Belfast Telegraph

What's in a name? Quite a lot actually in organisation's efforts to get back into the black

By John Simpson

The name change, when Northern Bank becomes Danske Bank in Northern Ireland, is more than a simple change of name.

The details already announced point to systemic and organisational changes in the organisation.

The loss of the well-known Northern Bank name and the renaming of the National Irish Bank, to bring both banks under the brand name of Danske Bank is, at least, an emotive matter of regret.

Although the legal name, Northern Bank, may remain as a registered company, the custom and practice is likely to be 'Northern Bank, trading in Northern Ireland as Danske Bank'.

The reference to the current name will come in the small print alongside greater prominence to the new one.

The arguments for the change are, first, that the two banks on this island will now be more clearly part of a successful international group.

To protect its Irish banks, Danske Bank has invested heavily to strengthen their balance sheets and has transferred significant sums to offset continuing capital impairments.

The Northern Bank, in the last five years, since the banking crisis unfolded, has earmarked more than £700m as impairment charges which reached a record £274m in 2011.

The bank's own assessment is that because of continuing (but decreasing) impairment charges, it will not return to overall profitability until 2014-15.

Critically, for the local economy, lending by the Northern Bank to its customers, in parallel with similar trends in other banks, has been decreasing each year from a total of £5.4bn at the end of 2008 to nearer £4.6bn at the end of 2011.

The decrease in the amount of lending has attracted critical comment from the business community.

Business complains of problems in obtaining loans: the Northern Bank says that finding customers with worthwhile propositions is difficult.

The balance sheet of the Northern Bank, reinforced by extra capital injections, is now healthy.

The ratio of lending to deposits has been corrected to nearer to one-to-one from a vulnerable 11-to-9 ratio in 2008.

The rebranded Danske Bank in Northern Ireland is aiming to be identified as part of a successful large European organisation which is emerging from five years of difficult trading conditions.

As the UK emerges from recession and growth policies gain traction, the turning point in the economic cycle may coincide with better bank results.

An interesting feature of the rebranding is that printing and circulating local bank notes will remain a profitable part of the new organisation.

Whether sterling bank notes with a strong Danske Bank label will prove more generally acceptable outside this island remains to be seen.