Marks & Spencer Takes On the Big Banks

LONDON -- Marks & Spencer (ISE: MKS.L) is making a big splash today with the details of its new banking service. Customers can now pre-register for its Premium Current Account, which is expected to launch this autumn.

There are two main options, either 20 pounds a month including travel insurance, or 15 pounds without. Customers also get various vouchers, worth up to approximately 250 pounds a year, plus access to a fixed-rate savings account that offers a 6% interest rate.

Marks & Spencer hopes to open around 50 bank branches over the next couple of years, starting with one at its flagship store in Marble Arch. Marks & Spencer is therefore hoping that the banking service will help drive increased customers at its stores. The market is giving a thumbs-up verdict at the moment to the plans, with shares up 1.5% at 323 pence.

Despite the branding, M&S Bank is actually run by HSBC (ISE: HSBA.L) , which splits the profits equally with Marks & Spencer. Last year, M&S Money contributed 50 million pounds to the retailer's bottom line, about 7% of its total profits. That said, even Marks & Spencer itself seems less than convinced by its efforts so far, as it's barely mentioned in its reports and presentations.

Obviously, this is an opportune time to grab a share of the lucrative U.K. current account market. Customers frustrated with Royal Bank of Scotland's recent IT problems, or disgusted with Barclays LIBOR skullduggery, are going to be key targets.

Of course, M&S isn't the only company set to attack the big banking giants. Tesco (ISE: TSCO.L) has been threatening to offer a current account for some time now and might even get around to doing it next year. Newcomers such as Metro Bank and Virgin Money are also making waves, and Lloyds Banking Group is being forced to sell more than 600 branches to promote more competition in the sector.

How these developments will affect the profits of the big banks is unclear, but it's unlikely to be good news.

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