Perfect timing

The perfect storm of Covid and Brexit may not present an obvious window of opportunity to launch a bank, but James Meigh thinks now is the ‘ideal time’, writes John Grainger in The Yorkshire Post.

While many in the business world have been battening down the hatches and waiting for the Covid storm to pass – developments mothballed and plans on ice – others appear to have opted to ignore the pandemic almost completely.

It’s a bold approach under the circumstances, but for some it may well end up paying off.

James Meigh must surely hope so. He’s regional director for the North of England at Recognise Bank, which cleared a major hurdle towards becoming the UK’s newest lender when it was awarded a restricted banking licence by regulators in November.

It’s a strange time to launch a new business – “it’s been interesting,” says Meigh – perhaps especially one as finance-thirsty as a new bank, but there may actually be some serendipity involved, and City of London Group, the AIM-listed investment company behind Recognise, is hoping the timing will end up working in its favour.

The bank will be focusing on the SME market, but notably, it hasn’t done any lending under CBILS or the Bounce Back schemes launched in response to the pandemic last spring.

“We’re entering the market at a time when we’ve got no legacy loan-book issues. We weren’t in a position to get involved in the Government lending initiatives, so we’re launching at what we believe is an ideal time for us,” Mr Meigh told The Yorkshire Post.

So far, so good, but the question remains: why launch a new bank at all? The UK market has its share of high-profile big lenders, and they have been joined in recent years by a crop of so-called challenger banks. So in a cutthroat market, what’s Recognise’s edge?

“The short answer is, we’re digitally-enabled, but it’s the human touch as well,” says Mr Meigh.

“We’re using the latest cloud based technology to improve efficiencies, and as far as the customer is concerned, to speed up credit decision processes and access the funds.

“But part of our DNA is our relationship-led approach. We feel for many years that the SME market has been underserved. If you go back to 1990, when I started my banking career, the bank manager was a very traditional role and they were very much considered the trusted adviser.

“Through a process of cost reduction and trying to create economies of scale, that personal touch has been lost. The larger banks now are operating through call centres and automated decision-making. We feel that there’s a gap there that hasn’t been filled since the financial crisis.

“With Recognise, we’re going back to what I would call old fashioned relationship values.”

As good as this sounds, aren’t other competitors already doing this? Swedish bank Handelsbanken, for example, has been selling its services on the strength of its “old-fashioned” approach for years, and it has scale that Recognise must envy.

“We’re going to go into full launch in several weeks’ time, with four offices in four key locations: Manchester, Leeds, Birmingham, and London. We haven’t got the reach that Handelsbanken has got yet, but we may well have one day,” says Mr Meigh.

“But part of that relationship proposition is about having relationship managers in the geographical locations where we want to operate, so we can immerse ourselves in the professional community. We want to have that close relationship with our target market.”

Again, the timing appears to pose a problem. After all, isn’t there a certain irony in trying to get back to a more face-to-face approach when actually meeting people is still not on the cards?

“No, we can’t do that,” Mr Meigh concedes, “but the technology works very well, and I think psychologically, people are very comfortable now holding meetings on Zoom or similar.

“It certainly hasn’t prevented us from completing any transactions. It’s a challenge, but certainly not unique to us.” Yet whether working remotely or in person, Recognise will have its work cut out. The conjunction of Covid and Brexit have made the term “perfect storm” common currency in the media, and not without reason.

But Mr Meigh and his colleagues see the opportunity, rather than the crisis.

“Where banks, including Recognise, can assist is through the provision of funding lines, for example to help businesses increase stock levels to deal with supply chain issues,” he says.

If the bank’s five-year plan comes off, Recognise will have a lending book of around £1.5bn, with around 5,000 SME borrowing clients, and a deposit base of up to 50,000 private individuals and SMEs.

It all amounts to a huge pile of work for Mr Meigh and his 50 colleagues, and given the current waters, it’s unlikely to all be plain sailing.

So what made him leave a directorship at Santander and take his chances with a brand new competitor?

“I saw it as a very exciting opportunity,” he says. “I’ve had a career in banking of just over 30 years. I was looking for a new challenge, and the prospect of getting our licence, shaping our offering, creating teams of business developers – that’s what really excited me. It was a blank piece of paper.”

This article originally appeared in The Yorkshire Post on 28 March 2021.