More M&A activities can be pursued at Lloyds Banking Group since the bank can assist customers during times of high cost of living.
The CEO of Lloyds Banking Group Charlie Nunn has indicated that the company might engage in further mergers and acquisitions (M&A) with fintechs.
Continuing to look at possible mergers as well as partnerships is what Nunn suggests; however it usually does so with a focus on bolt-on opportunities. In Mr. Nunn’s opinion, this is “going well” and it bought digitized retirement platform Embark for nearly £400mn in July 2021, which will now create new customer propositions on top of Embark’s platform.
“We interact with fintech firms in various ways. We have some investments in Fintech partners that are complementary to our services, we got some which we thought could accelerate our capability build like Emberk… they are definitely still on our radar screen going forward,” he told Bloomberg.
However, he warns that the group would rather concentrate its innovation effort around digital services. It is because within UK no other fintech can really impact for customers at scale like Lloyds”.
Fintechs today deliver a much better bang for buck
Several players within this sector have suffered job losses and declining valuations caused by global economic slowdown. However, venture capitalist Oliver Richards said this was almost a “sense check” after years of inflated values during which Klarna alone lost almost 40 billion dollars off its valuation over last few months. So nowadays big banks such as Lloyd are more likely than ever before to consider buying such firms as fintechs due to their acquisition targeting strategies.
“Companies become more attractive when they go down,” said Kevin Chong, Co-Founding Partner at Outward VC.” “Lower valuations allow founders to live up to investors’ expectations.”
But this might lead to increased M&A activity as banks consider the customer needs during this difficult financial period. “We’ve got 70-80% of our UK customers being concerned about the cost-of-living crisis right now, I mean that is the big topic,” Nunn added. In fact, this includes one percent of them who cannot change their lifestyles at all and twenty percent of customers are forced into significant adjustments in life style by increased energy costs and food and fuel prices while another one percent cannot change their lifestyles at all. Recent economic conditions have also underscored how important integrations like Minna – a platform that lets users manage and cancel subscriptions straight from their banking app – are for big banks like Lloyds which first partnered with Minna in 2020.
Lloyds is “in a good place” financially after posting strong results for H1
In addition, Lloyds performed well in H1. This year’s first half recorded an increase in group income to around £8.5bn ($11bn), representing an almost 12 % increase, with post-tax profit expected to be approximately £2.8bn($3.bn). It shows that both COVID and Lloyd’s economy are recovering very quickly,” added Mr Nunn.” Additionally, we position ourselves pretty well”.
“Hitherto standout relics of coronavirus receded but steadiness of higher inflation and its impact on people struggling to subsist with cost of living is uncertain for families as well as businesses,” according to Nunn.
The first findings of Nunn Group H1 2015 show that despite high cost of living problems, the company does not in any way disregard them. Although he admits that the most pressing cash flow problems today are those of several households. Actually during the crisis it became known that retail bank got an extra amount of about £70bn as deposit; which suggests that clients still keep faith in it and have raised their stakes with the lender.