Metro Bank (United Kingdom)

Last updated

Metro Bank plc
FormerlyMetro Bank Limited (2007–2009) [1]
Company type Public limited company
LSE:  MTRO
Industry
Founded29 July 2010;14 years ago (2010-07-29)
Founders
Headquarters London
Number of locations
76
Key people
Products
RevenueIncrease2.svg £648.9 million (2023) [3]
Increase2.svg £30.5 million (2023) [3]
Increase2.svg £29.5 million (2023) [3]
Total assets Increase2.svg £22,245.0 million (2023) [3]
Total equity Increase2.svg £1,134.0 million (2023) [3]
Owner Jaime Gilinski Bacal (53%)
Website metrobankonline.co.uk OOjs UI icon edit-ltr-progressive.svg

Metro Bank PLC is a retail and commercial bank operating in the United Kingdom, founded by Anthony Thomson and Vernon Hill in 2010. [2] At its launch it was the first new high street bank to launch in the United Kingdom in over 150 years. [4] It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

Contents

After a period of rapid growth, Metro Bank hit difficulties in early 2019 when it announced it had insufficient capital to meet regulatory requirements, following the discovery of an error in the way it categorised its commercial loans for capital adequacy purposes. As a result, it had to raise an additional £350m of capital. Concerns over the announcement and the bank's ability to raise the capital resulted in the bank's share price falling by 75% in less than four months, and large depositors withdrawing cash, because of "adverse sentiment".

History

Sutton, Surrey London Sutton High Street - Metro Bank.JPG
Metro Bank, Borehamwood.JPG
Metro Bank in Sutton, London (top) and Borehamwood (bottom)

Metro Bank was granted its licence by the Financial Services Authority on 5 March 2010, the first high-street bank to be granted such a licence for over 150 years. [4] It planned to open between 200 and 250 branches in Greater London within ten years of starting up. [5] Its first branch opened on 29 July 2010 in Holborn, central London. [6]

In 2012, the bank raised an additional $200 million in funding from investors including Fidelity, Steven A. Cohen of hedge fund SAC Capital Advisors, and New York real estate investors the LeFraks and David and Simon Reubens. [7] In the same year, Forbes magazine reported that Metro's flagship Holborn branch had "...garnered $200 million in deposits, four times the total at the average mature American branch". [7]

On 2 May 2013 the Daily Telegraph reported that, following a loss of £8.8 million in the first quarter of 2013, Metro Bank's pre-tax losses had exceeded £100 million in less than three years since its launch, but the bank stated that these were planned for, [8] and were "a result of its growth initiatives". [9] In an interview with the Financial Times , Hill said the bank was "...in line with the business plan to rapidly grow this company". He added: "Our primary goal is to expand the business ... and profit certainly will come". [10]

Metro Bank increased its account holders by 50% in the first half of 2013 for a total of 200,000 customer accounts, including 15,000 business accounts. It was aiming to have 200 UK branches open by 2020. [11]

In January 2019, Metro Bank admitted classifying a portfolio of commercial loans for capital purposes incorrectly, thereby failing to hold sufficient capital to meet regulatory requirements; [12] [13] the error applied to around 10% of its loan book. [12] The miscalculation was identified through a review by the Prudential Regulation Authority (PRA) but Metro Bank erroneously gave the impression that the bank had identified the incorrect classification itself. [13] To correct the error in the capital classification, Metro Bank announced a £350m share issue and said it would reduce its growth plans. It was also reported that the PRA and the Financial Conduct Authority were to investigate the circumstances of the error. [13] In December 2021, the bank was fined £5.38m by the PRA after their investigation, saying that it had "failed to meet the standards of governance and controls expected of it" with regards to the risk weighting and classification of commercial loans. [14]

As a result of the admission and the share issue announcement, Metro Bank's share price fell sharply, losing 40% of its value in the month after the announcement [15] and 75% in less than four months. [16] By March 2019, the BBC reported that Metro Bank shares were the second most shorted shares on the UK stock market. [17] Additionally, large depositors began withdrawing funds: Metro Bank admitted that there had been a 4% drop in its deposits in the first quarter of 2019 because of "adverse sentiment". [18]

On 6–8 October 2022, Metro Bank's mobile banking app failed, resulting in its customers being unable to manage their accounts remotely. [19]

Customers were informed ahead of a September 2024 withdrawal of the Credit Card offering, along with the curtailment of free EU overseas withdrawals on Metro Bank's Debit Card offering, something that was highly popular with frequent travellers and ex-pats. Several commentors expressed disappointment and expressed a desire to close their accounts. [20]

In November 2024, Metro Bank was fined £16.7 million by the Financial Conduct Authority for failing to ensure an automated system was correctly checking customer transactions for potential money laundering until four years after it was installed. [21]

Services

A Metro Bank debit card, credit card and cheque book issued in 2011 Metro Bank Account Cards.jpg
A Metro Bank debit card, credit card and cheque book issued in 2011

