Bank returns have since been clobbered by record low interest rates, lenders face tough regulatory requirements and costs have spiked.
Banking ambitions for Marks & Spencer have been shelved with the retail chain deciding to close all of its 29 in-store branches come summertime. M&S Bank, a partnership with HSBC, had hoped to become a one-stop shop for everything from mortgages to underwear, but stopped offering new home loans last March.
The business blamed the latest banking cuts on the shift to online, particularly since the start of the pandemic, and said it will focus more on credit cards and store rewards. Its in-store travel money desks in some 100 stores are not affected.
Sainsbury’s last year put its banking venture up for sale, while Tesco sold its mortgage book to Lloyds for £3.8bn in 2019 after saying it would abandon the industry due to tough market conditions. Around the same time, Co-op Bank, which cut historic ties with the wider Co-operative Group following a rescue deal in 2017, also began looking for a buyer.
Sir Philip Hampton, the former chairman of both Sainsbury’s and NatWest, said last year that he could see why grocers found it difficult to enter finance. He said one of the reasons is that it is notoriously tough to get people to switch banks, even when they know they should. “Most people stayed loyal to their long-standing bank [after the 2008 crash]. They hoped and expected the banks to behave better. I think that’s happening. Banking is much less attractive as a business [now]. Much more capital is needed, there’s tougher regulation, a collapse in margins through low interest rates, [plus] technology and competition challenges,” he said.
