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Reversing the decline for Mutuals? |
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23 February 2010 |
Justin Urquhart Stewart Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio, and in the press. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor.
Justin Urquhart Stewart Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio, and in the press. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor. Justin provides financial advice to clients of Kester Cunningham John Financial Planning LLP.
A great history but in a tough environment. The world of mutuals has not been an easy one. Many have glorious chronicles of the past dating back into the developing financial world in the Victorian era. The concept has been robust and certainly the view of shared ownership has been attractive to businesses in various areas of commerce. From the Co-Operative movement which covers virtually everything from supermarkets to funeral directors, financial businesses and even one of the UK's largest department store chains, John Lewis, the mechanism has appeared to be a successful business structure.
However, this equitable model has found itself open to attack both directly and through market competition from its more aggressive capitalist cousin, the joint stock public company.
We will all recall the fashion fad of 'demutualisation' whereby apparently "inefficient" old building societies could be transformed into modern dynamic financial companies. Not only would they wake up a sleepy hollow but provide far more aggressive competition to the existing banks. Additionally the old members (many of whom never even realised they were part owners) would receive a windfall payment by way of cash or shares, and so would the staff, and so everyone would be happy. Oh and if that wasn't enough with some bright financial engineering, they would also be able to 'make their balance sheets much more efficient', which was a polite way of saying borrowing a lot more. And so a raft of flotations came through, with Northern Rock, Halifax, Bradford & Bingley and even Abbey National many years ago.
However, you can see the pattern here. None of those names exist any longer in their original form. Many others were scooped up by banks, like Cheltenham & Gloucester and Bristol & West, leaving a rump of building societies gamely fighting for a shrinking cause.
The demutualisations actually started off rather well. They brought in new products and aggressively took on the banks. Northern Rock, for example, was known for being a low cost mortgage operator and took positive pride in being the bank that liked to say "No". No, that was, to other products and services |
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