The End of the Abbey Habit

Today saw the Spanish Banco Santander Group announce that it will be re-branding its UK subsidiaries Abbey and Bradford and Bingley as Santander UK with immediate effect. For Abbey, once an industry leader in the mortgage and savings market, and a pioneer of building society de-mutualisation in the late 1980s, this seems a sad end for a once well known British brand.

Abbey can trace its roots right back to the National Permanent Mutual Benefit Building Society established in London in 1849, in compliance with the 1836 Building Societies Act which allowed the creation of societies to lend money from subscribers to fund house building. In 1874 the Abbey Road & St. John's Wood Permanent Building Society was formed in north west London. In 1944 this society, now the UK's second largest merged with the National, by this point the sixth largest society, to create Abbey National, with assets of £80m, to exploit the expected post war building boom. The society, rooted in the affluent south east, prospered; by 1968 the society had assets of £1 billion and a network of 150 branches. Despite the poor economic conditions of the 1970s the society continued to prosper, compiling assets of £5.8bn by 1979, supported by a network of 500 branches. The brand was also a very strong one, with its clever logo of a couple holding up an umbrella that was also a house roof, while youngsters were told to 'get into the Abbey habit' (habit, Abbey, monks), later, saving with Abbey was 'the habit of a lifetime.'

In 1989 the Abbey National was the first building society to take advantage of the Thatcher government's de-regulation of banking, converting itself into a bank by granting its members shareholdings proportional to their savings. It would be easy, and lazy to suggest that the demutualisation of Abbey was what led to its eventual purchase by Santander in 2004. Like industry contemporaries Halifax and Northern Rock, there was nothing inherently wrong with Abbey National's business model as it stood. However, the company diversified into new operating areas in which it lacked experience, notably wholesale lending and the insurance industry. Exposure to the Enron collapse of 2001 coupled with a slowdown in the wholesale lending market damaged the Abbey National. In an attempt to fight back the company restructured in 2003, with new Chief Executive Luqman Arnold expensively re-launching the consumer brand by dropping the 'National' from the name, and introducing a new logo and colour scheme, to try to paper over the cracks. Consumers were not convinced by this however, despite the aim of the rebrand being to make the Abbey a more radical, friendly bank.

Santander steered Abbey capably through the financial crisis of the late noughties, notably avoiding exposure to the US sub-prime mortgage market. What remains less clear is how well Abbey's customers, and those of other banks, will take to the Santander name, so far only known in Britain via the company's sport sponsorships, notably in motor racing (Abbey's corporate identity has been identical to Santander's since 2004). One thing is for certain; the disappearance of the Abbey name is a reminder that nothing in business is permanent, even in 'permanent' mortgage banking.