Metro Bank provides banking services to personal and business customers. It is authorised by the Prudential Regulation Authority and regulated by both the Financial Conduct Authority and the Prudential Regulation Authority. [22]

Acquisitions and divestitures

Metro Bank acquired SME Finance in August 2013, and rebranded the business as Metro Bank SME Finance in May 2014. [23]

It was announced in August 2020 that Metro Bank had agreed to acquire Retail Money Market Ltd, a London-based provider of peer-to-peer loans trading as RateSetter. The price would be between £2.5 million and £12 million, depending on performance over the next three years. The purchase was subject to regulatory approval and the agreement of Retail Money Market Ltd shareholders, and was expected to complete in the fourth quarter of 2020. Metro Bank would continue the RateSetter brand and its operations, but new unsecured personal lending would be funded by the bank's deposits, not through peer-to-peer. [24] In February 2021, Metro Bank bought RateSetter's entire portfolio of loans, valued at £384m. [25]

In February 2021, Metro Bank completed the £3.04 billion sale of a residential mortgage portfolio to NatWest. The deal was agreed upon in December 2020. [26] [27]

The bank was reported to be exploring the sale of a further £3 billion slice of its mortgage book, potentially to NatWest or Lloyds Banking Group. [28] At the same time Metro Bank entered into discussions over a financing package with its bondholders and shareholders with the aim of restructuring its debt and gaining a capital injection. [29]

In November 2021, Metro Bank entered talks with the Carlyle Group concerning a possible takeover bid. [30]

It was also revealed that JPMorgan Chase had considered a bid for Metro Bank before opting not to proceed due to the capital required by the bank. [31] Metro was also claimed to have rejected an offer from fellow challenger bank Shawbrook. [32]

On 8 October 2023, Metro Bank secured a £325m capital raise alongside £600m of debt refinancing with Jaime Gilinski Bacal, the second richest person in Colombia, becoming the controlling shareholder with around a 53% stake in the business. [33] [34]

Management

Founder Vernon Hill received the Institute of Economic Affairs' Free Enterprise Award in April 2013. The organisation cited him as "a remarkable entrepreneur who has identified a clear opportunity and entered the UK banking scene at a time when the sector has been under constant fire". [35]

Craig Donaldson, the chief executive officer, started his career on the Barclays graduate scheme in 1995. [2] Later he worked for the Royal Bank of Scotland where he met Hill. [2] Together they decided to set up a UK equivalent to Commerce Bancorp, and this idea grew into Metro Bank. [2] In 2015, Sir Michael Snyder joined Metro Bank's board with a view to developing Metro Bank's small business lending operations. [36]

In October 2019, Hill stood down as chairman. He was replaced by Sir Michael Snyder who was appointed Interim Chairman. [37]

Donaldson stepped down as CEO in December 2019, and was replaced by Daniel Frumkin from February 2020. [38]

