Memorandum submitted
by Clydesdale Bank
I am grateful to you and
your Committee for giving Clydesdale Bank the opportunity to set out our
approach to supporting our business customers through the current economic
challenges. As you will see from the attached submission, our business banking
models differs from other UK
banks. This has enabled us to continue
to support and to lend to the vast majority of our existing customers very much
as we always have done, despite the many challenges facing the banking sector.
As you may know, Clydesdale
Bank PLC is part of National
Australia Group, one of only a small number of banks worldwide that are
currently 'AA' rated. Whilst part of a
bigger group the UK business
is managed by a UK
executive team led by me and we hold a single banking licence covering both our
Clydesdale and Yorkshire Bank brands. We have approximately 2.6 million customers,
of which approximately 200,000 are businesses.
We operate 342 retail branches (predominantly in the Midlands, North of
England and Scotland),
along with 77 'Financial Solutions Centres', which provide specialist support
for our business customers. We provide traditional banking products and
services and our approach has won significant customer approval and external
recognition.
In November 2006 (the last
time of its publication) a survey by the Forum of Private Business named
Yorkshire Bank 'The Best Business Bank' in the UK, with the Clydesdale Bank placed
next. In the same month, our call centre
in Clydebank, Scotland, was named 'Best Call
Centre in the World' at the Contact Centre World Awards. Last month, 'Your Mortgage' magazine named
Clydesdale Bank as 'Best Mortgage Lender, Scotland'
and Yorkshire Bank as 'Best Regional Mortgage
Lender'.
This recent success is the
direct result of our strategy to focus our business model firmly on the needs
of our customers and, in particular, to build local relationships with the
small and medium-sized businesses that bank with us.
Our Financial Solutions
Centres are the focal point for the support that we provide to businesses. Each
is led by a Managing Partner, who is a senior banker with a personal interest
and involvement in supporting the local business community. Almost all credit decisions are made locally
because our managers have built a deep understanding of local conditions and
individual business circumstances.
Similarly, deposits raised locally are reinvested locally. This local approach particularly suits the
SME market that we operate in and our typical business loan size averages
c.£170,000.
As we have developed strong
and trusted relationships with our business customers, we know the issues that
they are facing at the moment, and we believe that we have an obligation to
work with them through the current economic challenges.
Even though we have always
had a disciplined and conservative approach to credit risk, we still approve
nine out of 10 business credit applications. This approval rate has not changed
over the last year. What has changed however is the number of applications that
we receive, these have fallen by approximately a third in the last twelve
months as businesses become more cautious in their borrowing. We are committed
to continuing to support trading companies wherever possible, particularly
SMEs, but we have scaled back lending in some sectors, most notably for
property development given the almost complete absence of a market for these
activities at present.
As before, the majority of
our business lending continues to be priced against Base Rate, with customers
benefiting from any Bank of England
reductions. Any change to rates or facilities that we need to make is agreed by
negotiation rather than imposition. This is despite the significant increase in
the cost of funds that we have faced as a result of higher than normal LIBOR
rates and specifically the major dislocation between it and the Base Rate
compared to long term trends. We have only been able to do this by reducing our
own margins.
I hope that you will
appreciate from the attached information the effort that we have made to forge
a new approach to business banking with our customers and to differentiate
ourselves in the market place. We regard
the economic challenges that banks and businesses currently face as an
opportunity for us to strengthen still further the trusting relationships that
we have built with our customers.
Supporting Information from Clydesdale Bank PLC
GENERAL
· We are a traditional bank, managed in the UK and benefit from an Australian
parent, one of only 12 AA rated banks in the world
· We continue to grow our UK
business in a prudent and responsible manner.
· Our growth has been balanced, growing both lending and deposits. This
means we have a responsibility to our savers as well as those with borrowings
STRATEGY
· Our focus since 2004 has been on
becoming the bank of choice for SMEs.
· Our business model is based on trusted, local relationships with our
business customers.
· We empower our managers to make local decisions enabling our managers to
react to local conditions and individual business circumstances.
· Our focus is on businesses with a
turnover up to £30m; reflecting this, our average business loan size is
c.£170,000
· The basis for our growth has been
the value we can add to a business rather than simple price.
· Since 2004, we have grown our
business lending from £6.3 billion to £15.3
billion
BUSINESS LENDING
· We continue to grow our business - in the year to September, our
business lending increased by 24% while business deposits grew 19%.
· This growth has slowed, principally because businesses are being more
cautious in their borrowing - the number of new lending applications has fallen
by over a third compared to 12 months ago
· We have a disciplined and thorough approach to credit risk. Whilst the
number of applications has fallen we are still approving nine out of 10 business
applications-the same as 12 months ago.
