Prudential, the UK's largest insurer, yesterday declared war on the high street banks and building societies by announcing that it is to launch a telephone-based banking service.
The company said that one of its main targets would be to persuade its 6 million clients, who receive up to pounds 1bn a year when their policies mature, to bank with the Pru.
It also intends to launch a massive advertising campaign aimed at winning over millions of other bank and building society customers.
The insurer also aims to bring under its own roof the mortgages it currently arranges with a panel of other lenders.
Prudential's move, due to begin by the end of next year, is part of a pounds 30bn reorganisation of the financial services sector this year, which has included a series of dramatic merger proposals.
Peter Davis, Prudential's group chief executive, said that only building society-style deposit accounts would be available at first. But he did not rule out the Pru moving into more traditional banking areas, including current accounts, credit cards and other loans.
"Offering traditional building society products of competitive deposits and mortgages is an important step for Prudential in widening the range of products available to our customers," Mr Davis said.
"Prudential already arranges around pounds 700m a year of mortgages for its customers using a panel of building societies and banks. In addition, we pay out more than pounds 1bn per year in maturing policies which research shows is largely placed on deposit with building societies and banks. Given this base, we believe we can build a substantial business in a short period of time."
The Pru has recruited Michael Harris, former chief executive of First Direct, the UK's first and most successful telephone-based bank, to head its banking operation.
The launch will be backed by Prudential's 7,000-strong direct sales force and a pounds 70m investment on equipment and office space.
Experts yesterday greeted the announcement with enthusiasm. "It's very positive news," said Nick Bunker, an analyst at ABN AMRO Hoare Govett. "There's always been a strategic case for the Prudential to be in the mortgage-lending and deposit-taking business."
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