City cool on Blackstone plan for a new high street bank

A PLAN by private equity giant Blackstone to launch a new British high street bank has been received coolly by the City.

Analysts and banking industry executives say the move faces several hurdles, including the low public opinion of the private equity sector.

In addition, two of the "front of store" banking names linked to the project, former Abbey National boss Peter Birch and former Royal Bank of Scotland director Stuart Sinclair, are thought to be not sufficiently well-known to the City to generate support.

Sources say Blackstone is preparing to launch The Home and Savings Bank, which may make offers for branches that have to be sold off by Lloyds Banking Group and Royal Bank of Scotland to meet European Union competition rules. It is believed Birch will become chairman of the new bank.

Sinclair, who was chief executive of Tesco Personal Finance for one year in 1998, will also take a senior position, sources said.

But doubts were expressed this weekend about Blackstone's potential to make significant inroads into the industry.

Keith Bowman, banking specialist at broker Hargreaves Lansdown, said: "This does surprise me to a degree because they (Blackstone] would be starting in the UK from scratch in terms of a brand name. They are known in terms of investment but not at all in terms of the banking industry."

Bowman said the difference between Blackstone and the likes of Tesco Bank and Virgin Money was that the latter had strong consumer franchises to underpin their banking ambitions.

Some industry executives also believe the banking names associated with the venture are not sufficiently well-known to generate customer belief and support.

Birch was chief executive of Abbey National (now Santander) from 1984 to 1998, taking the group to flotation, but he has not been a pivotal player in the industry for well over a decade. Sinclair was below board level at RBS and his stint at Tesco Personal Finance is seen as possibly having been too brief for him to become well-known.

One executive said: "They are not names to set alight the sector in this venture if it comes off."

Blackstone is expected to pump 200 million into the new business, with a further 50m provided by the wealthy Pears family. Blackstone was unavailable for comment yesterday.