When Grupo Santander succeeded in taking over Abbey in November 2004, many predicted the acquisition was the first move in an armada of continental players coming in to change the face of our retail banks.Until last week, the biggest headline in the 12 months since the takeover had been the confirmation of up to 4,000 job cuts in May but Grupo Santander has now announced a three-year strategic plan that aims to change Abbey from a mortgage bank into a full-service retail bank. The strategy will include moving Abbey into riskier markets, including sub-prime, buy to let and new-build mortgages. The objectives of the plan are to increase revenue between 5 and 10 per cent for three years and continue its cost-cutting programme to improve efficiency by 45 per cent by 2008. In its core businesses, the group wants to increase net lending market share of about 10 per cent from 2006 and return to revenue growth. It also wants to increase its share of life protection to 20 per cent of the total share of the intermediary market by 2007. The indication is for more aggressive balance sheet growth in a more stable margin environment. The bank is also looking to grow in currently under-represented areas such as unsecured loans, investments and pensions. The three-year plan is effectively Abbey putting on its red boxing gloves, emblazoned with the white Santander flame, ready to take on the big four clearing banks and to attack aggress- ively in areas where significant opportunities appear. With HBOS holding a 23.4 per cent share of gross mortgage lending on Council of Mortgage Lenders’ figures, Abbey has a serious fight on its hands. Worn down by poor service standards and a chop and change attitude towards underwriting processing centres, swit-ching from central to regional centres, Abbey has got quite a hill to climb to regain the market’s confidence. Cartel director of comp- liance John Rattigan says: “Over the past year, performance has been variable, from good to poor. Abbey should ensure it gets the basics right first before considering where it should go in to sub-prime or buy to let.” John Charcol senior technical manager Ray Boulger says: “The service issues are better than they were but there are still some problems. It does not make sense launching into new markets before this is sorted out, although three years gives it plenty of time to get servicing right.” The improvements on the mortgage side mainly come down to Ricky Okey, now managing director, intermediaries, who joined Abbey in February. Boulger says: “Ricky clearly knows what brokers want. Before, they were quite arrogant, telling brokers what they wanted.” Accord Mortgages managing director Linda Will says that a lot more will be exp- ected from Abbey now. She says: “Abbey heralded the 10-day mortgage offer and fast-track but it was not the first to pioneer these. It needs some new ideas.” A move into sub-prime will get some people scratching their heads. Up until February 2003, Abbey was already in this market but then the management decided to sell First National to GE Consumer Finance for 848m. The cash was helpful but it was does look like a failure not to realise the scope of the sub- prime market. Rattigan says: “Abbey always seems to miss the boat with these things. The boom time in these specialists areas have gone and Abbey has left it too late. They should concentrate on building on what they are good at – residential mortgages and remortgages.” Boulger believes the bank could make some headway in these niche areas but says: “No doubt, for a lender of Abbey’s size, it will be successful if it goes about it in the right way. This comes down to the people who do the underwriting. Its underwriting will more than likely be technology-based but there is an argument for sub-prime to have some manual underwriting as there are occasions when this can be helpful.” Other brokers are even more optimistic, hoping that Abbey’s three-year plan will turn them into a one-stop shop for intermediaries. Brentchase Financial Services mortgage specialist Michael Fitzgerald says: “Many brokers go to Abbey with a potential case and it fails because of a small amount of adverse. It is losing out to business to people such as Platform. This seems like a perfect venture for them. “Abbey’s online offering is very good. If it utilise this, and as long as they have a good cascading system, it could stand to do very well.” Santander has already committed to implementing its Partenon IT systems to improve the speed at which Abbey can market new products and provide better sales tools and processes. There will be a phased roll-out through 2006 and 2007 but the full benefits will not be realised until the final year of the three-year plan. Can Abbey stand up to the likes of HBOS in the ring? Fitzgerald says: “If brokers know that they can go to a brand such as Abbey for everything – buy to let, self-cert, sub-prime and residential – as well as all the other things, it can only stand to win.” With three years of training in front of it, a lot of cash from Spain and a fair amount of loyalty from the intermediary market, the support is available for Abbey to rival the likes of HBOS and be in the running for heavyweight champion of UK banking.