Not just any bank services, M&S bank services

By Matt Scuffham | June 8, 2012 4:19 PM IST

British retailer Marks & Spencer Plc plans to launch an in-store banking service next month, backed by HSBC, providing fresh competition to the UK's established but deeply unpopular high street banks.

After the financial crisis blew up in 2008, many Britons blame the country's biggest banks for its economic woes, so M&S, a stalwart of UK town centres for nearly 130 years, hopes its unique position will lure banking customers its way.

The public is also angry that senior banking executives such as Bob Diamond at Barclays have pocketed multi-million pound bonuses while the country slid into a double-dip recession with millions out of work.

"M&S is one of the most trusted brands on the UK high street. This bank will be built on M&S values; putting the customer at the heart of the proposition and delivering the exceptional service that sets us apart from the competition," Chief Executive Marc Bolland said in a statement on Friday.

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The group, which serves around 21 million customers each week, said 50 M&S Bank branches would open in M&S stores across the UK over the next two years, with the first branch scheduled to open in July at its flagship Marble Arch store in London.

Like the rest of the high street, M&S has not had an easy time during the economic downturn. Last month it slashed its sales growth forecast, signalling it expects consumer spending to remain weak.

Peel Hunt analyst John Stevenson welcomed the company's move into banking but doubted it would contribute to a broader recovery for the retailer.

"It makes perfect sense. There are very few trusted brands on the high street, and M&S are one of them. They've got a customer base that has a pretty good credit profile," he said. "Is this going to be a major part of getting the company back to a billion pounds of pretax profit? No."

HSBC, Europe's biggest bank, said the venture was its biggest innovation in retail banking since launching First Direct, the online and telephone bank, 22 years ago.

"It is concrete evidence of HSBC increasing innovation, competition and investment in the UK," said Joe Garner, head of HSBC in the UK.


The venture gives HSBC an opportunity to attract high quality new depositors from M&S's relatively affluent and older customer base. M&S already offers limited financial services through M&S Money, having first ventured into personal finance in 1985.

"M&S customers tend to be of a slightly older demographic They are certainly good prime customers," an HSBC spokesman said.

Oriel Securities analyst Mike Trippitt said the venture "makes complete sense" for both parties.

"The risk return is quite attractive, I would have thought. You've got an unemployment level that is skewed towards youth, and to some extent that is a market you don't want to be hitting too hard as a bank," he said.

Shares in Marks & Spencer were down 1.1 percent at 336.9 pence at 1000 GMT, with the wider market down 0.7 percent. HSBC shares were 0.7 percent lower at 531.2 pence.

Paul Mumford, portfolio manager at Cavendish Asset Management, a top 100 M&S investor, said he doubted the venture would have much impact on the retailer's profit.

"It will be run by HSBC so, in profitability terms, I don't expect it to have a very meaningful impact, but nevertheless if people get cards and are doing more of their shopping with those, that won't be a bad thing," he said.

Britain has been keen to stimulate competition to its big five retail banks - Lloyds, RBS, Barclays, HSBC and Santander UK - which dominate lending.

M&S's banking venture is a more full-on entry into banking than the services provide by rival British retailers Tesco and J Sainsbury, which are predominantly offered online.

M&S said current accounts would be made available from autumn 2012, and customers can pre-register their interest in July. Mortgages will be offered by the bank at a later date.

"Branches will be open twice as long as traditional high street banks; mirroring M&S store opening hours and enabling customers to bank while they shop, seven days a week," M&S said in a statement.

In February Tesco said it was delaying the autumn launch of a current account service until next year while it awaited the implementation of new industry-wide systems to help customers switch accounts more easily.

(Additional reporting by Sinead Cruise, Sarah Young and Adveith Nair; editing by Paul Hoskins and Will Waterman)

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