Comment: Challenger banks | Grocery price wars

Martin Flanagan
Martin Flanagan
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THE so-called challenger banks don’t seem to know whether to stick or twist at present. It’s not that they don’t have faith in their relatively fledgling business models. Most are trading reasonably well.

The would-be contenders’ indecision is over whether to take the stock market shilling in order to fund expansion and be able to take on the big four banks more effectively.

Virgin Money, backed by Sir Richard Branson, floated on the market yesterday, but at a price towards the lower end of the range and a month after the business had postponed a public listing due to equities’ volatility. Yes, no, yes to a float in a number of weeks.

Aldermore, which focuses on lending to small and medium-sized businesses (SMEs), as well as mortgages, scrapped its plans to go public last month for the same reason, with no new date set to try again.

TSB had greater faith when partly spun off by Lloyds last summer, but it did not have much choice given the failure of the Project Verde sale of the business to the Co-op Bank and the lack of trade buyers queuing up round the block to snap it up.

Santander UK has said it has plans to float “in the medium-term”, but few believe that will now happen in 2015. NAB UK, comprising Clydesdale Bank and Yorkshire Bank, has been cut adrift strategically by its Australian parent. However, nobody knows whether those businesses will go to the stock market, private equity or a rival bank.

And unconfirmed rumours continue to swirl around a partial listing for Tesco Bank as part of the strategic review of the listing parent company by new chief executive Dave Lewis.

There is nothing to stop challenger banks being able to expand without either acquisitions or stock market finance. But the pace of incursion into the dominant market shares of the big four, and a higher public profile, is arguably going to be achieved less fast if they just depend on organic growth and the uncertain pockets of parent companies with other priorities.

Voucher wars? It ‘Asda’ be addressed

IT IS getting messy in the aisles. Even when privately quite narked at a business competitor, it is an unwritten rule of the corporate world that executives do not comment on how rivals are running their businesses.

It shows how cut-throat the supermarket industry is getting – and it was never about high profit margins in the first place, rather volumes – that Asda largely abandoned this restraint yesterday.

Unveiling a 1.6 per cent fall in like-for-like sales in its third trading quarter, Asda focused most of its venom on what it seemed to regard as a voucher storm being unleashed by its traditional three rivals to help fend off the march of the German discounters.

Asda chief merchandising officer Barry Williams name-checked Morrisons, Tesco and Sainsbury’s at a press conference, saying “there are desperate measures from a number of people in the marketplace”.

As vouchers go head-to-head against Leeds-based Asda’s long-standing Everyday Low Pricing strategy, it is unsurprising they would irk the group.

But Williams said Yorkshire rival Morrisons’ strategy, in particular, seemed to involve “printing £5 notes”, likening it to a Bradford-based version of the Bank of England’s quantitative easing programme.

Price cutting everywhere. Could things worsen? Don’t discount it.

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