Life has become complicated for Britain's sixth-largest bank. Abbey (formerly Abbey National) suffered a record £686 million loss last year, caused in part by its disastrous foray into corporate banking - a strategy it is now reneging on. Drafted in two years ago to turn round the fortunes of the ailing mortgage lender, CEO Luqman Arnold and COO Stephen Hester instituted a three-year restructuring scheme, the benefits of which they hope to start reaping later this year. Yet first-quarter results for 2004 showed profits at the bank's core personal finance services lower than last year, and Abbey admitted that the profit outlook for the division was 'moderately weaker than originally expected' and that attempts to revive its fortunes were proving to be 'tough work'.
Arnold heralded Abbey National's new start with an £11 million Wolff Olins image makeover. Out went 'National' and the boring red umbrella.
In came soft-focus 'Abbey', pastel colours and a jargon-free approach to customer communication. 'Banks have managed to make money scary, confusing and boring,' he said, hoping the new brand would 'change the whole tone of how we speak to our customers and how we behave towards them'. The idea was to 'turn banking on its head' by improving customer service.
THE STRAIGHT TALK
Some customers may be happier with the new-look Abbey, but many investors are not. The company's April AGM gave private shareholders the chance to air their views. 'You've done the most magnificent job of camouflage since the Second World War,' said Norman Edwards. 'You can stand three doors down from the branch and not see it.' Veronica Hosking said she had been foxed in her attempts to find her local Abbey outlet because 'it looked more like a dress shop than a branch'. Arnold must have wished he had the red umbrella to hand.
Despite recent disappointments, Abbey investors are prepared to give the management time to deliver the turnaround, though a pick-up in the personal financial services division would boost confidence. The bank has said it expects to return to profit this year, and announces its interim results at the end of this month. Abbey is no stranger to takeover speculation - it recently received a bid from Spain's biggest bank, Santander Central Hispano, which it is understood to have rejected. Will the new Abbey habit be making better profits?