Greg Wright: A reputation that’s survived the years of financial folly

THE rush to demutualise in the closing years of the 20th century was one of the greatest acts of financial folly in history.

In a few months, towering institutions were swept away and replaced with banks built on the shakiest foundations.

But there are encouraging signs that one historic Yorkshire brand, the Halifax, is about to stage a remarkable comeback.

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It’s quite possible that Antonio Horta-Osorio will use the Halifax as the Lloyds Banking Group’s main retail brand.

There’s widespread affection for the Halifax, which dates from the time when financial services revolved around ledger books and mutuality was a respected principle.

The Halifax still wins awards, although there had been concerns that it might flounder as part of a vast group, in which the Government has a 40.6 per cent stake following the financial crisis of 2008.

Mr Horta-Osorio, who was installed as Lloyds Banking Group’s chief executive in March, is said to be a fan of the Halifax.

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The Lloyds boss is believed to be ready to unveil a new strategy for the Halifax brand, focusing on its current accounts, which are ranked among the best in the country, and savings and other products which draw in customers.

Thousands of readers must wish they could turn back the clock to the days when the Halifax was a building society.

There’s always a temptation to view the past through rose-tinted glasses.

But the solid Yorkshiremen – and women – who believed in mutuality and turned the Halifax into the biggest society of its kind were the personification of prudence.

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How many members are cursing their decision to convert to plc status back in 1997?

Or wishing they’d never seen the merger with Bank of Scotland four years later?

Let’s highlight a brutal fact.

Not one of the seven building societies that chose to convert to banks in a fit of arrogance and ignorance is left standing.

The stupidity shown by some of them brought the banking sector to its knees and cost us, the taxpayer, billions of pounds to bail them out.

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Millions of Halifax investors who received nearly £1,500 in free shares when the group demutualised saw their windfall plummet to just £38, according to figures released in October 2010, the second anniversary of the bank’s rescue.

Although nobody would claim that all building societies are flawless, they work on the principle that their savers provide the bulk of the cash for mortgage loans.

The building societies’ collective wisdom seemed to vanish when they became banks.

The desire to produce dazzling short-term gains to impress shareholders seems to have been overwhelming.

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Would Northern Rock have launched a mortgage product that allowed customers to borrow 125 per cent of the value of their homes, if it had remained a building society?

At the time, Northern Rock was sourcing only 25 per cent of its lending from savers’ deposits.

This was a recipe for disaster.

Bradford & Bingley’s enthusiasm for self-certification mortgages proved to be its undoing.

Before Bradford & Bingley listed on the London Stock Exchange in December 2000 it was one of Britain’s largest building societies.

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A decade later, the society’s name, and its distinctive logo, had vanished from the high street forever. Santander took over Bradford & Bingley’s savings accounts and branches, and the Government took control of its mortgages and loans, following the bank’s collapse in 2008 due to massive bad debts.

For former members of Bradford & Bingley, this is a painfully fresh memory.

Although the Halifax’s days as a mutual are gone, its success can ensure that taxpayers get a good return on their investment.

But we shouldn’t expect too much from Mr Horta-Osorio’s review on June 30.

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My sources tell me that it’s unrealistic to expect a detailed five-year plan for Lloyds.

Mr Horta-Osorio has only had 100 days to draw up a plan for two vast businesses which are still being integrated.

It’s far more likely that we’ll see a process of evolution, with changes implemented over three to five years.

Nobody will be surprised if Lloyds decides to drape itself around the Halifax banner.

Some reputations are so powerful that they can survive the biggest financial meltdown in history.