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Times
2 hours ago
- Business
- Times
Is it game over for Britain's challenger banks?
Ever since Gordon Brown unleashed Sir Donald Cruickshank to review the competitiveness of the banking sector in 1998, the dominance of the 'big four' banks has been on the minds of Britain's politicians. Brown's successor, Alistair Darling, even used the aftermath from the 2008 bailouts to proclaim the creation of new high street banks, which would take on the dominant players — Lloyds, NatWest, HSBC and Barclays — and boost competition for consumers. This sparked the rise of the 'challengers' — a mixed cohort of high-street banks, which at various times have tried to unseat the giants. Back in the 2000s, one of them, Halifax, famously insisted it would 'eat the big four's lunch'. But, after more than 25 years of effort, it seems it could be game over for challenger banks. Last week, Sabadell, the Spanish owner of TSB, stunned the City by confirming it had received potential bids for the British bank it bought ten years ago. That came just hours after reports that Metro Bank had received a takeover approach from a private equity house. • What a TSB bank sale could mean for customers It led the ratings agency Moody's to warn that consolidation in the sector would 'ease the competitive pressure on the big UK banks'. That also included the Nationwide Building Society which has bolstered its status by its £2.9 billion swoop on the challenger bank Virgin Money last year. That deal came in a year when the sector was also rocked by Coventry Building Society buying the Co-operative Bank for £780 million. Benjamin Toms, banks analyst at RBC Capital Markets, said: 'While there has been a lot of noise about trying to level the playing field with the challenger banks taking more of the market, that hasn't really happened.' So why have the challengers lost their way? And is anything coming to replace them? Statistics produced by Cruickshank in 1998 are often used to explain the uphill battle they face. He found the big four banks had a 68 per cent share of the current account market. But by 2010, their dominance had risen to 73 per cent because the early challengers themselves had to be rescued by the bigger players, particularly Halifax, which was gobbled up by Lloyds. It goes to the heart of the problem, according to Barbara Casu, professor of banking at Bayes Business School. 'It's very difficult for the challenger banks and to a certain extent the smaller building societies to compete because of the market share of the big banks,' she said. Some of the challengers did get a boost from the banking crisis, as Darling had promised. Virgin Money took on parts of the nationalised Northern Rock while the Spanish bank Santander bought bits of the troubled building societies-turned-banks Alliance & Leicester and Bradford & Bingley. The crisis also gave TSB, which was set up as the Trustee Savings Bank in 1810, a new lease on life when the European Union demanded that Lloyds spin out a new branch network in return for its taxpayer bailout. TSB was floated on the stock market in 2014 before being bought by Sabadell a year later. But some reckon they squandered the opportunity to compete. Edward Firth, banks analyst at KBW, reckoned that some of the challengers 'weren't particularly well run and made a number of strategic errors'. Metro Bank, for example, launched in 2010 as the first new bank on the high street for 100 years. But it has never recovered from an accounting crisis in 2019, which ultimately led to its rescue in 2023 by the Colombian billionaire Jaime Gilinski Bacal. Even after rallying last week on reports of a potential bid from Pollen Street Capital, its £850 million market value is still a fraction of the £3.5 billion it was worth at its peak. Firth also blamed regulations requiring smaller banks to hold more capital as a ratio than larger ones for holding back challengers. 'That makes it very difficult for anybody to ever challenge because you're not playing on a level field.' He said the big four's dominance in current accounts also mattered, because these accounts pay very low rates of interest — if any — and so provide these banks with a cheap way to finance their lending. One of the many reviews into the sector recommended the creation of a current account switching service to make it easier for customers to move between banks. But while the big four's share of current accounts had fallen to 64 per cent by 2022, according to the latest analysis by the Financial Conduct Authority, it was not the challengers who benefited. Instead, it was the digital banks such as Monzo and Starling that gained market share, from about 1 per cent in 2018 to 8 per cent by 2022. This seems to be the result of customers opening additional current accounts, as the FCA found that the number of accounts had increased by 15 per cent over four years. On average, each adult in the UK now has 1.9 current accounts. Casu at Bayes said this also reflected the dominance of the big four: 'People have not shifted entirely to challenger banks. They use them as e-wallets, to travel on the Tube or buy online, but they don't put their whole salary in there.' The big four have also staged a fightback by spending billions on their own apps. At the same time, they have cut costs, particularly by closing branches. Barclays, for instance, has reduced its network by a remarkable 77 per cent over six years. The digital banks still outcompete the big four when it comes to customer service. The Chase app — the retail banking arm of JP Morgan, America's biggest bank — is the highest rated of any of the banks for customer service. Karim Haji, head of financial services at KPMG, said it was important not to see competition in the narrow terms of the traditional challengers. There are also competitors targeting specific sectors, such