THOSE who fail to study the past are condemned to repeat it. That is my warning today for those tempted to wave through the Lloyds TSB takeover of HBOS on the strength of assurances about a continuing Scottish presence and office in Edinburgh.
In fact, should this deal go through as outlined, it is not one iconic name that will be wiped from our national consciousness, but two. Bank of Scotland is set to disappear with the proposed new post- takeover name of Lloyds Halifax. But so, too is
the TSB. This is (or was) a unique Scottish banking institution, the preservation of whose name, identity, persona, distinctiveness, Scottish board and Scottish corporate headquarters were the subject 20 years ago of solemn guarantees and assurances. Now only the name has survived. And now this, too, is about to go.
The slow death of the TSB is instructive. It was once one of the biggest and most popular banking institutions in Scotland. It was a champion of social inclusion long before the concept was re- invented in the 1990s as a right-on mission statement for the progressive set. TSB was a penny bank. It drew its huge popularity and strength from its origins as local savings banks in the early 19th century. It reached into every little Scottish town. It employed some 40,000 at its peak and had 1,100 branches across the UK.
It catered in the main for that tranche of the population now known as the unbanked – those who needed a reliable repository for their savings but who were routinely turned away by other banks who thought their custom too trifling to bother with.
It generated great loyalty. Thus, when the board sought to convert into a quoted company there were complex legal changes – and an army of more than three million customers to be won over. Ahead of the conversion in 1986, the chairman, Sir John Read, and the TSB board gave earnest undertakings that historic links would be preserved with the trustee savings bank movement.
There would be a separate Scottish board in Edinburgh and the Scottish identity would be preserved. However, even with these pledges, many in Scotland still opposed the flotation. They were swept aside.
TSB fared badly as a plc. Its board made a calamitous decision to buy the merchant bank Hill Samuel a year later for £770 million.
The deal was struck just ahead of a stock market crash which saw prices plunge 25 per cent. And Hill Samuel proved to be a mess.
An acrimonious shareholder meeting to approve the takeover lasted for six hours and at times degenerated into uproar. The meeting, in London, disadvantaged many Scottish shareholders. But even with the board ranged against them, rebel investors voted a total of 12.2 million shares against the deal .
Three years and many write-offs later, the board launched a re-organisation. The Scottish operation was lost in a new region embracing the north of England. "Even retention of a separate Scottish board and a registered office in Edinburgh", thundered a lead article in The Scotsman at the time, "is largely cosmetic if business strategy is to be dictated by a centralised group rather than allowing TSB Scotland managers to adjust services to local market conditions as has been the case to date... The Scottish financial community as a whole should be concerned at the latest threat to its standing as a centre of excellence in money management." Quite so.
The re-organisation was deeply unpopular in Scotland. Lord Taylor of Gryfe, who had vigorously opposed the flotation until receiving the assurances stood up against it, urging the Lord Advocate to investigate breaches of the guarantees. But the re-organisation was pushed through.
TSB struggled on. Then in October 1995 came a £5 billion takeover from Lloyds Bank.
Like the HBOS takeover, the plot had been hatched for some time. And, like the HBOS deal, the announcement was forced by disclosure in the media.
But unlike the current takeover, reaction from the Labour Party was notably cool. Instead of Monopolies Commission investigations being swept aside, a Labour Treasury spokesman said competition issues would need to be explored and the merger "could have competition implications for the UK banking system." The spokesman was one Alistair Darling.
Here again there was talk – initially – to maintain the separate identities to cater for different sectors of the personal banking market. But today Lloyds TSB Scotland, chaired by Euan Brown, received only two small print mentions in the 2007 annual report. There are no disaggregated earnings statements. And there is no mention of its chief executive Susan Rice, who is not a member of the main board (though the Labour peer Lord Leitch is safely ensconced).
For those seeking comfort on the future of Bank of Scotland, some conclusions can be drawn from this sad affair.
One is that word of mouth assurances are of little use and can be quickly cast aside by new faces coming through the executive revolving door. "Guarantees" given in good faith are steadily whittled away.
Such undertakings must be entrenched. And there have to be guarantees on Treasury arrangements, to ensure that BoS corporate has some meaningful budgetary discretion and control.
Many would dearly love the Bank of Scotland pre-Halifax merger to be reconstituted, and with the same culture and ethos. In recent years it became part of a flawed business model. And its own lending to housebuilders and property companies concentrated risk exposure rather than diversifying it.
All that said, Bank of Scotland is more than a name. It is not just a brand like Crawfords biscuits or Baxter's soup. It is a vital part of Scotland's story. It is just too historic an institution to lose in a shotgun smash-and-grab – and smothered with "guarantees" that only prolong a certain death.
The full article contains 987 words and appears in The Scotsman newspaper.
