IT IS downright rare to hear a banker talking about good news these days. Yet David Anderson, the chief executive of the Manchester-based Co-operative Financial Services is in a positive frame of mind.
Although details won't be released until the group unveils its annual results in April, CFS, which runs the Co-operative Bank and is in the process of merging with the Britannia Building Society, is having a moment. It may even be, according to Ander
son, the "turn of the tide" for Britain's mutual financial services.
Deposits – from both account holders and business customers – are on the up. In 2008, current accounts were up 65 per cent and Anderson says they have gone up another 50 per cent since.
And as the Co-op Bank is "old-fashioned", it mainly funds lending from deposits.
As a result, the bank's write-downs last year were in the tens of millions, rather than tens billions common to most other UK banks. It also means that although the bank may not be in a position to meet all the clamouring demand for finance since lending has dried up, it maintains it is "open for business".
"We will lend more in 2009 than 2008," says Anderson, although he admits the bank won't be able to fill the funding gap completely. "That doesn't mean to say we can cope with all the demand, we can't. But we are growing lending. We are seeing large numbers of customers coming to us. It is good news."
Since 1992 the bank has grown its corporate lending book from a low of about £600 million to £4.4 billion in 2008. Traditionally a retail bank, it began targeting the corporate market at the end of the 1980s under chief executive Terry Thomas, now Lord Thomas of Macclesfield.
In the early days, the Co-op's corporate division was focused on banking for local authorities and charities. But now it has a network of more than 20 corporate banking centres throughout the UK and it is targeting SMEs. And the Co-op will officially launch its new corporate banking centre in Edinburgh in two weeks.
The Edinburgh Co-op, next to the Bank of Scotland's Corporate Banking headquarters in Fountainbridge, has brought in two former HBOS bankers to run it. David Bell, the senior corporate manager spent 16 years with HBOS, while Craig Ramsay, senior business development manager, also worked there.
Bell and Ramsay are aiming to lure new corporate customers with turnovers between £1m to £50m and will talk finance for acquisitions, management buy-outs and working capital requirements. Although the Co-op may not be as freewheeling with its lending as HBOS was, it is looking to its trustworthy brand to attract bank customers burnt by rising costs of lending.
"We believe customers are looking for brands they can trust," says Anderson. "There is all kinds of evidence people are suspicious of the shareholder-owned banks.
"We are seeing people wanting to do business with us. There are a lot of corporates that want to do business with a bank that has a more traditional view of relationships than the very large players."
Of course, not all comers will be welcome. Since 1992, when the bank launched its ethical policy, the bank claims it has turned away £1bn worth of business. Fossil fuels, animal testing and the arms trade are all black marks.
Since the Co-op quietly opened its door in Scotland in January, no-one has yet been turned away. But the bank is currently focusing efforts on the renewables sector.
Already the group banks a number of Scottish renewables projects. Also joining Bell and Ramsay in Fountainbridge is Chris Rodgers, a renewable energy specialist, who will work with small and medium-sized companies involved in wind, hydro and biomass schemes.
And there is more to the strengthening of the Co-op. In January, it announced plans to merge with the Britannia Building Society to form a £70bn "super-mutual". The deal, which will be voted on by Britannia's members in April, is the first of many expected to follow after the introduction in January of the Building Societies (Funding) and Mutual Societies (Transfers) Act 2007 allowing such mergers to go ahead more easily.
"From the mutual sector's point of view a building society, a mutual life assurer, a friendly society, or a co-op can all merge without demutualising," explains Anderson. "We could have done this transaction before, but either CFS would have had to demutualise or Britannia would in order to do it.
"Psychologically, if you are an organisation that wants to be mutual, going to your members to say we want to demutualise in order to do this is a fundamentlally difficult step to take. This legislation has made it possible. We think there will be other cross-sector mergers. It is another pathway mutuals didn't have before."
Anderson brushes aside the fact that when the merger completes in July he won't be there to see the mutual promised land. The top job at the newly-merged group instead goes to Britannia chief executive Neville Richardson. Anderson says he is all in favour of the move.
"I think Neville will do a great job. I think he will be a great successor. I am very proud of the part I have had in the deal."
Anderson won't be drawn on where he plans to go next – he says he looks forward to taking time off.
A former chief executive of the Yorkshire Building Society, he has been at the helm of the Co-op only for four years.
During this time he oversaw the merger of the bank and Co-operative Insurance to form CFS. It was a difficult job, involving thousands of rather unco-operative job losses, but he succeeded in taking steps to modernise a group that has been around since 1872 and can trace its roots back to the birth of the co-operative movement in Rochdale in 1844.
Anderson will likely not be out of a job for long if the mutual sector continues to be galvanised by the UK economic crisis. When asked if this is a new dawn for the mutual sector, Anderson says "why not?"
He continues: "What you have got here is the opportunity for mutuals to start to turn the tide. None of the demutualised building societies are left independent, but the remainder are strong and growing. When the government finishes with all the banks, they might have to turn them all into mutuals.
"There aren't now any large banks that aren't owned by government. The hierarchy goes something like HSBC, Barclays – which you could argue is owned by a foreign government – Nationwide and then CFS."
He laughs: "It does change the landscape a bit."
The full article contains 1145 words and appears in The Scotsman newspaper.
