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Flotation of TSB is a positive step [Herald, The (Scotland)]
[June 21, 2014]

Flotation of TSB is a positive step [Herald, The (Scotland)]

(Herald, The (Scotland) Via Acquire Media NewsEdge) THE flotation of TSB is another step in the right direction for the UK's banking sector but there remains a long way to go. For owner Lloyds Banking Group it is a further tick in the box as it moves to meet demands from European regulators, the UK Government, other shareholders and customers.

The smooth running of the initial public offering is in stark contrast to the shambolic end to the collapsed Project Verde sale to Co-operative Bank. Significant problems at Co-op's banking arm have since emerged but that transaction was also dogged by rumours of political interference.

Thankfully there appears to have been no repeat of the latter with TSB. Antonio Horta-Osorio and his team have managed to get the flotation off to a good start, and that in itself is a positive result as appetite for stock market listings has been waning in recent weeks.

A challenger bank with a reasonably sized and located retail estate, 4.5 million customers and a freedom from the legacy issues that have affected the sector would appear to have solid foundations on which to build.

Yet whether TSB can really challenge the dominant market position of RBS, Lloyds, HSBC, Santander and Barclays remains to be seen. It is also emerging into an increasingly crowded sector. Metro, Virgin Money, Marks & Spencer, Sainsbury's and Tesco are all at various stages of rolling out their retail banking offer. RBS will soon have its own offshoot, through the Williams & Glyn brand, which will add further diversity to the mix. In Scotland there is Clydesdale Bank and Bank of Scotland, also owned by Lloyds, and that is before we consider the banking services offered by the likes of Nationwide Building Society.

So TSB will have to offer something compelling to stand out from the crowd. Another factor to consider is that the majority of consumers have little appetite to switch banks, even after the excesses that have come to light in recent years.

While regulatory change has made current account changing easier, it is unlikely to remain high up the "to do" list of most people unless they have had a particularly bad experience with their current provider. Perhaps the real benefit to consumers will be in Lloyds further selling down its TSB stake and moving closer to fully emerging from out of the clutches of the UK Government.

Were Lloyds to get that monkey off its back it would show the bank is moving into the recovery on the front foot. The investment Lloyds has made in its Scottish branches in the past 18 months, along with a commitment to retaining the last bank in town, suggests it still sees a future in the customer service tradition that, once upon a time, made Bank of Scotland one of the most admired organisations in the sector.

Sadly, the chances of a fairytale ending for RBS appear quite distant. There is little sign the UK Government will be able to get rid of its majority shareholding any time soon and predictions from 2008 of a potential lost decade for some financial services firms are beginning to look prescient.

(c) 2014 ProQuest Information and Learning Company; All Rights Reserved.

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