Banking Consolidation and Competition: A New Era for Customers

Strategic Insights -

In the past decade, the British banking industry has undergone significant changes, marked by a decline in branch-based services, job losses, and an increase in competition. This shift has led to consolidation, with demutualized building societies and supermarkets entering the market, offering better deposit rates and pushing high street banks to adapt. The merger of Lloyds and TSB, and the takeover of Midland by HSBC, signal the trend of consolidation that is expected to continue. Furthermore, life insurance companies are being targeted for acquisition, with Lloyds TSB's purchase of Scottish Widows being a notable example.

Key Takeaways:

  • Over the past decade, hundreds of bank branches have been closed, and thousands of jobs lost as banks sought to reduce costs and increase efficiency.
  • Demutualized building societies, such as Alliance & Leicester, the Woolwich, Northern Rock, and the Halifax, have entered the market, competing with high street banks.
  • Supermarkets, including Tesco and Sainsbury's, have offered higher deposit rates, attracting customers away from traditional high street banks.
  • The Internet and telephone banking have become essential tools for customers, with all major banks offering 24-hour services.
  • The banking industry is expected to continue consolidating, with further mergers and acquisitions likely.
  • Mutual life insurance companies, such as Friends Provident, Equitable Life, and Scottish Provident, are potential targets for acquisition.
  • The Government is concerned about social exclusion, where low-income individuals may be left without access to banking services.
  • The clearance banks are awaiting the results of a report by Don Cruickshank, examining the competitiveness of banks, including credit-card pricing.

Statistics:

  • In just three months, Standard Life has taken a 1% share of the savings market.
  • Lloyds TSB has agreed to purchase Scottish Widows for £7 billion.
  • The purchase of Scottish Widows is expected to pay windfalls of up to £40,000 to each member.
  • The clearing banks are expected to continue consolidating, with further mergers and acquisitions likely.

Sources:

  • Caroline Merrell, Banking Correspondent, The Times, 1999
  • "It's A Wonderful Life" film
  • The report by Don Cruickshank, examining the competitiveness of banks
  • The Government's initiative to address social exclusion in banking services
  • The industry moves by Lloyds TSB, Scottish Widows, and Standard Life
  • The trend of consolidation in the banking industry