As I See It
RBS should think again before changing name
RBS may be on the way to rehabilitation after its previous misdemeanours, but the board now thinks it needs a new identity if it is to be accepted back into polite society.
Some may regard this as a wise move to help the re-modelled bank rebuild its place in the market. Well, that’s one point of view, but it may also be a little short-sighted.
Talk of re-branding has been around for some time, not least as part of a strategy that began a couple of years ago. It now seems to be moving up the agenda on the back of last year’s decision to replace the RBS branding at its London headquarters with the NatWest brand. There is even talk of renaming the whole group NatWest.
There is some irony in this, given that RBS rescued the battered NatWest business almost 20 years ago. NatWest was involved in an earlier banking scandal which sowed the seeds of its own demise.
The bank’s expansion strategy hit trouble with the stock market crash of 1987 and involvement in the financial scandal surrounding the collapse of Blue Arrow. A government report on the affair was critical of the bank’s management and resulted in the resignation of several members of the board, including then chairman Lord Boardman.
In 1999 Bank of Scotland made a hostile takeover bid for NatWest, a move that prompted RBS to mount a rival hostile offer and ultimately win a bruising Edinburgh derby with a £21 billion bid.
The takeover of NatWest in early 2000 was the biggest in UK history. National Westminster Bank, once Britain’s most profitable bank, was delisted and became, with its subsidiaries, component parts of the Royal Bank of Scotland Group. The man who led RBS to this triumph? Fred Goodwin, who was later demonised as the banker from hell but until 2008 was feted as the sector’s boy wonder.
The re-emergence of NatWest as the “good” brand over the “bad” brand RBS should encourage the current RBS board to consider how quickly reputations can be created, destroyed and reinvigorated.
Ultimately, it is performance that counts. If a company proves it is better than hitherto then it will gain customers’ respect. Consider how the Czech car company Skoda was the butt of every stand-up comedian’s jokes until a clever move by Volkswagen to buy the business cheaply, inject some German engineering, smarten up the specification and re-launch it as the group’s budget brand.
No one laughs at Skoda anymore. In recent years, Skoda’a superior car reviews and profitability have intensified rivalry within the VW empire. Skoda even surpassed Audi’s operating profit margin in 2016, second only to Porsche within the VW Group stable of brands.
And didn’t we all scoff at Aldi and Lidl as downmarket places to shop for our groceries when they arrived on our shores? Having grown market share and won over the middle classes, they have prompted the big four to launch their own ‘budget’ supermarket chains.
The RBS board needs to consider these lessons from history before making the mistake of overlooking centuries of banking success soured by a decade of recklessness. Changing the name of the company would be a final attempt to distance itself from these excesses, but it also smacks of a failure by the senior management to fully restore the bank’s performance and how it deals with customers.
Axing branches and IT staff may have helped restore the battered balance sheet, but have not helped it win many friends.