Page last updated at 12:47 GMT, Tuesday, 9 June 2009 13:47 UK

Why the C&G has to disappear

By Ian Pollock
Personal finance reporter, BBC News

C&G branch
The C&G branches and their logos will soon disappear

The surprising thing is that the Lloyds banking group, in its previous guise as Lloyds TSB, kept the Cheltenham & Gloucester as a separate business for so long.

It took over the former building society in 1997.

When two similar organisations merge, the bigger one usually imposes its will on the smaller one.

This is often done by changing its name, shutting branches and offices, sacking staff in duplicated jobs and generally erasing the most obvious signs of its former existence.

That is what eventually happened to the former Woolwich building society branches three years ago, after they were snapped up by Barclays in 2000.

Woolwich mortgages are now just a brand name only.

Until now, the Cheltenham & Gloucester (C&G) had kept its name on its own branches as well, with its own mortgage deals and savings policies.

Just like a traditional building society, in fact.

Turning into banks

It was back in 1995 that the C&G demutualised to become that exciting, new-wave, financial institution known as a bank.

It then joined up with an even bigger one, Lloyds.

This sparked the wave of demutualisations of the mid-1990s that changed the face of the UK's financial services industry for ever.

In rapid succession, the Alliance & Leicester, Halifax, Northern Rock and the Woolwich decided to become banks too.

In doing so, they forsook the cuddly embrace of their customers, who were also their owners, for the more bracing winds of the stock market.

The Bradford & Bingley became the last society to strike out on its own as a bank, in 2000.

The unfortunate fact for the C&G staff is that their new parent, the Lloyds banking group, has now taken over the huge HBOS bank - and right in the middle of an unprecedented slump in mortgage lending.

Getting bigger

The Halifax part is still the UK's biggest lender of home loans and last year's rescue of HBOS added 670 Halifax branches to the enlarged Lloyds group.

Not only does Lloyds now have far more branches on its hands, they certainly are not all needed for the routine business of mortgage lending, especially as some are a few minutes' walk from each other in the same High Streets and shopping centres.

In common with all other banks, Lloyds is rationing its lending to only the most creditworthy customers, although it is still aiming to scoop up about 30% of all the UK's mortgage lending this year.

But to rationalise its sudden accumulation of outlets, Lloyds has gone for a clean cut - dumping the C&G in all but name.

Ray Boulger at mortgage brokers John Charcol points out that such a move is not without its dangers.

"C&G has a much better brand name for mortgages than Lloyds TSB - even though they are offering the same products," he said.

"If you have been a C&G customer for a long time and you are satisfied with the service there, the chances of retaining the customers must be less if they do not keep the brand."

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