Posted on Thursday 14 October 2010 byUlster Business
Northern Bank has launched a campaign to promote what the bank sees as its core identity. Ulster Business talked to the bank’s chief executive Gerry Mallon to find out what was behind the move.
As the recent hearing with the Stormont Finance Committee confirmed, banks still have a long way to go to win back the trust of the public.
In the wake of one of the worse financial crises of all time many of the world’s financial institutions are reinventing themselves.
Some of those that got their fingers burnt badly in the days of easy credit and property market excesses are telling anyone who will listen they are in good shape and open for business despite anecdotal evidence suggesting otherwise.
Northern Bank has come out of the crisis in reasonable shape thanks to a conservative approach to the property market, and chief executive Gerry Mallon is keen to distance Northern from some of its competitors.
As such it has launched a campaign highlighting the bank’s brand identity, which is designed to show that it is a full service retail bank that remains focused on what its customers want and that it is straightforward in the way it does business.
“The underlying thinking behind it is that we’ve always felt that we were in a different position from others and that we behave different from others in terms of our culture,” Mallon told Ulster Business.
“It is about communicating what the bank already does rather than trying to change to react to criticism. It is about making sure the perception of us is correct,” he added.
“I don’t think we have anything to be apologetic about, we have a lot to be proud of. I think we have behaved honourably to our customers through the last couple of years and I intend that we continue to do that.”
While other banks have implemented measures to make sure they meet up with customer expectations, Mallon points out that Northern Bank has been conducting customer satisfaction surveys for years and current satisfaction levels are at their highest since they started measuring them in 1999.
“Even though banks have been maligned and criticised we’re pretty convinced that our staff have done a very good job of staying close to customers and focusing on them,” says Mallon.
“People in Northern Bank are very straight with each other and they’re very straight with the customers. In the long term I think that pays off.”
While Northern’s most recent quarterly results showed a pre-tax loss of £16.7m due to impairment charges of £42.2m, the bank said its underlying profit had increased and that impairments were mainly linked to property in the Republic which hadn’t spread to trading businesses.
Mallon says the impairments will be managed but because they relate to investment decisions made three to five years ago he prefers now to look to the future.
“The biggest challenge for me is the lending decisions we make in 2010 and 2011. Those are the important ones that will either reap benefits for us in the future or cost us if we don’t make them right. We’ve got the capital there to make lending decisions and we’re prepared to put our money where our mouth is. The biggest challenge is there not being a market,” the Northern CEO says.
“Business owners have done the sensible thing. They’ve de-stocked, they’ve reduced their working capital, they’ve trimmed their overheads, they’ve moderated their lifestyles, they have deleveraged, and they are not investing in their businesses because they don’t know what is around the corner in terms of demand. I just hope that confidence starts to return, that the global economic recovery flows through to the UK and Northern Ireland.”
Mallon says that Northern’s corporate acquisition teams are working harder to win new business from other banks – in particular those who are running good, sustainable, cash generative businesses that are not getting the support they need.
He acknowledges that other banks not previously well represented in Northern Ireland – such as Barclays and HSBC – also see opportunities as customers look for better service and are stepping up their presence here.
“We don’t take them lightly,” he says. “Any competition is useful for testing your standards. They will provide additional sources of funding to the Northern Ireland market and keep us all competitive.
“But I don’t see anything that they do that we don’t already do or can do better. Whether it is in terms of pricing products, the sophistication of products or breadth of product range, or the capability of the people involved. Added to that the fact that we have a presence across the whole of the North, those guys are behind us.
“What they will do is cherry pick, that’s how new competitors enter a market. They don’t have the reputational baggage that others have. It is some of that baggage that I want us to shed because I think it is unfair that we are lumped in the same category as Bank of Ireland, AIB and RBS/Ulster.”
Northern Bank, he says, is able to draw on the capital strength of parent company Danske Bank and notes that Danske’s recent results showed signs the global economy is beginning to pick up – with its banks in Norway, Sweden, Denmark and Finland getting back to almost normal performance.
“The group wasn’t catastrophically hit in the way that others were,” says Mallon. “There’s no government equity stake in our parent company. The group feels that it is through the worst of the crisis and is optimistic, albeit cautiously. The signs are encouraging. The biggest issue for us is uncertainty.”
A former civil servant Mallon says that the impending Comprehensive Spending Review and the inevitable cuts that will bring to public services will undoubtedly have an impact on the economy.
Earlier this year the bank chief said he thought that Northern Bank and the local economy had turned a corner, but looking back says confidence has again faltered.
“In January and February there were certainly tentative signs of recovery and there was an increased sense of optimism in the Northern Ireland economy. As we got into the General Election an air of uncertainty started to creep in to the economy and I think that hardened as the media analysis of the economy started to move towards public sector austerity,” he says.
“With all of that we sensed the wind coming out the sails in Northern Ireland. What recovery we had seen in the housing market stalled and hasn’t picked up again. Consumers aren’t spending money to any great extent and business owners aren’t investing in their businesses.”
Some confidence may return once it becomes clear where the cuts will be, he believes.
“I hope we are having our expectations managed by the politicians. If the Chancellor has any sense he is trying to frighten us so that very unpleasant cuts are actually welcomed, because he’s threatening us with something that is catastrophic.
“The fear of what is round the corner is almost worse than what is actually around the corner. I think that is a deliberate political tactic in some ways.”
The larger problem of rebalancing Northern Ireland’s economy towards the private sector will be a much more long term project that will take radical measures such as the proposed lowering of our corporation tax rate in order to happen, he adds.
“One of the challenges for us is we need to take a long term view. You need to start with a vision of what the Northern Ireland economy will look like in 20 years, what skills will be needed and take that back to primary school level. It has never really been the core competence of politicians to take short-term pain for long term gain. The electoral system doesn’t really reward them for that,” he says.
“If we really want the Northern Ireland private sector to be transformed, we need something absolutely transformational.”