What a Great Deal?!

You couldn't make it up but I suppose it's to be expected.

Today, our prize investment, RBS, having just got the details of the extra £30bn we are pumping into it, has announced it is shedding around 4,000 jobs.

It makes you stop and think. Recently, there was a lot of controversy in that RBS' investment bankers will be getting fat bonuses this year and, indeed, their CEO, Stephen Hester, is in line for a £9.6m. They may get some deferred but that will really sit well with the 4,000 who will pay for them. In fact, around 16,000 jobs have already been shed from the back room, branches and other places - the sort of jobs that the expensive adverts on TV about NatWest and their push for more personal banking might be lead us to believe have not gone.

4,000 jobs and let's say the average salary is £30,000 per annum - that would be £120m off the wage bill this year. That will probably be less money saved than the bonus bill.

But it gets better. 700 branches of British banks will be sold to other companies in the fire sale of the decade as the EU rules that banks that got state aid must split. Private Equity houses and foreign banks will love this as they will buy already stripped down versions of the banks branches with redundancies already paid for by the taxpayer and because so many branches will be up for grabs they will be sold at rock bottom prices, once again leaving the taxpayer with the mired end of the stick.

It gets better than that. Having given away the jewels of the banking industry cheap and subsidised by us, they will be precisely the same buildings, staff and products as before just owned by someone else who will reap the profit on our loans and mortgages rather than us at least contributing to the value of our 'investments', i.e. the banks we saved. We are told it will promote competition - sure it will. Why would anyone buy the banks and then trash the price when there is so much cash and profit to be made? Prices will remain the same, believe me.

And is it good that Tesco buys into a bank? They squeeze the living daylights out of suppliers and only pass on part of the savings to customers which makes them ever more profitable. We are handing them a cash business to make them more money. Meanwhile, Virgin must be laughing as they offered to buy Northern Rock when no one else would and when it was leaching money - now they get to buy the cleaned up good part at a knock down price with a great deal more advantageous loans from the Government to lend at a large profit.

Alistair Darling kept a straight face as he announced all this. He didn't want to let on that we have all just been right royally shafted. The smiles will come later.

Bank Rip Offs

Is it comforting to know that although we may now be significant shareholders in several major High Street banks, and paying handsomely for some time to come and for all the other things we have 'agreed' to, that the banks themselves are ripping us off too. Such gratitude.

Of course, if we were big institutional or private investors, they would be treating us very nicely with possibly big lunches, promotional events or even a few 'sweeteners'. But at the grim end of banking, we non-institutional investors are being ripped off right royally.

My knowledge of this came about by a unilateral move by my bank, who I shall call to save their embarrassment, HSBC. Oops. A couple of years ago, they welcomed me with open arms after I finally got so cheesed off with Nat West after 30 years, that I changed. Along with my Business Account, HSBC, make a fine penny out of me. On arrival, they rolled out the red carpet and gave me Premier Account status as I had the Gold Account with NatWest, which in fairness to them gave you a number of good privileges one of which was a £10,000 preferential rate overdraft facility and another was a £10,000 credit limit on the Gold Card.

HSBC offered none of that mumbo jumbo but told me this account used to cost £25 per month and was only for 'high value customers' only which in hindsight was anybody swapping from Nat West. Well after a few disasters on the Business side, which have not been addressed for over 3 months, I got my Premier Account statement yesterday to find that they had started charging me £25 per month. I looked for an anniversary or something but none existed. I looked for a letter - nope, none had arrived. I had received a sales call the week before but I had sent them away with a flea in their ear. No, this was something a clever bank manager had thought up and unilaterally decided to charge Premier customers with.

My feverish mind went into action and wondered if the £25 per month gathered from all the customers would in some small way got to pay for the vast bonuses at the investment bankers end while the consumer customers rotted as usual. I also scoured my new booklet to see what fantastic new privileges I received on top of the lack privileges I already had - but there were none.

