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US equity giant eyes British bank sector

The chief executive of US private equity giant Blackstone has confirmed the company is examining the possibility of entering the UK banking market.

Last week, sources indicated that Blackstone, one of the world's leading buyout firms, had applied for a British banking licence and was working alongside fund manager Cambridge Place on a venture called The Home and Savings Bank.

Stephen Schwarzman, Blackstone's CEO, declined to comment on whether Blackstone had applied for a UK banking licence but when asked yesterday whether he was looking to enter the UK market, he said: "We are looking at one potential situation."

The chief executive said that opening a bank in the UK would not represent a major change in strategy for Blackstone.

He pointed to Blackstone's move last year with other private equity giants, including the Carlyle Group and WL Ross & Co, to take over failed Florida lender BankUnited.

Carlyle Group was among the private equity outfits that in 2008 were examining the possibility of investing in the Irish banking sector. Carlyle was part of the Mallabraca consortium that also included JC Flowers and Middle Eastern sovereign wealth funds.

A shake-up of the British banking sector -- due in part to a forced sell-off of over 900 high-street branches by bailed-out lenders and government support for increased competition -- has attracted dozens of potential bidders and new entrants. Among them is Virgin group founder Richard Branson. His Virgin Money company recently acquired a banking licence and bought bank minnow Church House Trust.

It's expected Mr Branson will seek to establish a sizeable banking presence in the UK. Virgin tried to buy Northern Rock before the British government nationalised it in 2008.

Blackstone is expected to put £200m (€228m) in to its new banking venture and the UK-based Pears family a further £50m (€57m), with Cambridge Place making a small investment, said a source last week.

Cambridge Place is speaking to other potential investors, which could include private equity and blue-chip institutional investors, about investing in the planned bank. (Reuters)

Irish Independent