Vernon Hill is the closest thing the staid banking industry has to a rock star.
He's unapologetically bold and bombastic. He lives large, in a palatial home that is one of the biggest private residences in the country. And his fans gush about how he revolutionized retail service with his famously iconoclastic Commerce Bank.
So maybe it's only fitting that his invasion of the British market is being talked up like something akin to the Beatles coming to America.
Hill thrives on such hype, fuels it himself and above all believes it. "There was a lot of talk that Brits are more inclined to get divorced than to switch banks," says Hill, who is fashioning Metro Bank in London in the same style as Commerce, operating seven days a week, handing out dog biscuits and lollipops and welcoming even noncustomers to use the restrooms and the free coin-counting machines in the lobby. "But we were basically overwhelmed."
Metro Great Britain's first new bank in well over a century opened 3,000 accounts in its first month, exceeding its target for the full year.
Hill, 65, easily could have retired on the $400 million he pocketed when Commerce was sold to Toronto-Dominion Bank in May 2008, polishing his golf game at the upscale club he built, Galloway National, not too far from his Moorestown, N.J., mansion. But that's not his style.
Despite his regulatory scrapes and the defeat of getting forced out of the bank he spent 35 years building into a regional powerhouse he's not giving up on the industry. Besides starting Metro, he is a major investor in two Pennsylvania banks that he hopes to use as a springboard for recreating Commerce stateside.
Hill says he finds motivation in taking on a great challenge. "Entrepreneurs live to create and succeed."
With his trademark showmanship, Hill made a party of opening day at Metro's first branch in July. A Dixieland band played on the sidewalk outside. Women in bright red dresses handed out dishes of ice cream from large trays. And colorful dancers and jugglers strolled through the crowd, creating a circus sideshow atmosphere.
As newspaper photographers and television news crews captured the scene, Hill surveyed it all with satisfaction, his Yorkshire terrier Duffy tucked under his arm in Paris Hilton fashion.
"Considering the crying need for more competition in the banking market, hats off to Mr. Hill," The Economist said.
It is the lack of competition and the resulting dismal customer service that drew Hill to the U.K. The market is dominated by a handful of large banks: There are the homegrown and entrenched Barclays, HSBC, Lloyds and Royal Bank of Scotland, and Santander from Spain.
"The British do hate their banks more than Americans do," Hill says. "Every survey has said that, and when we opened, that's what we found. And I don't mean American dislike. I mean hate."
Extended hours and quick account openings Commerce hallmarks are foreign concepts, and Hill is certain tactics like these can wow frustrated consumers. "This idea you could open an account in 15 minutes or less it can take days to open a bank account in Britain," he says. "The fact that we were instantly issuing debit and credit cards in the branch no one had ever done that before."
Hill's U.K. courtship began about a decade ago. Anthony Thomson, a marketing executive who is the founder and chief executive of an industry group called the Financial Services Forum, struck up a friendship with Hill and encouraged him to take his banking model abroad.
At the time Hill was busy expanding Commerce; he had recently jumped into the New York market and begun dueling for customers with JPMorgan Chase & Co. and Citigroup Inc., which jointly controlled 70% of the deposits. But in 2007, Hill's career took an unexpected turn. Regulators demanded Hill step down as the chairman and CEO of the bank he had created. They questioned contracts between the bank and various family members, particularly his wife Shirley. Her design firm had received millions of dollars for its work on the Commerce branches, and some branches were built on land leased from Hill's family trust.
The Office of the Comptroller of the Currency eventually concluded the investigation without filing charges.
Hill's forced sabbatical from banking was over as quickly as it began. Hill recalls getting a phone call from Thomson right away. "When I left Commerce and Commerce was sold, he was on the phone saying, 'You have no excuse now not to do it,' so I got on a plane to London."
The two men raised 75 million pounds (roughly $120 million) to start Metro, which has Thomson as its chairman and Hill as it vice chairman.
The closer Hill looked at London the more it intrigued him. In the city and its immediate suburbs, overall deposits rivaled metro New York about $700 billion and he figured the Commerce strategy with its emphasis on customer service could really stand out.
Some question whether Metro can maintain its momentum, given that it does not plan to compete on rates. The skeptics say it could be a stretch to think that many people will choose dog biscuits over a good rate of return, especially after there are more choices for those who want to switch. And Metro's 0.5% interest on savings pales in comparison to the 2.5% that is available elsewhere.
"Almost three-quarters of consumers think that new banks will lead to greater competition, resulting in better products and services. On the face of it this doesn't seem to be the case with Metro Bank," says Dilshad Issa, a personal finance expert at London's uSwitch.com, an independent price comparison and switching service.
But Jens Baumgarten, managing partner at Simon-Kucher & Partners, says Metro is unique in the U.K., which bodes well. "Banks have been competing on price and product, but there's a huge calling for a service-oriented bank."
Metro, which has three branches now, expects to have a fourth one by yearend, eight next year and 12 in 2012. Hill estimates that greater London can take about 200 stores, and conceivably many more.
Meanwhile, Hill is a major shareholder in two Pennsylvania banks, though not an officer or director in either. One is called Metro Bank, with $2 billion of assets. It has no affiliation with Metro Bank in Britain except Hill of course. The stateside Metro, formerly called Pennsylvania Commerce Bank, once had a franchise agreement with Hill's Commerce in New Jersey, but had to rebrand itself after its namesake's sale.
Last year the Pennsylvania Metro announced a merger with Hill's other significant investment, Republic First Bank in Philadelphia, which has about $1 billion of assets. But a year after both banks' shareholders approved the deal, regulators had yet to approve. The reasons were never made clear, though some have speculated, again, that Hill's previous entanglements with regulators contributed to the delay.
Hill would say only that the two banks called off the merger because of "regulatory uncertainty." But, he said, "That's something we might revisit again."
That's the kind of tenacity that Brown of Second Curve Capital has come to expect from hill. "Some people just thrive on competition and winning," Brown says. He's like Michael Jordan. That's the way I think of Vernon. Some people never get tired of the competition no matter what the sport is."