The garage that went global: It Came From Humble Beginnings, but this duo'S £1bn business could shake up banking around the world in the next 12 months

Three years ago a disgruntled Gerhard Huber quit his job as managing director of Fidelity Investments in London when his employers shot down his plan for an online bank. Undeterred, he set up the operation himself in a room above his garage in Surrey, with a computer on a camping table. His idea blossomed, investors poured in, and he is now leading an internet bank worth £1bn. And somebody in Fidelity must feel foolish.

Three years ago a disgruntled Gerhard Huber quit his job as managing director of Fidelity Investments in London when his employers shot down his plan for an online bank. Undeterred, he set up the operation himself in a room above his garage in Surrey, with a computer on a camping table. His idea blossomed, investors poured in, and he is now leading an internet bank worth £1bn. And somebody in Fidelity must feel foolish.

"In the summer of 1997, I could see I would not prevail with my mission of financial services within Fidelity," says the Austrian-born entrepreneur. "If you are part of an organisation and the organisation doesn't believe in what you believe in, maybe it is time to go." The affable 41-year-old started Enba, an incubator for fostering new companies, with two former Fidelity senior executives, Xavier Azalbert and Christian Kaiser.

A year later they raised money for their initiative but they had resistance from regulators wary about giving a banking licence to a financial institution which sprang from a garage in Surrey. Mr Huber then pulled off the first in a series of ingenious coups to fast-track his internet bank. He cut a deal with a French bank, Banque d'Escompte, to use its licence in return for giving it shares in his company. He then decided to base the business in Dublin to take advantage of low taxes.

In December 1998, significant backers, including British venture capitalists Apax Partners and computer-chip giant Intel, injected £8m into the company in return for shares. Nine months later came another round of financing. US investment bank Morgan Stanley and insurance group CGU became involved and a further £28m was added to the pot. By July 2000 the total figure had reached £370m and the Swiss-owned investment bank Pain Webber joined the list of shareholders.

Mr Huber used the backing to fund the start-up of the internet bank, First-e, which began business in Britain last November offering high interest rates for savers. He also struck a deal with stockbroker Dresdner Kleinwort Benson, allowing his new customers to buy and sell shares.

Three months after the bank's UK launch, Mr Huber was at a European Parliament lunch hosted by a Spanish and Latin-American bank, Banco Bilbao Vizcaya Argentaria (BBVA), in the breathtaking 19th-century building it owns in the centre of Madrid. The headquarters was the former home of Don Jose, the Marquis of Salamanca, who was a banker, politician and entrepreneur during the reign of Queen Isabel II.

Mr Huber found himself sitting beside Manuel Galatas, the head of BBVA's internet bank, called Uno-e. Mr Galatas struck up a conversation with the Austrian to relieve the boredom of the uneventful function. The two hit it off and found they were thinking along the same lines about developing their businesses. Within a few hours they had agreed in principle to merge their internet banks. "They were focusing on Spain, Italy, Portugal and Latin America but we were focusing on Northern Europe, Asia and the United States," says Mr Huber. "There was one country where there was an overlap, which was France. It took us about 30 seconds to sort that out."

BBVA is a heavy hitter in the banking world with 35 million customers and a market capitalisation of more than £172bn. It had taken the unique move of setting up its online bank, Uno-e, with internet service provider Terra Lycos. In March, Uno-e and First-e announced their merger. The new company was named Uno First and was valued at almost £1bn. Although the link-up has yet to get regulatory approval, Gerhard Huber, who is chief executive and Manuel Galatas, the executive chairman, have been busy developing an ambitious expansion plan to have a presence in four continents in just 12 months.

Although Mr Huber heads a fast moving machine with a demanding growth trajectory, he carries the responsibility with ease. In the new tradition of casually dressed internet entrepreneurs, he wears a snappy blue and cream open-collar shirt and navy chinos for our interview in Uno First's temporary office in Madrid. He answers questions with the enthusiasm of a man who likes to collect new experiences. The son of a paediatrician from Salzburg, he wanted to go to the US as soon as he finished his education. He did leave Austria, which he now finds insular, and he is repelled by its recent embrace of right-wing politics. He began working for accountancy group KPMG in Frankfurt. As soon as he had joined he thought: "Maybe if I really nag them they will send me to the States." Within 18 months he was working in the New York office.

He spent five years in the US where he met his wife, Amy Clarke, a descendent of the Pilgrim Fathers. But he found himself being pulled to the other side of the Atlantic again. "She [Amy] decided, as she was married to a European, she wanted to live in Europe and pushed me to find a job there. I pretended for a year to look for a job then she saw through me and found herself a job there."

The couple moved to Paris then to Munich, where Mr Huber worked for Hypo Bank. In the Bavarian capital he got his first experience of breaking the mould in financial services, setting up the phone banking operation of Direkt Anlange Bank, before he joined Fidelity in London.

His new role is the most demanding of his career. Uno First has 120,000 customers in the UK, Germany and Spain, but some of its competitors are ahead. Egg, the Prudential's online venture, is heading towards a client base of 1 million customers, and Scandinavia's MeritaNordbanken has more than 1.5 million.

Mr Huber says his offering is different, a "financial supermarket" which allows customers pick a mortgage from Halifax or HSBC, for example. Other financial institutions are simply selling their own products online, he says. Despite the shareholding by BBVA in Uno First, it shows no preference for its products, he points out. The internet bank is also expanding beyond deposit accounts to credit cards, mutual funds, stockbroking and insurance.

