Metro Bank bids to QUADRUPLE small firm clients

Days after blunder wipes £800m from its shares...

METRO Bank has revealed ambitious plans to sign up 400,000 new business banking customers as it recovers from an accountancy error that decimated its share price.

Almost 40 per cent, or £800million, was wiped off the FTSE 250 bank’s shares on Wednesday after it revealed a blunder in the way it classified its loan book and issued a profit warning.

The challenger bank, which has 66 branches, told The Mail on Sunday it wants at least to quadruple its share of the business banking market to 9 per cent in the short term.

It currently has 2 per cent of the estimated five million business current accounts in the UK, or just over 100,000 customers.

If successful, its move into business banking would catapult Metro ahead of other competitors to the Big Four banks – HSBC, Barclays, Lloyds and RBS – in what is emerging as a major battleground.

More than a dozen challenger banks including TSB, Nationwide Building Society, Virgin Money owner CYBG and Starling Bank are plotting to take advantage of a shakeup at RBS and make aggressive expansions into the small business current accounts market this year.

To meet a condition of its bailout during the financial crisis ten years ago, RBS is being forced to send 120,000 business customers to rival banks as well as paying £775 million in grants and incentives to these other firms to improve competition in the sector.

The scramble for customers is likely to provide a once-in-a-generation opportunity for small firms to get better rates and service after years of suffering abject treatment at the hands of large banks.

The largest grant being handed out to challenger banks is worth £120 million.

Several firms have submitted their business plans to an independent committee for consideration.

Larger banks such as HSBC, Barclays and Lloyds are not allowed to compete for the cash. Santander pulled out last week.

TSB has revealed that if it wins a £120million grant it will aim to boost its market share from 100,000 customers to nearer 300,000.

CYBG has around 200,000 business customers, or 3.5 per cent of the market, while Starling only launched its business current account last year and has 27,000 customers.

The battle will begin properly on February 25, when the 120,000 RBS customers will be asked to choose a different bank on a dedicated new price comparison website.

A number of challengers said they were preparing attractive new accounts and services to woo switchers. Some are expected to offer incentives such as cash rewards.

Paul Riseborough, chief operating officer at Metro Bank, said it wanted to increase its market share ‘rapidly’ from 2 per cent to 9 per cent once the RBS scheme goes live. The bank, which is growing its business current accounts by 31 per cent a year, will focus on providing branch services as well as innovations on its app, such as prompts to tell firms when they do not have enough cash to meet upcoming loan payments.

Riseborough said bigger banks often forced small firms to use phone or online services and actively discouraged them from visiting branches.

‘Businesses with up to £5 million in annual turnover have been underserved because they have been perceived as high-cost and low-value to the bigger banks,’ Riseborough added.

Starling is another firm with particularly aggressive plans.

Anne Boden, its chief executive, told The Mail on Sunday she wanted to reach 500,000 business customers in the medium to long-term and promised to inject £1 billion of lending into the market. She said: ‘We need more competition in business banking because the only difference between RBS, Barclays, Lloyds, HSBC and Santander is the colour of the carpet in the branch.

‘The money [from the RBS scheme] should be used to benefit customers, and we are committing to make sure any funding goes back into the pocket of our customers.’

Starling is hiring 500 new staff and creating 56 new products.

CYBG has invested £12 million in a support team and hired 50 relationship managers. TSB has hired 30 new staff and is on a second recruitment round.

Nationwide’s first ever business account is due to be launched by the end of the year.

Its research suggests four in ten of Britain’s smallest businesses run their finances via personal current accounts.