Corporate Strategies: "It's not just rhetoric"

Lloyds Banking Group’s new “coverage” strategy for corporate businesses is winning friends and influencing growth, says its Joint Head of Business Development ALISON NICOLSON. Chartered Banker’s Laura Millar reports.

Forget those media headlines. “We’re very much open for business,” insists Alison Nicolson. “And, no, it’s not just rhetoric. Yes, we have government lending targets to meet, but it’s our strategy to go out and lend. We’re doing just that.”

As Lloyds Banking Group’s New Business Director, Nicolson – who job shares her role with colleague Jane Clark-Hutchison – sees the economy gradually strengthening, and corporate customers increasingly in the market for funds to grow and acquire. And the strategy developed by Lloyds aims to sustain and expand its market share.

They call it their “coverage model” – a multi-tier approach designed to give the corporate customer (those turning over from £15m to £750m) access to a relationship team based in their local area who work with their customers to co-ordinate and deliver their risk management and product needs: “We’ve put more relationship directors on the ground and resources behind them to give us time to really understand our clients’ businesses.”

Local credit centres now undertake the banking analysis and ensure direct, senior level interaction with the customer. “The result is a closer relationship,” says Nicolson. “We don’t want to tell them how to run their business, but we do want them to see us as trusted advisers. So we’re sharply focused on all aspects of customer service and deliverability.”

She’s clear that, while price is important in this, it’s the quality of the banking relationship that’s paramount. “Above all, it’s the way we do business with our corporate customers that’s the critical thing. All the feedback we’ve had since the ‘90s supports this: it’s all about the relationship. Price isn’t the highest issue on the agenda, at all.”

And it’s a strategy that takes full account of the new post-crisis realities. Financing major acquisitions, for instance, does take longer these days, she explains. ”That’s not to say we can’t be nimble. But acquisitions have to work for everyone involved: negotiations and due diligence have become exceedingly careful. Companies making acquisitions are now more likely to bide their time and avoid rushing in and paying more than they ought. Sellers, in particular, need to accept a more realistic price in today’s business climate.”

And, for the acquirers, Lloyds is helping companies plan ahead by providing a ‘war chest’ of funds: “We’re going out proactively to customers to make them aware we can do this for them. It’s all about increasing confidence in the corporate market.” Its ‘war chest’ offer means predator customers can move faster so that, when they identify a target, all but the final stages of due diligence have been completed.

“We still need to be happy with the acquisition target, but it does give the company the confidence to progress its growth plans. As a result, we’re retaining customers and re-banking others who are moving their business to us.”

Also, she says, companies are now looking for long-term funding. “Five-year funding had become too expensive due to the liquidity crisis in the market, but the trouble was that three-year finance does leave companies open to refinancing risks, so we’re now able to offer five-year terms, at a better price.”

And Lloyds has also been building on key skills in business risk evaluation. “We’ve done in-house and external refresher training to remind us what to look for and the signals which show a company’s health in more detail so we can understand risk better during and coming out of the economic downturn. Are they over-trading? Is the management performing? Are they meeting budgets and targets?”

Sectorally, it means distinguishing the promising prospects – in renewables, for instance, food and drink, parts of manufacturing and North Sea oil activity. And individually, it means acquiring an inside-out knowledge of clients, both to help them exploit opportunity, and to give early warning of those businesses heading into choppy waters and needing support through difficult times.

That can involve help to strengthen a management team, or to refocus its business approach. And the strategy is paying off: with only a very few exceptions in the past year, all the corporate banking customers who’ve come under the wing of the bank’s Business Support Unit have been helped back into a more robust state of health.

Some have become award-winners. “In 2009, two of our customers won awards conferred by the prestigious Institute for Turnaround – one as Private Company Turnaround and the other as SME Company Turnaround. As sole bankers to both of them, our Business Support Unit played a leading role in restoring these businesses back to health and profitability.”

It’s paying off. Feedback with the bank itself, as well as through external research and TNS scores, all point to high-level satisfaction. Another demonstration is Lloyds’ recent win as Bank of the Year for the sixth year running at the 2010 Excellence Awards of Real FD and the CBI. Finance Directors voted on the criteria of service, the degree to which their relationship manager understood their business and the support offered as part of their approach to lending, and the help they would be able to provide over the coming year.

“We’re certainly getting something right,” says Nicolson.