Following rumours that began circulating within London’s fintech community as far back as June, digital-only or so-called ‘challenger’ bank Tandem has announced that it has signed an agreement to acquire Harrods Bank, the banking arm of the U.K.’s most famous luxury department store. Terms of the deal aren’t being disclosed, and the transaction remains subject to regulatory approval.
Under the agreement, Tandem says it will acquire 100 per cent of Harrods Bank and benefit from around £80 million of capital coming into the business. On completion — and presuming U.K. regulators don’t wave a red flag — Harrods bank will operate under the Tandem brand.
In addition, Tandem says the acquisition will accelerate the launch of savings accounts to customers, pegged for before the end of the year. Tandem’s app — which doesn’t yet offer a bank account but instead is a Personal Finance Manager (PFM) of sorts. designed to help you manage your money — is available in the iOS App and Google Play Stores, whilst Tandem credit cards are set for launch in “the next few months”.
According to City AM, the acquisition will give Tandem a much-needed push against a number of other rival U.K. challenger banks, such as Atom, Starling and Monzo, “with a near-£200m loan book and over £300m of deposits,” even if Harrods Bank, owned by Qatar Holdings, is itself loss-making.
The proposed deal also comes after a somewhat shaky time for Tandem. Last December it announced that it had secured a £35 million investment from department store House of Fraser, owned by China’s Sanpower. However, restrictions on capital leaving China led to part of the investment being withdrawn and Tandem eventually losing its own banking license and having to re-jig the business, including layoffs. Acquiring an existing licensed bank may be a quicker way to get its own regulatory status back on track.
Update: Given that Tandem recently lost a significant part of its funding, I asked the startup bank to clarify what it meant by benefiting from “around £80 million of capital coming into the business” — specifically if that was referring to new investment and/or Harrods Bank’s balance sheet. Here is what a spokesperson for Tandem told me:
Tandem has used its equity as well as support from existing shareholders to complete the transaction. The £80m of capital is made up of the capital within Harrods Bank, which is a well-capitalised institution, as well as some additional investment from new and existing shareholders.