June 8 (Bloomberg) -- Marks & Spencer Group Plc, the U.K.’s largest clothing retailer, plans to open 50 bank branches in its stores within two years as it takes on Tesco Plc and British lenders such as Lloyds Banking Group Plc and Barclays Bank Plc.
Marks & Spencer will open the first branch at its flagship Marble Arch outlet in London in July as part of a joint venture with HSBC Holdings Plc, the London-based retailer said in a statement. Customers will be able to open new checking accounts by the autumn as part of the re-branded offer called M&S Bank, and mortgages are planned.
The move extends M&S Money, which offers car, home and travel insurance, credit cards and foreign currency exchange services online and via phone. M&S sold the business to HSBC in 2004 for 762 million pounds ($1.18 billion) to raise cash to help fend off a hostile takeover bid by billionaire Philip Green. The retailer still receives half the unit’s profit after some costs. The amount it received rose to 50.7 million pounds last year.
“Even with the backing of HSBC and a commitment to creating 500 new U.K. roles, we would expect M&S to grow slowly in this new area of business,” said Caroline Gulliver, an analyst at Execution Noble. She has a buy recommendation on the stock.
The shares fell 1.4 percent to 335.8 pence at 1:42 p.m in London trading. The stock has climbed 8 percent this year.
M&S Money has more than 3 million customers and the retailer said its new M&S Bank branches will have a competitive advantage as they’re open for twice as long as traditional banks, including weekend trading hours.
“Clearly there is an opportunity here for M&S, there is a general mistrust with the financial sector and its a brand that engenders a lot trust,” John Stevenson, an analyst at Peel Hunt said. He has a hold recommendation.
The move pits the company against Tesco Plc, the U.K.’s biggest supermarket-based bank, which offers credit cards, savings account, loans and insurance. Tesco reined in targets to offer checking accounts and mortgages due to difficulties as it migrates existing products onto new systems and call center platforms after it bought back Royal Bank of Scotland’s 50 percent stake in the business. J Sainsbury Plc also offers some banking products like home and pet insurance.
“This is our most significant innovation in retail banking since we launched First Direct over 22 years ago,” said Joe Garner, head of HSBC in the U.K.
“It should be easy to deliver, and execution should be strong with HSBC’s backing,” Stevenson said. “Tesco is somewhat behind, whereas M&S is getting in fast with a broad offer.”
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