Easy to summarise but harder to execute. The Metro Bank success is summarised by founder Vernon Hill thus:” create fans designed around service and convenience, deliver unbelievable deposit growth combined with the lowest cost of money.
“That is the magic of the Metro Bank model.”
Hill is in typically ebullient form as he discusses Metro Bank’s third quarter earnings and with good reason.
He is also on good form when it comes to discussing Open Banking and the extraordinary imbroglio that is RBS Williams and Glyn – in particular Santander benefitting from the so-called Challenger Fund.
Pick a metric, just about any typical banking metric and Metro Bank has reason to toast its latest results – but one metric is a standout at Metro that is not generally studied so forensically at rival banks.
Hill says: “We have delivered average deposits per store growth of $105m in the past year; comparable US figures are typically deposit growth per branch of just $1m-$2m a year.”
He adds:”You can always drive deposits if you are a high rate payer. We do not. Nobody buys the latest Apple iPhone because it is cheap-they buy the whole Apple world and Apple experience and that is the way to describe Metro Bank.”
Asked about store profitability, Hill chooses his words carefully.
Metro Bank has just opened its 50th UK store and of those open for more than a year, Hill says that “over 80% are making a positive contribution.”
A practical example of what differentiates the Metro Bank drive for excellence in service and convenience relates to safety deposit boxes- a service long since shunned by the incumbents.
Hill can rattle off store by store stats but one in particular is top of mind.
“At Ilford, before we even opened the store, we had 1,000 safety deposit boxes reserved – the income from that alone is worth roughly £350,000 per year.”
In the past quarter alone, customer numbers at Metro rose by 79,000 to hit 1.12 million and Metro is punching above its weight in particular in the business banking sector.
“If you want to open a new business current account at one of the major incumbent banks it takes about six to eight weeks-it takes one hour at Metro Bank.
“What you have in the UK is a cartel incumbent market where the banks have taken business customers for granted,” argues Hill.
And Metro Bank’s business banking market share is set for a boost as a result of the embarrassing and costly failure by Royal Bank of Scotland (RBS) to hive off its Williams and Glyn business unit.
RBS is going to pay competitor banks to offload business customer accounts and Metro Bank is set to benefit.
“Only in Britain,” says Hill, but he adds “all of it is helpful.”
“I am surprised that Santander with £350bn of UK deposits is being subsidised by RBS.”
On that score he is not alone in finding the entire arrangement bizarre.
Hill is equally quotable when it comes to the impending changes arising from Open Banking and admits to ‘mixed feelings’.
“I am sceptical that the British (or American) public will let us share their financial information with third parties. Open Banking will not be as big as you might think. Customers are rightly concerned about cybersecurity.
“But if Open Banking does take off, we are all set up for it because of our modern IT systems.”
As for future store expansion, Hill says that stores in Bristol and Cardiff are under construction and will open next year. The bank will roll out a Midlands expansion plan next year with Birmingham in its sights.
Pressed on the possibility of expansion farther north he says there are “no immediate plans but it will certainly happen in time.”