Lloyds’ big push targets affluent
Leaked memo reveals major strategy to drum up sales from middle class
LLOYDS Banking Group has hatched a secret plan to turbocharge sales of its services to wellheeled, middle-class customers, The Mail on Sunday can reveal.
New boss Charlie Nunn has devised a growth strategy putting what the bank has described as its ‘mass affluent’ customers – typically people earning more than £75,000 – at the centre of its business.
According to an internal memo, the FTSE100 lender will merge its private banking division, which caters for wealthier individuals, with its more broadly focused consumer relationships arm.
It means the two divisions will coordinate their efforts to sell investment products alongside insurance and other services.
The memo, sent by senior Lloyds banker Antonio Lorenzo, said the merger will take place in July and that work ‘has already started to define the vision’. It added: ‘A key part of this will be connecting banking, insurance, lending, payments and investments into a single integrated proposition. This provides a terrific opportunity for our private banking team, led by Debbie Burton, to become part of the new Consumer Relationships business.’
The latest move is part of a strategy to boost Lloyds’ growth in areas outside of traditional high street banking, where it already has the lion’s share of the market in current accounts and mortgages.
In his first annual results in February, Nunn outlined a blueprint to rake in an extra £1.5 billion in annual revenue by 2026, split equally between lending income and fees from products such as insurance.
The bank, which has 26million customers, has calculated the ‘mass affluent’ market could expand at 10 per cent a year. Lloyds plans to invest £300million on developing services for the affluent middle class. It hopes that will boost the total balances of the accounts held by customers by as much as £15 billion by 2026.
Gary Greenwood, an analyst at Shore Capital, said: ‘They’re looking to get more bang for their buck from mass affluent customers.
‘There’s a difference between forcing products down people’s throats that they don’t actually need – like the sales practices of the past that led to mis-selling – and getting customers to buy products that they actually want. The bigger risk is that they over-charge on one product to sell others more cheaply.’
Last week, the bank announced changes to its management team. Lloyds’ commercial banking boss David Oldfield will leave next year and retail banking head Vim Maru will also exit the bank.
MAJOR high street banks Lloyds and Barclays are poised to announce a raft of branch closures in the coming days as they continue to desert the high street and persuade customers to do their banking digitally rather than in person.
It is understood that Lloyds could put between 60 and 100 branches on notice of being axed, representing the first in a wave of closures this year across its retail brands. Barclays is likely to announce the closure of up to 20 branches.
One banking expert told The Mail on Sunday that the big banks will then cut a further 200 after Easter with another 400 being axed before the year end. If correct, it will confirm The Mail on Sunday’s report last month that some 800 bank branches will be closed this year.
News of the imminent cuts follow in the wake of HSBC’s decision last week to cull 69 branches – one in seven of its high street outlets – between July and October this year.
HSBC says the trimming of its network is a result of a preference among customers for mobile and digital banking. Less than half of the bank’s customers, it adds, ‘actively’ use its branch network.
Analysts believe the cuts at Lloyds will disappoint many customers who rely on a local branch and who genuinely believe the (outrageous) claim the bank makes in adverts that it will always be by their side. But they also say the closures are long overdue in financial terms. Although the bank announced 48 branch closures in October last year, it has been nowhere near as aggressive as rivals in taking an axe to its branches – branded Lloyds, Halifax or Bank of Scotland.
Currently, the bank has just short of 1,500 retail outlets – three times more than HSBC and nearly double the number of Barclays and NatWest.
Derek French, a retired banker with NatWest and a longstanding campaigner for shared branches or banking hubs, says Lloyds is ‘overbranched’, so news of imminent branch cuts does not surprise him.
‘The bank is under new leadership,’ says French, ‘and I am sure it will want to get to grips with a bloated network as soon as possible.’
Charlie Nunn, the new boss of Lloyds, is busy restructuring its commercial and retail businesses. With a focus on offering insurance and investment products to customers on salaries of £75,000 plus – the mass affluent market – it is understood the case for a branch network twice as large as rivals has become untenable.
Barclays has been steadily chipping away at its branches. Last year, it culled 63 with two more closing earlier this year. It has just short of 800 branches. Already this year, more than 100 branch closures have been announced. Last month, The Mail on Sunday exclusively revealed NatWest’s decision to axe 32 branches across its NatWest and Royal Bank of Scotland brands.
Like HSBC, NatWest said the closures were a result of customers shifting to mobile and online banking ‘because it’s faster and easier for people to manage their financial lives’.
This month we were the first newspaper to report on Nationwide Building Society’s decision to serve notice on four London branches. Its Cheshunt branch in Hertfordshire was added to the closure list on Friday.
The spate of closures this year represents the first big test for a system just introduced by the banks, designed to ensure branch closures do not cause irreparable harm to local communities.
The voluntary system was devised by the Access to Cash Action Group, a committee headed up by ‘cash champion’ Natalie Ceeney and set up by banking industry trade association UK Finance. It means that when a bank announces branch closures, it must provide cash machine network operator Link with details of the communities affected.
Using an algorithm devised by the banks, it looks at those specific communities that will be left bankless – and assesses whether they will be left with inadequate access to cash as a result of the closure.
For example, a closure could result in certain sections of society – the elderly and cash-generating businesses like independent retailers having to travel to another town or village to do their banking.
In such cases, Link can request that the banks fund the setting up of a shared bank which customers of all the banks can use – with the bank being managed by a third party such as the Post Office.
Alternatively, Link can recommend less expensive solutions such as the installation of a free-to-use cash machine or an improvement in the existing post office facilities – for example, an extra counter so that more customers can be served.
The effectiveness of this new regime remains in question. Although it is still early days, Link has con
firmed it is only probing three of the 107 closures announced so far this year – the NatWest closures in Headingley, Yorkshire, and Swanley in Kent; and HSBC’s scheduled axeing of its Clifton branch in Bristol. Banking sources do believe a number of new banking hubs will be sanctioned by the end of the year, bringing their total to around 20. Two – in Cambuslang near Glasgow and Rochford, Essex – are already up and running while another five were given the green light before Link began its monitoring work. These are being set up in Acton, West London; Brixham, Devon; Carnoustie, Angus; Knaresborough, North Yorkshire; and Syston, Leicestershire. Yet some argue the rollout of shared branches is being stymied by the strict rules the banks have imposed on Link. It can only intervene in communities that the algorithm, devised by the banks, identifies as worthy of further investigation. Banking experts believe that the algorithm has been set up to minimise the costs that the banks must pay.
John Howells, chief executive of Link, says shared branches will represent a big ‘step forward’ for some communities that otherwise would end up bankless. But he concedes that the voluntary nature of the scheme put together by UK Finance and Ceeney is not fit for purpose.
For the scheme to be effective, Howells says it needs the backing of regulation and then to be overseen by the Financial Conduct Authority.
The regulator would then be able to insist on banks setting up shared branches where it felt they were required. The Government has promised supporting legislation for the last two years, but has so