Banking: competition emerges on the high street

The arrival of Metro Bank is followed by Lloyds Bank's divestment of 632 'Project Verde' branches. Will customers benefit from genuine competition at last?

A new bank called NBNK has formally bid for Verde branches which Lloyds has been forced to sell by the European Commision competition team. Six hundred and thirty two branch offices could fall into the hands of NBNK, a new group led by experienced bankers. Lloyds is understood to be calling on other interest parties to table counter-offers. These are:

• Sun Capital, an American investment firm
• Virgin Money, the banking arm of the Virgin Group whose interest in the Lloyds offload is backed by the Abu Dhabi Investment Austority
• Co-op Bank, the financial services arm of the Co-operative movement.

Not being the fastest operators in the world, the European Commission has given Lloyds until 2013 to rid itself of these offices, which include those of Cheltenham & Gloucester.

Meanwhile, Metro Bank has sprung up. Led by people like Vernon Hill, who founded Commerce Bank in Philadelphia in 1973 and sold its 500 branches to Toronto-Dominion in 2007, and Anthony Thompson, a financial services marketing guru in the UK, Metro opened its first branch in Holborn in 2010. It now has fourteen, and plans to upscale to 200 or so by 2020.

Whoever buys the Verde branches will add fuel to the fire of competition in UK retail banking. For too long the big six have had it too easy. As fast as they've consolidated so have they failed to innovate or provide cutting edge services to hard-pressed small-time entrepreneurs or private individuals. The big six are:

• Barclays (British)
• HSBC (British)
• Lloyds (British)
• National Australia Bank, owner of Yorkshire Bank and Clydesdale Bank (Australian)
• RBS, owners of NatWest (British)
• Santander (Spanish).

Metro was the first bank to win a retail banking licence for one hundred years. A century ago there were dozens of banks. Businesses which have since been absorbed like Cater Allen, Midland, Westminster, County, Abbey National, Halifax, Trustee Savings Bank, Hill Samuel. A long list indeed.

After all this time will we experience real, unfettered competition between banks?

If Vernon Hill's experience is anything to go by, yes we will. He received numerous accolades in America, particularly for developing a business focussed on customer service. The English bank customers won't know what's hit them after so many years of indifferent service and high charges.  

If Virgin Money, Co-op Bank, NBNK or Sun Capital win the 632 Lloyds branches, competition should heat up further.

It would reach fever pitch if Tesco decided to use its branch network to develop its banking brand and provide a wide range of services. That's a strong possibility, it appears.  And if Tesco, then why not Morrisons, Sainsbury, ASDA, Marks & Spencer or even John Lewis/Waitrose?  

The face and fortunes of English retail banking are set to alter for good.

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