Starting a new bank is not easy. Ask Citigroup about Egg. But it is even harder for private equity. Apax’s experience with the sub-prime lender Picture Financial was not a happy one, and not just because Picture’s links with Peter Hain caused a political scandal that lost him his job as Work and Pensions Secretary. The £1.2 billion loan consolidator was one of the first victims of the credit crunch. When short-term credit markets dried up in 2007, it collapsed and no private equity investor could be found to take it on.
Private equity’s plans for the Home and Savings Bank are still sketchy. But if hedge fund manager Martin Finegold and Blackstone get it off the ground, it will target savers rather than borrowers and launch with a relatively modest online offering. In the long run Home and Savings wants a branch network picked up on the cheap from forced disposals at RBS and others. It wants to be a real bank.
Top buyout houses have been waxing lyrical about the opportunities for new entrants in retail banking, but it’s not clear any have worked out how to do it yet. As someone offered a stake in Home and Savings said yesterday: “It’s just a damn hard thing to do.”