Metro Opens First New U.K. Consumer Bank Since 1872
Metro is attempting to win clients from the U.K.’s biggest banks by opening for longer hours seven days a week and providing faster, better quality customer service than rivals. Photographer: Simon Dawson/Bloomberg
July 29 (Bloomberg) -- Richard Stovin-Bradford of the Financial Times' Lex commentary team discusses Metro Bank's U.K. expansion. Metro is opening the first new U.K. consumer bank in more than a century today. The bank will also offer services to businesses and aims to have about 200 outlets by 2020. Stovin-Bradford talks with Jon Erlichman on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Metro Bank is opening the first new U.K. consumer bank in more than a century today, as the government pushes for more competition in the industry.
Metro, which will also offer services to businesses, aims to have about 200 outlets by 2020, capturing 10 percent of London’s consumer-banking market, Anthony Thomson, chairman and a co-founder of the company, said in an interview at the new branch in Holborn. The bank may raise 250 million pounds ($391 million) in the next three years to fund the expansion, probably through an initial public offering, Thomson said.
“New banks will face a very difficult time offering better products and prices,” said Ralph Silva, a strategist at London- based Silva Research Network. “Customers need to know how different a new bank will be, whether it would give them a premium over others on their mortgage for instance.”
Metro is attempting to win clients from the U.K.’s biggest banks by opening for longer hours seven days a week and providing faster, better quality customer service than rivals. It’s taking on HSBC Holdings Plc, Barclays Plc, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, after the reputation of the industry was battered by the collapse of Northern Rock Plc and the global financial crisis.
The government, which bailed out some of the U.K.’s biggest banks in the credit crunch, is encouraging competition and transparency among lenders as it seeks to improve the country’s financial-services industry.
Competition and Transparency
“Competition is necessary in the market, and like any product, for banking too, transparency of price is essential,” Andrew Tyrie, chairman of the U.K. Treasury Committee, said at a conference earlier this month.
The U.K.’s biggest four banks made a total of about 2.5 billion pounds of pretax profit from U.K. consumer banking last year. Lloyds, Britain’s biggest provider of checking accounts and mortgages, had 1,786 branches nationwide at the end of last year. Barclays had 1,698 outlets and HSBC had 1,369, according to British Bankers’ Association data. Barclays had about 300 branches in the London area as of Dec. 31.
Price comparison website uSwitch.com found in a survey this month that 38 percent of bank customers would consider moving their current accounts. Fifty-seven percent viewed the banking industry in a dim light and 37 percent said that new banks will be innovative and change the industry for the better.
‘Something Different’
“I need to know if a new bank is offering something considerably different from my current one” before deciding to change accounts, Leslie Tully, a 32-year-old who works at a London security-services company and has been banking with HSBC for the past five years, said in an interview. “I don’t know what, but maybe a cash incentive?”
Metro, set up by Thomson, 56, and Vernon Hill, the founder of New Jersey-based Commerce Bancorp. Inc. in 1973, will offer products including mortgages, credit cards, loans and savings accounts. The rates charged and paid out will be “fair and transparent,” Thomson said, without giving further details. The bank plans to distinguish itself with customer service and it’s “not just about the rates,” the chairman said.
Thomson is also chairman of the Financial Services Forum, an independent member-based organization for more than 300 executives with an interest in financial-services marketing. He has worked in financial services for the past 27 years, and founded City Financial Marketing in 1987, selling the firm 10 years later.
Man’s Best Friend
Hill is a former real-estate developer and owner of Burger King restaurants who resigned from Commerce Bancorp. when regulators challenged contracts awarded to his family. He had built the company into the largest bank in New Jersey, with more than 400 branches, using a customer-friendly approach, including longer opening hours and providing dog biscuits for customers’ pets at branches.
In 2008, Hill became chairman at Philadelphia-based Petplan USA, which sells insurance for dogs and cats. He has also set up a private investment group and joined the executive committee of the Saladworks Inc. restaurant chain, based in Conshohocken, Pennsylvania.
Metro’s services will also include opening bank and credit- card accounts within 15 minutes, free coin-counting for anyone and providing water and biscuits for dogs. Branches will be open 361 days a year and tellers won’t be behind security screens.
“We see a huge growth opportunity,” Thomson said. “The only way for other high street banks to improve profits is to cut their costs. We will invest in services because we are in the business of taking market share from the other banks.”
Expansion Plans
The Holborn branch will be followed by outlets at Earl’s Court, Borehamwood and Fulham Broadway later this year, and customers will also have access to a 24-hour call center and online-banking services.
Metro is the first consumer bank to enter the market since the Co-operative Bank in 1872, according to the BBA. Richard Branson’s Virgin Bank and Project New Bank, promoted by Lloyd’s of London Chairman Peter Levene, plan to enter U.K. banking by 2011. Apart from the country’s big four banks, they will also be competing with supermarkets offering financial-services products in their stores, many of them at a discount to loyal customers.
“The underlying challenge around all this new activity would be whether customers will switch accounts or not,” said Steve Davies, head of retail banking at PricewaterhouseCoopers LLP. “New banks will bring in a new perspective to banking in the U.K., but it will be a marathon, not a sprint.”
To contact the reporter on this story: Sakshi Sharma in London at ssharma121@bloomberg.net
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