CYBG’s £1.7 billion takeover of Virgin Money could mark the start of a merger and acquisition wave in the sector, with mid-tier banks now ripe for takeover as crisis-era woes are laid to rest, the global chairman of PwC has said.
Despite recent speculation around big-scale tie-ups – including reports Barclays is eyeing Standard Chartered – Bob Moritz said smaller lenders were likely to star in the next string of acquisitions.
“You’re probably going to see it more so in the mid-tiers regardless of the country, even though there’s lots of rumours with some of the larger institutions – obviously particularly coming out of the UK,” he said. “The mid tiers are the ones that I think have historically been limited by what they can do with their capital because of the regulatory requirements. I also think they’re looking for the return and they are more likely to be challenged, and therefore they probably need a little bit more scale because of the cost of doing business.”
CYBG chief executive David Duffy framed the Virgin Money deal in a similar light. “Customers want more from their banks, there are new entrants emerging all the time, the technology is changing and with all the regulatory changes, we know PSD2 and Open Banking puts a lot of challenges out there,” he said.
He also noted the opportunity to scale up quickly, with the combined group set to double in size “on day one” with six million customers, and assets worth about £83.5bn.
“What’s important is that at our size and level we move out of the challenger bank market,” Duffy said.
It leaves sector peers like Metro Bank straddling the space between the challengers and the big players, while specialist bankers like OneSavings Bank and Charter Court have also joined the fray.
Some British lenders have already been snapped up, including Aldermore which was recently bought by South Africa’s FirstRand in a £1.1bn takeover, and Shawbrook, which was taken over by private equity firms last year in an £850 million deal.
Rumours have also swirled in recent months of big-ticket deals, with reports that Barclays was exploring a possible merger with rival banks including Standard Chartered in light of pressure from activist investor Ed Bramson.
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here