The new high-street bank being launched this month by City grandees plans to become a FTSE 100 company quickly. The business, still unnamed, will be floated at the end of this month on AIM, the junior stockmarket, by Lord Levene, the chairman of the Lloyd's insurance market, but could move to a full listing by the end of the year.
Lord Levene, a former civil servant who ran a major defence company before becoming a City banker, will chair the bank, which plans to raise about £50m from City institutions including Invesco and F&C for the Aim float. That will enable it to buy a small bank with a licence, but it will then issue further shares to permit substantial acquisitions, greatly expanding the company's value. The bank could raise between £2bn and £4bn, offering 10 per cent of the shares to private investors in a public offering.
Acquisition targets include Northern Rock's state-owned "good bank" and 600 branches that Lloyds Banking Group has been ordered to sell following its state rescue. Advisers say there are other potential purchases to enable it to build a nationwide branch network, possibly including Clydesdale and Yorkshire, now owned by National Australian Bank.
But new banks face a hard task winning customers, warns Neil Saunders of the DataMonitor consultancy. "All banks face apathy in terms of switching behaviour," he said. "It takes an awful lot to get people to change bank."
Lord Levene is being advised by Kinmont, a finance house that specialises in insurance deals. He has recruited as non-executive directors Sir David Walker, a former Treasury and Bank of England official, who was deputy chairman of Lloyds bank, plus Lord McFall, who chaired the House of Commons' inquiry into the banking crisis, and former EU commissioner Charlie McCreevy. Two directors from the Scottish financial services industry are expected to join, and executives will be appointed after the flotation.
Moving into the FTSE 100 would imply a value of well above £2bn. Of eight retail banks in that index before the 2007 crash, Alliance & Leicester, Bradford & Bingley, HBoS and Northern Rock have all disappeared while Royal Bank of Scotland and Lloyds are now substantially state-owned.
It is hoped up to 12 UK institutions will back the flotation with options to invest more in the next financing.
The new bank faces competition not only from UK banks but also Santander of Spain, which is negotiating to buy the 318 branches that RBS has been told to sell. US-backed Metro Bank opens the first of 200 planned branches this month and Tesco will soon roll-out a major store-based bank.
Lord Levene's bank will offer savings and loan products including current accounts and mortgages to individuals and small businesses. It will be financed mainly by deposits, rather than wholesale money, and will seek to sell on service rather than price.
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