Thursday, 4 November 2010

The competition in UK Retail Banking is coming ... but when?

Gary Hoffman, the CEO of Northern Rock, today announced that he is leaving the bank to join NBNK Investments, the new banking start up. NBNK in their turn have promised not to bid for Northern Rock for at least twelve months. However NBNK have been vocal about wanting to bid for the Lloyds Banking branches that the EU has dictated that they must dispose of as the cost of taking state funding to stabilise themselves after the acquisition of HBOS.

Meanwhile JC Flowers has been buying building societies starting with Kent Reliance with the aim of creating a cluster to take on the big banks. They too have, in the past, expressed an interest in acquiring Northern Rock when the government decides to dispose of it.

At the same time Blackrock has been pulling together plans to create one of the UK's biggest credit card companies by buying both Egg and SAV Credit, owner of the Marbles credit card.

And then of course there is Tesco, which has made no secret of the fact that it is building a full service banking operation.

The list goes on with the likes of Bank of Ireland creating a separate UK subsidiary regulated by the FSA, National Australia strengthening its UK offering, Virgin buying a small bank to get a banking licence and Metro Bank rolling out its offering one branch at a time.

There certainly appear to be more players looking to enter the UK retail banking market than at any other time in recent history. This on a day where the Office of Fair Trading publishes its report on barriers to entry in the retail banking industry and basically says the reason that there isn't enough competition in the UK market is fundamentally down to the consumer and the small business owner being too apathetic to change their bank. So it was all our fault all along - silly us!

As the Independent Commission on Banking takes its year to look at competition, concentration and stability in the UK banking market, the big banks can all point to the new entrants who say that they're going to shake up the market and ask what the problem is - this is a market that is vibrant with competition. The only problem is that, so far, it is all talk and we're no closer to being told when any of these players will actuallly open an account for a customer.

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