Mr Stewart told an analyst briefing in Sydney that the National proposes to revitalise its two UK banking franchises, Clydesdale Bank and Yorkshire Bank, and expand its operations throughout
the south-east of England.
“Following an extensive review, we have decided to stay and build our banking franchises, Clydesdale and Yorkshire, because the UK is an attractive market with a positive outlook,” he said.
“The UK is big enough for smaller banks to compete profitably in niche markets. It is three times the size of the Australian banking market and offers growth opportunities not available to our Australian competitors.”
The National’s European Chief Executive, Mrs Lynne Peacock, told analysts that Clydesdale and Yorkshire had followed an undifferentiated strategy from the major British High Street banks, with multiple legal entities and complex operating structures, significant inefficiencies and duplication, distribution limitations, product pricing out of step with the market and frequent management changes.
“In the past, our service delivery has not kept pace with customer trends, our distribution network did not extend into the south-east of England, we had no third party channels and limited direct channel capability,” she said. “In addition, we lacked common products, processes and systems and had separate banking and wealth management platforms.”
Mrs Peacock said that Clydesdale and Yorkshire are becoming more nimble and customer focussed so that they can develop a sustainable presence in the UK banking market and provide
adequate returns to National shareholders. “The change strategy we are implementing is building on the strong foundations of Clydesdale and Yorkshire which include quality brands that have secured a strong customer base in their
natural market area,” she said. “We also have good people with business and retail banking skills that are being leveraged
across our current franchises and extended into our new banking business in the south-east of England.”
The new Clydesdale and Yorkshire banking presence in the UK is based on:
· a re-aligned High Street presence in the UK with a simplified and refreshed product set and
small business banker support in “flagship” branches;
· a new ‘light infrastructure’ distribution network of integrated financial solutions centres
based around our business and private customers;
· simplifying our product range, more product support and actively managing our margins
down to market levels;
· third party distribution of mortgage products; and
· a broad cost reduction program involving process simplification, centralising workloads,
rationalising management structures and consolidating technology platforms.
Mrs Peacock said the National had recently completed the legal entity merger of Clydesdale and Yorkshire banks which will reduce duplication and improve efficiency, and opened 12 new
integrated financial solutions centres in the south-east of England.
“We will have over 30 integrated financial service centres across the south-east and converted 39 Clydesdale and Yorkshire locations in the midlands and northern UK into IFS centres by the end of the year,” she said. “We will also shortly commence the conversion of 50 existing Clydesdale and Yorkshire branches into flagship High Street centres, strengthen our e-business capability and improve processing of customer transactions.”
Outlook
Mrs Peacock said UK earnings will be lower in 2005 because of the headwind created by margin decline, built-in cost growth and ongoing investment.
“As part of our change strategy, we are aiming for a significant reduction in our cost base, improved productivity, higher volumes of new business and improved customer and staff satisfaction,” she said.
“We are already seeing some positive early results from implementation of the new strategy. Clydesdale and Yorkshire are recording a decrease in customer attrition and an increase in new customers. This gives us confidence that a two to three year turnaround is achievable.”
