What's up you guys sasha here now over the weekend, some really interesting news came out. Maybe you have heard about. Maybe you haven't because it wasn't really reported that widely, but it came out that not one but two big banks are interested in buying styling bank. Now, reportedly, jp morgan and lloyd's bank completely separately are both interested in buying the entire operation the starting bank has.

But how likely is it? What would the impact be if it was to happen, and what is my personal view on what will actually be happening from here on out? Let me dig right into the depths of this and tell you everything i have to say now. Let's first talk about the reasons why each of those two banks may possibly be interested in acquiring styling. First, let's cover jp morgan, jp morgan in uk. Don't really have a retail banking operation.

They have a very successful retail banking operation back in the us, where they're one of the leaders and provides some of the most innovative. Some of the most interesting consumer finance products, including credit cards and bank accounts and a whole host of other products. But in the uk that don't have a retail banking operation at all and it has been rumored, i have heard a lot of people mentioning that they are considering entering the uk market based on the success they've been having in the us with a retail banking proposition. At some point in 2021 - and this would give them a really easy entry where they have an established operation, they have an established bank, they have an existing customer base and an existing set of products that they can go and work with with lloyds.

The situation is quite similar, but somewhat different, as well: lloyd's unknown in the industry for being very heavy on acquiring other banks as part of their growth strategy. This has been going on not just for the last few years, not just the last few decades. They started it about 120 years ago, when they went and acquired kunliff brooks and company. They then went and acquired wiltshire and dorset bank in 1914.

In 1918, they acquired the capital and counties bank and by 1923 they managed to acquire over 50 different banks, building societies and other financial services companies. They were growing very fast now. This continues all the way to present day more recently, you might remember that they went and acquired cheltenham and gloucester in 1995, and they also acquired tsb in 1995, which is how the whole lloyds tsb bank was born in the first place through this weird: reverse merger: That i'm not going to go into the details of in 1999, nick white, scottish widows in 2009, they acquired age boss, and that became part of the lloyd's banking group. And although there's been some divestments and there's been, some splits and tsb has gone become their own entity and age boss has gone and split up anyway, although all this has been happening.

Lloyd are continuing to acquire other businesses, as recently as 2017, they went and acquired the uk mbna business from bank of america to go and acquire their very large credit card base and in 2020 they went and smashed the like button for the youtube algorithm. If you want to go and do the same, you can go and do it it's just down. There make sure you go and hit it and, if you haven't done so already make sure you subscribe to this channel as well anyway, lawyers have not really innovated in the consumer finance space. For some time they have been offering relative vanilla products.

They haven't been doing very much in either the credit card space or the loan space or the current account space and, as a result, the business hasn't been doing so well. If you look at the current account, switching dashboard they've been losing customers rightly consistently in the switching process. For the last few years, people like starling people like monzo and even nationwide, have managed to grow their businesses through their switching service, because some of the older banks, like lloyds, haven't been keeping up and improving their products in the process. Now, because of all of this, lloyd's could really do with going and freshening up their business and acquiring a portfolio to go and potentially give their business a bit of a job.

This would significantly increase their market shares, give them a new technology platform to play with and give them a lot of upsides like the fresh young feel and the challenger bank vibe that stanley would bring, but even if this whole deal was to go ahead, even if Lawyers really were interested. There is one big issue that i haven't seen other people mention, and that is the fact that this deal could i still get blocked by the competition commission, and this does happen. Lloyds themselves actually had a deal blocked in 2001 when they tried to acquire abbey national. Now i appreciate that they've recently gone and divested and got rid of some of their assets by splitting off with tsb, etc.

Yada yada, and it may be that the total size, if the two banks actually came together, would not be as big as the situation was in 2001. But there's still a risk that the competition commission would not want a high street bank to go and acquire one of the only two real current account providing challenger banks in the uk. Now, how did this news actually come out because representatives of both lloyds and jp morgan reportedly didn't provide any comments to the publications that published this news over the weekend now what's been happening in the background? Is stunning bank have been raising a new funding round? They are looking to grow their business and as any other fintech as any other young stage startup. They go from one funding round to the next to go and fund their expansion to go and fund their business costs, while the business is unprofitable.

