In the corner of Anthony Thomson’s floor-to-ceiling glass corner office stands a hand-built Victoria 20012 amplifier. Outside the door, in a cupboard, sits a 1976 Fender Stratocaster guitar, used once a week in a music lesson.
All three – Thomson, amplifier and guitar – are housed, along with 20 staff, in Metro Bank’s first store, in Holborn, WC1. Famously, it is the UK’s first new commercial bank in more than 100 years.
The music connection, plus the use of the word “store”, not “branch”, sums up what Metro Bank is trying to be: different from other high street retail banks. That message is clear when talking to anyone involved with the business, particularly Thomson, its chairman. He co-founded Metro with American tycoon Vernon Hill, who in 1973 started up Commerce Bank in the US before selling it to TD Bank of Canada in 2007.
Thomson says: “We are entering a new era of banking, one where we go back to a more traditional model where customer service is key and there is deposit-based lending.
“We believe that by providing unparalleled service and convenience, Metro Bank will stand out from other high street banks.” This means longer opening hours, trading seven days a week, having open, bright stores and a “customer is king” attitude. There is also a friendly welcome for man’s best friend, with water bowls and dog biscuits provided.
With last month’s call from the Independent Commission on Banking that more competition was needed in retail banking, Metro Bank has opened at just the right time.
Metro stepped up its expansion plans after raising £52m of fresh capital in December – it started with an initial pot of £75m. It aims to have 200 stores by 2020, mainly in Greater London and the South East. Tasked with finding the sites is Calum Ewing, a partner with Knight Frank, who reports directly to Thomson and Hill. Despite its ambitious expansion plans, Metro Bank does not have a property director. Montague Evans is also retained.
At the time of Metro’s opening in July 2010, there was an almost comical battle with Barclays.
Metro Bank had people out in force bright and early, thrusting red balloons, popcorn and pens into the hands of passers-by. On an average working day, well over 100,000 people pass through the congested High Holborn/Kingsway/Southampton Row junction.
Meanwhile, Barclays, which has a branch a couple of hundred yards up the road on Southampton Row, was determined to steal Metro’s opening thunder with a blue attack to outshine Metro’s red. People in blue T-shirts with blue balloons were thrusting Barclays paraphernalia at bemused pedestrians.
Comedy aside, the reaction of Barclays proved two things. First, the opening of Metro’s flagship store was clearly seen as competition for the 321-year-old British establishment, although that is denied by a Barclays spokeswoman, who says the company “welcomes competition”.
And second, that Metro Bank, true to its property requirements – high street location, free-standing and roadside, opposite or near Tube and train stations, prominent position, 3,000 sq ft-5,000 sq ft – had definitely picked the perfect location for its first store.
Open stores are located at Earl’s Court, Fulham Broadway, Borehamwood, Tottenham Court Road, and Kensington High Street. Stores in Bromley, Croydon, Uxbridge, Hounslow, Orpington, Watford and Ealing will be open by the end of the year. These are impressive numbers given the bank’s initial target of having four stores open in 12 months.
Ewing says Metro will be competing with high street fashion chains for sites, and is even looking at roadside petrol station sites. It also wants to be the UK’s first drive-through bank. So keen is Metro to get the right sites that is it on the hunt for joint development partners of any size.
“It’s the attitude of the developer that is important, not whether they are big or small,” says Ewing, who adds that Metro will develop the building at its own cost. “Metro will secure planning and do the demolition, if necessary, in exchange for a 25-year lease and discounted rent. From a developer’s point of view, there is no risk.”
However, there are no plans to expand to the rest of the UK. The reason, says Ewing, is that there are enough business opportunities around Greater London. “This is about growing organically and managing that growth,” he adds.
There are also no plans for Metro to buy any of the 600 branches that Lloyds has been told to sell by the European Commission (see panel). “Metro Bank will not take on any [of Lloyds’] legacy sites, staff or systems,” says Ewing. “I don’t expect that the business [Lloyds] will be selling vacant sites – sites will be sold with their customers/IT systems all packaged up. Generally, those sites don’t suit Metro Bank.”
