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Home » Money Blog » Recession Watch » Why an A&L Takeover Could Spell Bad News for Consumers
Why an A&L Takeover Could Spell Bad News for Consumers
By Nic Cicutti
Jul 14, 11:47 AM
You can always tell an old bore by the way he drones on about how long ago it was that he bought his first property. And it was almost exactly 25 years ago when I put on a suit and tie and went to plead with our local Abbey National Building Society manager for a £14,000 mortgage.
As luck would have it, he lent it to me and so began a long relationship with the Abbey, in which I received free shares when it floated on the stock market a few years later, sold them several years after that and then watched as the bank grew, then contracted and was finally taken over by the Spanish-owned Banco Santander back in 2004.
Today, I read that Abbey (it lost the National part of its name a while ago) is in the running to buy Alliance & Leicester (A&L), another former building society. In reality, of course, it is Banco Santander’s acquisition, as the bank consolidates its holding in the UK.
If the bid is successful – and Alliance shareholders don’t reject the offer – Abbey and Alliance & Leicester will be merged into a single entity.
Realistically speaking, I can’t see why they would reject the proposed deal. For several years A&L’s share price was sustained mainly by the fact that it was seen as a takeover target.
The current collapse in the mortgage market has led to growing speculation over the future viability of A&L. The bank might like to say that the quality of its mortgage book is much better than Bradford & Bingley’s, to take one example, but speculators don’t care about these things and they have been driving A&L’s share price down in recent months.
So, what does this all mean?
What this suggests to me is a number of things. The first is that when a bank is taken over in this way, you are effectively waving goodbye to an element of competition in the market.
This is especially likely when the name Alliance & Leicester disappears completely, compared to, say, Royal Bank of Scotland’s decision to let NatWest carry on trading as a separate business.
My second area of concern is that of customer service. In the past two or three years, since the Banco Santander takeover, Abbey has become a byword for shocking service, generating many thousands of complaints from aggrieved punters – although, oddly enough, my own very recent dealing with the bank over my old mortgage was totally trouble-free.
Merging two computer systems, plus savings and mortgage accounts, branch closures, and lots of other services being merged will lead to many months of strife.
Don’t believe me? Check out Nationwide and the trouble it’s had over its merger with Portman, fast becoming a byword for how not to bring two building societies together.
Is this all doom and gloom then? On the contrary: to some extent at least, Banco Santander is calling a bottom to the current crisis in the UK housing market.
In other words, Banco Santander’s proposed takeover signals that it believes mortgages will become a profitable area of activity again – after having taken out one of its many competitors.
That’s not to say things will get better immediately, more that the Spanish are lining up their ducks so that when the market does finally begin to improve in nine to 12 months’ time they are there to take advantage of the situation.
All in all, this is a very small but hopeful sign that some institutions are starting to see there is money to be made again out of lending money to buy homes. And, unlike me 25 years ago, it won’t be necessary to wear a suit and tie to go and borrow it.
User Comments
Steve 25 November 2008, 10:16
So very glad to see A/L disappear into the sun set they are like most building societies and banks, greedy profiteering people whos only insight is to see vast profits made from the very backbone of the countrys workforce.Bring back the old days of saving under the mattress!!!
Simon 30 October 2008, 14:47
I left Abbey over a year ago, couldn’t agree more with the comments about poor customer service – that’s 100% the reason I left Abbey. I moved current accounts and savings accounts to another high street bank with a much better online banking service. Now I can do all my banking online, myself with no need to get the bank’s customer service involved :)
I’d NEVER go back to Abbey :(
Chris 21 October 2008, 20:23
We have been customers of A & L since it was Giro, and have always found staff pleasant and helpful and have never considered moving to another bank but I must say we are concerned now.
Judith 21 October 2008, 07:54
What does this mean for a mortgage customer of A&L will my fixed rate be affected?
bear 20 October 2008, 22:03
i have been banking with the abbey for over 10 years and since it was taken over by the spainish,the customer service has been rubbish,took me four times to order a cash card and over two months to get a sorry letter.my advice to a & l, say no
alan 9 October 2008, 10:34
just how many banks will Santander be allowed to take over before the monopolies commision gets involved?
