We need more banks, but the public must demand them


One of the most high-profile challenger banks in the UK, Metro Bank, continued to grow its customer base and reduce its losses in the last three months.

But just days after the Competition and Markets Authority started an investigation into personal and small business banking, the gap between the likes of Metro and the big banks remains stark.

Its chairman and founder Vernon Hill said: “It is hard creating a new bank from scratch – the environment is hard what with raising capital, dealing with regulation and having the right IT. We are the only really new bank in the country.”

But Mr Hill said that his list of complaints or suggestions to the CMA would be “very short.” He added: “This country needs change and it needs real competition in banking but over time it is up to customers to fix it.” Metro added 41,000 new customers in the three months to June, taking its total to 359,000. That is 13 per cent up quarter on quarter, but down on the 16 per cent seen in the first quarter.

Metro’s deposit base grew 21 per cent in the quarter and 125 per cent year on year to £1.96bn while loans increased 21 per cent and 216 per cent to £1.16bn.

Mr Hill highlighted the bank’s increasing move into the SME market, with business customers now accountng for more than half its total deposits at the end of the half-year.

Metro, which launched four years ago, plans to open a further six branches this year including in London’s Wood Green, Basildon, St Albans and Cambridge. Mr Hill beleves that Metro can expand from its current 27 outlets to about 200.

Losses after tax declined from £10.6m in the first quarter to £9.9m in the second, and Mr Hill said he still expects to reach profitability in “the  middle of next year”.

The scale of the gap between Metro and the older banks remains huge. Against its 359,00 customers, Barclays has 16.7 million in the UK and Barclays’ retail and business deposits and loans in this country stand at £137bn.

The CMA’s initial findings last week showed that Lloyds, RBS, Barclays and HSBC still dominate the personal current account market with a 77 per cent share.

Newcomers such as Tesco, TSB and Metro together have about 5 per cent of the market while, in the last year, just 3 per cent of customers switched accounts.

The City minister Andrea Leadsom has signalled the Government wants to make it easier for new banks, including lowering capital requirements and making access to payment systems better.

On the up: Provident

Provident Financial, which specialises in lending to consumers turned away by traditional banks, saw its pre-tax profits jump 25 per cent to £90.1m as the number of people using its cards rose 17 per cent to about 1.2 million.

Profits in its traditional doorstep lending business were also up after stripping out costs. “It’s difficult to operate without a credit card and lots of people are being rejected by banks,” Peter Crook, its chief executive, said. “Our typical customer has an average income but may have had difficulties with credit in the past or no credit history.”