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Trust founders on the rock

Nicola York looks at whether Northern Rock can make a comeback

Northern Rock faces a difficult task to rebuild consumer trust in its brand with commentators divided over whether it will succeed.

Financial Services Forum chief executive Anthony Thomson believes it will struggle to regain trust unless it is sold.

He says: “This is a classic case of the operation will be a success but the patient dies.”

Thomson says it is not necessarily Northern Rock that consumers did not trust in the recent crisis but the Chancellor and the Bank of England that the public lacked faith in.

On the one hand, there is a huge legacy of goodwill towards Northern Rock, especially in its Northern heartland. On the other hand, he believes the bank will be taken over imminently by a strong parent, which will restore confidence among any remaining doubters.

He says: “I think its brand will recover but this is immaterial because it will be bought. If Citibank or one of the big banks bought it, I think it would restore consumer confidence.”

Several brands in the financial services sector have sign dramatic highs and lows. Aberdeen Asset Management is a case in point. One of the biggest direct Isa sellers in 1999-2000, its retail brand was heavily hit in the aftermath of the technology crash and split-capital investment trust debacle.

Aberdeen’s share price plummeted from more than 800p to a low of 26p in 2003, such was the impact of the fallout on its business.

That said, the fund firm, is now thriving, albeit as a smaller, refocused entity.

Hargreaves Lansdown head of investment research Mark Dampier says Aberdeen’s recovery is largely down to chief executive Martin Gilbert’s nous. He says: “Northern Rock will only recover by a lot of hard work. It needs someone like Gilbert. I doubt whether it will do it.”

Barings is another example of how a brand can become synonymous with a negative image but Baring Asset Management has managed to shake off the legacy of Nick Leeson in recent years.

Marketing director Ian Pascal says a combination of time, honesty, openness and delivery are essential for a brand to recover.

Although Leeson was not involved in the asset management side of the business, Pascal says the knock-on effect was obviously felt across the whole company.

“If you were to ask the man on the street what they thought about Barings a few years ago, then they would have said Nick Leeson and that was what we had to overcome,” he says.

“Communication with clients was paramount. The companies that struggle are those that hide under their desks and are opaque. But it does take a long time. You can destroy trust in seconds but it takes years to build up.”

Pascal says Northern Rock has a particularly difficult problem to overcome because most consumers accept that there is an element of risk involved with investments but with cash on deposit, the public assumes these are as safe as if it was stashed under their mattresses.

Pascal says: “I would not imagine that the brand name will exist longer than it has to. If a buyer comes forward and their brand is stronger, why keep Northern Rock’s name? I would struggle to see the logic of keeping it. It seems that its business strategy and the way it holds money is the problem.”

Stradbrooke Consultancy Director Martin Fox says it is going to be hard for Northern Rock to bounce back from the images of queues of customers outside its branches up and down the land.

Fox says: “One of the worst images was of the queues of people. It was so damaging. Going forward, there are two things it needs to watch out for. How competent are its staff? If staff are bullish and confident, then that will inspire trust.

“And second, it would be nice to see some investment in product development and marketing to show commitment to customers. With the support of the right partner the brand can survive but it has to demonstrate competence and confidence.”

Fox names Equitable Life and Independent Insurance as other examples where brands have been damaged – sometimes beyond repair.

Teamspirit chief executive Joanne Parker says Northern Rock has dealt with the situation effectively, reacting quickly, honestly and calmly.

She says: “The breakdown in communications came from the Government and the Bank of England. Last week, the bank’s governor Mervyn King stated it would not intervene to shore up ailing financial services companies, yet Chancellor Alistair Darling contradicted this with his decision to guarantee all monies in Northern Rock would be covered. Then Mervyn changed his mind.

“This lack of cohesion exasperated the level of consumer panic, and will contribute to levels of public trust in financial services falling further,” says Parker.

Teamspirit has been monitoring consumer trust levels for four years, and says it has seen a decline of more than 50 per cent for the most prominent financial brands. Parker says she expects the Northern Rock debacle to contribute to a further slump in trust when the firm conducts its next round of research .

She says: “To rebuild trust in the industry a measured campaign is needed from the Government and the Financial Services Authority, because no single brand can restore trust in the whole of the market.”

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