Priti Surti 17 August 2008, 16:11
Another sad day for customers, staff and shareholders. As an A&L customer for over 25 years, I feel very sorry for the staff who have worked tirelessly to provide excellent service and are potentially likely to lose their jobs in the takeover. It is amazing that a deal could be done over 2 days without any consideration for the implications for all stakeholders.
It is a shame that A&L management did not consider takeover proposals over the last 2-3 years when the share price was in excess of £12 from overseas banks like Credit Agricole. A takeover by this bank would have secured a major UK banking force, excellent products, job security at Head Office and branch networks and a decent price for shareholders. When this tentative approach was made by this French bank at least discussions should have taken place to see what could be agreed given that Santander were still busy sorting out Abbey at the time.
Now it is being sold at a cheap price with concerns about jobs in key areas like the Midlands. As usual, the management will walk away with a “golden handshake”, whilst staff have no knowledge of whether they have a job or not. Also, branch closures are also likely to be on the cards since a significant number of A&L branches (approx 40% which equates to around 100 branches are either on the same street or within a mile of the nearest Abbey branch).Therefore, the talk of an increased branch network under the takeover are based on lies and not fact.
I would encourage all shareholders (large and small) to vote against the takeover of A&L and would appeal to other major overseas banks like Credit Agricole, ING and National Australia Bank (NAB) to put in a counter-bid. A&L is a solid company, it retail and commercial business is strong and deserves to be a major banking force in the UK. The takeover of A&L will put the UK banking landscape back 13 years when the market was dominated by “Big 4” banks plus Halifax and the then Abbey National. This cannot be seen as healthy competition.
It is also a sad fact that much of the media coverage suggest that the takeover was instigated possibly by 10 or 11 Downing Street indirectly through the Financial Services Authority (FSA) so as to avoid another financial crisis for Gordon Brown and Alistair Darling. I appeal again to all shareholders for the sake of the staff and customers do not let this takeover go through and let another UK company fall into foreign hands.
From the other comments displayed it is quite clear, Santander do not care about customer service and the letters page of any national paper indicate they have a major problem in this area. They cannot carry out some of the most basic requests (e.g. ordering a PIN or debit cards) to dealing adequately with sensitive issues like probates for deceased customers. Given the similar financial problems in Spain, the only way Santander can keep growing is continuing to acquire other companies but not address any of the issues that concern customers.
The outlook looks bleak for staff and customers so to the large shareholders I say look beyond this deal and consider the implications for jobs and consumer choice.
david hill 19 July 2008, 12:07
any ideas when take over actually happens? when are they putting proposals to shareholders and does it have to be cleared by both governments first.
Sarah L Foster 16 July 2008, 19:54
We have a joint account with A+L and a mortgage with Abbey, to be honest Ive never had any issues with Abbey but A+L customer service leaves alot to be desired!!
Mike Willis 16 July 2008, 19:39
As a pensioner of A&L, mortgage holder and investor, I’m pretty well locked in; my concern is total. Is my pension safe? will my mortgage hold good? will my investments be safe? With Abbey/Santander?, I fear not! If you read the Saturday Daily Telegraph’s money section with more than frequent problems with Abbey’s administration it bodes ill for all of us. Then read comments of others here in Money Blog, and you’ll see what I mean.
Helena Doddenham 16 July 2008, 18:22
Will I get a windfall & after that how long will it take me to transfer my accounts to another bank. I have had dealings with Abbey before, never again.
Paul Williams 15 July 2008, 23:40
savers won’t get anything, other than maybe customer service overseas, probably spain not india… quite amusing the “how much do i get out of it brigade”
as a shareholder, I will be voting against the takeover when it is put to shareholders for 2 reasons, one I believe there is more value in A&L though it may take some time to recover that, bigger banks is likely to lead to bigger problems (next time around)
M Marsh 15 July 2008, 13:41
I have banked with A/L since it was Giro bank back in the 70’s and was horrified to hear that they were now being taken over and merging with the Abbey. I also have an account with the Abbey who are not, I am afraid to say a patch on A/L, and there customer service also leaves a lot to be desired!!! Not too sure what will happen to A/L customers I only hope that A/L will stay as they are, and carry on offering an excellent service to all their customers.
