Standard Life formally threw in the towel yesterday after an 11-year battle to establish itself as a leading bank in Britain, selling its Standard Life Bank offshoot to Barclays for £226 million in cash.

Sir Sandy Crombie, chief executive of the insurer, said that the board no longer believed that expanding the bank was consistent with the group’s long-term financial objectives.

Although the bank moved into profit six years ago, the aggregate net losses since the launch amount to £45 million and the insurer is writing off an additional £40 million on its initial investment.

Barclays is understood to have been the only serious contender to buy the bank, casting doubt on ministers’ hopes that new entrants to retail banking could help to trigger more competition in what has become an oligopoly of only five significant companies.

Ray Boulger, of John Charcol, the mortgage broker, said that the deal was bad news for consumers: “One of the dwindling number of brands still active in the mortgage market may well disappear next year when the sale is concluded.”

Thanks to innovative product design and sometimes keen pricing, Standard Life Bank attracted 350,000 depositors with balances of £5.5 billion and built a mortgage book of £8.8 billion.

The 270 employees based in Edinburgh would transfer to Barclays and there were no immediate plans for any redundancies, Barclays said. The Standard Life Bank name will be dropped.

Frits Seegers, head of retail and commercial banking at Barclays, said that the acquisition was a great fit with the bank, boosting its mortgage book by more than 10 per cent and its deposit base by 6 per cent. The price was at a 23 per cent discount to the bank’s £293 million book value. The mortgage book is seen as relatively conservative, with an average loan-to-value ratio of 48 per cent, slightly higher than 44 per cent for Barclays. There are some buy-to-let mortgages in the portfolio, as well as 100 per cent mortgages extended to professional people.

Barclays and Standard Life also signed a strategic agreement to explore opportunities together in pensions and investments.

Standard Life had ambitious plans to move into banking in 2007, when it asked Jim Spowart, who previously helped to set up Direct Line insurance for Royal Bank of Scotland, to establish the bank. At first, it was a success with depositors, both retail and commercial, who rushed to open phone-based accounts. In the first ten months of 1998, it attracted £1.5 billion in deposits and it rapidly moved into mortgages. Its market-beating interest rates pressured other savings institutions to offer better terms.

It was a pioneer in developing customer-friendly loan products, including flexible offset mortgages and long-term fixed-rate mortgages. After heavy start-up costs — the bank lost £153 million in its first four years alone — it moved into profit for the first time in 2003.

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