Mr. White: The company itself, as the name implies, Alliance & Leicester, was formed from a merger between two building societies, roughly equivalent to your savings and loans. We were a mutual building society until April 1997, when we floated on the London Stock Exchange. We are currently ranked 58th in the FTSE 100. We started our conversion process sometime after the other major converters in 1997, that is, the Halifax and the Woolwich, but we finished the process first. The roots of Alliance & Leicester are firmly in mortgages and retail savings, but for some years our strategy has been to diversify away from that rather narrow, if you like, business basis. And our latest results show that 47% of our profits are now generated by businesses outside our traditional mortgage and retail savings business. Alliance & Leicester operates in four business sectors. The first of the sectors is mortgage lending and insurance, the second is personal banking, the third is commercial banking, and the fourth is treasury and group. And I should say at this stage that commercial banking is carried out through Girobank, and Girobank's subsidiary, Sovereign Finance. And for your readers, Girobank was originally the United Kingdom's Post Office bank, until Alliance & Leicester bought it from the government in 1990. Girobank is market leader in cash handling in the U.K. We have a 25% share of all the cash and cheques which goes through United Kingdom retailers' tills.
TWST: When you look at the financial service industry and at your own
position in that industry, what are the key trends over the next two to
three years that the industry is facing, that you feel will have the
most impact on your own goals and strategies?
Mr. White: I think the first part of my response would be that it's
generally fairly well known that the United Kingdom financial services
market is extremely competitive - probably as competitive as anywhere in
the world. And that competitiveness arises from the fact that London
and the U.K. present a fairly free market for new entrants from both the
United Kingdom and from overseas. Other countries tend to have a more
restrictive environment for financial services, especially for what you
might call incomers. And of course these new entrants that are joining
the market have made it very, very competitive, and very exciting. It's
also made the existing companies look at their business, and some of
them have changed their business focus. They are doing that by taking
up new technologies, such as the Internet. So we believe that many of
the personal financial products, for example, mortgages, are
increasingly becoming commodity products, and Alliance & Leicester's
strategic response is, first of all, to have a very firm emphasis on
costs. We know that the way to continue to succeed, in a competitive
market is to make sure that we improve our cost/income ratio so that we
are first in class. We also, I think it's fair to say, have the
strongest commitment to reducing costs of all the U.K. banks for 1999.
We have said openly, and to our investors, that our costs in 1999 will
be lower in total than they were in 1998. We also determined to
increase our business in those markets that are growing, for example,
unsecured lending and credit cards, and the thing about those markets is
that they are also growing markets in the sense of the margins
available. The mortgage market margins are under extreme pressure
because of the competition. Our personal banking business, which is
unsecured loans, credit cards and current accounts, made GBP 62 million
profit in the first half of 1999 which is approximately 25% of the total
group profit. And as an example of our new businesses, A&L, Alliance &
Leicester credit cards, doubled to over 1 million since the beginning of
1997, and we have approximately half a million unsecured loan customers.
So the business climate in the U.K. for companies like ours is one of
really intense competition. And of course, companies like ours have to
make sure that we can meet and beat that competition by some of the
measures that I've already explained.
Tickers included in this excerpt: AL.L
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