The Times

Coronavirus: why is Lloyds Bank being so slow to lend?

Publication: The Times
26th April 2020

The bank is lagging rivals in supporting small businesses in distress Jo Harris, a senior Lloyds executive with responsibility for the bank's 890 branches in England and Wales, last week laid bare the pressure faced by staff handling the government-backed Coronavirus Business Interruption Loan Scheme (CBILS). “We've got 43 [customer service assistants] supporting business banking, sending decline emails for the new CBILS applications,” she said in a leaked audio recording of an internal presentation. “We're seeing that quite a high proportion [of businesses] don't actually qualify against the criteria the government set out, so that's a massive help.” Moving staff from branches that have remained open during the lockdown to help send rejections to emergency loan applications is a stark indication of how the coronavirus crisis has transformed traditional lenders' priorities. As criticism mounts over CBILS' failure to distribute money to the businesses that need it, banks have scrambled to reallocate resources and convince customers that they are willing to help them. Thousands of companies are still being turned down and are running out of cash. Lloyds has moved hundreds of staff to work on CBILS responses, including, it said, a “small team . . . responding to ineligible customers”. Others are reviewing loan applications, arranging appointments for customers and updating them. Last week, chancellor Rishi Sunak discussed with bank bosses the progress of the government's rescue measures amid calls for him to intervene. Despite there now being more than 45 lenders accredited to offer CBILS loans 80% guaranteed by the Treasury, they appear unwilling to take the risks required to save businesses — and jobs. Plans for the government to fully underwrite lending to the smallest companies should speed up the distribution, but the volume and value of loans approved remains less than similar schemes in Germany, America and even Switzerland. Figures released last Thursday showed that 16,624 loans worth more than £2.8bn had been made in the month since CBILS was launched. Lloyds is not pulling its weight. It has a 19% share of the market for small business lending — up from 13%, and second only to NatWest — yet has approved just 2,382 CBILS loans, or 14% of the total. Their value is £335m, or 12%. By contrast, NatWest has a 20% share and has approved more than 40% of the total loans by volume and value. Barclays, with an 18% share, has made 2,971 loans worth £586m. Lloyds claimed it approves 80% of completed applications — but thousands do not get to that stage. The lax performance is embarrassing for Lloyds, which was bailed out by the taxpayer during the 2008-9 financial crisis, and its boss, Antonio Horta-Osorio, who has sought to increase business lending since taking the job in 2011. Over the past nine years, Lloyds has increased its share of small business lending and has set annual lending targets as part of the bank's Helping Britain Prosper campaign. The focus on smaller companies is an attempt to refresh the bank's image following the mass fraud at the Reading branch of HBOS, which Lloyds acquired in 2008. The crimes, which saw six people jailed for cheating small businesses and the bank, took place some years before the takeover, but Lloyds has struggled to distance itself from the scandal. A second review into the compensation offered to victims began this month. CBILS was a chance for Horta-Osorio, who was paid £4.7m last year, to prove he could back up his rhetoric — but, so far, he has been found wanting. Early last month, thousands of small businesses were sent letters by Lloyds saying they would no longer have a local manager as their main contact. Instead, their accounts would be handled by the bank's “relationship team”, available via a call centre. The new regime started on March 23, the date CBILS was launched. On that day, when companies wanted to contact someone to discuss options, they faced severe delays. When they did get through, the customer service agents had no prior knowledge of their businesses. Vital days were lost in processing applications, according to several who applied in the first week of CBILS. Ben Bowles runs CEG, a lighting, rigging and staging rental company in Cambridge with five staff. He filled out an online application because his Lloyds bank manager had been removed. He was contacted by a representative, who answered some basic questions but was not permitted to give their personal email address or a direct phone number. He has had to resubmit information several times to a central email address, and is still unaware of the status of his application. “Without the money, we'll have to make three people redundant,” said Bowles, 30, who founded CEG in 2008 and posted sales of £1.1m last year. Lloyds would not comment on individual cases, but said: “To act responsibly, we must consider the viability of a business prior to Covid-19, along with the affordability of the borrowing sought.” A source added that Lloyds was also helping SMEs outside CBILS, granting 20,000 capital repayment holidays and 10,000 corporate overdraft extensions. Staff at all big banks are under pressure to process more applications. Last week, the trade union Affinity wrote to Mel Stride, the Conservative chairman of the Treasury committee, urging him to examine working conditions at Lloyds. The letter claimed that each application took 1?