Excerpted from May 2015 civilsociety.co.uk The voice of civil society 25 UNDER 35 We identify the rising stars among charity professional advisers charity banking survey 2015 • divestment from fossil fuels • effective board reporting • charity 250 index • English Heritage survey banking Rising to the challengers With the large high street banking groups splintering banking relationships with them – particularly in the area of deposits – and new players eyeing their customers, the UK banking as charities seek to maximise their cover from deposit protection for sector looks set for another shake up, findsDiane Sim. balances up to £85,000. Climate ripe for change Almost 10 per cent of charities Charity Banking Survey 2015 surveyed this year say that their bank has experienced – or is about to SINCE OUR survey of the charity which hold the remaining 73 per experience – a change of ownership banking scene last year, there have cent of Unity Trust. and, for the most part, they are been a number of restructuring The recent upturn in the UK happy with the way in which the moves aimed at creating new – or equity market has also prompted change has been communicated. strengthening existing – so-called a wave of IPO activity, with Virgin However, with new players eyeing ‘challenger banks’, with a view to Money and OneSavings Bank the space and ongoing change increasing competition and choice floating last year, and Aldermore among the incumbents, many in the UK banking sector. Bank and Shawbrook Group floating charities may judge it a good time Since demerging Lloyds TSB in earlier in 2015. Should market to shop around: a quarter of 2013, Lloyds Banking Group has conditions remain positive, other charities say they are likely to review sold a 50 per cent stake in TSB Bank banks thought likely to seek a stock their banking arrangements over the and plans to sell its remaining 50 market listing include Santander’s next 12 months and half of these say per cent holding to Spain’s Banco UK business and Metro Bank. that they expect to switch their main Sabadell, whose takeover bid for banking provider (see figure 10). TSB Bank was accepted in March. It is against this backdrop of Meanwhile RBS Group is in the Challenger banks are increased competition that many process of combining 308 RBS increasing competition in banks active in the charity sector are branches in England and Wales, the UK banking sector increasing their efforts to develop and the six NatWest branches in tailored, value-added propositions, Scotland, under the Williams and aimed at attracting and retaining Glyn brand. The new bank, which While none of these banks can their charity customers. will have 1.7 million customers, currently boast widespread primary Just over 400 charities participated is expected to separate from RBS banking relationships with charity in Charity Finance’s 2015 banking and float by the end of next year. clients, many enjoy secondary survey. Small charities with annual Both sales have been mandated by the European Commission as figure 1: Banking arrangements a condition of these institutions’ entitlement to state aid: Lloyds Have you reviewed your banking arrangements in the last year? Banking Group has until the end Yes No of this year to divest itself fully of 2015 32 68 TSB Bank, while RBS Group has 2013 32 68 until the end of 2017 to sell off 2011 45 55 Williams and Glyn. 0 20% 40% 60% 80% 100% Another move signalled but yet to Have you spread money across more than one bank over complete, which involves two major the last year to offer more protection to your funds? players in the charity banking Yes No market, is the proposed sale by the 2015 47 53 Co-operative Bank of a 27 per cent 2013 28 72 stake in Unity Trust Bank, which is 2011 43 57 likely to be offered first to existing 0 20% 40% 60% 80% 100% shareholders – namely trade unions, 22 Charity Finance May 2015 civilsociety.co.uk banking survey income of under £1m are well figure 2: Primary bank by charity income bracket 20151 represented and make up 43 per cent of the survey sample. The remainder Number of clients Charity Charity Charity Charity Total income income income income is split between charities in the £1m- < £1m £1m – £5m £5m – £20m > £20m £5m income bracket (32 per cent); Allied Irish Bank2 4 4 charities in the £5m-£20m income Bank of Scotland3 bracket (15 per cent), and large 11 5 1 6 23 charities with income over £20m Barclays 10 18 29 79 136 (10 per cent). C. Hoare & Co. 3 3 We have supplemented these CAF Bank 21 7 2 1 31 survey responses with data sourced Clydesdale Bank/ Yorkshire Bank4 3 3 1 1 8 from the UK’s largest 350 charities, Co-operative Bank 27 27 9 17 80 which are routinely tracked for the Coutts5 1 4 14 19 purposes of compiling the Charity Handelsbanken 1 1 2 Finance Charity 100 and Charity HSBC 12 9 6 34 61 250 Indexes. 