as buy-to-let mortgages, payments services, and business banking. Still, the potential takeover of TSB would be a key moment in the story of the challenger banks. This week the pressure is on to find a suitor as TSB's fate is tied up in a hostile takeover of its parent Sabadell by Spanish rival BBVA. The Spanish government is scheduled to announce on Tuesday whether it will sanction the takeover of Sabadell. But if Sabadell agrees a deal for TSB it would need to be put to a shareholder vote under Spanish rules — delaying any deal. It could also scupper the BBVA takeover by altering the financial terms. Hence, the speculation in the City that news of the potential sale was fortuitous and that if any formal bid was going to be made it needed to happen quickly, with expectations that Friday is an informal deadline for any approaches. It is rumoured that the Spanish owner is seeking £2 billion for the bank but it is not clear how easy that will be to achieve. Despite speculation about bidding wars for Co-op Bank and Virgin Money last year, no rival offers emerged for those banks and TSB has been subjected to repeated takeover speculation. Analysts said that all of the big four would take a look at TSB, but Lloyds seems an unlikely bidder given it was forced to sell off TSB in the first place. NatWest has ruled itself out. Barclays, however, is known to be seeking expansion in the UK. TSB would provide a 2 per cent market share of deposit taking and mortgage lending. While any deal might trigger the need for the Competition and Markets Authority to look at the transaction, few think it would stand in the way, particularly in light of the government's pro-growth agenda. Neil Baylis, partner at the law firm CMS, said: 'If you have a story that you're basically doing something that is good for the UK economy, then you're in a better position [to do deals] that you've been in for quite some years.' Other potential bidders could come from the reinvigorated building society sector, with Yorkshire's name in the rumour mill. As it stands, Nationwide has already bolstered its position as competitor to the big four and this wave of consolidation could result in a new 'big five' or even a 'big six'. Nationwide looked at TSB and other challengers before bidding for Virgin Money last year, and that deal is still being integrated. On the day of Nationwide's results this month, when asked about further deals, chief executive Debbie Crosbie, who was made a dame this month, said she was 'super focused' on Virgin Money. 'You never say never in the future, but right now we're focused on making the most of this acquisition,' Crosbie said. Nationwide claims to have a relationship with one in three Britons after the Virgin deal and is promising a major expansion into the business banking arena, where the big four also dominate. Intriguingly, Santander is said to have expressed an interest in TSB. This has surprised some in the City given speculation that chief executive Ana Botin was looking to exit the UK market, something she was forced to deny this year. While Santander has already claimed a slot as the fifth-biggest bank in Britain since arriving on the scene with the takeover of Abbey National in 2004, it has struggled to achieve the dominance it craved. Buying TSB might edge it closer to that goal. A sign, perhaps, that the game to challenge the big four is not over yet.
Global News
5 hours ago
- General
- Global News
4 missing after Airmedic helicopter crash in northeastern Quebec: police
Quebec provincial police launched a search operation Saturday after a helicopter crash in northeastern Quebec that left four people unaccounted for. They said the aircraft operated by Airmedic was involved in an accident around 10:30 p.m. on Friday near Natashquan, Que., a little more than 1,000 kilometres northeast of Montreal. Police planned to comb a wooded area in the region north of the community in the province's Côte-Nord region. Sgt. Élizabeth Marquis-Guy said five people were aboard the chopper, but one man was rescued and reportedly suffered non-life-threatening injuries. He was taken to hospital. The four others remained missing on Saturday morning. Get breaking National news For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen. Sign up for breaking National newsletter Sign Up By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy Raphaele Bourgault, a spokesperson from the Longueuil, Que.-based air medical transport firm, confirmed the helicopter was part of the company fleet and said emergency services were quickly dispatched to the scene. Story continues below advertisement 'Airmedic staff are working closely with authorities and first responders to manage the situation and provide the necessary assistance,' Bourgault said in an emailed statement. 'Airmedic will release further information as soon as it is confirmed.' Bourgault said the company's thoughts and concerns are with those affected by the crash. Airmedic specializes in air medical transport and operates both planes and helicopters as part of its fleet. It is a private company that offers its services across Canada. A command post was set up and search specialists are on site and are capable of searching on the water as well as by ground and in the air. The Canadian Armed Forces have also been called for assistance, police said. Provincial police say the Transportation Safety Board of Canada has been informed of the crash and will conduct an investigation to determine the circumstances behind it. A TSB spokesman said the helicopter was in the process of a medical evacuation and crashed into a lake shortly after takeoff. 'The TSB is in contact with the operator and others involved and is collecting information,' spokesman Nic Defalco said in an emailed response. Story continues below advertisement Police investigators will collaborate in the TSB probe, Marquis-Guy said.