Senior leadership

Former chairmen

  1. Anthony Thomson (2010–2012) [41]
  2. Vernon Hill (2013–2019) [35]

Former chief executives

  1. Craig Donaldson (2010–2019) [42]

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References

  1. ↑ "Metro Bank PLC overview - Find and update company information - GOV.UK". Companies House . 6 November 2007. Retrieved 19 February 2024.
  2. 1 2 3 4 5 Chris Harlow, Metro Bank’s chief executive Craig Donaldson reveals what he looks for when hiring new talent, City A.M. , 5 March 2013
  3. 1 2 3 4 5 "Annual Results 2023" (PDF). Metro Bank. Retrieved 13 March 2024.
  4. 1 2 "Computer says no". The Economist. 22 July 2010. Retrieved 10 August 2010.
  5. ↑ Pollock, Ian (29 July 2010). "Metro Bank: Sublime or ridiculous?". BBC News. Retrieved 11 December 2014.
  6. ↑ "Metro Bank opens doors in UK". BBC News. 29 July 2010. Retrieved 30 May 2013.
  7. 1 2 Tully, Shawn. "The bank that's rising amid Europe's ashes". Fortune. Archived from the original on 17 September 2013. Retrieved 20 August 2013.
  8. ↑ Armitstead, Louise (28 April 2013). "Monday Interview: All-American shake-up comes to UK banking". The Telegraph. London. Retrieved 20 August 2013. Hill raised £250m from investors at the start and said it would take years to make a profit.
  9. ↑ Winch, Jessica (29 July 2013). "Metro Bank reaches 200,000 customer accounts". The Telegraph. London. Archived from the original on 24 September 2013.
  10. ↑ Sakoui, Anousha (January 2013). "Metro Bank plans expansion and listing". Financial Times. Pearson. Retrieved 22 August 2013.
  11. ↑ "Metro Bank to Have 200 U.K. Stores by 2020". Bloomberg TV. Retrieved 20 August 2013.
  12. 1 2 Collinson, Patrick (23 January 2019). "Metro Bank shares crash after loans blunder revealed". The Guardian . Retrieved 3 March 2024.
  13. 1 2 3 "Regulators probe Metro Bank's possible false market creation". Financial Times . 27 February 2019. Retrieved 22 March 2019.
  14. ↑ Cohn, Carolyn (22 December 2021). "Bank of England fines Metro Bank $7 mln after accounting blunder". Reuters. Retrieved 22 December 2021.
  15. ↑ Simon Jack (9 May 2019). "Metro Bank shares tumble again amid fresh worries about its finances". BBC News. Retrieved 9 May 2019.
  16. ↑ "Don't re-elect CEO or chairman, Metro Bank shareholders told". The Guardian . 9 May 2019. Retrieved 10 May 2019.
  17. ↑ Simon Jack (19 March 2019). "Financial sharks circling Metro Bank". BBC News. Retrieved 22 March 2019.
  18. ↑ "Big customers desert Metro Bank over accounting error". Financial Times . 1 May 2019. Retrieved 9 May 2019.
  19. ↑ Metro Bank [@Metro_Bank] (7 October 2022). "Our App is temporarily down due to a technical issue ..." (Tweet) – via Twitter.
  20. ↑ "Metro Bank Axes Credit Card And Imposes EU Fees". ThisIsMoney. 11 September 2024. Retrieved 9 September 2024.
  21. ↑ Arnold, Martin (12 November 2024). "Metro Bank fined £17mn for anti-money laundering control failings". Financial Times. Retrieved 12 November 2024.
  22. ↑ "Metro Bank Online". Metro Bank PLC. December 2014. Retrieved 12 December 2014. Metro Bank PLC. Registered in England and Wales. Company number: 6419578. Registered office: One Southampton Row, London, WC1B 5HA. We are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Most relevant deposits are protected by the Financial Services Compensation Scheme.
  23. ↑ "Metro Bank Launches Metro Bank SME Finance". Press AT. 20 May 2014. Retrieved 12 December 2014.
  24. ↑ "Acquisition of RateSetter". Metro Bank. 3 August 2020. Retrieved 3 August 2020.
  25. ↑ Shepherd, Damian (2 February 2021). "Metro Bank snaps up £384m RateSetter portfolio of loans". CityAM. Retrieved 7 February 2021.
  26. ↑ "Update: Metro Bank Completes GBP3 Billion Mortgage Sale To NatWest". Morningstar. 2 February 2021. Retrieved 13 February 2021.
  27. ↑ "Metro Bank completes sale of mortgage portfolio". Bolsamania. 2 February 2021. Retrieved 13 February 2021.
  28. ↑ Fowler, Ryan (6 October 2023). "Metro Bank looks for buyers for £3bn chunk of mortgage book, reports". The Intermediary. Retrieved 8 October 2023.
  29. ↑ "Metro Bank in Talks for Debt Restructuring, Equity Injection". Bloomberg.com. 7 October 2023. Retrieved 8 October 2023.
  30. ↑ Wiggins, Kaye; Venkataramakrishnan, Siddharth; Morris, Stephen (4 November 2021). "Metro Bank receives takeover approach from Carlyle". Financial Times.
  31. ↑ Smith, Ian; Walker, Owen; Morris, Stephen; Massoudi, Arash (8 October 2023). "JPMorgan Chase studied bid for Metro Bank". Financial Times. Retrieved 8 October 2023.
  32. ↑ "UK's Metro Bank rejected takeover approaches from Shawbrook, in talks for debt restructuring, equity injection - media". Reuters. 7 October 2023. Retrieved 8 October 2023.
  33. ↑ Withers, Iain; Sakoui, Anousha (8 October 2023). "Embattled Metro Bank secures capital, Colombian billionaire Gilinski to take control". Reuters.
  34. ↑ Fowler, Ryan (8 October 2023). "Metro Bank secures financing with £325m capital raise and £600m debt refinancing". The Intermediary. Retrieved 9 October 2023.
  35. 1 2 "IEA awards Free Enterprise Award to Vernon Hill". Institute of Economic Affairs. Retrieved 20 August 2013.
  36. ↑ Wallace, Tim (2015). "City grandee Sir Michael Snyder joins Metro Bank's board". No. 17 October 2015. The Telegraph. Retrieved 6 November 2017.
  37. ↑ "Metro Bank chairman steps down early after torrid year". The Guardian. 23 October 2019. Retrieved 6 February 2024.
  38. ↑ "Dan Frumkin, Metro Bank PLC: Profile and Biography". Bloomberg.com. Retrieved 7 February 2021.
  39. ↑ "Metro Bank Plc appoints Robert Sharpe as Chairman".
  40. ↑ "Metro Bank appoints Dan Frumkin as Chief Executive Officer".
  41. ↑ "Q&A: Anthony Thomson, chairman, Metro Bank". Marketing Week. 1 January 2012. Retrieved 6 February 2024.
  42. ↑ "CEO of Metro Bank and Alumnus, Craig Donaldson, highlighted for changing the face of Banking". University of Bradford. 28 October 2016. Retrieved 6 February 2024.
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