3 Figure 2 shows the primary bank Lloyds Bank 9 10 16 47 82 used by charities participating in the NatWest5 12 16 21 59 108 survey and by charities that are RBS5 5 7 37 11 60 members of the Charity 100 or Santander 5 5 Charity 250 Indexes. While it does Triodos 10 4 14 not purport to represent the charity Unity Trust Bank 51 23 5 2 81 banking market as a whole, it Other 2 3 0 3 8 provides fairly comprehensive Total 178 133 132 282 725 coverage of large charities with 1 annual income of over £20m and Based on data provided by 350 members of the Charity 100 and Charity 250 Indexes, plus 410 survey respondents (minus the overlap) 2 Part of AIB Group 3 Part of Lloyds Banking Group 4 Both part of National Australia Bank 5 Part of RBS Group more selective coverage of small and medium-sized charities. figure 3: Ethical banking Market share How important is an ethical/socially responsible approach The large charity segment is when making a decision on who to bank with? dominated by the main high street 2015 34 41 20 5 banks – namely Barclays, HSBC, 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Lloyds Banking Group (comprising Very important Fairly important Neither important/nor unimportant Fairly unimportant Lloyds Bank and Bank of Scotland) and RBS Group (comprising NatWest, RBS and Coutts). Do you think that banking ethically would increase your charitable impact in the eyes of your supporters and trustees? Together, these four act as main Yes No bank to 90 per cent of charities with 2015 58 42 annual income of over £20m. 2013 64 36 Barclays has the most primary 2011 60 40 banking relationships in this income 0 20% 40% 60% 80% 100% bracket, with a 28 per cent market share, with RBS Group having Has ethical banking become more important to you a 30 per cent share split between over the last five years? Yes No NatWest (21 per cent), RBS (4 per 2015 52 48 cent) and Coutts (5 per cent). 2013 59 41 Lloyds Banking Group has a 2011 63 37 19 per cent share of main banking 0 20% 40% 60% 80% 100% relationships with charities in this segment, split between Lloyds Bank civilsociety.co.uk Charity Finance May 2015 23 survey banking figure 4: Bank review figure 7: Additional banks How often do you review your main bank? Banks used in addition to the primary banking relationship 2015 8 22 16 24 14 16 2013 12 21 16 20 9 22 Barclays 10% 2011 15 21 17 19 12 16 CAF Bank 8% 2009 10 22 17 25 11 15 Lloyds Bank1 8% 2007 6 20 24 17 8 25 Co-operative Bank 7% 0 20% 40% 60% 80% 100% NatWest2 6% Every year Every 2-3 years Every 4-5 years Every 5-10 years 10 years+ Never Triodos 6% Santander 5% Virgin Money 5% figure 5: Length of service CCLA 4% How long have you been with your main bank? HSBC 4% Clydesdale Bank/Yorkshire Bank3 3% 2015 9 19 25 27 20 RBS1 3% 2013 15 26 26 22 11 Unity Trust Bank 3% 2011 13 16 22 32 17 Bank of Scotland1 2% 19 23 2009 11 29 18 Charity Bank 2% 2007 9 10 23 27 31 COIF 2% 0 20% 40% 60% 80% 100% Nationwide 2% Less than 2 years 2-5 years 5-10 years 10-20 years 20 years or more Scottish Widows Bank1 2% Close Brothers 1% (17 per cent) and Bank of Scotland figure 6: Important factors Metro Bank 1% (2 per cent), while HSBC has a 12 when choosing a bank per cent share. United Trust Bank 1% The most significant provider Good reputation in charity sector 39% Other 15% outside the big-four high street Ethical/socially-responsible approach 30% 1 Part of Lloyds Banking Group banks is the Co-operative Bank Existing relationship 28% 2 Part of RBS Group with a 6 per cent share. Competitive fees 26% 3 Both part of National Australia Bank Internet/online banking 24% Ethical banking Ease of access 23% The concept of ethical banking Offers specialist charity services 14% figure 8: Biggest complaint suffered a blow at the end of Range of services 13% about main banking provider 2013 when the formerly mutual Recommendation 13% Co-operative Bank sold a 70 per cent Attractive interest rates on cash deposits 10% Low interest rates 19% stake to private investors – mainly National representation 5% Fees 10% hedge funds – to plug a £1.5bn Credit rating 2% Call centre/back-office support 7% capital shortfall.