So I called the number on the statement and went through the reams of security, not knowing my PIN as I rarely called people and just used the internet. The helpful chap in Northern Ireland told me that all Premier customers now had to pay £25 per month - had I not been told? Right, so what did I get. There was along pause - it appeared I got nothing, except the 'Premier' logo on my card, remembering the things I got at Nat West. The only way he could waive the £25 per month charge was if I earned over £100,000 a year in salary and bought one of their Wealth Management products or I had to have a minimum of £50,000 in their deposit account which pays naff all interest (note the stock market has risen 40% in the last few months).

I would have laughed but he was being serious. My response was, and what if I didn't comply - oh, I could be downgraded to a normal bank account. Asking what the difference was, he couldn't actually think of any. When I pointed out that if I was to shop around and see what new account I could get for my simple needs, what would stop me from changing banks? He offered to refund the £25 that had already been taken from my account without authorisation, which got me back to where I was at the end of last month. I asked if a manager could call me to explain all this, as part of the Premier package is a mysterious relationship manager which sounds more like a marriage guidance counsellor. Again a long pause - it may difficult to get someone to call me. I have to admit I offered a financial inducement - a bribe if you like. I said I would send him a cheque for £1 if a manager called me back today. I knew my pound was safe and sure enough no one has called yet.

Call over, I have looked at the web to see what bank accounts are available and my goodness I was shocked. Most now have some kind of monthly charge even for internet banking, either implicit or hidden depending on what you want. But here is the incredible part - most are offering overdraft facilities at around 19% (some more, some less).

Read it again - 19% APR. The current base interest rate has been pegged at 0.5% for the last 4 months and banks have repeatedly missed their lending targets. Here is a good reason - getting credit costs and arm and a leg. Meanwhile, they offer only 0.1%, if anything at all, if you have money in your account or some offer deals of up to 6% if you have an unreasonable sum in your current account. Suffice to say, HSBC comes well down the Moneymarket.com list of 100 ranked bank accounts with a punitive 19.9% should you go over the agreed overdraft limit at any time, for however long, as I have found out.

For the mathematically challenged this is nearly 39 times the base rate that they are earning. In some cases, like Nat West, RBS, Northern Rock and Lloyds they are actually charging us extortionate rates using OUR OWN MONEY.

It really makes you think, as we sit aghast watching the whole debate about bank bonuses, high risk investment strategies, regulation and the like, that the whole world relies on our utter stupidity and ignorance. We bail the banks out and they sting the consumers who did so by charging us ridiculous mark ups for borrowing back our own money that we gave or lent them, and they also want to pay excessive sums to the idiots who caused the whole problem in the first place.

Who is to blame? Well the daft idiots who decided on a bank bail out plan that just gave banks money without a single caveat on how it was to be used - the Government. It could not be a worse scenario. Take credit cards, loans, mortgages or overdrafts, the minimum multiple on the base rate is at least 6 to borrow our own money back. Banks are having it easy at every end of the spectrum as they have us by the short and curlies, make no mistake. We are damned without them and we are damned with them - and we missed the one opportunity to get more favourable terms, when they needed us more than we needed them.

I am still not sure how the heck I solve my problem with HSBC, but the one thing I learnt in my short research today, is that there isn't a bank out there who is offering a fair deal. It is such a pity that none of us had a say in the more than fair deal we gave them when we bailed the swines out.

Marketing In A Recession

I am not a classically trained marketing person so my comments are not based on professional or academic expertise but I know enough to make a comment on this subject and invite views. I am specifically talking about two campaigns and a product launch which have caught my eye.

In a recession, one of the first budget lines to get slashed is marketing - there is a logic that says that if people aren't buying so much there's no point in communicating with them, plus it is usually a budget line that has not been all spent so there can be some actual savings made. Training is another budget line that gets hammered early for the same reason on savings although the logic is different.

So here are two campaigns which are very high profile in the UK right now and I thought it apt to highlight them. Remember, this isn't just a recession, but we are in the grips of a financial meltdown with the stock market going like a roller coaster and pensions getting walloped because of it and Quantitative Easing.

