Will the Lloyds TSB switch really be “seamless”?

Maybe not.

For the 4.6 million Lloyds TSB customers being forcibly switched to the new TSB Bank as of 9 September, the move will be a “seamless transition.” So says Antonio Horta-Osorio, chief executive of Lloyds Banking Group in an interview with the BBC. According to Horta-Osorio, the only change customers will notice will be a change of name. There is a bit more to it than that.

Ahead of the European Commission imposed carve up of Lloyds TSB, the group has a network of almost 2,000 branches. Before long, customers of the new TSB Bank will have a network of only 631 branches compared to the new Lloyds network of around 1,300 outlets. Customers of the new TSB Bank wanting to use a re-branded Lloyds branch will be treated as customers of a rival bank and pay service charges accordingly.

Lloyds customers using a newly re-branded TSB branch or vice-versa – TSB customers using a Lloyds-branded branch – will also find that their deposits will take longer to reach their accounts. Lloyds and TSB will, after all, be totally separate banks. In all of this, it is hard to regard the customer as being on a winner but the banks will be on a “nice little earner” in the future if you dare to use the wrong brand of branch.

The European Commission and the UK government will however pat themselves on the back and proclaim that an additional bank means more choice for the consumer so must be a good idea. Pure poppycock but the exercise has provided a windfall for IT contractors and branding consultants, among others. For Lloyds, the cost of this exercise has been massive: somewhere between £1.3bn and £1.5bn and counting.

As for being “seamless”? Well customers of TSB – in addition to having a branch network that has shrunk by two-thirds – will need to use new bank cards and negotiate around a new website. The website is down for much of this weekend by the by but in fairness to the bank, this has been flagged up well in advance. Then there is the management of Lloyds and the new TSB. In fairness to them, the project has been a massive undertaking and the TSB launch is going ahead next week on schedule.

For that, the management of Lloyds TSB deserves considerable credit. But by one measure – the inability to handle and assess customer complaints – Lloyds TSB is in a league of its own. The statistics released yesterday by The Financial Services Ombudsman were a shocker and shame Lloyds TSB.

It came as no surprise to read that a whopping 43 per cent of all PPI complaints in the first half of the year related to Lloyds and its various subsidiary brands. Lloyds has form as regards PPI – it was the most successful in selling – or mis-selling PPI – and has been getting more practice than most in handling PPI complaints. One might be forgiven for thinking that they would have got the hang of it by now. Not a bit of it. In February, it was fined £4.3m for dragging its heels in delaying PPI compensation to 140,000 customers.

Fast forward a few months and we learn that Lloyds complaints handling process is so dire that the Ombudsman found against Lloyds TSB in 90 per cent of PPI cases; as regards its Bank of Scotland business unit, the figure was not much better at 87 per cent. By contrast, the Ombudsman found against HSBC in less than one case in two (45 per cent) while Royal Bank of Scotland did even better with only 34 per cent of Ombudsman complaints relating to PPI mis-selling going against the bank.

For the record, the figure at Nationwide Building Society was a mere 7 per cent. Customers of the new TSB may be forgiven for hoping that certain aspects of Lloyds TSB’s customer service ethos remains with the new Lloyds.