Vernon Hill, the ebullient founder of Metro Bank, is not too interested in the British way.
Sitting in the new bank’s brightly coloured head office in central London, he rejects the sandwiches laid out in front of him and instead asks a member of staff to fetch a McDonald’s: “Some proper American food”.
The Philadelphia-born entrepreneur is just as quick to dismiss the British banks.
“They are never open when customers want and when they are there are two cashiers and 35 people queuing,” he says. They are “too big to manage” have “a million stupid rules” and “antique” IT systems that prevent them doing the simplest tasks such as changing a customer’s address.
Mr Hill, who set up Commerce Bank in the US, owns a hedge fund, a golf course and the franchises of 40 Burger King stores, believes what is needed is a heavy dose of American service culture.
His vision for Metro Bank’s larger branches is based on Apple’s glass-cube building on New York’s Fifth Avenue. He wants the bank to offer superior customer service – albeit at the expense of the best rates – and he wants to make the experience of banking more pleasurable with extended opening hours, airier branches and no queues.
Metro Bank has been in the pipeline for about two years and is scheduled to open its doors to customers in six weeks’ time.
As the bank’s largest shareholder, Mr Hill initially planned to be chairman but towards the end of the application process handed that role to Anthony Thomson, a former marketing executive who persuaded Mr Hill to bring his US banking model to the UK.
Mr Thomson says the tougher regulation in the wake of the financial crisis meant the chairman would have to spend more time dealing with regulators and so needed to be based in the UK.
They discard any suggestion that the one cloud hanging over Mr Hill’s past – an investigation in the US over some third-party deals between Commerce Bank and members of Mr Hill’s family, including his wife – had any bearing on the decision.
“The FSA is not going to appoint anybody to be a director unless they are 100 per cent happy with them,” says Mr Thomson. “They are not going to say we’re 99 per cent happy with you so you can be a director but not chairman.”
Mr Hill emphasises that he was never charged in the US. In fact he quips that the investigation, which prompted him to step down from Commerce Bank, was “the best thing that happened as we sold the week the Dow [Jones] index hit an all-time high”.
He believes Metro Bank is exactly the kind of new banking model the UK regulator wants.
The bank plans to expand its deposit base faster than its mortgage book and expects to have a core tier one ratio that will “never drop below the high teens”.
“The FSA woke up to the fact that funding killed the banks,” says Mr Hill. “Our model of a pure deposit- funded bank fit into their new view of life.”
Metro, which has raised an initial £75m from a pool of investors, including Fidelity and Wellington Capital, plans to expand slowly and organically – four new branches in the first year, the first two in Holborn and Cromwell Road, eight in the second and 200 within a decade. The branches will be in high-visibility areas in central and west London as well as retail parks further out.
Its initial funding should see it through to the third year, when it expects to raise a further £260m, possibly through a stock market listing.
The strategy is to build a local presence around each of its branches, which will eventually spread across Greater London.
It expects its customer base to be split evenly between small local businesses and retail customers and will offer a range of financial products that will be “simple, transparent and fair” but not the best value in the market. Its credit card, for example, is likely to have a fixed fee of 10 per cent with no additional charges.
“The model is that customers give us their deposits at a somewhat lower cost for a service experience,” says Mr Hill.
The bank hopes to build a deposit base of £50bn within 10 years. The big question that still remains is how successful that model will be in wrenching typically lethargic customers from their existing provider without a financial incentive, particularly when the bank will have such a small market presence and is relying predominantly on word of mouth to market itself.
Mr Hill argues that other banks are doing a good job of driving customers away.
“We don’t have to target them – they’ll target us,” he says.
However, Mr Thomson admits that winning customers is still the one unknown. He says the bank has answered three of its four big challenges: obtaining the licence from the FSA, finding the right sites at the right price and establishing the IT platform.
“The one remaining risk in the business model is ‘Will the Brits switch?’,” he says.
That crucial factor will only be known once the bank finally opens its doors in June.
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