Mission Statement of Abbey Essay Example

while reducing costs and improving efficiency. A good mission statement should provide strategic direction and long-term vision without the need for frequent revisions. Halifax Bank of Scotland (HBOS) is one of Abbey's main rivals offering similar products and services.

Previously two separate banks, Halifax and Bank of Scotland merged in 2001. Like Abbey, HBOS articulate their mission in a concise statement that explains their purpose. Their strategy further specifies their intended direction and the methods they will utilize to accomplish their objectives. Customer service is also a top priority for both Abbey and HBOS. Additionally, personal finance plays a significant role in their strategic plan. HBOS elucidate their objective, target customers, and the range of products they will provide to realize their goal.

HBOS, like Abbey, has recently updated its mission and strategy, eliminating the need for a near-term review. In Abbey, agency problems primarily manifest as moral hazards, as the executives prioritize growth over earnings. Abbey is currently in the midst of a three-year turnaround plan after previous expansion attempts. In 2001, Abbey faced significant issues, with a loss of over 54 million, a relatively modest amount considering the institution had earned 1.7 billion in pre-tax profits the year prior. Investors unfamiliar with credit losses began questioning the wholesale banking business that posed the risk. The head of Abbey's wholesale bank, Gareth Jones, authorized the purchase of assets such as junk bonds and aircraft leasing in Australia.

In general, executives prioritize the increase in the firm's size rather than the growth of earnings, resulting in strategies to achieve this. Gareth Jones, an executive, followed this approach at Abbey, a UK mortgage lender. However, this conflicted with Abbey's

desired image and led to the need to cover a portfolio of over 2 million. Shareholders, on the other hand, typically aim to maximize earnings. The failure of the wholesale bank, along with the subsequent capital used to cover it, eventually resulted in a loss of 686m. This was frustrating for stakeholders and led to Gareth Jones and the chief executive, Ian Harley, leaving Abbey. Abbey also faced adverse selection issues, particularly in relation to the wholesale banking sector. Shareholders were not fully aware of how wholesale banking operated and therefore did not understand the priorities of the head of that division.

Both shareholders and the chief executive have suffered as a result. Abbey has five main stakeholder groups: customers, shareholders, business partners, employees, and the wider community. The influence and power of these stakeholders vary, as shown in a stakeholder map. Communication with stakeholders has recently been incorporated into Abbey's strategy. Shareholders are considered as inside stakeholders.

During 2003, Abbey experienced a loss of 686m7 as a result of the company's decision to refocus itself as a retail bank. Typically, Abbey prioritizes communication with its shareholders. This includes holding annual general meetings (AGM) and regularly sending out share-related information via post. Additionally, Abbey's website features a "shareholder centre" that provides ample information on shares and the company's performance. However, it is acknowledged that Abbey could have managed the wholesale bank issue more effectively, ultimately benefiting its shareholders.

Abbey's shift towards wholesale banking resulted in relatively smaller losses compared to other banks. However, venturing into a new market comes with its own challenges, including initial difficulties and a perceived decrease in shareholder communication priority.