View from the Street: Someone worth banking on

@AndrewWilson

View from the Street: Someone worth banking on

The Prince’s Trust Scotland Financial and Business Lunch is one of the best dates in the calendar of the UK’s finance industries. In a world where business dinners usually mean black tie, rubber chicken and late night speeches, it brings lightness and springtime to the fore. And for the best of possible causes.
 
It takes place in Edinburgh, and more London headquartered businesses should think about taking tables at it, especially if they have colleagues and clients north of the border. It makes for a great day out in a city far easier on the constitution than London travel can ever be. Ferrying between London and Edinburgh every week are thousands of financial industry employees and leaders, making the route one of the arteries of the UK economy.
 
The entertainment this year is to be anchored by the national treasure of Jim Naughtie who himself splits his life between London and Edinburgh. He is due to be joined on stage by John Kay, one of the finest minds and financial thinkers and journalists there are. Also scheduled to take part was Jayne-Anne Gadhia, the quite remarkable CEO of Virgin Money. However, she had to withdraw due – we assume – to the focus she must give to the proposed merger/takeover offer being tabled by Clydesdale and Yorkshire Banking Group. Christine O’Neill, chair of Brodies LLP, is an excellent speaker in Gadhia’s stead; an exemplar leader who commands respect well beyond her field.
 
Ms Gadhia has more than earned the right to be forgiven for such a call off. She is a perfect example of a business leader who strikes the right balance between focussing on the job in hand with playing an engaged and active role in the country and society her business serves. She also leads with courage, and is not afraid to call out the antediluvian behaviour of business and the city she has experienced as a woman. We need more like her. We need more of her.
 
It was a big week in banking once again in the UK. RBS finally secured a near $5 billion settlement with US authorities, which analysts hope will mean the financial foundations of the company can be secured, enabling the UK government to begin to sell its stake in the bank. The deal must mark the beginning of the end of the crisis a whole decade after it began.
 
Banks’ travails have not subsided, and technology and security woes continue. Meanwhile, the handling of the large community footprint of branches, and the modernisation of how people wish to engage with their banks, persist as priority challenges facing the industry.
 
One of the positives that many hoped would come from the crisis was the promotion of competition through scalable challenger banks to take on the dominance of the titans. This hasn’t worked out as its principal architect, the then-chancellor Alistair Darling, had anticipated. The incumbents and account inertia have made it difficult for smaller players to grow, and the scale of investment in technology needed is so vast that it has acted as an effective barrier to entry to the big league.
 
These factors explain the motivation behind CYBG’s current endeavours. The merger of the two banks would add both scale and reach, exposing shareholders to well thought through arguments on the potential for cost and revenue synergies. The snag is that making mergers work is never easy, and history tells us that they can destroy shareholder value.

If the deal progresses and a more substantial well-run player emerges, that will be good for the UK and good for customers.
 
What will not be good for banking, however, is if Jayne-Anne Gadhia is lost to the sector. The industry needs the sort of deftness and difference female leaders like her can bring. She is as driven and tenacious as any CEO, but the tone she sets from the top is deeply impressive.
 
Maybe the answer could be that when Ross McEwan decides it’s time to return to the antipodes, Jayne-Anne Gadhia would emerge as the outstanding candidate to lead the return of RBS to the private sector. Her leadership to date offers the prospect of creating a model that is sustainable for the RBS shareholders and respectful of the communities and country that kept it alive.
 
That really would be a win worth banking.

 

Andrew Wilson is a founding partner of Charlotte Street Partners.