WEDNESDAY 15th SEPTEMBER - Workmats, Wanless and worries emerge…
I am invited to a meeting (planned some time ago) for the "top 200"senior managers in the Gibson Hall, our grade l listed Victorian banking hall in the City. It is now used for conferences and functions, and I suspect costs us a fortune to maintain and run. The idea was to use the meeting to discuss the Brand Mobilisation project, which is a "let's get all the staff behind the Brand, customer service is everything," type initiative about which cynicism comes very naturally.
We have already spent considerable time completing "workmats" to get a deeper understanding of our customers, what our competitors are offering and so on. One disadvantage of being in purchasing is that we also get a deep understanding of just how much NatWest is paying an external company for these workmats and consulting support for this exercise, which does make my team tend to be even more dubious than most about the whole thing.
This exercise is at least partially redeemed by being run by John Paddick, a senior executive who has done various jobs around the Group. John has a wicked sense of humour and can be genuinely inspirational as a presenter, which greatly helps in this case.
However, given the events of the last couple of weeks, the meeting now becomes largely about the bid. Derek Wanless is, as you would expect, incredibly positive about our new bancassurance strategy- combining traditional banking, "wealth management" (pensions, long term savings and so on) and insurance, both general (cars, property and so on) and life insurance, including endowment and savings products.
Well, he has to be positive as we bid 25% above L&G's previous share price (market value), and the City response has been somewhat mixed. Some see it as a bold move and like the strategy, others think we are overpaying and believe bancassurance is unproven. Lloyds TSB are now pursuing the same strategy with their purchase of Scottish Widows, but their performance has been so good over the last few years they could get away with anything. Sir Brian Pitman, the Lloyds Chairman, could announce the acquisition of Jack's Fish and Chip Shops for £10 Billion and the press would praise his vision in spotting the potential for selling health insurance to heavy consumers of deep-fried products.
Other analysts and journalists see this as a diversion from what should be our core business, and a management distraction when we should be sorting out our basic Retail Banking business, which is under-performing the competition. And virtually admitting that NatWest needs the management injection that Prosser will bring has been seen as a sign of weakness, rather than a positive strengthening of senior management resource.
It doesn't help that NatWest has a long track record of acquisitions ranging from the adequate to the disastrous. After abortive attempts to become a major player in North America, and then to become a global investment bank, there isn't much goodwill left in major investors’ NatWest account. Unwinding the investment bank strategy generally, and various specific fiascos (German bond trading springs to mind) in the mid 90's cost billions of shareholder value. The result has been that the immediate market reaction to the bid has been poor, with the price down from around £12.50 pre-bid to under £11. Only a few months ago, it was as high as £15.
Derek stresses at some length the benefits of the management injection that L&G can bring, particularly Prosser, who will run a large chunk of the new organisation. But this is sending mixed messages to our own senior management, just as it has to the City. There must be a few people sitting here thinking that, by implication, they are not considered to be capable of a top job here. Is it sensible to admit weakness to your own senior management?
There are also losers in this whole process, although they are losers who will walk away with large sackfulls of money! Gartmore, the fund management business, will be amalgamated into L&G, and *Paul Myners, the main board director responsible for Gartmore and Coutts, and the man who built Gartmore really, will go, as well as their MD's. He doesn't look too unhappy. I like Paul; he sent me a personal message of congratulation when I became Purchasing Director, which was unexpected and very much appreciated.
He also seems to have a bit more energy and life than some of our top management- perhaps starting as a teacher, then journalist rather than purely working as a banker explains it. Martin Gray, another board member, who runs Retail Banking, is retiring as planned, but there must be a few others at a senior level who are worried by the developing situation.
* 2019 notes; Paul Myners – sorry Baron Myners, became a Labour Minister under Gordon Brown, and was made a life peer for his efforts. He’s done far too many different things to mention here, and I didn’t know about his humble upbringing until I read his Wikipedia page. Having done so, I stick with my view that he is fundamentally a Good Bloke.