PRICING
· The cost of funds has increased for all banks as the competition for
deposits has increased and interbank lending has slowed
· Banks are also being asked to hold greater levels of capital than 12-18months
ago which has further increased costs
· We have softened the impact on our customers - our margins have reduced
compared to 12 months ago (reduction of 44 basis points).
· Nearly 60% of our total business lending is priced against base rate
with full base rate cuts passed to our customers, an approach we will continue.
· For our small business customers, borrowing less than £250,000, 100% of
our borrowing is priced against base rate.
ASSISTING BUSINESSES
· During the current economic climate our focus is on supporting our
existing customer base whilst prudently acquiring new customers.
· It is not in our interests to have any of our customers in financial
distress.
· We are committed to supporting our business customers through these
difficult times and helping them to be successful
· Our
business model is based on a close relationship between the Bank and our
customers.
· The Business
Partner is the best person to provide early assistance to any customers experiencing
difficulties.
· If
appropriate, they can then call on the services of a range of specialists to
assist the business.
· We
have a strong track record in supporting our customers.
INTEGRATED FINANCIAL
SERVICES
Clydesdale Bank has developed an integrated Financial Services (iFS)
model to manage and deliver its business banking operations.
The majority of business lending is managed through the 77 Financial
Solution Centres (FSCs), which are managed in eight regions. 50 are branded
Clydesdale Bank (16 in Scotland,
34 in England)
while 23 are branded Yorkshire Bank. An additional 4 are dual branded.
The iFS approach ensures that everything we do revolves around meeting
the needs of our members. We offer a total banking solutions for SME customers
that is tailored to their needs and integrated within the bank. But we also
offer more than simply banking-the iFS model prioritises the additional benefit
that we can create by helping to connect people and create value partnerships
between our customers, partners and suppliers.
Each Financial Solution Centre is managed by a Managing Partner who is
accountable for the performance of their Centre and is empowered to take
decisions locally. They have all the essential resources that they need
available to them, while functions (such as Human Resources) are delivered
centrally.
We have placed a great deal of emphasis in creating the right culture
throughout our network and believe that we have empowered a team of staff who
are passionate and creative but, most of all, are committed to service and
business excellence. We have done this by recruiting high performers with the
expertise to build relationships and who are good communicators too.
We work to ensure that our processes are streamlined and completely customer-centric
and that all of our Financial Solution Centres have a professional 'look and
feel' with integrated technology that speeds the decision-making process
LOCATION OF
FINANCIAL SOLUTION CENTRES
Rural Scotland
|
Brand Used
|
London
|
Brand Used
|
Ayr
Carlise
Dunfermline
Inverness
Stirling
Perth
Thainstone
Montrose
Inverurrie
|
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
|
Canary Wharf
Chelmsford
Basildon
Knightsbridge
Paddington
London City
Richmond
West End
|
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
|
North & Central Scotland
|
|
East
|
|
Aberdeen
Dundee
East Kilbride
Edinburgh
Glasgow
Paisley
Bearsden
|
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
|
Bury St Edmunds
Cambridge
Hertford
High Wycombe
Ipswich
Milton Keynes
Norwich
Peterborough
St Albans
Watford
|
Clydesdale
Clydesdale
Clydesdale
Dual branded
Clydesdale
Clydesdale
Clydesdale
Dual branded
Clydesdale
Clydesdale
Clydesdale
|
North East
|
|
Southern
|
|
Doncaster
Leeds
Newcastle
South Yorkshire
Tees Valley
West Yorkshire
York
East Yorkshire & Lincs
|
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
|
Basingstoke
Brighton
Crawley
Croydon
Guildford
Maidstone
Tunbridge Wells
Portsmouth
Reading
Southampton
|
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Clydesdale
|
North West & Midlands
|
|
South West
|
|
Birmingham
Bolton
Blackburn
Coventry
Northampton
Leicester
Liverpool
Chester
Manchester
Nottingham
Derby
Preston
Lancaster
Stafford
Cheshire
|
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
Yorkshire
|
Oxford
Bristol
Bath
Taunton
Worcester
Gloucester
Exeter
Plymouth
Truro
Cardiff
|
Clydesdale
Dual branded
Clydesdale
Clydesdale
Clydesdale
Clydesdale
Dual branded
Clydesdale
Clydesdale
Clydesdale
|
SUMMARY OF THE IFS OPERATING MODEL
1 Value proposition
A full service, offering a
traditional relationship model with decision making close to the customer and
helping businesses connect to one another.
2. Customers
Targeting high-value and
high-potential members from SME business segments.
3 Economics
Driving favourable
economics through relationship based pricing and a low cost network footprint.
4. Staff and Incentives
Sharing profits through an
incentive system that promotes "ownership" and aligns high-performance partners
and encourages tenure.
5. Business Leadership
Attracting local business
leaders as Chairmen to provide mentoring and connections.
6 Network
Reinforcing the powerful
business network to create value for the members and is supplemented by referral
partners/brokers.
December
2008