorrow, you make a bigger loss."

Sir Brian added that Lloyds could, if it wanted, win customers from Tesco by changing its pricing tactics. "But we're absolutely delighted Tesco have got them [the customers]", he said.

Tesco came in for praise elsewhere in Sir Brian's speech, though. He said the supermarket group's "low per unit cost" had allowed it to "give Sainsbury's hell". He added: "Those of us with a low-cost format in the mortgage market could make life unbearable for those who haven't."

Lloyds is generally regarded as one of the most efficient traditional retail banks. Its cost-income ratio is 51.3 per cent, compared to 67.6 per cent for Barclays and 73.8 per cent for NatWest.

Sir Brian used Barclays' "number one by 1991" campaign of the late 1980s to illustrate his view that "volume is vanity; profit is sanity".

Richard Reay-Smith, chief executive of retail banking at Barclays, followed Sir Brian on the podium and said: "I find myself in agreement with everything he said, not least in his characterisation of Barclays in the late 1980s."