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Friday, 30 March, 2001, 18:53 GMT 19:53 UK
Watchdog hears merger protests
bank logos
By BBC News Online's Mike Verdin

"Recognising and monitoring suspicious transactions" - it was an ominous conference title which greeted delegates at the hearing into Lloyds TSB's bid for Abbey National.

True, the name applied to a session being held in the next door room.

But it rang a certain chord among followers of the Lloyds/Abbey saga which, having raised eyebrows in the trade, prompted the Competition Commission to hold on Friday its first ever public meeting into a takeover.

Denise Kingsmill, deputy chairman, Competition Commission
Denise Kingsmill: Heading inquiry
Lloyds' 19bn bid for Abbey has become a matter of "huge public interest", said Denise Kingsmill, deputy chairman of the commission, which is examining the takeover proposal for its impact on competition in the UK banking sector.

The 200 people who won tickets for Friday's session were but a few of the crowd who applied.

The great and the good of City institutions were, nonetheless, well represented.

Indeed, perhaps over-represented, Mrs Kingsmill admitted afterwards, saying she would like to have heard more of a "youth voice".

'Grey suits'

The "grey suits", as a black-wearing Mrs Kingsmill called them, had come ostensibly to voice their opinions on a merger which Lloyds believes will allow it to boost profits by 950m a year, with the loss of up to 600 branches and 9,000 jobs in the process.

In fact, the emphasis throughout the 3.5 hour session seemed to be on listening rather than speaking, prompting Mrs Kingsmill to urge delegates "feeling shy" to submit comments later in writing.

There was as much writing as talking, more furrowed brows than pointed fingers.

And never in recent years can a meeting of so many power dressers have gone so long without interruption by the beeping of a pager or mobile phone.

Head to head

It was indeed a gripping contest, as an upbeat and jokey Mike Fairey, for Lloyds TSB, squared up to Abbey National's brusque chief executive Ian Harley.

Ian Harley, chief executive, Abbey National
Ian Harley: "We have the muscle"
The merger would allow the banks to achieve the performance boost needed to survive in an ever more challenging sector, said Mr Fairey, Lloyds deputy chief executive.

"The scale of competition is visible in City analysts' forecasts of margin erosion."

But, Mr Harley countered, when Abbey had as an independent won top ranking in many markets, to look for a further performance boost was like "chasing chimeras".

"We have the muscle to keep the feet of existing [financial services] providers in the fire," he thundered.

Key market

Not that market forces may be acting in the banking sector quite as fiercely as this duo might believe, some contributors hinted, talking of a reluctance among current account users to change banks even when offered better terms elsewhere.

"We keep telling our members 'switch over you current account, and these are our reasons'," said Phil Evans, of the Consumers' Association.

"They don't. And that's among our members, who we would hope would be the people most likely to do so."

This issue is central to deciding whether the merger should be approved, Mr Evans said,

'Blocked outright'

The deal would create a bank with 30% share of this market, a level sufficient to raise fears of the potential for market abuse.

Inquiry timeline
Jan 31: Lloyds issues details of Abbey takeover
Feb 23: Watchdogs refer merger to Competition Commission
Mar 30: Public hearing
Early Apr: Commission publishes initial findings
Late Apr: Ongoing talks with banks
Jun 12: Deadline for submitting findings to government
"We now think this [merger] should be blocked outright," said Mr Evans.

While the commission will within two weeks issue a document outlining its concerns, plus any asset sales or business shake-ups Lloyds TSB might implement to tackle them, Mr Evans could not envisage a satisfactory compromise being reached.

"We do not think behavioural remedies are an option, and we do not think structural remedies are possible," he said.

Job losses

Staff representatives, meanwhile, voiced opposition on grounds of the job losses the merger would prompt.

"We believe the total job losses will be nearer 20,000 than 9,000," said Linda Rolph, general secretary of the Abbey National Staff Association, warning of implications for customer service.

A spokesman for finance union Unifi predicted that approval of the deal would "unleash a wave of further consolidation" prompting "thousands of job losses in the next few years".

The workers' united front was rattled somewhat when a spokesman for the Lloyds TSB union said that while he had "really serious" concerns over the deal "job security is not one of them".

The redundancy packages Lloyds has offered since merging with TSB in 1995 "attract large numbers of volunteers" whenever advertised, the spokesman said.

Unifi mended the gap by pointing to a joint statement demanding that any merger should be implemented without compulsory redundancies.

Tough competition

But a Bear Stearns representative warned that jobs were likely to go within the bank even if the merger were blocked.


We believe the total job losses will be nearer 20,000 than 9,000

Linda Rolph, Abbey National Staff Association
And David Rhodes of Boston Consulting said that the share of the current account market held by a joint Lloyds/Abbey was not as much of an issue as might be thought.

The value of signing up current account holders lies in their potential for signing up for other products.

And such cross-selling is proving more and more difficult to secure.

There are, in the UK banking sector, "more than 200 million customer relationships", he said.

"Taken simply, that means that everyone has a relationship with four providers, all of which are trying to increase their share of the take from customers' wallets."

Summing up

It was a theme echoed in Mr Fairey's summing up, when he said Lloyds only had a minority of its customers' business.

Mike Fairey, deputy chief executive, Lloyds TSB
Mike Fairey: "We want our business back"
"Other people have the majority, which we would very much like back," he joked.

Mr Harley closed, in four blunt sentences, by again promoting Abbey National's strength as an independent.

And on The Strand nearby, an Abbey branch, where 18 people were queuing for counter or cashpoint services, gave some support to his assertion.

At the Lloyds opposite, 15 people were waiting under the sign of the black horse.

Which while a sign of healthy business, does not necessarily bode well for Lloyds in winning approval for its takeover.

Black hat?

After Friday's meeting Mrs Kingsmill said one issue which the session had brought home to her was the significance of margins as an indicator of competitiveness.

The grey suits at Lloyds must be hoping that, in June when she presents her report on the takeover to the government, a black-loving Ms Kingsmill is not wearing a hat to match.

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See also:

06 Mar 01 | Business
Big banks 'operate monopoly'
23 Feb 01 | Business
Lloyds TSB bid under scrutiny
14 Feb 01 | Business
Abbey posts record profits
12 Dec 00 | Business
Abbey rebuffs new Lloyds TSB bid
14 Feb 01 | Business
The battle for Abbey National
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