“Tesco is to compete with High Street banks [in Britain] after it has bought out RBS’s (RBS) 50% share in Tesco Personal Finance (TPF) in a deal worth £950 million.”
http://www.financemarkets.co.uk/2008/07/28/tesco-to-enter-banking-market-following-rbs-buyout/

Events in retail banking in Britain have moved on swiftly since. From the news on Monday:

“The men at the top of Scotland’s two big banks are to go, after the government announced a £37bn bail-out. RBS chief executive Sir Fred Goodwin has stepped down and RBS chairman Tom McKillop is to retire.”
http://news.bbc.co.uk/1/hi/scotland/7666647.stm

Standing in the checkout queue of my favourite supermarket this last Sunday lunchtime, the lady behind me, who was also buying a copy of the weekend edition of the FT, suggested that we’d probably all be better off if we simply let Tesco take over the government of Britain. On the evidence of performance, I was bound to agree. In terms of global sales, Tesco is now the third largest supermarket chain in the world, after Wal-Mart and Carrefour. At the start of the 1990s, it wasn’t even the largest in Britain.

I’m counting “emergency takeover brokered as an alternative to collapse” as “failure” here, while “sale for a large premium to book value” is “success” (yes, this is quite a shareholder-focused view, but what ya gonna do?). Hence RBS and HBOS count as failure. Abbey was a success – its shareholders received an enormous amount of money from Santander – while A&L’s shareholders received very money from Santander (similarly, Woolwich was a success as Barclays paid a decent premium to its shareholders).

And as I said above, LTSB appears only to be taking the money to ensure it’s able to go through with the HBOS deal and win retail market share for the future.

“all those demutualised building societies have done since they became banks… mostly regional companies, and therefore mostly headquartered outside London.”

Which still raises the interesting question, if we’re assuming demutualised building societies are too uncommercial to compete successfully against banks but also lose the values that made them successful as mutuals, of why the South East ex-building societies understood this and sold out for a good pay-off, while the rest-of-England ex-building societies went on crazy errands that resulted in either collapse or fire-sale.

(sorry John Q if you’re viewing this as some anti-Scottery – was intending to take the discussion from where Bob put it to somewhere more interesting, but maybe the well was too poisoned to start with. Delete if you reckon that’s necessary)

“More than four centuries after she was executed in England for treason by her cousin, Elizabeth I, a row has broken out over the rightful resting place of Mary Queen of Scots, and her true place in the pantheon of Scottish heroes.

“For Christine Grahame, MSP, Mary was ‘an iconic historical Scots figure’ and this week the SNP member for the South of Scotland will begin a campaign in the Scottish Parliament to repatriate her remains from Westminster Abbey.”
http://www.timesonline.co.uk/tol/news/uk/scotland/article4932480.ece

For those who have an understandable lapse of memory as to who exactly Mary Queen of Scots was and her lamentable fate on the warrant of Elizabeth I, Queen of England, try this:
http://en.wikipedia.org/wiki/Mary_I_of_Scotland

Talk about political spin to divert attention from unpalatable issues . . .

A&L didn’t fail, it was taken over by Santander. RBS hasn’t failed (yet). HBOS is being lined up for a takeover but hasn’t failed (yet) either. RBS and HBOS are both seeking government aid – but then so is Lloyds TSB, which you classed as “in reasonable shape”… HSBC and StanChart are both very different animals, being much more heavily into EM business. Basically, of the top ten, only Northern Rock and Bradford & Bingley have failed.

A more interesting point might be: isn’t it interesting how all those demutualised building societies have done since they became banks? Northern Rock, Bradford & Bingley, Alliance & Leicester (taken over), Halifax (taken over), Abbey National (taken over), Bristol & West (taken over), Woolwich (taken over) … mostly regional companies, and therefore mostly headquartered outside London.

What characterises the British banks which got into trouble – beyond being undercapitalised for the investment risks they were taking on – is that that only a small part of their new investments were being funded by actual deposits. The funding gap was filled by borrowing wholesale on the money markets. The banks in trouble came to grief as the costs of borrowing on the money markets soared and then dried up when trust between bankers evaporated.

As the chairman of Lloyds TSB explained in a BBC interview, bankers can increase their profitability – at least for a while – by investing in higher risk assets.

There were other incidentals as well. It was reported last year that Northern Rock had been offering 125% mortgages and mortgage applicants had been encouraged to lie or remain silent about their actual incomes, hence concerns about the extent of subprime mortgages in the bank’s portfolio and the ensuing rush of depositors to cash their deposits:
http://news.bbc.co.uk/1/hi/business/6996136.stm

There’s a wide consensus across the media that incentive bonus schemes in remuneration packages were generally flawed by being asymmetric: bankers and traders were rewarded for signing up new deals and trades but not penalised as and if the deals or trades turned sour.

I guess the question could be rephrased in “is there any underlying reason beyond coincidence for the fact that the UK mortgage banks who went for the riskiest growth strategies were headquartered outside of London and/or weren’t subsidiaries of leading global banks?”.

[*] The general view seems to be that Lloyds isn’t suffering desparately itself, but is taking the Treasury money to ensure it can take on HBOS’s liabilities and thereby be left in a very strong position when things stop being mad. This could be spin, but if so it’s fooling most of the people who normally write sane things as well as the hacks.

By the look of it, shares in HBOS, Lloyds TSB (which is planning to takeover HBOS) and the RSB - all of which are taking state-aids – have taken a battering.

From the comments posted here, it would seem that that even the stockmarket is now afflicted with a touch of xenophobia.

That only leaves HSBC and Barclays – which are highly diversified global universal banks, like Citigroup, and haven’t shared the fate of the mortgage monkeys.

And RBS; which is adequately explained by Goodwin’s fit of God disease last year when he levered up crazy to win a bidding war at the top of the market for another, painfully overleveraged, bank.

Whether that reflects the relative talent pools, the desire of ‘provincial upstarts’ to grow where London banks wouldn’t, the fact that regulators can’t be bothered to spend 3 hours on a train, or sheer coincidence, is less clear.

It’s gone like this.

Bob: Ha! RBS and HBOS are in trouble! That shows that the Jocks are no good at banking after all!
Me: Actually, HBOS’ top chaps are both English. Most of the banks that have got into trouble aren’t run by Scots. And anyway, isn’t it a bit dodgy to go around stereotyping particular ethnic groups as being “clever with money”?
Bob: No, look here! The BBC says HBOS’ top bods are resigning! That proves it!
Me: Well, yes, they are. But they still aren’t Scottish.
Bob: Look! Porridge wogs have a high rate of violent crime! And alcoholism! You’re a mad conspiracy theorist!
Me: Bob, you aren’t making any sense at all.
Bob: Well excuuuuuse me. Obviously the truth hurts.