Outlook: Bank of Scotland

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THERE'S AN old saying which has it that those who jump into bed with dogs are bound to come out with fleas. To suggest that the Rev Pat Robertson can in anyway be likened to a dog would probably draw another of those helpful letters from Mr Robertson's UK lawyers, the venerable Glasgow firm of Levy & McRae, but there is no doubting that Bank of Scotland is more than a little flea bitten by the association.

As it happens, the failed joint venture with Mr Robertson has proved more in the nature of an embarrassment than a commercial catastrophe. Peter Burt, the bank's otherwise widely admired chief executive, emerges with egg on his face, but his job intact and hardly under any serious threat.

Nearly everyone in the City agrees that from a stand alone business perspective, the Robertson deal was a good one, allowing Bank of Scotland direct access to the lucrative US retail market at little cost to short term profits or risk to capital. If the truth be known, most of his peers in the banking industry were green with envy when Mr Burt first announced the initiative. Furthermore, the monetary loss to the bank of terminating the relationship is marginal.

All the same, questions do need to be asked of how the Bank of Scotland came to sign up for this public relations disaster. Directors must have known that Mr Robertson's views were at best controversial and at worst insulting to some customers.

All commercial relationships are a matter of judgement and the charitable view of Bank of Scotland's linkup with Mr Robertson is that it carefully weighed these risks and came to the view that the commercial potential far outstripped the possibility of a public backlash.

More likely is that directors failed to think about the public relations implications at all, or arrogantly assumed they could brazen them out. Whatever the answer, Bank of Scotland is refusing to comment - probably wisely in view of the mess so far - beyond the bland statement that "changed external circumstances" had made the joint venture unfeasible.

The most obvious recent parallel is with the fiasco of Brent Spa. Most of the scientific evidence has since backed Shell's judgement that the correct policy was to sink the rig at sea. None the less, the company's failure to anticipate public hostility ended up costing it dearly, both in terms of a consumer boycott and an expensive U turn on means of disposal.

The lesson of both episodes is an old one - that big corporations need to listen to their customers and stress test their business strategies against customers' views and prejudices. Bank of Scotland is lucky to escape the Robertson fracas with little more than red faces all round. Next time it could be worse.