Halifax plans ?100m e-bank launch

Halifax will spend ?100m launching a separately branded internet bank next April aimed at reducing the bank's dependence on branch-based mortgage business for the bulk of its profits.
The new bank, named Greenfield.co, will target non-Halifax customers and is expected to employ hundreds of people at its base in central Scotland. It will be headed by Jim Spowart, who yesterday quit as managing director of telephone-based Standard Life Bank to join Halifax.

Prudential has accumulated losses of ?150m in its internet subsidiary Egg, and Standard Life Bank has lost ?35m since its launch last year. But Halifax chief executive James Crosby insists that start-up losses at the new bank would be `very modest' as it would aim to compete not on price but on brand name and service instead.

`We don't see it as price led in the same way as Egg or Standard Life,' he said.
Mr Crosby says Halifax expects to commit ?750m in additional capital backing over the next three years for the bank and Halifax Direct, the internet and phone bank for existing Halifax customers.

The bank, which is not expected to pick its brand name until early next year, will focus on current account and savings products but not mortgages. It will also offer personal loans, Isas, stakeholder pensions and health products, which customers will be able to access by both telephone and the internet.

`The real prizes are going to go those companies which use phone hand-in-hand with internet,' said Mr Crosby.

Halifax has faced criticism from City analysts for failing to diversify its earnings away from core business in the same way as Abbey National, particularly at a time when traditional business is under attack from new entrants.

But yesterday Mr Crosby said Halifax would announce targets in its preliminary figures in February for the proportion of profits it expected to generate from diversified businesses such as Greenfield.

Analysts welcomed the move by Halifax. Huge Pye of Robert Fleming Securities said: `Halifax has not done anything particularly interesting for a while, so this is potentially quite exciting.
`They have got Mr Spowart, which is a coup, although he has not yet presided over the profitable phase of running one of these operations.'

Under Mr Spowart's leadership Standard Life Bank has grabbed a 15% share of the British mortgage market in only nine months. Prior to Standard Life he ran Direct Line Financial Services and Direct Line life insurance.

Mr Crosby said Halifax was strategically more interested in establishing new ways of selling products, rather than using its growing cash pile to finance moves such as a bid for NatWest Bank.

`Our focus is on building franchises in new distribution channels, although we never rule out acquisitions,' he said.