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| Assisting a customer at Clydesdale Bank. |
Financial Services Europe’s 2004 results reflect the challenges we are facing: customer attrition, pressure on margins and the management of expenses.
We have looked at a range of ways to address these issues, including, in the past, reviewing potential acquisitions, examining potential sale opportunities for the Irish businesses (ongoing at the time of this report’s publication) and refocusing our strategy around initiatives to improve the growth, efficiency and quality of the European businesses. We have concentrated on building stronger relationships with customers and sustainable value in our businesses.
Financial Services Europe achieved a net profit* of $536 million, which was 35.8% lower than the previous year.
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| Our integrated Financial Solutions Centre in Reading, England. |
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| An image from our new advertising program to instil key brand values with our customers. |
Growth
Growth initiatives have concentrated on rebuilding our brands, improving sales effectiveness and expanding our distribution into the south east of England.
We have established a network of strategically located Financial Solutions Centres, offering integrated business and private banking services. By the end of September 2004, eight centres had been opened with further expansion planned in 2005.
In September 2004, we announced that Clydesdale Bank had entered into an alliance with the Post Office that allows customers to conduct transactional banking at any of the 16,000 Post Offices in the UK. This took effect from October 2004, and will greatly assist the Financial Solutions Centre network as it allows business customers to deal with their day-to-day banking needs locally.
An important aspect of the alliance is the benefit it brings to customers in Scotland, particularly those in rural communities, where there are fewer branches. The alliance with the Post Office will be reviewed before we consider expanding it to include Yorkshire or Northern Banks.
We also entered the intermediary market, selling Clydesdale Bank mortgage products through a range of key broker partners. This provides an opportunity to acquire additional customers who will be offered relationship-managed banking through our Financial Solutions Centres.
In February 2004 we launched a new branding program designed to instil key values – trust, expertise, approachability and empowerment – into every aspect of the customer experience. This included new television commercials shown across Scotland, England and Northern Ireland.
Efficiency
Our efficiency program is focused primarily on improving manufacturing productivity and the standardisation of processes and business operating models. A key initiative was the pilot of a new branch model, which introduced new sales and service structures and further centralised administrative and processing functions to allow staff to focus on customers. This is supported by other initiatives, such as the standardisation and optimisation of employee roles, and improvements to channels such as internet banking, call centres and automatic teller machines.
We made progress in our program to rationalise and enhance products to a single product set supporting multiple brands and distribution channels. We released new current account and offset mortgage products, which will be rolled out further in the UK and Ireland during 2005. We are also rationalising suppliers to deliver better purchasing power, and undertaking a legal entity merger of Clydesdale and Yorkshire Banks in December 2004. This is to simplify structures and reduce associated corporate and support infrastructure costs, with both Clydesdale and Yorkshire brands to remain.
Quality
We are aiming to ensure that whatever we do reflects the philosophy that we are a quality business.
The upgrading of our front-end systems to meet the requirements of incoming mortgage regulations will deliver an improved platform for our branch staff and customers. A great deal of work has also been done on developing our talent and leadership quality, while several initiatives, such as the introduction of long-service awards and more flexible working conditions, are supporting our efforts to attract and retain quality staff.
In July 2004 the High Court Inspectors’ Report into National Irish Bank was published. The National had been working for more than six years to deal with the issues in the Report, cooperate with the investigation, develop reimbursement schemes and implement a wide-ranging compliance program. While the work to complete the reimbursement schemes will continue into 2005, the National responded to the issues with integrity and now has a solid foundation from which to meet the needs of customers and satisfy regulators.
Investing in our communities
We continued a long tradition of investing in our communities in the UK and Ireland, coordinating the efforts across our four banks with a focus on financial literacy and youth projects. We launched a national staff grants scheme to recognise and support staff who volunteer their time in their communities.
* Net profit attributable to members of the Company before significant items.
Click here to download a PDF of the Concise Annual Report 2004 (2,596KB)
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