Outlook: Lack of vision

CAN THERE be a viable independent future for the likes of Alliance & Leicester, the Woolwich and Bradford & Bingley? The first of these is a pounds 5bn company in terms of stock market capitalisation, and the idea that there might not be might seem silly.

Yet today in the financial services industry, nobody enjoys a God-given right to exist, however large and established, and in a world where companies less than a year old can float with valuations not far off this level, there's plainly plenty of cause to wonder.

The immediate causes of Peter White's unceremonious sacking as chief executive of Alliance & Leicester are now well chronicled. Up until about 18 months ago, he seems to have done a competent job in steering the former building society into the publicly quoted sector, cutting costs and generally sharpening it up. Then he seemed to lose the plot. His autocratic, lordly manner rubbed non-execs and executives alike up the wrong way, and he came to be seen as more of a barrier to change than an instigator of it. The failed merger with Bank of Ireland was just the final straw.

Yet there is a deeper subtext to Mr White's abrupt execution, as well as the executive turmoil which is all too apparent in other banks. All these established players are finding it hard to know how to deal with the technological revolution going on around them. Should they be embracing the future, as the Prudential is with Egg or Halifax is planning to with its own stand-alone Internet bank, despite the risk of cannibalisation of their existing customer base, or should they be huddling together for warmth by engaging in defensive consolidation, as proposed by Bank of Scotland in its hostile bid for NatWest?

In many of the established banks, there is a good deal of confused thinking on these issues. The truth of the matter is that in most cases they don't know what to do, nor is there any reason why the people who run these organisations ought to know. Typically men in their 50s, trained in the old ways and grown complacent on the cartelised structure of traditional banking, they perhaps lack the vision to know how to respond.

Without sitting at the Alliance & Leicester board table, it is impossible to know whether that was specifically true of Mr White, but certainly there's been very little evidence of creative thinking from this company for some years now. The irony is that this need not have been Alliance & Leicester's fate.

As a comparatively small operator with an excellent brand name, A&L is reasonably well-placed to take advantage of the new technologies. If A&L had used this position to launch an Internet bank, like Sir Peter Davis at the Pru, it would now be sitting pretty with a stock market value about double what it is now. Instead, Mr White spent his time faffing around arguing about who should be top dog in ill-conceived banking consolidations like that proposed with Bank of Ireland.

As things stand, A&L's prospects as an independent company are probably poor. A&L may now be too far behind to catch up. Instead it is left contemplating the prospect of a miserable little merger with the Woolwich or Bradford & Bingley, or worse still a knock on the door from the big bad wolf, Sir Brian Pitman of Lloyds TSB. The tragedy is that it needn't have been like this.