Finding himself non-exec Chairman of Metro Bank, my old friend Anthony Thomson now spends a good deal of his time flying round the world giving case history presentations to groups of foreign bankers on How Metro Bank Reinvented Branch Banking In The UK. I’ve never heard Anthony say anything other than that Metro Bank is a huge success and has regularly beaten – nay, smashed – all its targets since launch. I wouldn’t expect him to say anything else. But still, I wonder what’s really going on.
Metro Bank clearly has one huge advantage in what it’s not – a big bad legacy bank with huge rafts of negative headlines, loathsome behaviour and customer detriment behind it. And it has a biggish advantage in one of the things that it is – supposedly, at least, a network of local branches with staff empowered to get out into their local catchment areas and beat the trees in search of new customers. (When the Tottenham Court Road branch opened a couple of hundred yards from my office, I was genuinely impressed by the way that I kept meeting groups of staff wandering up and down the road waving flags, handing out free pens and inviting us all to drop in, although I haven’t seen them out there for a while now.)
Against that, it seems to me that it has two even huger disadvantages. First, as a network consisting of a handful of branches, it has virtually no affordable, targeted and appropriate marketing communications opportunities available to it other than what it can do in its branches and what groups of staff can do out in the street with flags and pens. I suppose they can just about advertise in the Evening Standard, or Time Out online or offline, but even this is horribly wasteful – and that’s about it. How you recruit a customer base in that situation is a mystery to me.
And then of course over the long, long haul while you’re aiming to build that customer base, you’re saddled with enormous and potentially crippling costs – not just the costs of running the branches themselves, but, even more than that, the costs of running a full-fat Head Office with a whole C-suite of full-fat Heads Of on big salaries presiding over product and service areas still only provided to handfuls of customers. In a business which is as much about scale as retail banking, I just can’t imagine how you thrive when you have the cost base of a retail bank and the customer base of a few corner shops.
That doesn’t mean that there won’t be a profitable exit available for Anthony and his fellow-shareholders when they decide the time has come. A small branch network which makes no sense as an independent business may make very good sense as an add-on to someone else’s. For all I know, this – rather than an eventual move into profit under its own steam – may have been the objective stated in the business plan from the outset. But speaking for myself, whenever I think of Metro Bank, I see a line on my wall up near the ceiling which represents the cost base, and a slowly-rising line down near the floor which represents the revenues. And I’m not at all sure that there’s enough wall in the world to reach the point where the two lines cross over.