Daniel. 15 July 2008, 08:52
The shareolders will be mad not to do it, as they will make £2 per share, doesn’t sound a lot unles you have lots of shares!! All I see here are people thinking of themselves what about the people that work in this company, what will it mean for them????
pam 15 July 2008, 02:49
i have had an account with A&L since 1983 which it was then giro i have never had aproblem in all the years i have had my accounts with them i have current accounts and saving accounts with them i worry that the great service they provide will change
scott 15 July 2008, 00:11
i changed from abbey to alliance and leicester as they were pretty much useless in all aspects of banking my heart sank when i heard the news
Heather 14 July 2008, 23:36
does any one understand how hard and stressful it is to work in a british banking
industry? It is easy to condem the Abbey in my opinion The british public demand too much customer service even when they are in the wrong, I bank with the A&L and I am moving to live and work in Spain still within the financial sector, I will be happy for A&L to move over to the Santander Group.
Phil 14 July 2008, 22:27
I agree with a lot of these comments, the service at Abbey is shocking. I also took my buisness to A&L with the hope of better service. I am now disapointed with the news of this merger.
ADRIAN FISHER 14 July 2008, 21:38
UNFORTUNATELY ANOTHER MERGER,THIS CAN’T BE GOOD FOR THE BRITISH ECONOMY AS IT STANDS.
WE ARE IN THE GRIPS OF ANOTHER RECESSION,THIS IS ONLY MAKING MATTERS WORSE,BE WARNED!.
Allen Brookes 14 July 2008, 20:44
I have been with A/L since the giro Days never had to complain. If the takeover is anything like the Abbey takeover by Santander it took Abbey six months to find my documents to pay out my endowment and no word of apology.
Pat & Larry Caley 14 July 2008, 20:38
We have been customers of A&L since since ’65, and apart from a few minor glitches, the service has been good, and interest rates have always been competitve. The thought of foreigners taking over yet another British business is worrying.
MRS ENID STEPHENSON 14 July 2008, 20:11
I HAVE BEEN A CUSTOMER OF A/L SINCE IT WAS GIRO BANK IN THE 1970s I HOPE THEY DONT SELL OUT ,IVE ONLY EVER HAD GOOD SERVICE
Mel 14 July 2008, 19:13
European countries are taking over pretty much everything in Great Britain, why should Alliance & Leicester be any different.
DAWN LAWSON 14 July 2008, 18:39
DAWN LAWSON
I FOR ONE WILL NOT E PLEASED THAT THE ABBEY WILL TAKE OVER A +L BOTH OF WHICH WE HAE HAD ACCOUNTS WITH, THE CUSTOMER SERVICE WITH ABBEY IS RUBBISH, WE HAVE ASKED FOR HELP WITH THE MORTGAGE AND THEY ARE NOT INTERESTED, WHAT GOOD IS THAT WHEN YOU ARE ASKING FOR HELP.
Steph 14 July 2008, 18:22
I have had my account with A&L for over 20 years and have had no problems at all,any help I have needed they have given it me time and time again,its a great place to bank.I worry that it will all change.
ian 14 July 2008, 17:16
Does the take over mean we lose the benifits at A & L ie free Holiday insurance.
Alyson 14 July 2008, 16:59
Surely the customer service at Abbey/Santander can’t be as shocking as that at A&L already! I have a mortgage with Abbey and a current account with A&L and I would go with Abbey any day if it was about customer service!
andrea myhill 14 July 2008, 15:13
yes will i get any free shares from this take over already have 250
philip 14 July 2008, 14:38
So if i have money in a A+L account will i get anything out of it??
Whats in it for me as an average customer?
shaun barbery 14 July 2008, 13:40
Do A and L customers get any payout if the companies merge?
Craig Hurst 14 July 2008, 13:26
I hope that Alliance + Leicester don’t sell out to Santander. I was an Abbey customer for years and had great service until the Spanish took control and now the service is attrocious. I have recently changed my account to A + L so I am hoping they steer well clear of the Spaniards because a lot of customers will be affected.
A note to A+L – DON’T DO IT – PLEASE – FOR ALL OUR SAKES!
James 14 July 2008, 13:26
A very interesting analysis. Hopefully it means that even if mortgages are not yet as competitive as they were 12 months or more ago, there will be more of them available….
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