National Girobank (Hansard, 23 February 1979)

§ Mr. Kaufman

On 18 July 1978 my right hon. Friend announced to the House that he had agreed with the Post Office Board a financial objective for National Girobank of a return of 12 per cent. on public dividend capital plus retained profits over the period 1 April 1978 to 3 March 1979. This was an extension for a further year of the target which had been agreed for National Girobank for the period 1975–76 to 1977–78 and which Girobank had achieved. He explained that the extension was an interim measure pending the outcome of a review of the target for 1979–80 and subsequent years. Present indications suggest that National Girobank will successfully achieve the interim target for the current financial year.

National Girobank has continued to make sound progress, in the development of its range of services and the size of its business. In April 1978 it introduced bridging loans, budget accounts, and personal deposit accounts, and now holds in total 630,000 accounts with total customer balances of £300 million. In August my right hon. Friend announced the provision of an additional £8 million capital for National Girobank to strengthen its capital base in line with this growth in business.

My right hon. Friend has now completed the review of the target in the light of the development of National Girobank, of the White Paper on Nationalised 325W Industries—Cmnd. 7131—and the introduction of prudential supervision of National Girobank on the lines exercised by the authorities in the banking sector generally. He has concluded, in agreement with the Post Office Board, that National Girobank's financial target for the period 1979–80 to 1981–82 should be to make an average annual return of 13 per cent. before interest on its net assets, and that additionally it should aim to earn a further £5 million over the three-year period, from which it will be in a position to make a substantial reduction in its accumulated deficit. This level of target, while having regard to the profitability of its present business, takes account of National Girobank's aim to offer a wider range of services to the public subject to its earning an adequate return on new capital. I consider that this target will provide a sound basis for the future development of National Girobank.