HOW BRITISH BANKS WOO STUDENTS

One of Britain's leading banks suffered some horrible publicity a few years ago when an exasperated bank manager called in a student to discuss her persistently overdrawn account. As soon as the girl arrived for her appointment, the doors of the bank were slammed shut and the police called in.

The bank was mercilessly censored in the press for its insensitive treatment and even now doesn't like to be reminded of this unfortunate incident.University and college students, struggling to make ends meet on barely adequate grants and loans, are hardly bank managers' favorite customers. But today's penniless students with their low bank balances and tendency to slip into the red are tomorrow's high-flyers, a fact clearly recognized by Britain's big four banks, National Westminster, Barclays, Midland and Lloyds, which have recently become conscious of the strength of student power.

All are carefully scrutinizing their market share and actively wooing young customers following a significant shift in the pattern of student accounts over the past three years.

Barclays, until recently the U.K.'s biggest bank, has felt the full brunt of a student backlash and seen its share of this market slump from a high of 27 percent a few years back to the present level of around 15 percent.

Barclays, with its strong South African connections, was the main target of anti-apartheid protests in Britain for many years, even though it was regarded as one of the most enlightened employers in the republic. The bank finally succumbed to pressure last year and sold its remaining 40.4 percent stake in its South African associate, Barclays National Bank. But it faces a tough uphill struggle to win back its share of the all important student market from its close rival, National Westminster, that recently overtook Barclays as the U.K.'s largest bank.

While Midland and Lloyds each have just over 20 percent of the student market, NatWest's share has climbed to 41 percent.

This, says NatWest's chief executive Philip Wilkinson, represents "the seedcorn of the future," a thought that may give the bank's rivals some cause for alarm.

NatWest is already the star performer of the British financial services industry, having just become the first U.K. bank to achieve profits of more than 1 billion ($1.5 billion) to put it amongst a very small world elite headed by Citicorp.

While the other three have all had setbacks of one kind or another in recent years, NatWest seems to have avoided all the pitfalls and gone from strength to strength. Pretax profits rose by 26 percent in 1986 to reach 1,011 million, with U.K. domestic banking profits up by 37 percent to 720 million and the international banking division showing a 23 percent rise in earnings to 223 million. In the United States, where most other British banks have had a hard time, NatWest USA's pretax profits last year topped $100 million while after-tax earnings rose by 24 percent.

Last year was the first time NatWest's profits had exceeded those of Barclays that reported only a 7 percent rise to 895 million.

The bank that in 1985 reported a 37 percent earnings growth and ranked as one of the most profitable banks in the world is now in the throes of restructuring its vast overseas network that was based very much on Britain's colonial past.

Now that the bank's links with South Africa have been cut, Barclays is concentrating future expansion efforts on Europe, the Far East and Australiasia, and above all North America, as well as building up its investment banking operations.

But Barclays chairman Sir Timothy Bevan could not disguise his disappointment when he announced the bank's lower-than-expected profits that left the group well behind NatWest.

There was a far more upbeat mood at Midland where the bank is at last recovering from its disastrous experience in the United States that has left the British bank as reluctant owners of Californian vineyards, housing developments and a hotel. The huge losses incurred by Crocker National Bank, sold last year to Wells Fargo, weighed on Midland's results for several years, but now the bank is back in favor with the stock market after reporting a 24 percent jump in 1986 pretax profits to 434 million. With a new team headed by former Bank of England deputy governor Sir Kit McMahon in charge, the bank is striving to close the gap between itself and its peers and was described by a leading securities analyst last week as having "excellent long term recovery potential."

The millstone, albeit a fairly light one at present, around Lloyds Bank's neck is Latin America. With a large presence throughout the South American continent, Lloyds has a big exposure in Brazil with outstanding advances of 1.2 billion, and total assets in Central and South America of almost 5 billion ($7.5 billion).

But for 1986, the outturn was excellent with pretax profits up 25 percent to 700 million and chairman Sir Jeremy Morse sounding confident that Brazil's

financial difficulties were containable and that neighboring states were unlikely to emulate the Brazilian freeze on interest payments.

But as all financial institutions continue to review and restructure group operations in the wake of the sovereign debt crisis, and place far greater emphasis on domestic operations, NatWest's high profile on the campuses should go a long way towards helping the bank consolidate its number one spot.

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