Halifax’s full-year results, published today, will encapsulate the problems facing the giant ex-mutual: the consolidation of the global financial services industry, falling domestic market share and, at a corporate level, the fact that it is ploughing an all-too-narrow furrow.
It does not go unrecognised within the bank. Chairman Jon Foulds admits as much, saying that Halifax needs to look at rebalancing the group through a concentrated effort on growing new business areas. That task falls to group finance director Roger Boyes.
Boyes, who joined the bank when it merged with Leeds Permanent Building Society in 1995, has a wealth of sector experience. He was FD and chief executive of the Leeds, after all. But Boyes will need to draw on experience from his previous jobs in industries as diverse as ceramics and automobiles if he is to reposition the bank.
Halifax’s interim results, issued for the six months to 30 June last year, revealed underlying pre-tax profits up 10.1%. But few expect it to match that kind of growth for the full year.
PricewaterhouseCoopers principal in charge of the banking technical group Andrew Hawkins says Halifax remains far too reliant on its traditional strongholds of mortgages and savings; a remnant of its days as a building society before it converted in June 1997.
New entrants such as direct lenders, Internet account providers and supermarkets are getting a head start by avoiding the cumbersome costs of a branch network. These competitors have used high savings rates to attract customers and are expected to attack the mortgage market next.
Hawkins also says Boyes will have to look carefully at the Halifax’s capital requirements, as many observers fear the bank is keeping too much capital which could be invested to yield returns and protect it from hostile takeover bids.
Goldman Sachs bank analyst David Townsend neatly summarises the bank’s problems. ‘Nearly 80% of Halifax’s business derives from mortgages and savings which are under massive attack from newcomers as they recognise the money that can be made from selling these products,’ he says.
The Halifax has already shown it is more ambitious than a mere building society.
As a bank it needs to widen its horizons once more.
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