Barclays' new brand takes on Virgin and the supermarkets

BARCLAYS yesterday attempted to throw off its traditional banking image and tackle Richard Branson's Virgin and the supermarket banks head- on with the launch of a new financial services company, called "b2" .

The new venture is aimed at the 5.5 million UK savers who have traditionally shied away from the stock market.

b2's first product the "Advanced Savings Account" - is linked to the stock market, but guarantees customers will not lose their savings in the event of a market crash.

But calculations show that the cost of the guarantee is so great that stock market growth of 45 per cent over three years would only deliver annual returns of about 8.2 per cent, barely better than some building society investment bonds.

Mark Bogard, managing director of b2, said: "Many people feel that they could make more of their money than in the building society. But they simply don't feel confident or comfortable enough to do anything about it. b2 will bridge the gap between savings and investing for ordinary savers."

Barclays said the brand b2 was an attempt to combine the concepts of safety and security traditionally associated with the Barclays brand with the "newness and innovation conjured up by recent entrants". In recent months, the high street banks have had to cope with an aggressive assault on their core saving markets from new entrants such as Virgin and the supermarkets.

The company said that any similarity between b2 and V2, the new Virgin record label was "entirely coincidental". The bank added that neither itself nor Budgens, the supermarket, were concerned by similarities between the brand names of their services.

Last month, Budgens rebranded its 7-11 stores "b2".

Martin Taylor, Barclays' chief executive, said his company was "trying to change the way people save". He added "this will be a very important market for us".

City experts were more cynical about Barclays' latest move, saying it was "good PR" but not necessarily good for profitability.

b2's advanced saving account requires a minimum investment of pounds 500, or pounds 50 per month. Savers can take "payment holidays" and may withdraw their money at any time. The account is "PEP-able" and will evolve to fit the criteria of the government's new Individual Savings Account (ISA).

Mr Taylor said the new company "drew on the skills and strength from around the Barclays Group". Barclays Global Investors will manage b2's funds, and Barclays Capital will look after the equity derivatives operation.

b2 is aimed at an audience of self-perceived thrusting, modern, "can- do" customers who are bored by old-fashioned, fuddy-duddy investment talk.

Yet shorn of its 30-something radical chic, the clever imagery, the daring typography and trendy logo, the new Advanced Savings Account (ASA) is an old idea with a few fresh bells and whistles.

It is a guaranteed stock market investment product, investing in the FT-SE 100 share index. The company is targeting former building society savers who want the same ease of access coupled with a level of security, but with minimum risks.

The amount savers get back at the end of either a three, five or seven- year investment period in the ASA is guaranteed, even if share prices fall. If the stock market rises, savers gain most of that upside, including dividend income. Derivatives are used to underpin this guarantee.

Investors seduced by the seemingly limitless opportunities of equity market growth should also remember that any potential upside is limited to about 86 per cent of their investment. The rest of their money is used to pay for the guarantees that protect them against any downside. Over shorter periods, stock markets have delivered worse returns than building societies.

In this, as in many other respects, the ASA is similar to most other guaranteed investment products. But there are a number of differences, including easier access to funds and the possibility of payment holidays without penalty.

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