Does Britain need the 'grumpy old men' bank?

The Council of Mortgage Lenders points out that just a handful of banks and Britain's largest building society Nationwide account for almost all lending in the UK. After recent mergers between building societies and with many smaller lenders reluctant to take on more risk, that is a potentially worrying narrowing of choice for consumers.

Ralph Silva, founder of Silva Research Network, a business consultancy, does not think Britain needs a new bank. ‘I can understand why they want to form a new bank. I am not convinced that people are saying to themselves I want an alternative to what I’m getting at HSBC or Barclays,’ he said.

Despite the outcry over bank charges in recent years, the unpopularity of banks does not translate into customers voting with their feet and moving their money elsewhere. ‘It is not clear that the retail banking customer is critical of the banking services,’ he said, adding that no UK customer who banked with a British bank has lost money from the crisis.

Could the new bank compete?

Although impressed with the line-up Buick has doubts about the outfit's ability to compete. 'The fact that every large bank in world will almost certainly have to subscribe for fresh capital, it will make this new bank’s job that much harder competing for similar capital.' 

Bruce Packard analyst at Seymour Pierce thinks the new venture could struggle to get critical mass. 'We've seen in the past that it is very hard for new entrants to gain scale in the banking sector,’ he said.

He points out that when RBS put branches up for sale five or six companies were interested but eventually decided against an offer. ‘Only Santander, which already has scale was the sole bidder, and even they were reported to have scaled back their offer from £2 billion which RBS was hoping for.'

Packard says the UK banking sector still has a number of challenges: an ageing population, unsustainably high house prices and UK disposable incomes under pressure from rising taxes and interest rates.

Profitable or not?

The FT reports one of Walker's backers saying, ‘the long-term returns from the sector have been excellent.’

The bank would benefit from the fact it would not be hampered by mortgage loans and bad debts. But Silva points out UK retail banking is not particularly profitable as people in the UK are unwilling to pay for banking services. He says that means it is difficult for a bank focused on just retail banking to ‘make a lot of money.’

Eye on Northern Rock’s ‘good bank’

The government has been looking for a buyer for the 'good' savings and mortgage lending operations in Northern Rock, the bank whose near collapse in 2008 started the financial crisis. It has ring-fenced the toxic loans that went bad for the bank, thereby strengthening its balance sheet and paving the way for the bank to be re-privatised - either as a mutual or through a sale.

A number of businesses are understood to be interested in buying Northern Rock and Silva thinks it would make sense for the new venture to be looking at the business. ‘Making changes to a bank that already has customers has a much better chance of success than starting something up from scratch,’ he said.

Perhaps these old hands do know a thing or two after all.