Standard Life gets sucked in to Barclays

Looks like Standard Life has given up trying to be a bank – despite 6 years of profitable operation.

The insurer has sold its Standard Life Bank operation to Barclays, which shelled out £226 million for the acquisition and says it doesn't expect to shed any of the 270 Edinburgh-based staff.  Since the cash price was a 23 per cent discount on the bank's theoretical value, Barclays should be able to afford a spot of leniency on matters like that.

And it looks like they're getting a good deal.  Standard Life Bank has a mortgage book of around 48 per cent loan-to-value ratio, slightly higher than Barclays' at 44 per cent but not by much. The only 100 per cent mortgages in the portfolio were granted to professionals and are therefore considered kosher.  This deal boosts Barclays mortgage book by 10 per cent, so you can see why its head of banking called the acquisition "a great fit".

Why did Standard Life let go of a relatively untroubled mortgage lender with a decent market position before it had recouped all of its set-up costs?  Chief executive Sir Sandy Crombie explained that the board of directors didn't think a further expansion into banking would help the group's long term strategy. 

And what are mortgage borrowers going to be missing?  Standard Life was a reasonably innovative lender.  It made a big splash in the early part of the decade with market-beating interest rates and customer-friendly loan products. It pioneered flexible offset mortgages and long-term fixed-rate mortgages.  Other pioneers will surely rise up to take its place as the mortgage market rumbles back to life, but not everybody catered for those kind of borrowers' needs so well.