In the most recent funding round they are allegedly apparently i'm not sure - i'm not really privy to the specifics, but apparently they're looking to go and raise 200 million pounds. So far. The bank has managed to raise 263 million pounds with an extra 100 million given to them as part of the capability and innovation fund, if you're not sure what that is, it's basically a government initiative which was put in place after the government went and rescued rbs, Where, because of the rescue package and the nature of the way that the banks that were nationalized back in the last financial crisis actually operated, essentially a new fund was created where different challenger banks, financial services companies, could go and apply to get a slice of this Fund in order to go and push themselves up, the pecking order and stanley bank was one of the big winners in this. They got one of the big pockets of money that were available and as a result that helped them fund their business to date.

Now, apparently, what happened is as part of this funding round. Styling bank began sharing a bunch of data with potential investors through a data room, and i am not previous to exactly what happened but after that happens, suddenly in relatively short time frames. Two separate banks that apparently don't have anything to do with this funding, suddenly became very interested in their business. Maybe some information was shared with some people.

I have no idea, i'm just speculating here, and that was very, very positive on some of the inside workings of how the bank operates, that isn't available to the general public through the materials that they publicly release and that made its way to the decision makers. In those particular places, maybe it's just completely accidental and has absolutely nothing to do with what's been happening on our funding, we shall find out, or maybe we'll never find out. I don't know now the fact that the two banks refused to actually publicly acknowledge or provide any comment on. This means one of three potential things number one is the leak was not planned and they didn't really know what to say.

They didn't want to deny it because they are actually interested and they didn't want to confirm it, because that would potentially drive the price up and maybe have an impact on their share price. That could be one of the potential outcomes. The other one is that the leak was actually intentional. It could be that they have gone and intentionally leaked this, both of them, maybe in conjunction with each other, to go and test what the government would say to go and test what stalin bank would say to go and test what the competition commission would say to See if anyone would actually show them any of their cards as to whether they're interested as to whether there might be any issues or something like that.

The third potential option is that the leak was intentional, so that i could go and create this video. And you could go and watch it and then smash the like button for the youtube algorithm. I don't know it could be a reason. It's probably unlikely compared to the other two, but it's certainly a possibility.

Now the big question of the day is: does starling actually want to sell if these two banks went and approached them, could they actually go and buy them, and this is a really interesting question, because the answer isn't as straightforward as it might seem now: ann bowdan, The ceo and founder of the bank has repeatedly, over the last few years, said that she is not interested in selling out to one of the big high street banks. She wants to take this bank all the way through to an ipo, and that is actually a very believable position, because, typically founders. Take their businesses through to an ipo over the long term will get a considerably higher value on the shares that they hold in their businesses than selling out early before that, ipo point is reached now. The second reason the ipo is probable is because starting bank have been following the traditional route that lots of companies take.

If they are interested in ipo, which is, they are maxing the customer growth. They are maxing. The market share they're maxing, all of the new customer acquisition channels and all of that kind of activity and they're not actually as interested in making revenue, because the revenue part of the business is something they're planning to go and tackle later. The same business model was done by facebook and by whatsapp and a bunch of other companies that either sold out for huge valuations or went public, and the business model does tend to work reasonably well.

If you wanted to go and sell to a large established bank, you would probably go and focus on the revenue generated out of the business considerably more because that would increase the value pre-ipo for that particular sale. That's just my personal opinion again now. The other important thing to note is that, unlike monzo's efforts over the course of the last year, starlings fundraising is going considerably better. This latest 200 million pound round is looking considerably more probable and is likely to attract a much better valuation than the sort of jump that monster had last time they raised funds and the size of the race is also hugely significant.

Now, 200 million is a huge amount of money, but, most importantly, it is more than twice the 98 million that the bank has recently published in their october update that it costs to run the bank for an entire year. So, although they are now saying that they are profitable - and i have a whole separate video link up here and link in the description below as to why that profit number is not quite what it may seem, go and watch that after if you're interested, although they Are technically apparently profitable, this money that they're raising now will allow the bank to essentially operate without accounting for any profit whatsoever for a period of about two years of their cost base remains about the same, which is a really long time for a young company like That to go from one funding round to another. Now here is something really interesting. Ann bowdan, the founder apparently currently has about 25 of stanley bank shares until relatively recently.