� days to assess and some Lloyds staff were working from 5am to 11pm. Some colleagues are self-isolating, adding to the strain on those who remain. “We believe that the lack of available staff across all the banks is holding up loan applications,” the letter concluded. Horta-Osorio, 56, knows about pressure. He took two months off in late 2011, in what was seen as a shift in big business's approach to stress and anxiety. As the economic impact of the pandemic became apparent, the chief executive waived his 2020 bonus, which would be worth up to £1.8m. Unlike some rival bank leaders, he has not yet cut his wages. CBILS is starting to work more efficiently. Last week, banking trade body UK Finance said 36,000 completed applications had been received. The figure does not include thousands of business owners who have been asked for more information, or told their application is unlikely to be successful before submitting it. There are growing calls for daily updates from UK Finance and a bank-by-bank breakdown of lending data. “The key will be whether they can get this money out of the door quickly,” Stride said. “I want to see this data in days.” For some borrowers, the choice between lenders is illusory. One boss approached other accredited providers after being rejected by Lloyds. He was told by a NatWest relationship manager that there was “no guarantee we will ever be able to offer the scheme to people who bank with the major banks like Lloyds”. Attention is turning to the smaller end of the market, where the need for cash is most acute. Sunak is considering a full state guarantee for loans of less than £25,000. A report by Funding Xchange, a lending platform, suggested that 60% of companies wanted less than £15,000. For Lloyds, its ability finally to draw a line under the HBOS Reading scandal will in part be determined by its response to the coronavirus crisis. That also applies to Horta-Osorio, who joined years after the crimes took place, but has been criticised for failing to take the fallout seriously at first. He needs to act fast. FALLING OFF THE BLACK HORSE: THE REJECTED 'Our need for cash is urgent' Diana Carroll, 50, has run A Place Setting, a crockery hire business, in Wickhambrook, a village near Newmarket, Cambridgeshire, for 15 years. Her parents, who also own a small business, have banked with Lloyds for more than 40 years. A Place Setting, which made a small profit last year on sales of £500,000, employs nine people, all from the village, and all of whom have been furloughed. Carroll watched Rishi Sunak, the chancellor, pledge to do “whatever it takes” to save the economy. She felt encouraged that she would be able to apply for a loan without much difficulty. That has not turned out to be the case. She applied for an £85,000 loan from Lloyds, which her relationship manager said was “obtainable and sensible”. It was declined after 10 days. “The manager was embarrassed,” said Carroll. “There were no real reasons given, it was all very vague.” The company does have an alternative source of finance from Redwood, a specialist small business bank set up three years ago, but the need for cash is urgent. “It's coming into high season for weddings and events, but we can't do anything and we don't know when this will end.” 'It's shocking. They don't care' George Kafetzis, 42, owns two restaurants in the West Midlands and has not been able to get a government-backed loan to save either. The co-founder of the Funky Bear group, which has sites in Sutton Coldfield and Walsall, applied to Lloyds and Barclays for cash under CBILS. While Barclays declined, he reserves his greatest frustration for Lloyds, which, a month after he applied on March 26, has still not replied to his request for £95,000 to help pay 25 staff. “It has been five weeks and they haven't even responded — it's shocking how much they don't care,” said Kafetzis. “It has been very tough, but the toughest thing was telling staff that I couldn't pay them any more.” Kafetzis has lodged a complaint with Lloyds but said even that had been ignored. “I hope people move banks after this.” 'Thrown to the wolves' After “calling it a day” and sending his three employees home on March 16, the owner of excavator attachment maker Northerntrack was refused an emergency loan from Lloyds when he applied one week later. Although the firm has been in business for 30 years, Andy Hair, 51, said he was turned away from CBILS because the cost of moving its manufacturing base pushed Leeds-based Northerntrack to a £25,000 loss the year before last. Last year, it posted slim £1,500 profits on £518,000 sales. Hair said that since the rejection, he had been inundated with calls from high-interest lenders offering rates as high as 18%. “Once we were on the declined pile my phone didn't stop ringing,” he said. “It is like being thrown to the wolves.” Hair said he would look at using asset financing to make up the deficit. “I've got machinery that I own that I'm going to have to buy again.” This article was published on The Times 26th April 2020