But it unlikely to be an easy ride. Analysts say while the Spanish and Latin American arm has the backing of the well-known BBVA brand, in Northern European markets it does not have an established brand name which has reputation for safely keeping savings like traditional banks.

"Seeing is believing," says Hew J van Steens, an analyst with JP Morgan. "People feel a lot more confident when they can see a bank exists with all its branches on the high street." He believes the future lies in the so-called "Martini" model, the latest buzzword among investment bankers. The theory goes that banking can be done "anytime, anyplace, anywhere", and customers can conduct transactions over the phone, using mobiles to access the Net, through the television or in a bank branch. Uno First's UK operation, First-e, is a start-up internet-only bank and analysts say it would have difficulties offering customers banking through all of these channels.

First-e also suffered from a dose of bad publicity when it launched in Britain, because the banking ombudsman did not have jurisdiction over the start-up. As it was using the Banque D'Escompte licence, complainers had to write in French to regulators in Paris. Mr Huber says he has set up a customer council for the UK which is chaired independently, and that should solve the problem.

Like other internet banks, First-e has had technical problems. In some cases, customers have been unable to access its website. Mr Huber says the problem stemmed from a row between Sun Microsystems and Microsoft which resulted in some internet browsers being unable to read the Java computer language. He says those problems have been overcome, and his irritation is obvious at First-e falling victim to a dispute outside its control.

Uno First's four-continent invasion is gathering pace. Mr Huber has entered a joint venture with Singapore's Overseas Union Bank in April to provide internet banking services in Singapore, Hong Kong and Australia. Entry into the US is fraught with red tape for an organisation such as Uno First but Mr Huber says with unstoppable confidence: "There are ways and means to overcome this." One possibility is a joint venture with a US bank.

As Uno First group expands, the Dublin operation, which is home to technical wizardry and business development, will recruit more employees in addition to its 400-strong workforce. It has already out-grown its offices in the well-heeled leafy suburb of Dublin 4 and is moving to new premises near the city's Sandymount strand. Space has been so cramped until now that job interviews are conducted in the hall and Mr Huber shares his desk with his secretary.

But he is not there often enough to mind, because he flies between meetings in Dublin, London, Madrid and other cities where Uno First is hoping to develop a foothold. He stops off at his home at Kingswood, Surrey to see his children, Alexander, seven, Christopher, six, Patrick, four, and one-year-old Markus, whenever he can. He does not spend enough time with them but he hopes that will change, he says optimistically.

But that does not seem likely as Uno First picks up speed. It expects to spend more than £120m by the end of next year on its expansion and Mr Huber says operations in each country should be breaking even in three to five years. The merger between Mr Huber's bank and Mr Galatas' group is expected to be approved by regulators next year.

Next stop is raising further money to fund the rapid growth. Uno First expects to float by the middle of next year. Mr Galatas says if there is a merged European stock market in operation by then it would provide an ideal home for the company's shares.

Otherwise Uno First may float in Madrid where the company will be registered. He says if the internet banking operation is successful "there will be a lot of demand for shares". With Uno First already valued at almost £1bn, the flotation could be one of the biggest of its kind next year. "The valuation of the bank can go down or up - hopefully up," he says. The company could float off up to 30 per cent of its stock, if it follows the example set by others in the same field.

Mr Galatas says the partnership has been "working well" but there have been the "usual problems". He and Mr Huber are certainly not cut from the same cloth. The latter brings his missionary zeal for growth to the organisation, while the former is a representative of a major international bank.

"We are more concerned on the regulatory and administration side, they are more concerned with technology and fast decision-making," says Mr Galatas. Unlike Mr Huber's dress-down-Friday attire, which he wears every day, Mr Galatas, 38, is immaculately turned out in a crisp beige suit. His plush Madrid office, in BBVA's building, is where the pair thrashed out the details of their merger, codenamed Mickey Mouse, before it was announced to the markets.

Mr Galatas denies BBVA runs the risk of seeing its own customers flock to Uno First. The Spanish and Latin-American group owns one-third of the internet bank, the other two-thirds are split equally between Terra Lycos and Enba.

The latter has started three other business, besides Uno First. The others are Factor-e, providing electronic commerce back-office services for clients, Xelector, which allows visitors to compare financial services over the Web, and an investment fund to back online startup businesses with Wit Capital, the US investment bank.

When Mr Huber is asked what drives him, he says he does not want to be famous. His mother already frets about the dangers of him making the headlines in the financial press.

He says: "The biggest driver is to create something that is a great business, which produces a profit and creates a lot of shareholder value. For 13 months we were self-financed, and with my partners we had eight families relying on our payroll, including my own, with no chance of any income. Nothing is certain with private equity, so there is a great personal risk and of course you want to have a reward for that."

Through Enba, Mr Huber owns almost 2 per cent of Uno First group, worth about £20m

When his is not working Mr Huber, who used play piano, listens to jazz, opera and rock. "For me there is no separation of music. There is only good music and bad music. I do a lot of running. My partner Manuel Galatas is an extraordinary marathon runner. He is an hour faster than I am. I run a marathon at around 3.30 and he runs at 2.30."

But the pair will have to show Olympian speed, and the guts of a Athenian at the battle of Marathon to build an internet bank that will be a significant performer on the global stage. They are not the only ones in the race and there is a long way to go before anyone gets a medal.

But not many of the rivals will have had to start in a suburban garage.

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