Although the bank has no worries about getting the right kind of sites now, Thomson admits: “Life was tough for us to get sites when we started out.
“I would see prospective landlords and as soon as we walked in, they would say they didn’t like banks. But I would say we are not like other banks, and don’t think of us as a bank because everything we do is geared towards people coming and using us.
“Life was made a lot easier once the bank got its Financial Services Authority approval. The landlords who have talked with Metro Bank so far are people who have shared the Metro Bank vision and have understood the Metro Bank model.”
There is one message Thomson wants landlords to get: “Don’t think of us as a bank – we will drive footfall. For some people, we are a destination.”
Thomson believes that Metro’s arrival, and its style of banking, will ultimately force its older rivals to change. “Other banks will try to do some of what we do. Other banks around our stores will lengthen their hours. They will copy little bits, but they can’t copy everything. They will need to change their opening hours/staff/IT/sales culture. It can’t happen in my lifetime.”
That is not something the established banks agree with – they seem unfazed by Metro’s arrival. A Barclays spokeswoman says: “Our business model is solid, sustainable and proving successful. We are focused on deepening the relationship with our existing customers as much as attracting new ones. We believe banking is a scale business and you need to have a multi-channel strategy.”
A Lloyds spokesman comments: “Metro Bank is still a very, very small player and it does not have the critical mass of branches which will allow it to become a real competitor. Having said that, it is a very welcome player into the banking industry because it offers customers further choice, which is always a good thing.”
But, with Metro’s sights fixed on having hundreds of stores, it looks like it will be only a matter of time before it is considered a real competitor.
Other new entrants
NBNK
The financial investment company was formed in 2010 by Lloyd’s of London chairman Lord Levene and a consortium of senior business figures. The aim of the company is to build a large UK retail bank, primarily through the acquisition of other banks.
Virgin Money
Virgin Money was granted its financial licence in December 2009. This year it recruited two Santander executives to its team and is said to be gearing up to bid for hundreds of Lloyds branches, which the Lloyds Banking Group has to sell off on the orders of the European Commission, and the “good bank” half of Northern Rock.
The group will open four “Virgin lounges” in London, Edinburgh, Manchester and Norwich in September. Playing on Virgin’s airline credentials, the lounges will offer a café-like environment in branches. More traditional branches will also open next year.
Tesco Bank
With six branches open already, Tesco Bank is set to expand further when the economy gets firmly back on its feet. In April, it announced its revenue was up by 7%, to £919m, and its trading profit was up 5.6%.
Who is expanding and who is consolidating?
Santander: around 1,400 branches
The company has no plans to increase or cut its number of branches in the near future.
RBS/NatWest – number of branches: RBS 644; NatWest 1,545
A spokeswoman says: “At RBS and NatWest, we are consistently reviewing our network to ensure we can successfully meet the needs of our customers and deliver on our customer charter. We are committed to servicing local communities and have pledged to stay open for business if we are the last bank in town. To date, we continue to provide banking services in 146 locations where this is the case.”
Lloyds TSB: 2,900 branches across the group The split is: Lloyds TSB 1,785; Halifax 669; C&G 164; Bank of Scotland 295.
In March, the bank agreed with the European Commission that it would divest 600 branches by November 2013. A spokesman says the process will begin next year.
For now, Antonio Horta-Osorio, the new chief executive who took over on 1 March, is carrying out a strategic review of the business, which will complete at the end of June. Until then, there is a moratorium on any closures.
Nationwide: 800 branches across the portfolio
The split is: 700 Nationwide; 100 Cheshire/Derbyshire and Dunfermline building societies.
There are no plans to expand or consolidate.
HSBC: 1,300 branches
HSBC is spending about £100m pa on refurbishing and improving its branch network. A spokesman says: “We will always be on the look-out to open more, or move existing branches to better locations. For example, we have just announced that we will be opening six more branches in Scotland over the coming months.
“There are also some locations where, because of falling usage or a shift in town centre locations, we will close or relocate our existing branch network. It is vital that we have our branches located in areas where our customers need them and use them.”
