Banking on tradition

Banking on tradition

Despair not. Banking still has some respect for the traditions that customers wish to see revived. And some of us are already enjoying their return, as Brian Nicholls discovers.

In some gratifying ways, Kevin Pattison’s banking career has turned full circle. Here he is, back in Newcastle’s gracious Grey Street 30 years after beginning his banking career there. And here he is, in charge now and restoring some traditional services that many bank customers generally are appealing for. Progress has been commendable, then, since he was the counting house teamaker.

He is Newcastle branch manager of Handelsbanken, the 140-year-old Swedish bank which, unlike much of the disconcerting competition today, pays no staff bonuses (“a breeder of wrong behaviours”), gives its branch managers autonomy, sets no budgets or targets, is unconcerned about market share and volume of business, and shuns call centre methods. It does, though, embrace 21st century technology, and for its customers the branch is in effect the bank. Measured against its global competition, Handelsbanken is relatively small. But its branches and subsidiaries worldwide still employ more than 11,000 staff. Pattison not only launched Handelsbanken’s first North East branch in Grey Street in 2002, but is now engaged with the opening of a second branch in Newcastle, which will also be fifth in the region. A Haymarket facility is expected to open during the second quarter, with further branches to follow at Durham and Darlington.

The manager at Haymarket will be a Pattison team member, Mike Brunskill. The expansion comes as research by the Institute of Chartered Accountants in England and Wales (ICAEW) suggests that relations between many banks and small business clients are breaking down. Some small and medium size businesses feel “bruised” and “scarred” by treatment from their bank during the recession, leading to a disappearance of whatever trust existed earlier.

ICAEW findings also suggest breakdowns have worsened through a perceived lack of authority among the banks’ relationship managers, often seen now as unsupportive of their clients, and reliant on tick-box mentality to reply to loan and overdraft applications.

Hotelier Mukesh Chawla, however, says at The Mercure Newcastle George Washington Hotel Golf and Spa that he considers Handelsbanken very understanding of business needs.

“Unlike high street banks, they are very flexible – easy to deal with,” he says.

“I consider the business perception and understanding of the Newcastle staff second to none.” The ICAEW check also confirms that, despite current low interest rates, fees, charges and margins banks require have risen, and the ICAEW wants offending banks to restore trust and business growth by repairing damage done. Handelsbanken, meanwhile, has opened almost 100 of its near autonomous branches in Britain since 1992, 21 in 2010 alone.

Decisions on funding are taken at branch |level, and some 95% of credit is granted that way. Handelsbanken also says it will consider any banking proposition, and it’s perhaps not surprising in light of the ICAEW findings that it now wants to see “small and medium businesses having easy access to a universal bank”. It’s commonly argued in Scandinavia about whether Handelsbanken is Sweden’s biggest or second biggest bank. Here, because it keeps a comparatively low profile, its ways are still understated.

Pattison himself admits: “I hadn’t heard of Handelsbanken when I got a call inviting me to join it in 2000. And there had already been branches in this country for nearly 10 years then. It was all very new, different, unique. I thought it too good to be true – head offices existing to help branches in need, not to run them. And where local managers can feelthey’re almost running their own business... Our customers get a service like other banks used to give three decades ago when I started out.” Every branch manager has detailed knowledge of the local patch, and manager and staff alike know customers personally. The branches, planned to sit among their customers, run on a “church spire” principle, with a clearly defined geographic area. How many managers of other banks these days can claim to recognise many customers by their voices on the phone? Branches remain risk averse, however, and managers do operate a daily profit and loss check.

“We don’t take on bad debt,” says Pattison. But nor do they do financial services, pressing sales of insurance or other financial services. However, says Pattison: “You can pick up the phone to arrange a loan for a car or a mortgage and there will be no two weeks’ wait for a decision. A financially stranded holidaymaker rang us from abroad recently and we sorted the problem in 10 minutes.

