The Investment Column: Sir Bruce gets the simple things right

Assuming no disasters between now and next June's annual meeting, Sir Bruce Pattullo will bow out on a high note after 18 years at the helm of Bank of Scotland. Yesterday's record pounds 369m interim profits were 14 per cent up on last year's first half and beat most expectations.

They confirmed the merits of combining the bank's 300-year-old conservatism with an impressive streak of innovation that meant it entered direct banking years ahead of rivals and pioneered supermarket banking with Sainsbury. Despite having no branch network in England, Bank of Scotland's market share of the UK banking sector has risen in a more or less straight line during Sir Bruce's tenure.

It has achieved that by doing simple things right. While many believe that any rise in costs is unacceptable, Sir Bruce says no company ever downsized itself to greatness. Key is growing income faster than costs and Bank of Scotland has been doing that for years.

As a result it has some of the most impressive statistics in the sector. The tier 1 ratio of capital to income, the most common measure of a bank's balance sheet strength, rose to a healthy 6.8 per cent from 6.3 per cent. And the important cost/ income ratio improved to 51.4 per cent from 52.9 per cent.

Some analysts question Bank of Scotland's strategy, particularly its move into Australia. Shareholders, however, should have no complaints. At the start of 1993, the shares traded at 110p. Yesterday they closed 2p lower at 510p.

Even after such a strong run the price looks justifiable on a forward p/e ratio of 14, although the 1.9 per cent yield leaves little margin of safety. As a relative minnow in a sector of leviathans, a takeover must be odds on. Good value.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Sport
Seth Rollins cashes in his Money in the Bank contract to win the WWE World Heavyweight Championship
WWERollins wins the WWE World Heavyweight title in one of the greatest WrestleMania's ever seen
News
news
News
i100
Arts and Entertainment
tvPoldark, TV review
News
(David Sandison)
newsHow living on a houseboat meant I didn't officially 'exist'
ebooks
ebooksA special investigation by Andy McSmith
  • 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

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor