Winners and losers emerge in a changed lending landscape

This issue marks the fourth anniversary of Lending Strategy which launched in 2006 on a wave of optimism and into a mortgage market that had yet to peak.
On our front cover was Richard Pym, managing director of Alliance & Leicester, the former building society which had been the subject of merger rumours because, rather than being too big to fail it was deemed too small to survive.

Indeed, by the time I interviewed Pym A&L had been linked with more suitors than Madonna. But he had managed to keep the business independent and that, he said, was the way it should stay unless a proposition came along that added true shareholder value.

A&L was eventually to fall victim to the credit crunch and has now been subsumed into Santander but that was some time after the risk-adverse Pym had retired.

Who could have imagined that he would be lured back to the sector by the government as chief executive of Bradford & Bingley, whose troubled mortgage book was nationalised in Sept- ember 2008? Or that by December last year his portfolio would also include being chairman of Northern Rock’s so-called bad book of business?

Now there is speculation that he is to become top man at a merged B&B and Rock bad book – a development dictated by the restructuring of the Rock following a European Commission review of the state rescue package.

Other captains of industry featured in Lending Strategy have been less fortunate, particularly those in the specialist sector. But some have ridden the storm well. For example, Nici Audhlam-Gardiner, then head of mortgages at Abbey and A&L, who featured in our October 2009 issue has just been named head of retail banking at Santander UK.

Of course, Santander has done pretty well out of the financial crisis, proving there are winners as well as losers when the going gets tough. Pym may be looking after the buy-to-let mortgages of ill-fated B&B but Santander acquired his old firm and B&B’s savings book, along with its branches, for a song.
What’s more, with Europe still looking to the Royal Bank of Scotland and Lloyds Banking Group to shed some businesses, the likes of Virgin Money will have rich pickings, fulfilling Labour’s ambition to create new lender entrants. But one has to ask – where’s the net gain?

Curiously, chancellor Alistair Darling – who was critical of the US decision to let Lehman Brothers go and is questioning proposals to restructure big US institutions – recently told the press that the Rock was small in global terms but systemically it was important when it got into trouble. You can’t argue with that but why was the Rock rescued while others were deserted? The problem was that regulators had let things go too far and saving the Rock became synonymous with saving the government. At a stroke, moral hazard became a thing of the past.

The only way back might be the President Obama solution but that wouldn’t sit well with our big banks. And in a globalised economy it might not be possible anyway.