Standard Life Bank Sale to Affect UK Mortgage Borrowers

Standard Life, Edinburgh-based asset management company that operates in various market segments such as insurance, investments, pensions, banking, etc. has recently announced that it sold its mortgage and savings division – Standard Life Bank – to Barclays. The deal was agreed on October 26th, 2009, after 11 years of Standard Life’s efforts to put Standard Life Bank in a leading position on the British banking sector. The banking division was sold to Barclays for £226 million, which is 23% cheaper than the bank’s £293 million book value. According to Standard Life’s chief executive, Mr. Sandy Crombie, the company no longer believes that the development of its banking division is consistent with Standard Life’s long-term objectives. Despite the fact that Standard Life Bank became profitable 6 years ago, that is, 5 years after its launch, Standard Life still encountered net losses of £45 million, associated with the banking division. Probably because of this, Barclays seemed to be the only party interested in the purchase of Standard Life’s banking division. By adding Standard Life Bank to its empire, Barclays acquires 350,000 depositors, who’ve built a deposit balance of £5.5 billion, and substantial mortgage book of £8.8 billion, thus boosting Barclays’ own mortgage book by as much as 10%. Standard Life Bank’s mortgage book mostly features mortgage loans of 48% LTV, as well as some buy to let mortgages. According to the statement of Mr. Frits Seegers, Barclays’ head of retail and commercial banking, Standard Life Bank’s name will be dropped, but the bank’s employees do not need to worry about redundancies. UK mortgage brokers are, however, upset about the agreement made between Barclays and Standard Life; they are determined that the sale of Standard Life Bank means disappearance of another UK lender offering affordable mortgage deals for UK borrowers.