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Merger plan means big banking is back

Terry portrait with tieI hate to say “I told you so”, but I’ve been predicting for some time that the challenger banks would eventually merge or be snapped up by bigger banks.

There was much talk in those immediate post-crash days of creating greater competition in the banking sector.

Politicians and pundits with memories of high streets populated by butchers, bakers and candlestick makers thought that tough action would break the grip of the big, bad banks and give us greater plurality.

It looked for a time as if it might happen. New names emerged such as Metro, Shawbrook, Aldermore, Starling. But competitive pressures were always likely to get the better of the smaller banks, unable to provide products to challenge the big boys.

The era of the “challenger” bank has been short-lived. Shawbrook floated in 2015 and was sold two years later to BC Partners and Pollen Street Capital. Aldermore was acquired by South African conglomerate First Rand in March this year.

The potential tie-up of Clydesdale, Yorkshire and Virgin Money will be the ultimate merger of the challenger banks, if indeed Clydesdale can be termed in that way. It has been around since the 19th century and is on a different scale to the upstart banks.

That said, a deal would mark a coming of age for the bank following its demerger from National Australia Bank and subsequent flotation. A Clydesdale-Virgin combination would take it further up the league table, with six million personal and business customers and a balance sheet of between £60bn and £70bn.

The banking sector may be gearing up for another shake-out, with Lloyds now restored to health and even RBS on the acquisitive trail, starting with its swoop on the accounting software company FreeAgent.

Big banking is making a comeback.



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