Times
13 hours ago
- Business
- Times
What a TSB bank sale could mean for customers
TSB, one of Britain's biggest high street banks and mortgage lenders, has been put up for sale by its Spanish owner. Banco Sabadell is looking to sell TSB as it battles to fend off an €11 billion (£9.4 billion) hostile takeover from its Spanish rival, BBVA. Potential UK bidders for the high street bank include NatWest, Barclays, Santander and HSBC. TSB has more than 5 million customers, about 5,000 staff and 175 branches in the UK. Any offer for the bank would need shareholder approval and a sale would take time to finalise. We look at what it could mean for millions of TSB customers and shareholders. • Business live: follow the latest news on companies, markets and economics The primary driver is BBVA's drawn-out attempt to make a hostile takeover of Sabadell. Selling TSB could raise significant capital, which Sabadell could use to reward shareholders and make the company a tougher target for a BBVA acquisition. If BBVA does succeed in taking over Sabadell, the expectation is that it would look to sell TSB anyway. Sabadell bought the bank from Lloyds Banking Group for £1.75 billion in 2015. TSB said that for now, it's 'business as usual,' and customers shouldn't need to do anything differently. The bank is expected to remain a UK-based entity and will continue to be covered by the Financial Services Compensation Scheme (FSCS), which protects deposits of up to £85,000 if the firm holding your money fails. If TSB were sold, current accounts would probably be switched to the new owner. Those unhappy with a change could easily move banks using the Current Account Switch Service, which pledges to transfer customer deposits, direct debits and standing orders within seven days. While TSB has offered competitive current account deals in the past (such as its Classic Plus account, which offered cashback and savings features), some of its savings deals have not always been the most competitive. TSB now offers two current accounts. The Spend & Save account pays £5 a month cashback if you make 20 payments in a calendar month. It also gives you access to an easy access saver paying up to 2.05 per cent (which includes a 1.04 percentage point bonus for a year). • From threats to inviting us to tea: SJP changes its tune (and fees) The Spend & Save Plus account, which costs £3 a month, offers the same perks plus £100 interest-free overdraft and an easy access regular saver paying up to 5 per cent on up to £250 a month. The backing of another, potentially larger bank and an injection of capital could allow TSB to launch more attractive products and interest rates and become a stronger player in the market. TSB had £33.9 billion worth of mortgage lending on its books at the end of 2023, according to the banking association UK Finance. It can be worrying when the lender in charge of your mortgage changes hands, but it's not unusual — and TSB went through the process at its last sale in 2015. Any transfer would also be overseen and closely monitored by the Bank of England and the Financial Conduct Authority, the City watchdog, to protect customers. A new owner could change interest rates offered to borrowers starting a new mortgage deal, but those locked into a fixed rate would stay on the same terms and conditions until that deal expired. About 10 per cent of TSB's shares were held by private investors who bought them at £2.60 each when the bank floated on the stock exchange in June 2014. These were later sold to Sabadell when it acquired the bank in 2015. While no official price has been disclosed, sources familiar with the bank suggest that a sale could generate up to £2 billion. Laith Khalaf at the wealth manager AJ Bell said that if the bank were sold, those investors would get a windfall of up to £129.20 as well as the profit on selling shares at the £3.40 price offered by reported pre-tax profits of £285.1 million on income of £1.14 billion last year, up 21.1 per cent on the £235.5 million earned in 2023. It had total assets of £46.1 billion at the end of 2024.
