Metro Bank: First London – next, the rest of the UK
Metro Bank’s chairman and founder tells Tim Wallace he wants to take the Southern-focused lender out to a national audience
IT HAS shaken up London’s retail banking scene, with bright new branches on busy high streets, and a bold American-style service ethos.
But although Metro Bank startled the market as Britain’s first lender in more than a century, it is not Vernon Hill’s first.
The larger-than-life chairman founded Commerce Bank in New Jersey in 1973, cautiously growing the bank to $1bn in deposits by its 17th year.
When he left Commerce after 34 years, a departure that was followed by legal wrangling, Hill had more immediate confidence to grow Metro, which he established in 2010 – it reached the same size in just three years.
“As we went into multiple markets in America, people used to keep telling me ‘It is different in this market, it is different in New Jersey, it is different in Manhattan’. When I finally decided to stop listening to them and said ‘this is what we’re going to run everywhere,’ that is when the numbers started to go up like this,” Hill explains, proudly gesturing upwards.
“Metro is the Commerce model in Britain. Everything we do in Britain that we did in America, works better in Britain.”
Initially the plan has been to saturate what Metro calls “greater London” – out to Brighton, Reading and Milton Keynes – with around 200 branches.
This month the bank gave a clue to its future plans by appointing Roger Farah to its board, an experienced retailer who until November was the president and COO of Ralph Lauren.
As well as reflecting the bank’s focus on customer service, Farah also expanded Ralph Lauren’s footprint over several decades.
So is this a sign that Metro, with 25 branches and 300,000 customers so far, might expand to the whole UK?
“I am tempted. Will we go north to the other major cities? I think we will over time,” he says. “But for now the focus is on London.”
The next target on the way is the bank’s flotation. The initial public offering is planned for 2016, a timeframe dependent on the bank’s growth.
One factor affecting that is the seven-day current account switching scheme, which Hill says has accelerated the flow of customers to the bank.
He says Metro’s obsessive focus on customer service rather than on price competition has certainly been noticed, and now that it is easier to switch banks the challenger is clearly benefitting.
But that is not to say the bank faces no real competition.
The established lenders have upped their game in the battle for customers – First Direct, Halifax and the Co-op all offer new current account holders a £100 bonus, while Santander offers a range of cash back options. And it’s not just banks that Metro must compete with. The Nationwide Building Society is offering interest rates of five per cent on some account balances.
But Hill hits back at the offers, arguing the big banks have let customers down too often to bounce back easily.
“When banks become too big to fail, they become too big to manage. It is very, very difficult once you get this big and this broken to fix it,” he says. “And not only do you have to fix it, you have to change customers’ perceptions.”
Though the big banks have made changes, for instance paying bonuses based on customer service as well as sales, Hill claims that is not enough.
At Metro, promotions and bonuses are given after a review of service alone, which includes performance in mystery shops. Some of the rewards are the same, though, such as stock options that tie pay to the performance of the bank.
But competition also comes from new lenders. Tesco Bank says it will offer a current account this year, threatening Metro’s distinctive retail focus.
Even Metro’s status as the only new bank in 100 years is no more – the authorities last week gave a licence to Paragon Bank, the first under the new regime. That could be the biggest threat. When Hill applied for a licence, it took 18 months to come through, but under the new arrangements Paragon Bank got the thumbs up in just seven months, and another 20 would-be banks are in the pipeline.
“Yes, there are going to be new banks and they are going to change things. But we do not see on the horizon a complete competitor offering a wide range of consumer and commercial services,” Hill says. “But even if there was, the more the better.”
The fighting spirit that saw Hill set up a bank when he was just in his 20s is clearly not far from the surface.
CV VERNON HILL
Born: August 1949
Studied: Wharton School of Business, University of Pennsylvania
Position: Chairman and founder, Metro Bank
Other roles: Chairman, Pet Plan North America
Previously: Chief Executive and founder, Commerce Bank
Family: Married to Shirley, founder of design firm InterArch and designer for Metro Bank. They have four children and a dog, Yorkshire terrier Sir Duffield (Duffy).