A stan­dard bearer for pro­bity

The Herald Business - - Straight Talking -

WHILE the big play­ers on the Scot­tish bank­ing scene have been hit­ting the head­lines again in the past fort­night, post­ing big losses and reignit­ing con­tro­versy over bonuses, Ed­in­burgh-based Stan­dard Life has been go­ing qui­etly but de­ter­minedly about its busi­ness.

For Royal Bank of Scot­land and Lloyds Bank­ing Group, which owns Bank of Scot­land, much of the fo­cus has been on progress with their un­en­vi­able task of try­ing to ef­fect big branch sell-offs in the UK re­quired by the Euro­pean Com­mis­sion be­cause of the bil­lions of pounds of state aid th­ese in­sti­tu­tions needed amid the fi­nan­cial cri­sis.

And RBS ap­pears to have been fac­ing ever-greater pres­sure from the UK Government to re­trench by dis­pos­ing of part of its Ci­ti­zens busi­ness in the US and con­tin­u­ing to slim down its in­vest­ment bank­ing op­er­a­tions, so that its fo­cus is in­creas­ingly on its domestic op­er­a­tions.

Life, pen­sions, and in­vest­ments gi­ant Stan­dard Life, in con­trast, has been able to stay on the front foot as it tries to make the run­ning in a UK life and pen­sions sec­tor. This sec­tor has not been the eas­i­est of en­vi­ron­ments in which to op­er­ate in re­cent years, given the grim eco­nomic back­drop and sweep­ing reg­u­la­tory change.

At the end of Fe­bru­ary, just ahead of RBS and Lloyds un­veil­ing big losses, Stan­dard Life an­nounced a deal to hike its pres­ence in the UK wealth man­age­ment mar­ket. It is ac­quir­ing New­ton’s pri­vate client busi­ness, an op­er­a­tion which has about £3.6 bil­lion of funds un­der man­age­ment, for up to £83.5 mil­lion.

Although the price of this pur­chase is not huge in the con­text of Stan­dard Life’s multi-bil­lion­pound stock mar­ket worth, the deal is viewed as un­der­lin­ing Stan­dard Life’s con­tin­u­ing tran­si­tion from life in­surer to a more broadly-based as­set man­age­ment op­er­a­tion.

Stan­dard Life In­vest­ments has en­joyed great success in the in­sti­tu­tional f und man­age­ment mar­ket. It is there­fore log­i­cal enough that Stan­dard Life is now try­ing to hike its pres­ence in the pri­vate-client wealth man­age­ment arena, al­beit through ac­qui­si­tion on this oc­ca­sion rather than or­ganic growth.

Mean­while, Stan­dard Life In­vest­ments has been try­ing to claim the high ground in the cor­po­rate gov­er­nance field. Two weeks ago, this fund man­age­ment op­er­a­tion high­lighted its at­tempts to change re­mu­ner­a­tion poli­cies at bank­ing gi­ant Bar­clays and in­surer Aviva.

In terms of Stan­dard Life’s cur­rent prog ress i n the life, p e ns i o ns a nd in­vest­ments mar­kets, chief ex­ec­u­tive David Nish has been mak­ing his pres­ence felt. How­ever, his pre­de­ces­sor, Sandy Crom­bie, un­doubt­edly laid the firm foun­da­tions which have al­lowed Mr Nish to in­no­vate.

Mr Crom­bie faced a sig­nif­i­cant chal­lenge to get Stan­dard Life back on track. His success in achiev­ing this, and Mr Nish’s ef­forts since, mean that this in­sti­tu­tion stands out as a ma­jor success story in a Scot­tish life sec­tor which has seen more than its share of bad news over the last cou­ple of decades.

Up un­til rel­a­tively re­cently, the Scot­tish fi­nan­cial com­mu­nity in gen­eral had a wide­spread and proudly- held rep­u­ta­tion f or pru­dence. The near-col­lapse of Royal Bank of Scot­land and Bank of Scot­land owner HBOS, in the wake of the fail­ure of US in­vest­ment bank Lehman Brothers in au­tumn 2008, put a se­ri­ous dent in this over­all rep­u­ta­tion. HBOS, which was meant to be es­sen­tially a mort­gage bank, had to be rescued by Lloyds.

How­ever, amid the un­der­stand­able fo­cus in the UK on the con­tin­u­ing sagas of the big play­ers on the Scot­tish bank­ing scene, it is im­por­tant not to lose sight of the resur­gence of Stan­dard Life. Nei­ther should we over­look the amaz­ing track record of Ed­in­burgh in­vest­ment house Bail­lie Gif­ford, well-known for a longterm ap­proach that has been en­abled by its part­ner­ship struc­ture and which has de­liv­ered spec­tac­u­lar but steady success over the decades.

Then there is Ed­in­burgh Part­ners, built from a stand­ing start in 2003 by former Scot­tish Wid­ows in­vest­ment chief Sandy Nairn into a player with bil­lions of pounds of funds un­der man­age­ment.

All of th­ese success sto­ries have in­volved the lead­ers of th­ese busi­nesses set­ting their own agenda, with a firm idea of where they want to go and some bold ac­tion to get there.

There is lit­tle doubt that Stephen Hester, chief ex­ec­u­tive of RBS, and his op­po­site num­ber at Lloyds Bank­ing Group, An­to­nio Horta-Oso­rio, also have a firm idea of where they want to go.

Nei­ther of them was at the helm of their re­spec­tive in­sti­tu­tions back in the scary days of au­tumn 2008.

How­ever, by virtue of large Government stakes in RBS and Lloyds Bank­ing Group, things are not en­tirely in their own hands.

RBS’s rev­e­la­tion on Fe­bru­ary 28 that it is plan­ning to sell be­tween 20% and 25% of US bank­ing op­er­a­tion Ci­ti­zens in about two years’ time ap­peared to fol­low in­tense pres­sure for this type of move from the UK Government and reg­u­la­tors.

How­ever, it is far from clear that such a sell-off is the right idea. The tim­ing looks bad, given cur­rent val­u­a­tions. And there is a good chance that Ci­ti­zens might de­liver bet­ter fi­nan­cial re­sults for the tax­payer than some of the domestic op­er­a­tions of RBS, given the UK econ­omy i s cur­rently i n dan­ger of record­ing its third re­ces­sion since 2008.

The Government should be more aware than any­one of the poor UK eco­nomic out­look, amid con­tin­u­ing aus­ter­ity, given the re­cent de­ci­sion by rat­ings agency Moody’s to strip the coun­try of a triple-A credit rat­ing which Chan­cel­lor Ge­orge Os­borne ap­peared to view as so im­por­tant when he took of­fice.

David Nish has made his pres­ence felt as head of Stan­dard Life


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