IT crisis saved branches, says TSB chairman
TSB’S chairman is hopeful that the bank can move on from its nightmare year.
UNDER-PRESSURE TSB has rowed back on plans to cut its high street bank branches following an IT meltdown that left it on its knees. Chairman Richard Meddings told
The Sunday Telegraph that plans to cut some of the bank’s 550 branches have now been revised as the physical stores “made a real difference” to customers during its IT crisis, the UK banking sector’s worst crash in recent memory. “Our plans [for cutting branches] are different today to what they would have been if we had this meeting when I joined the board last October,” Mr Meddings said. “[But] we didn’t get given the best branch network when we left Lloyds [in 2014] so there will be some that will be closed, some will open, we’ll invest in others.”
TSB declined to comment on how many branches have been saved as a direct result of the botched IT upgrade. However Mr Meddings insisted that it will have more than 500 branches “for some time to come”. He said he hoped the network will also help land TSB a large slice of the £775m up for grabs from RBS. The fund is aimed at boosting competition in business banking.
The UK has lost over half of its bank branches since 1989. TSB is attempting to move on from its nightmare year, hiring CYBG veteran Debbie Crosbie to become chief executive in 2019.
TSB chairman Richard Meddings has had his fair share of luck. His friend Robin Budenberg has twice had to watch as the TSB chairman hit a hole-in-one while playing golf against him – including one on his stag do, which was witnessed by 11 of his closest friends. “How lucky is that?” jokes the veteran City banker, who was best man at Meddings’ wedding. “He thinks he’s good at golf but everyone he’s played against knows he’s just lucky.”
At first glance, it doesn’t appear that Meddings has carried that luck from the golf course into the boardroom. The 60-year-old was the finance chief at Standard Chartered during the financial crisis, leaving after a “challenging year” and in the wake of a £415m fine for sanction breaches from US regulators. He has been audit committee chairman at Deutsche Bank throughout its loss-making years, taking up the post as the German lender pressed go on a five-year overhaul. And he became the chairman of TSB just months before it was hit with an IT crisis so bad that MPS renamed it the “Truly Shambolic Bank”.
One senior TSB insider argues that the “rough and tumble” of Meddings’ career prepared him for fallout from the challenger bank’s disastrous IT upgrade. Yet Meddings’ seems visibly offended when asked if he feels as though he has been in the wrong place at the wrong time, repeatedly clarifying his sense of good fortune.
“My mother always used to say how on earth did you become a finance director of a bank just before the financial crisis,” he says of Standard Chartered, his favourite job to date. “I think I’ve been very lucky actually – I’ve lived through the changes in banking, I’ve been doing it since 1984. I’m not quite sure why [anyone would think] I’ve been unlucky.”
But in describing the past 12 months – during which TSB suffered a massive IT meltdown that resulted in political scrutiny, public ridicule and the chief executive Paul Pester being forced out – Meddings uses metaphors derived from contact sports rather than golf.
On strategy he cites boxer Mike Tyson – “everyone has a plan until they get punched in the mouth”; on the bank’s response he turns to legendary American football coach Vince Lombardi – “it’s not whether you get knocked down, it’s whether you get up”. And he insists that the TSB brand is “bruised rather than fractured”.
The bank has started to pull itself off the canvas. The recent appointment of CYBG veteran Debbie Crosbie as its next boss is viewed as a major coup. But it will be a while before the hits of the last year stop ringing in its ears. The lender’s IT crash was the UK banking sector’s biggest technology fiasco in years, leaving almost 2m people without access to their bank account, while 1,300 lost money through fraud attacks and 370 former customers were wrongly told that they had died. Between April and June, the bank lost around 500 customers a day. Some of those who stayed remain angry.
“There’s been no outreach to me as a customer saying: ‘Oh, well since the encounter your account has been dormant how do we get you back again,” says Jonathan Silverman, a customer who runs a consultancy for law firms. “It’s silent, it’s almost like they’re still too embarrassed.