1) Aviva/Norwich Union

For many in the know, Norwich Union, a bastion of the British insurance and pension market, got taken over by insurance giant Aviva a while back. Until recently, Norwich Union had remained under its own brand as it had such good position in the market. So in the teeth of a recession and credit crunch, Aviva has taken the opportunity to change the name of its UK dominant brand from Norwich Union to Aviva.

And not just with the odd brochure - this is as subtle as a housebrick through the window.

The first wave of adverts used the likes Ringo Starr, Elle McPherson, Alice Cooper and Bruce Willis to demonstrate how stupid the public are in that we would not have taken these people seriously if they had not changed their given names to their stage names. Some may be pedantic and say changed from their 'real' names. It is pretty much in your face stuff as the names are so iconic and the stars so recognisable, and subtly international - perhaps. It certainly got my attention.

The point being that these people had to make the name change to get where they are or simply get on in life. The interesting risk to the point of the adverts is that the vast majority of the world's population, and many famous people to boot, have not changed their name and still thrived. I would argue that it is not mandatory to change your name to become successful, but in those specific cases highlighted in the advert, it has worked for them. I suppose that in each case, they feel that we, the public, are so fine tuned in our tolerance range of names that if Alice Cooper had not been called Alice then we would not have heard of him or rated him. I would suggest that he became prominent for biting the heads off live chickens during his gigs which did that - but what do I know. I honestly don't think that it makes a jot of difference to Elle McPherson that she changed her name - she would still have been one of the most attractive people on earth. Ringo Starr, though, may have a point.

Famously, when asked if Ringo Starr was the best drummer in the world, John Lennon replied that he wasn't even the best drummer in the band.

A subsequent advert goes on to give us the real message. Norwich Union clearly felt that people were just numbers and did not cater for the individual - Aviva in contrast does and this name change proves it. We get the same icons in Starr, McPherson and Willis telling us how they want to be treated in a series of role plays and then we get the rather forlorn figure of McCauley Culkin who moans that he 'Just wants to be known'. The sulky looking McCulkin's career seemed to have peaked too early after the immensely enjoyable 'Home Alone' franchise and he has certainly struggled to gain our attention since. Aviva has sorted that out.

Clearly the advert was not made in the UK and it seems awkwardly American in its slant and I may be wrong in guessing that this advert was made originally for the US market. It makes it all the more risky from that viewpoint as we Brits are stuffy sorts when not having adverts tailored to our way of life.

Let's take a look at the second before my comments.

2) Nat West Bank

The new Nat West adverts courted early controversy, I am told by an industry insider. Apparently the originals featured wording either in the advert body or the small print that no one reads on the screen, that Nat West would be giving impartial advice. This clearly was never going to be true so a complaint was made and upheld and the word impartial was changed to helpful - allegedly.

We see a string of scenes where bank advisers have been mobilised and are visiting people in their homes to sit them down and give them advice on their future plans involving savings etc. All very nice and friendly.

It does not escape the cynical amongst us that Nat West is owned by Royal Bank of Scotland who are at the centre of a storm on one person's investment advice, namely their former CEO Sir Fred Goodwin, who left with his formidable pension after clocking up a UK record for corporate losses. Of course, had RBS itself led with this advertising then we would have all fallen off our chairs, mouths frothing and spitting vilely at the TV at the audacity to show such hypocrisy as it is very unlikely that anyone watching the adverts would ever be treated so generously by the Bank.

Such is the genius of marketing people, that RBS had a brand that was still functioning well and had not been caught up the controversies surrounding its Board, although I dare say it contributed some of the losses to the group. It has been handy, in this instance, that the Nat West brand has not been assimilated and turned into RBS, as ABN AMRO has.

Bold Moves or Good Money After Bad?

It is an interesting argument on marketing spend in a recession.

Clearly, it is not wise to stop spending money on brand, image and general communication to the outside world in a recession - that only damages the company in the long term. Most would advocate being wiser on marketing and use different, perhaps lower cost methods to keep the momentum going and certainly not spending any more than necessary. So in Aviva's case, this is a huge gamble. There is a lot of cynicism out in the market particularly about the largess of banks and institutions generally. The insurance market has weathered the storm well as long as you discount one of the biggest of that fraternity, AIG. But there has been a belief by a number of economists that insurance stands at a precipice and that should there be many more body blows to the financial industry then insurance could become part of an inevitable domino effect.

