The Cass Business School report said a Post Bank would improve access to finance for Small and Medium Enterprises, advance financial inclusion and rebalance the UK economy away from London and other major urban centres.
It pointed to successful examples such as Italy’s Poste Italiane and France’s La Banque Postale. The Post Office’s network would make it a major player in the UK market.
End partnership with BOI
The report said the Post Office’s current partnership with Bank of Ireland should end as it is still dealing with the aftermath of the financial crisis and is unlikely to invest substantially.
Lead author, Professor Barbara Casu Lukac, director of the Centre for Banking Research at Cass, said the partnership has not delivered.
“Our analysis suggests the revenues the partnership between the Post Office and the Bank of Ireland has brought in remain significantly lower than post banks around the world and it has not delivered a full range of banking products for Post Office customers.”
She added that the strong positive perception of Post Office is an opportunity.
“A strong brand and a solid reputation are key factors for a successful new player in any financial system, but this usually takes years to build – the Post Office already has this significant advantage.”
Casu Lukac said a Post Bank could join forces with challenger banks specialising in SME lending and acquire new technology to make sure that lending and related risks are managed prudently and sustainably.
Existing customers should be retained
The report advises that the Post Office acquires the Bank of Ireland UK portfolio, retaining existing customers. It suggests that the Post Bank is set up as a subsidiary, with a separate management team.
“We estimate that the initial equity should be in the region of £2bn – the same amount the government has put into the Post Office in the past seven years. The profits this would bring in would eliminate the need for an ongoing annual subsidy for the Post Office, putting it on a sustainable footing for the future.”
Dave Ward, general secretary of the Communication Workers Union (CWU) said: “Successful Post Banks are a key part of the postal industry in many countries from France to New Zealand – there is no reason for the UK to be leading the world in the managed decline of its post office network.”
He added: “The Post Office has a branch network that is bigger than all of the banks and building societies in the UK combined.
The partnership with the Bank of Ireland is now holding it back and we believe a Post Bank should be at the heart of a new strategy for the Post Office’s future.”
A spokeswoman for Bank of Ireland said it has a long established and successful financial services partnership with the Post Office, dating back over a number of years and serving 2.4 million customers. The bank would not comment on the report.
