Don't count on this merger to give better service

ON THE morning that Lloyds Bank and TSB unveiled their ambitious merger plan last week, I received a letter from my own bank. It was a questionnaire. They wanted to know, among other things, what branch I banked at, how old I was and my sex.

Since I've been banking with the same branch of that same bank since 1973, since my age is in their records, and since they've always managed to address me as "mister", it all seemed a bit un-necessary.

The letter was signed by the appropriately named MJ Folly of something calling itself "Personal Sector Service Development", whatever that might be.

Of course, this is the sort of computer-generated rubbish that every bank customer is plagued with. How much easier to set up something called Personal Sector Service Development and press the start button on a totally impersonal mailshot than actually do something to improve customer service. The very next day another arm of that same bank, my bank for 22 years remember, was trying to interest me in opening a chequebook account, apparently oblivious to the fact that I already have one.

The clearers have got ever bigger, ever more impersonal and ever more reliant on unthinking mainframes to do their business. So on one level at least the pounds 16bn Lloyds/TSB merger makes the heart sink. If the computers in a single bank are incapable of communicating with one another, what appallingly crass and inappropriate junk mail can we expect when two separate banks tie the knot?

Of course the quality of the junk is hardly the most pressing problem for the two banks as they set about becoming one. The potential for disruption and confusion in virtually every department is limitless, especially since Lloyds is only just starting to digest an earlier acquisition - the Cheltenham & Gloucester Building Society. Add in the vicious politicking inevitable when individ-ual employees are fighting to keep their jobs, and the task of making this marriage work would test the toughest.

At least Sir Brian Pitman, chief executive of Lloyds, is aware of the dangers. When we spoke on Friday, he said he had two priorities for the merger. First, no favouritism. Where there are duplicated functions, the best would survive, be it from Lloyds or TSB. Second, speed. "Nothing paralyses an organisation like uncertainty."

As for the potential savings, these can be very real, and they are probably far greater than the pounds 350m a year set out in the merger document. In order to get the green light from politicians, the bankers have almost certainly played down the scope of closures and job losses.

The lessons from bank mergers in North America is that the savings can be vast. In areas like information technology, cheque processing and treasury functions, the axe will fall deeply.

Later, once the necessary parliamentary bill is passed, the branch network will face a severe pruning.

In theory, the cost savings should in part be passed on to customers in the form of cheaper or better services. In practice, however, I have my doubts.

The curious thing about Lloyds Bank is that while it has been the City's favourite among the big four clearers for the best part of 10 years, in the eyes of consumers it is virtually indistinguishable from its peers, earning just as many brickbats in independent customer surveys.

The very real benefits achieved by Sir Brian have all gone to shareholders, not customers. Let's hope the fruits of this merger are distributed more evenly.

Pitcher could be right

ONLY time will tell whether Sir Desmond Pitcher's plan for a "super- utility" is the folie de grandeur of an egomaniac or the logical blueprint for a new hybrid company that will eventually drive down water and power costs for consumers.

North West Water's pounds 1.8bn bid for Norweb cleared a key hurdle on Friday when its shareholders approved the offer. The rival Texan bidders have retired from the battleground. Lancastrians now face the prospect of buying two essentials from the same company. Only a reference to the Monopolies and Mergers Com- mission is likely to stop the deal going through.

North West has been accused of overpaying for Norweb, after lifting its bid twice. But the offer still prices Norweb at 12.4 times prospective earnings - cheaper than either the 13.2 times Hanson paid for Eastern or the 13.9 times National Power is offering for Southern. I understand North West was prepared to pay even more had it been necessary. The scope for cost-cutting in a merged water-cum-electricity utility is undoubtedly enormous - from depot sharing to billing, from communications to debt recovery. If those savings can be achieved, a super-utility could work.

It was only three years ago that Welsh Water was berated by the City for buying a chunk of Swalec, the power utility for Wales, and it was eventually forced to sell out. Admittedly Welsh had been diversifying in a crazy way and Swalec wanted nothing to do with them. But if Sir Desmond is successful, Welsh will merely have been ahead of their time. Meanwhile, the pressure on the remaining independent utilities can only increase. Other regions ripe for a super-utility? London, Yorkshire and Severn Trent, say utility watchers.

What's next for George

ACCEPTED wisdom says you can't sell clothes in a supermarket. Knickers and socks perhaps, but not higher-margin fashion items. The hectic trolleys- and-toddlers atmosphere is all wrong. Shoppers aren't in the right frame of mind for agonising over dresses and suits.

George Davies, the ousted founder of Next, is turning accepted wisdom on its head, as we report on page 4. His George clothing range at Asda has taken off: sales per square foot have grown by 30 per cent in three years. Asda is delighted with the range and is now thought to be planning closer ties with Davies.

Asda, with its very large stores, has an advantage over its rivals in having the space for a full range - and changing rooms too. But if it and Davies really can carve a niche in mainstream fashion retailing, the likes of Tesco and Sainsbury will inevitably try to follow. Traditional high-street multiples, take note.