Aviva not only flies in the face of this but they have actually done what could be described as, in the vernacular, corporate self-gratification. That a company should think so much of itself that by changing its name we will believe it is good is just bloated self-confidence, it could be argued. Certainly, to do it in such a gaudy way with household names of high standing telling us how good it is to change your name, we get to know that they have spent a fortune on this one thing.

Here's the rub - by using household names to tell us, they have missed the obvious point that the Aviva brand is virtually unknown outside of the insurance inner world and it is not a household brand name in the UK the way that Norwich Union was.

So the question must be asked of the Board - was this the right time to blow such a vast amount of money just to announce a name change? There wasn't even a single comment on there to tell us what to buy - it was all about self flagellation and it seems so inappropriate.

Or is it?

The risk for NatWest is unquestionably whether the public are clever enough to make the connection between Nat West and its troubled, disgraced parent, RBS. I did and I shouted out loud frightening the dogs and stormed around the room in a lather. It did not help that just over 3 years ago I changed all my bank accounts, personal and business, from Nat West after a series of appalling calamities, lack of service and the fact that they certainly did not value my custom. There were plenty interested in calling me to sell things, though.

I think this, again, is a gamble by Nat West. they have been clever enough to keep the brand alive despite being part of RBS and keep its own strand of image, very different from the more corporate looking parent, although I dare say there are many customers in Scotland that have banked with RBS for many years who have difficulty recognising the new RBS.

I suspect that Nat West have weighed all this up and concluded it's worth it. However, talking of savings in the current climate is actually a bit dodgy given the dreadful run on the stock market and low interest rates and given my own IFA (and I stress the I is for Independent) advised to liquidate some of my ISA assets prior to the crashes. Interestingly, the advice is to buy ISAs now in readiness for the inevitable upturn, not cash ISAs though as the returns look pitiful.

It will be interesting to see how the two companies do as a result. One thing is for sure, in the glossy world of marketing, measuring the return on corporate image campaigns on TV is notoriously difficult and full of flannel - worse still in the midst of a recession. It could be a bold move or a very silly one by each company.

And Finally - Ta Ta for Tata?

It's launch time for the world's cheapest car, the Indian Company Tata Motors built Nano. It measures 3 metres, has no radio, air conditioning, air bags, or power steering but it does come with 5 seats, 4 doors, a massive 33bhp, a 624cc lion of an engine at the rear and a wheel rather than satellite navigation for guidance.

All for the paltry sum of 100,000 rupees or to you, guv, £1,366.

You may think this is a stroke of genius by its makers in the heart of a recession, particularly when one of the associated stories tells us that a chauffeur who has driven many a swish vehicle for his employers, has in fact never been able to buy a car for himself. However, Tata is also taking a horrendous gamble.

The firm is struggling heavily under a mountain of debt and falling sales and made a loss of 2.6bn rupees for the quarter October to December. It is also having a problem getting a further $2bn of loans on top of the $1bn it borrowed to buy the Jaguar and Land Rover brands from Ford Motors as late as last June - they could not have made a more worse mistake in terms of timing. Worse still, the Nano is 6 months late and there has been associated problems with production after Tata got into a spat over the site of its proposed factory in West Bengal and switched to the site to a new one in Gujurat. That new factory will not be available to produce that car for another year and so production is at a reduced level than anticipated from its other factories.

The real problem is that the numbers simply don't add up. Even if it were to sell 250,000 cars this year, it will only add around 3% to the company's revenues. Further, at the bottom line, it is likely to take 5 to 6 years to break even on the product.

As they say, there is such a thing as bad business and revenue is vanity, profit sanity. While the car may well revolutionise the lives of a lot of Indian people who have never afforded transport in the way we take for granted in the further developed world, it is perhaps another ill-timed strategic move for a firm already in the grips of financial hardship.

It really could be a gamble that ruins the company.