She was a person of significant control because she had a much larger amount of shares, but during the last funding round her share proportion was diluted and, as a result had dropped. But even more interesting is that there is an austrian billionaire based in bahamas called howard mcpike, who invested in the starting bank right from the beginning and through some of the early funding rounds and as a result, his 75 million investment has landed them. With 60 of the bank's shares, which means that the sum of the two people, the sum of what ann bowdan has and what harold mcpike has is 85. So, ultimately, at the end of the day, those two people get to decide whatever happens with the bank.

If they want to sell the bank will sell. If they don't want to sell, the bank cannot be sold. The bank cannot be bought. It's really interesting for a company that is so large that is so established that is so popular that it's doing so well for this to be the case, and here is a really important thing, although lloyd's bank is no longer owned by the shareholders in the uk, It is a public company and they are listed on the london stock exchange.

The same goes to jpmorgan. They are a public company, they trade on a new york stock exchange and, as a result, these companies are answerable to their shareholders, even if they are particularly interested in acquiring starting bank. Because standing bank has the ability to control the sale decision based on just the opinions of two people, they may want a much higher price than would otherwise be paid for a company like that, because ann bowdan has publicly stated that she's really interested in ipo and The same is possibly the case with harold mcpike as well. It is possible that they would only settle for a very large valuation which would be very inflated versus what a typical valuation of a bank at this stage in this growth would be, and the issue is that both lloyds and jp morgan are highly unlikely to go And pay way above the odds because of the way that they are governed because of their answerability to their investors, because they have to go and make smart financial decisions, they don't have the same benefit of being privately owned in the same way.

Now, what does it mean for customers? What if starting bank was actually to go and sell now? First, there are two immediate issues that i see happening to customers. If the bank was to sell number one is the product is likely to get diluted quite considerably. In recent history, whenever a big bank goes and acquires a smaller bank, they are relatively quickly interested in beginning to make money on it. So a lot of the features and services that are currently provided for free by styling because they have been trying to grow their customer base because they are positioning themselves as the alternative to old school high street banks may become paid relatively quickly.

The free use of the cut abroad, the really favorable exchange rates and a bunch of other stuff which is either free or very cheap, may stop being so. There is history for that happening, and the second issue - and this to me, i think, is going to really annoy a lot of people - is that the technology is likely to suffer as well. I've been through so many of these acquisitions, where somebody's acquiring something that is technologically potentially superior to what the big bank has, but because the big bank is so big and they just can't go and change the backend platforms and the ways of working and the structures That operate in their giant entity that is impossible to actually shift and change and turn around in any way whatsoever. What ends up happening is the young company with the much more perspective, much more interesting.

Much more positive technology is essentially migrated onto the old school platform that the bank operates and, as a result, people may lose nice functionality. People's apps may begin looking like that of lloyd's bank, rather than what happened with starting back. You may notice that this exact thing happened with mbna mbna had a much nicer app in my personal opinion, before the acquisition with lawyers happened and several issues in terms of the way the technology worked actually began happening after that acquisition, because the two were being migrated Together now, here is the really interesting piece of insight. If this sale was to happen, if the sale was to go ahead, i think the big winner out of this would be neither jp morgan.

Neither lloyd's nor starting bank. The big winner would be monzo, because if the sale happened, i have a relatively strong belief that it probably wouldn't be the best for starting customers in terms of the development of new features, the development of the product or the continuation of the really great value that Starting bank provides to its customers and, as a result, a lot of the customers who are currently using styling may well find themselves going and changing bank. For that reason, and being the only other bank that still exists out there, that is a challenger bank that is operating in this new way through an app first app central way that still offers lots of free perks and benefits and still offers some free usage abroad. And other benefits that traditional banks don't offer, they may find that if this was to go ahead, that would put them in an incredibly strong position going forward.

So i would say that out of all the different companies in this mix, monzo is the one. That's probably most keen for this acquisition to actually happen. Time will tell us to what actually happens. I will make sure to update you as soon as i hear absolutely anything.

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Thank you so much for watching. I really really appreciate it and i'll see you guys later. You.