Midland to make borrowing easier

MIDLAND Bank is to be encouraged by its new owners to reverse a fall in lending by accepting higher risks and devolving more decisions to its branches.

This could bring a welcome breath of fresh competition among the banks when many are reluctant to lend.

The new owner, HSBC Holdings, is understood to believe Midland has retreated too far towards lending only on the highest security at low profit margins.

It will aim to restore more normal banking criteria, allowing growth of the loan book - though it will be cautious, to avoid a repeat of past cycles of lending sprees followed by bad debts. More weight will be given to business plans of borrowers and less to the security on offer.

HSBC is understood to want to reduce the influence of the credit committees that approve loans. These are seen to delay decisions without improving loan quality.

HSBC is convinced Midland can accept riskier business safely by devolving decisions on middle and small corporate lending to the regions and the branches, which can make better assessments.

Midland is also under pressure to reduce its high ratio of costs to incomes from the present 72.9 per cent to 60 per cent in the next four to five years, which is the present worldwide average for the HSBC group.

This is certain to mean branch closures and job losses at Midland, but part of the reduction is to be through extra business rather than pruning costs.

Meanwhile, HSBC Holdings is to emphasise the devolved nature of management at the Midland group by setting up a new worldwide headquarters in Lower Thames Street, a quarter-mile from Midland's head office in Poultry.

HSBC Holdings is to move next January from Hong Kong to London as part of an agreement with the Bank of England over supervision of the group after the takeover of Midland.

HSBC considered taking a floor in Poultry. But William Purves, HSBC chairman, said a contract had been agreed for space in 10 Lower Thames Street, which will be shared with Samuel Montagu, the merchant bank subsidiary.