To Challenge Big Banks, U.K. Lenders Must Merge: Real M&A : Richard Partington
Even billionaire Richard Branson may need a partner to stand a chance of taking on Britain’s largest banks.
Lawmakers are encouraging the growth of lenders such as Branson-backed Virgin Money Holdings (U.K.) Plc (VM/) to challenge the dominance of Royal Bank of Scotland Group Plc, HSBC Holdings Plc (HSBA), Lloyds Banking Group Plc and Barclays Plc. (BARC)The smaller “challenger” banks may have no choice other than to merge with each other if they hope to compete against these four, which control as much as 80 percent of the market.
“Consolidation in the medium term is inevitable,” Warren Mead, head of challenger banking and alternative finance at KPMG LLP, said in a phone interview. “They don’t have sufficient scale on their own to be effective challengers.”
The need to gain scale could drive Virgin Money together with TSB Banking Group Plc (TSB), the consumer lender carved out of Lloyds in June, according to Gary Greenwood, an analyst at Shore Capital Group Ltd. The two are valued at about $2 billion each. Smaller challenger banks such as Shawbrook Bank Ltd. also may be targets, Greenwood said. A merger between TSB and customer-owned Co-Operative Bank Plc makes sense as well, according to Investec Ltd.
Virgin Money, based in Newcastle upon Tyne, England, is among U.K. lenders from TSB to...Read More
“U.K. banking continues to be an oligopoly,” Jayne-Anne Gadhia, chief executive officer of Virgin Money, said in a phone interview. “It’s important to give customers the best possible deal to make sure that oligopoly is changed.”
Virgin Money was little changed at 285 pence at 11:54 a.m. in London. TSB was little changed at 264.6 pence.
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