NEWS last week that TSB planned to close 73 branches in Scotland with the loss of around 300 jobs had a dreary air of familiarity to it but raised fresh questions about the future of the UK’s challenger banks.
TSB is one of a band of second tier lenders that it has long been hoped could pose a greater competitive threat to the giants that dominate the retail and small business banking markets.
READ MORE: TSB boss leaves amid IT woes for challenger bank
However, TSB’s actions last week only strengthened the feeling that the likes of RBS-owner NatWest Group are unlikely to be quaking in their boots.
The Spanish-owned TSB said it would close branches stretching from Wick to Kelso in a move bosses said was about reshaping the bank to respond to a marked shift to digital banking.
The fallout from the coronavirus has put increased pressure on the profitability of banks’ branch networks. Other lenders have announced closure plans in recent weeks.
But challenger banks need to show they are not just following the herd.
TSB’s plans caused a storm, not least because they will impact on a range of deprived communities across Scotland, which are already feeling the effect of wider pressures on high streets.
Age Concern Scotland said it was appalled by the closures noting the “relentless push” towards online banking “doesn’t suit everyone”.
TSB’s protestations that it would retain the 7th largest branch network in the UK and that 94 per cent of its customers would be able to travel in 20 minutes or less to a branch, did little to mollify critics.
It is notable that TSB’s branch closures announcement came after its parent Sabadell group was left facing a big strategic challenge when Spain’s CaixaBank and Bankia announced plans to merge to create what they said would be the country’s biggest bank. Sabadell may look to squeeze cash out of its UK business in response.
READ MORE: Clydesdale big hitter to lead fight back at TSB
Whatever, TSB’s closure plans will do nothing to help restore lustre to a brand that has lost its sparkle in recent years.
With its roots in the trustee savings bank movement that was founded in Dumfriesshire in the early 19th century, TSB was once seen as part of the fabric of the Scottish financial sector. But the brand’s impact was diluted after the bank merged with Lloyds in 1995, and became part of Lloyds TSB.
It was acquired by Sabadell in 2015 for £1.7 billion after a deal to sell what was known as the Project Verde portfolio to the Co-operative Bank collapsed. Lloyds was forced by the European Commission to offload more than 600 branches after receiving a £20.5bn bailout by the UK Government during the 2008 financial crisis.
TSB’s chief executive at the time of the Sabadell deal, Paul Pester, said the Spanish firm’s firepower would help the lender build on its position as Britain’s challenger bank.
He expected TSB to benefit from the £775 million competition remedies programme RBS had to launch to help smaller rivals win market share, to allay EU regulators’ concerns about the £45bn bailout it got.
READ MORE: Incentives for small firms to move from RBS to other banks increased
But Mr Pester departed TSB in 2018 after a botched IT upgrade Some 1.9 million people using its digital and mobile banking were locked out following the problems.
His successor, Debbie Crosbie, may be wondering if she was wise to leave the group that owns Clydesdale Bank to join TSB.
Ms Crosbie was acting chief executive of the former Clydesdale and Yorkshire Bank Group for four months in 2015 ahead of its demerger from National Australia Bank.
Her successor David Duffy presided over the group’s £1.7bn takeover of Virgin Money in 2018.
Mr Duffy reckons the CYBG operations will have a bright future as part of the enlarged group.But he is ditching the Clydesdale name in the belief the Virgin Money brand associated with the 70-year-old Richard Branson will have more resonance with young people.
In July Virgin Money reactivated plans for widespread branch closures in Scotland, which it paused because of the coronavirus.
Virgin Money has just been awarded £35m under the stuttering banking competition remedies (BCR) programme. Mr Duffy believes the group can use the funding to help it sign up another 100,000 small and medium sized enterprise customers by the end of 2025. However, the incentivised switching scheme introduced under the BCR programme to help banks such as those owned by Virgin Money has fallen way below target.
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