“I’ve left my account dormant to give them a chance to do something proactive – I will open an account with someone else if they don’t get their act together in the next couple of weeks. I’m talking to law firms every day about their banking and I can’t possibly put TSB before any of them at the moment.”
It is not surprising that people are still annoyed. MPS criticised TSB’S handling of the meltdown back in June, accusing its bosses of being slow to admit to the extent of the problems. Meddings argues that the team was simply reacting to the information they received from their Spanish owner at the time, and insists there was no deliberate attempt to gloss over the situation. The initial message was that systems would be up and running within two hours. The problems actually continued for weeks.
“There’s that saying: ‘Don’t shout fire in a crowded theatre,’” he says. “Looking back [you think] you should have been much more forceful in the negativeness of the messaging, but of course it’s a retrospective judgment. Everyone was trying to do their absolute best, they really were, in very difficult circumstances.”
Does he think Pester – once described as “the luckiest man in banking” for narrowly missing out on the top job at the Co-operative Bank before a £1.5bn black hole was uncovered – should have left earlier than he did? He stood down in September, six months after the IT issues first surfaced.
“It’s about understanding how important he was in the psyche of TSB, and in the heat of all that migration crisis to essentially pull out the CEO I think would have posed a very significant operational risk to the group,” says Meddings. “He’s held in huge respect and affection around the group. An earlier time simply would have been wrong.”
Meddings doesn’t pinpoint an exact moment when he realised the bank was in the grip of a major PR disaster. He said it was stressful, but not necessarily more stressful than the financial crisis. Friends of his say his answer would have been different a decade ago – the respected banker’s long experience of stressful situations helps him to stay calm in a crisis.
“He was concerned, obviously, and thinking about it, obviously, but not stressed, definitely not stressed,” says one person close to him. “Without doubt it would have been different 10 years ago. He’s been able to take this in a very measured way.”
Meddings says he had four priorities when he took over as executive chairman following Pester’s departure: ensure the bank’s IT systems were more stable, improve the way TSB resolved customer complaints, find a new chief executive and put in a bid for the RBS “alternative remedies package”, the fund set up as a condition of the state support provided to RBS following the financial crisis. He believes that he has ticked the first three boxes, albeit with further work to do on addressing customer complaints, and a bid will go in later this month for the RBS funds.
He is convinced that TSB can make a strong case for the money and hopes that MPS judging the bids will be able to look past the IT meltdown. TSB branches are well spread around the country (unlike Metro, which is predominately based in the South East, and CYBG, which is focused on the M6 corridor) and it has room to grow. TSB operates 6pc of the UK’S bank branches but has only a 2pc share of the business banking market. Santander, on the other hand, operates roughly 10pc of country’s branches and 10pc of business banking and therefore, TSB argues, would find it harder to grow.
It is interesting that TSB highlights the importance of its 550 branches, inherited when the bank was spun out of Lloyds, in winning SME business. This runs counter to the prevailing mood in the UK banking industry at a time when most of its rivals can’t shut their branches quickly enough. In fact it seems the bank’s nightmare year has shifted Meddings’ thinking – he insists that TSB will operate more than 500 branches for some time to come.
“Our issue was primarily an access issue, so if you lose your online capability, having the physical branch network made a real difference,” he says. “We didn’t get given the best branch network when we left Lloyds so there will be some that will be closed, some will open, we’ll invest in others. [But] our plans [for cutting branches] are different today to what they would have been if we had this meeting when I joined the board last October.”
Looking ahead, Meddings insists the bank has succeeded in getting back up after its proverbial punch in the mouth. “We caused a lot of distress and inconvenience, and our obligation is to fix it – which we have largely done.”
‘My mother always used to say how on earth did you become a finance director of a bank just before the crisis’
Richard Meddings, TSB chairman, has had a challenging year as the bank was caught up in a disastrous IT upgrade, which claimed the scalp of Paul Pester, the chief executive