We run like a business, appraising everything on individual merits and on a bespoke basis.” David Dale affirms this. He feels much of the banking sector has lost its way by targeting towards selling products and overacting with advice. Dale, as wealth partner of law firm Dickinson Dees, looks after the affairs of a number of wealthy individuals and serial entrepreneurs, and he chose to switch his personal banking to Handelsbanken. He explains: “I wanted as a bank manager someone local who could understand me and my family and, bluntly, ensure I have service at the end of the telephone. I didn’t want a call centre, didn’t want it centralised. I wanted a real person. I found that a real challenge. A number of banks, I found, say they providethat service. Early on they tend to.

Then you may be factored off to a call centre which, even if local, will be someone you really don’t have a relationship with – you don’t know who you’re speaking to.

I realise that on scale of economy that’s why it’s done.

But it’s not what I and a number of individuals want.

“I also want someone who understands my banking needs and aspirations – someone who can make a decision. I recently wanted to look at my mortgage facilities. I wanted someone to provide a good competitive rate of interest. I wanted it from day one without any lengthy process after which someone would try to sell insurance.

“I didn’t want to return home in the evening after a long day at the office and find, usually just before the watershed five to nine, someone phoning from the bank to say: ‘Would you be interested in X,Y, or Z investment or anything else?’ “That used to annoy me, bearing in mind I do that for a living – but also because of the time of the call. When I queried that with my personal bank manager, with whom I had a great relationship, he used to say: ‘Yes, David, I understand, but there’s nothing I can do.’ That made me look for an alternative.

“As far as I can see, Handelsbanken is not fighting for clients like many banks. It wants you to get the best point to point contact of local service from someone who understands you. So I recommend a lot of my clients and family to the bank. It’s banking as we used to know it.” Handelsbanken leads in an independent survey of Swedish bank customers that it commissions annually.

In Britain a similar outcome has emerged two years running.

What are the drawbacks, then, sceptics may rightly ask? Handelsbanken, though not a franchise, in some ways works like one. There are no direct over-the-counter dealings but agency arrangements whereby HSBC branches will serve the purpose for corporate dealings, NatWest for personal ones. One or two products have yet to be introduced to the UK, but probably will be.

And debit and credit cards and online facilities are already provided. The bank has been criticised as “too liquid” – holding on too much money. Asked how its lending and investment rates of interest compare against competition, Pattison at the time of interview felt investment deposit rates were fairly average, perhaps just below average at that point.

“We may be offering less than one or two other banks and building societies,” he agreed. “But there has been a customer flight to quality in banking, and we’ve increased our deposit base through our safety offering.

There’s no matrix of standard charges on lending. We price everything on a bespoke basis. We’re not the cheapest.

“The charge depends on the purpose of the loan, the quality of the customer, so we may not be everyone’s cup of tea. Some may prefer to keep their banking impersonal and use 0800 phone numbers. We, though, are very transparent.” The existing Newcastle branch has 600 customers, with corporate and personal divided about equally.

Since there are now more than 63,000 companies in the North East, not to mention a plethora of private customers, other banks whatever their shortcomings may have little to worry about yet over any massive loss of market share, unless perhaps other Handelsbankens of the region enlist much faster.

But Pattison points out: “While we are not necessarily seeking out high net worth in customers we are looking for above-average customers – quality customers.” So many customers come recommended, either by existing customers, professional contacts or are known to the managers and their staffs.

The welcome mat, it appears, is put out selectively, and the phrase “cherry picking” comes to mind.

“We go for the business we think suits the local market,” Pattison clarifies.

“The absence of centrally-driven markets in our view drives the right behaviour.” The bank’s main objective in performance, as yet, seems little more than to get the best return on equity within its Nordic peer group.

“To do that,” Pattison observes, “we are frugal in outlook when it comes to expenses and things like that.” Locally, he says, the business model is proving highly successful.

“Activity levels show significant growth across the patch in all aspects,” he says.

“Our banking base of individual customers has more than doubled in two years and we attract new customers daily – always through our offer of relationship banking.

“For both corporate and other sectors, our desire to take on full transactional day-to-day banking business is resulting in strong growth as well.” It has you thinking that if some other banks took a tip or two the public benefits could be widespread indeed.

The ICAEW might think so too.