What are the marketing issues facing the global banking system?
The central issue facing the global banking industry is one of trust. For safe people who saved with them, for people who borrowed from them, even for governments that support for banks and lost trust in the whole financial system. As we saw at the weekend, Alan Greenspan announced that even he was wrong in how the banks were allowed to be completely unregulated. And the main issue now for the banking system is to gain back people’s trust. So maybe people can save with them, that will then allow banks to lend and it will then start to rebuild the world economy. But that’s not going to happen for some time because this whole issue of trust has gone, and trust takes a long time to build up.
How will marketing issues affect HBOS brands like Halifax?
The HBOS brands, like the Halifax and Birmingham Midshires, are brands, and the problem with brands is they can have a negative or a positive image, and its image is determined by how the customers and how other people want to view that organisation on what it represents. Because HBOS has more or less gone bankrupt, it's run out of money, it's been bailed out by the Government and in that way it's been bought out by Lloyds TSB, the question we now have to ask ourselves is what value does brands like the Halifax and Birmingham Midshires represent to Lloyds TSB, and the answer is really going to be very little.
As a brand, thirty years ago, it represented a staid, boring building society where you saved your money, you got interest, you got a mortgage and you bought a house. With banking deregulation, in the ‘80s and ‘90s, the Halifax and Birmingham Midshires had formed HBOS, HBOS went progressive, aggressively lending money, and people thought it was great. But now it's lost that trust factor again. And people are no longer seeing it as a brand they can rely on because it's been bailed out by the Government, with the Government now being told it's going to be bought out by Lloyds TSB.
What Lloyds TSB is buying is not the brand. It's not got any interest in the Halifax brand. It's a cold hard commercial decision. It's buying a database of assets of properties with mortgages on them and people who are saving with them, and that’s where Lloyds TSB will make its money from. As far as Halifax and Birmingham Midshires will go, they may exist as a brand for a few more years but, just as Lloyds did when it bought out TSB Bank, it will just become a name and part of its marketing spiel but will no longer have any brand value to Lloyds TSB.
What types of marketing should banks focus on over the next year?
The main issue we have to address is back again to this issue of trust and accusations of greed. Your average British taxpayer is suffering. We’re entering into a global recession, money’s getting harder to get hold of, unemployment’s increasing, our tax burden will increase because the Government has to find the money to spend, and people do not want to see bankers walking around with large bonuses at the end of the year saying I'm off to buy myself a brand new Porsche. Those days of conspicuous consumption by City bankers with big bonuses are over.
In reality, they may still get their bonuses, but from a banking marketing point of view, they’re not going to have to publicise it. They going to have to say to employees keep a low profile, we’re not going to publicise bonuses, we’re going to discourage you from doing it, because we've been bailed out by the UK taxpayer and they do not want to see their hard earned money going into your pay packet as a bonus. So that’s the first thing they need to do. They need to get around this public relations issue they’re facing.
Complementing that, the British banks are going to have to start sending out messages to the British taxpayers and to its customers that we've learned the lesson from our ways of lending to all and sundry, and what we’re now going to do, regardless of what the truth might be, we’re going to return to a more traditional way of safe banking. We’re going to go back to, we’re going to be a high street bank, we’re going to lend responsibly and we’re going to build your trust up that way.
Now whether or not the banks do that behind the scenes is a different thing. They’re still going to make money but they’ll be more guarded. But the message they’re sending out to the UK taxpayer and to the customers will be one more of reservation, being more careful and more cautious in how they lend money, and that’s the main thing they need to focus on. Rebuilding that trust, rebuilding their brand images, let’s forget we've been bailed up by the British Government and by you, we are a responsible bank, and we’re going to behave like that.
This video extra is from Credit Crash Britain: HBOS Breaking the Bank which was first broadcast on Thursday 30th October 2008.