Benny Higgins is best known as the banker who liked to say no. In 2007, he thought the housing market was getting too hot, so he tightened the terms of HBoS’s mortgage offer, and as the bank lost market share, he lost his job. Mr Higgins is too polite to say  “told you so”, but now he’s getting his revenge the best way, launching Tesco’s long-awaited current account.

This move is likely to cause considerable pain for Lloyds, the owner of HBoS, as well as collateral damage to the raft of “challenger banks” led by TSB which are competing for the nation’s savings. Mr Higgins’ current account offer has echoes of the old-fashioned Tesco which worked out what the customer wanted and then tried to give it to her.

Current accounts cost the bank money, but are generally considered to be the gateway to profitable banking services like mortgages, so it will be a year or three before the £600m Tesco has sunk into the venture produces a profit. The big banks can ignore the growing number of fleas which are trying to bite them –  even after casting off TSB, Lloyds has £400bn of deposits – but Tesco is sufficiently big and ugly to cause them more than a fleabite. Potential customers pour through its doors every week in their millions, and while Britain’s biggest grocer may not be loved, its reputation is way above that of the biggest banks.

Retail accounts are much harder to get right than it looks from the outside, especially since we’re hooked on free-in-credit banking. Systems need constant updating to keep pace with the mobile-driven technology, and we’re notoriously reluctant to switch. Much depends on whether Tesco can deliver on its attractive promise of a straightforward, transparent current account which pays interest. However, if anyone has the necessary experience, it’s Mr Higgins. He’s been working on this project long enough, and he’s got the motivation too. Who knows: Tesco Bank could mark the start of the supermarket group’s fightback.

Dig those crazy deals

Oh no, say it ain’t so! Those Billiton assets which were such a “sensational fit” with BHP 13 long years ago have contributed nothing, well, nothing much, to the growth of the business. A devastating analysis from the FT’s James Wilson this week concluded that  the biggest beneficiaries of the deal (apart from the former Billiton shareholders, of course) have been those who took the fees up front.

Now, it seems, they or their banks are to be rewarded again, by overseeing the divorce, selling off the bits of Billiton that BHP no longer wants, which turns out to be most of them. The new management’s ambition to “simplify” the world’s mining colossus is admirable, but the move is another example of the shocking hubris of those who ran the businesses not so long ago.

It’s little more than a couple of years since BHP, far from getting smaller and simpler, bid to get bigger and more complicated by buying Rio Tinto, to create a woldscale monopoly of sea-borne iron ore. When that failed, BHP tried to buy into the potash business. Mercifully (for the shareholders) that was blocked too.

The moral of the story is that miners should stick to mining. Unfortunately, human nature being what it is, fee-addicted bankers singing siren songs about bragging rights in the Melbourne Mining Club will always make the bosses believe that deals are more exciting than digging.

Swish! and SWIP’s toast

What’s a fund manager worth? Little more than a rounding error in a takeover, it seems. The Aberdeen Asset Management sword has swept along the assembled heads at SWIP and decapitated almost the whole line. It’s barely six weeks since Aberdeen completed the £550m purchase from Lloyds Banking, taking over the £138bn of assets left under management left after £6bn had fled last year.  Since nobody had ever heard of SWIP, the name was ditched immediately. Few of the global equity managers have lasted much longer, and their bosses were already long gone. The ultimate owners of that £138bn will never notice…

This is my FT column from Saturday

 

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