Daily Mirror
3 days ago
- Business
- Daily Mirror
Santander 'eyeing up takeover of rival UK bank' after major firm put up for sale
Sky News has cited City sources who claim that Santander has contacted Banco Sabadell, the Spanish parent company of TSB, about a possible takeover Santander has reportedly approached the owner of TSB about a potential takeover of the UK high street bank. Sky News has cited City sources who claim that Santander has contacted Banco Sabadell, the Spanish parent company of TSB, about a possible takeover. Sabadell confirmed earlier this week that TSB is up for sale and said it had received interest about an acquisition, but did not name who had expressed interest. Sabadell and Santander, also a Spanish bank, have so far declined to comment on the report. TSB has around 175 bank branches in the UK, while Santander has 444 locations, but revealed plans earlier this year to shut 95 branches. The closures will leave Santander with 349 physical sites. Sabadell said: 'Banco Sabadell will assess any potential binding offer it may receive. Naturally, any transaction would be subject to the satisfaction of all legal obligations.' The reports of its interest in TSB come after the executive chairman of Santander denied the high street lender was looking to the UK. Speaking at the World Economic Forum in Davos in January this year, Ana Botin denied said Santander would remain in the UK 'into the future'. She said: 'We love the UK. It's a co-market and will remain a co-market for Santander. Punto [full stop].' The bank has been in the UK since it purchased Abbey National in November 2004. Sabadell is currently in the middle of rebuffing a takeover attempt by Spanish banking group BBVA, a deal which is opposed by the Sabadell board and government in Spain. BBVA has launched an €11billion (£9.4billion) move to take control of Sabadell. It comes a decade after Sabadell bought TSB for £1.7billion in the UK, a year after Lloyds had spun off TSB in a stock market float. TSB recently reported a £101million pre-tax profit in the first quarter, nearly double what it made a year ago. Meanwhile, Santander has reported pushed back bids from NatWest and Barclays to buy its UK retail bank. The Mirror has recently published a list of banks closing in June. There were 79 bank branches set to close for good this month, including 16 Lloyds branches, 15 Halifax, 24 Natwest, 23 Santander, and one TSB. According to a report from the consumer group Which?, banks and building societies have closed over 6,300 high street branches at a rate of 53 per month over the last decade. This represents 64% of the branches which were open back in 2015. Banks say the decline in high street branches has been driven by a rapid increase in online and mobile banking, and a rapid decline in the use of physical branches.
Yahoo
3 days ago
- Business
- Yahoo
TSB branches and jobs under threat as takeover looms
TSB branches and jobs could be at risk if a high street UK bank buys the business from its Spanish owner, analysts have warned. Warnings of cost savings have been made after Banco Sabadell confirmed on Monday it had been approached by several unnamed bidders to acquire TSB, prompting speculation that NatWest or Barclays could hatch a £2bn deal. If a takeover is completed, bank industry analysts predict TSB's 175 branches and 4,900 staff could be in the firing line as bosses seek to push through cost savings. 'To the extent that you've got overlapping branch locations and overlapping capabilities, then clearly they would be under threat,' said Gary Greenwood, from Shore Capital. 'The reality is if you're doing this sort of deal and you're a large domestic bank acquiring a small domestic bank, then you're going to be looking for some cost savings.' It comes after investment bank RBC Markets said NatWest was the potential frontrunner for TSB because it is already on the lookout for possible takeover targets. It said there was ample 'fat to trim' from TSB's running costs, which are higher compared to banking rivals. Benjamin Toms, of RBC said TSB has already shrunk its branch network by two thirds over the past five years from 540 to just under 200, but more could still be axed. 'Clearly if you're going to end up with TSB branches next to NatWest branches, then they won't need both of those,' he said. 'Removing branches does not save you huge amounts of money as a bank, but it's incrementally helpful around the edges.' John Cronin, an analyst from Seapoint Insights, added: 'I would expect that you'd see branch closures. 'But to the extent it's acquired by another UK bank or building society, they'd be thoughtful around where the closures are affected. It probably looks no different to what TSB will end up doing anyway. 'From an employee perspective, typically, these things are negative. You're going to get some consolidation of roles and there's cost take-out – that's always one of the reasons for doing these transactions.' A takeover of TSB, which stands for Trustee Savings Bank, would mark the latest ownership shake-up for the centuries-old lender. Founded by a Scottish minister in 1810, it existed for years as a major mortgage lender before being acquired by Lloyds in the mid-1990s to become Lloyds TSB. It was later sold after the financial crisis as part of the Government's nationalisation of Lloyds to create a new standalone lender. Sabadell has owned the bank since 2015, after TSB briefly listed on the London stock market. The group is still a relatively small player in Britain's mortgage market, with a 2pc market share. Around 94pc of TSB's loan book is owner-occupier mortgages. TSB's future has been the subject of keen speculation in recent months. This stems from separate takeover talk at Sabadell, as rival BBVA is attempting to merge with the group. TSB and Sabadell declined to comment. NatWest was contacted for comment. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
