Busy Blackstone Applies For U.K. Bank License

Among a whirlwind of activity, buyout giant The Blackstone Group is examining the possibility of entering the U.K. banking market, its chief executive Stephen Schwarzman said on Jan. 24.

Earlier in the month, sources familiar with the matter said that Blackstone, one of the world’s largest LBO shops, had applied for a British banking license and was working alongside fund manager Cambridge Place on a venture called The Home and Savings Bank.

Schwarzman declined to comment on whether Blackstone had applied for a U.K. banking license but when asked whether he was looking to enter the U.K. market, he said, “We are looking at one potential situation.”

In addition to its U.K. banking endeavors, Blackstone has been busy elsewhere. On top of an active fundraising effort for it’s sixth global LBO vehicle, the firm in January agreed to take over the management of nine leveraged loan and high-yield bond funds from business development company Allied Capital Corp. and launched a $2 billion IPO for its travel services portfolio company Travelport (see related table).

Schwarzman said that opening a bank in the U.K. would not represent a major change in strategy for Blackstone. “We’re looking at buying financial assets in other places in the world,” he said on the sidelines of a conference in Riyadh, the capital of Saudi Arabia.

Schwarzman pointed in particular to Blackstone’s move last year, together with The Carlyle Group and WL Ross & Co., to take over failed Florida lender BankUnited. In that deal, U.S. bank regulators seized BankUnited and sold it to the consortium in May for a reported total of $900 million. It was among the largest bank failures of the year, costing the Federal Deposit Insurance Corp. an estimated $4.9 billion.

A shake-up of the British banking sector—due in part to a forced sell-off of more than 900 branches by bailed-out lenders and to government support for increased competition—has attracted dozens of potential bidders and new entrants to the sector.

“The rationale is that with the banking industry under pressure in the U.K., there is a window for a very traditional banking model focused on savings and mortgages,” a source told Reuters.

Blackstone is expected to put £200 million ($326.5 million) into the new venture, while The William Pears Group, an investment company owned by the U.K.’s Pears family, will contribute £50 million. Cambridge Place will make a small investment, too, according to a source.

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

—Thomas Atkins is the Reuters bureau chief in the Persian Gulf. Simon Meads and Clara Ferreira Marques are Reuters correspondents.