Examination of witnesses (Questions 100
- 119)
TUESDAY 18 APRIL
2000
MR MATTHEW
BARRETT, MR
BILL DALTON
and MR PETER
ELLWOOD
100. How much were you losing because of them?
(Mr Barrett) I do not have the figures right off the
top of my head but you can be assured we would not close branches
we were making money in.
101. I shall come to that in a minute. I am
not sure about that. You chose 171. There must have been some
criteria for choosing those and not more or fewer. You must have
had some figure in mind as to what amount of loss was unacceptable
in any given branch.
(Mr Barrett) I am not nervous about sharing the figures,
I just do not want to give you the wrong one. I have so many numbers
in my head.
Chairman
102. Drop us a note on that.
(Mr Barrett) I can certainly drop you a note on that.[2]
Mr Plaskitt
103. You said you would not close any which
were making money, but a senior executive of your bank was reported
as telling the Sunday Times that some branches were profitable
but you still needed to close them because you needed the money
to invest in other channels. Are you thinking of closing profitable
branches as well?
(Mr Barrett) No. I think what he meant was that as
customers change their buying behaviour and switch from using
physical distribution to using electronic distribution, we have
to adapt. I am not going to rob Peter to pay Paul. I would not
close down a profitable operation to invest in something. What
I shall do is continue to invest from the profits I make and as
long as the physical distribution network sustains its profit
contribution branches are going to be around long after we are
all gone. There will be continuing refinement by virtue of the
technological revolution and by virtue of customer buying behaviour,
but we shall not close profitable branches.
104. Were you losing millions of pounds in the
171 branches?
(Mr Barrett) Yes.
105. How many millions?
(Mr Barrett) I told you that I would get back to you
with a number. I do not have them now.
106. You know it was millions.
(Mr Barrett) Yes, I do.
107. Ten million pounds?
(Mr Barrett) You are pushing me for a specific. I
do not want to mislead you. I am saying to you that I shall get
back with a number but all I can tell you is that it would have
to be millions and material or we should not have done it.
108. So it might have been around ten million.
(Mr Barrett) By the way, I do not see an awful lot
of applause for us being the last one in town, when everyone else
hotfooted out years earlier. We did try to hang on in.
109. I shall come to the others in a minute.
It would be ten millionish, would it? If it were lower than that
you would not be that bothered.
(Mr Barrett) Yes, that is correct.
110. Half an hour ago you said, "I believe
in maximising access and in making profits".
(Mr Barrett) Yes.
111. You make about £10 million profit
each trading day according to my calculations; at least you did
last year. Was it not worth trading one day's trading profit to
allow access to continue for the customers of those 171 branches?
(Mr Barrett) It depends on your point of view. My
job is to take a good organisation and try to make it a great
one and that means I have to deal with issues of competitiveness
against domestic rivals, against new international rivals coming
in and hopefully at a level at which I can take the battle to
them overseas and improve our export earnings. One cannot get
complacent because of one's overall profitability and use that
to justify continuing not to address areas of poor productivity.
You have to prune rose bushes from time to time to keep the whole
thing alive. I do not think one justifies the other. The connection
is not valid. In the end I have to run every element of the business
as productively as I can or else I would threaten the whole thing.
112. Of those two objectives which you declared,
the making profit outweighs the maximising access clearly.
(Mr Barrett) That is correct. You can do both for
99 per cent of the time.
113. You closed 171 on 7 April, you have actually
reduced the number of branches by 37 per cent since 1988, one
wonders how much further the process has to go. The senior executive
I quoted earlier, whom you may now wish to requote, said that
the figure of 800 is the number you need to keep. You currently
have 1,700, so are there 900 more closures to come?
(Mr Barrett) To speculate on the speed at which society
will transform from traditional modes and models of doing things
to the new models is a mug's game frankly. It is very, very difficult
to predict. All I can tell you is that the trends are in full
flood here, they are in full flood everywhere else in the world
and there is a significant reduction of physical branch use in
favour of telephone, internet, pc, banking by mail, etcetera.
How fast will that go? There is a demographic issue in it. It
splits. Although interestingly enough people tend to think of
the older community, one in eight of our internet customers is
over the age of 60. At Barclays we plan to do a customer education
programme because some of them are frightened by technology and
do not need to be. How many? What it will end up in the end it
would be foolhardy for me to guess, it would be hypothetical,
speculative and I would not do it. What I would concede though,
I would not duck the fact, is that you will continue to see a
transformation of physical distribution in favour of electronic
distribution for years to come.
114. What that means is that you are confirming
there will be a continuous programme of branch closures.
(Mr Barrett) Correct; that is correct, driven by customer
behaviour not by mine.
115. May I turn to Mr Ellwood? Lloyds TSB closed
207 branches between 1998 and 1999 according to our figures. Your
bank has actually cut branches by 37 per cent since 1988 so it
is a pretty similar track record to Barclays. Yet an executive
of your bank has been quoted in the press recently as pledging
not to close any of your branches where it risks leaving a community
without a bank at all. Have you changed policy?
(Mr Ellwood) We introduced that policy as a refinement
of our branch policy in the last few weeks.
116. Can you tell us the reason for changing
the policy?
(Mr Ellwood) Principally because we have been listening
very hard to our customers and where we have closed branches,
particularly historically where it has been the last branch in
town, our customers have been very vociferous in their commentary
to us about it. As a result of listening extremely hard to those
customers, we have said that with effect from the end of this
month we shall not close a branch where we are the last branch
in town.
117. So the customer driven message in your
bank is keep the branches open. The customer driven message in
your bank is shut them. Is that right?
(Mr Barrett) Yes, that is it.
118. That is very interesting.
(Mr Barrett) Do not oversimplify, with respect.
119. Very different customers.
(Mr Barrett) What I said to you was that we shall
provide banking services the way customers want them. If they
want them in branches we shall provide them in branches. If they
want it electronically we shall provide it electronically. If
the shift in customer buying behaviour changes, we shall provide
customers with choice to bank any way they choose. We shall not
bully them one way or the other. We shall not continue to have
unviable operations because if we do we are asking our customers
elsewhere to cross-subsidise the operations of keeping those open.
2 See p 17. Back
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