After a weekend of speculation regarding a possible takeover Metro Bank has secured a £325m capital raise alongside £600m of debt refinancing.
Speculation had been rife that the bank could be taken over before tomorrow’s London stock market opening.
However, the High Street challenger has averted a takeover securing last-minute financing from investors.
It said the funding would provide the opportunity to grow its specialist mortgage lending operation over the coming years.
The equity raise was led by Spaldy Investments, Metro Bank’s largest shareholder, which is contributing £102m.
Spaldy Investments will become the controlling shareholder of Metro with around a 53% stake in the business.
Banks linked with a deal for Metro had included NatWest, Lloyds, Santander, Chase UK and Shawbrook.
Daniel Frumkin, chief executive officer at Metro Bank, said: “Today’s announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years.
“Metro Bank made a statutory profit after tax in Q3 2023, and continues to demonstrate ongoing momentum as we strive towards our ambition to be the UK’s number one community bank.
“Our strong franchise is underpinned by our loyal customer base and engaged colleagues and we will continue to develop the Metro Bank offer to provide the digital and physical banking services our customers expect. We thank our shareholders and noteholders for their continuing support of Metro Bank and our customers.”
Jaime Gilinski Bacal, founder of Spaldy Investments Limited, added: “I have been an active investor in Metro Bank since 2019.
“The opportunity to become the Bank’s major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service.
“I believe that the package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years.”
The Prudential Regulation Authority (PRA) had been reported to be looking for potential buyers for the bank over recent days.
A Prudential Regulation Authority spokesperson said: “The Prudential Regulation Authority welcomes the steps taken by Metro Bank to strengthen its capital position.”
Reaction
Stephen Perkins, managing director at Yellow Brick Mortgages:
“It’s welcome news that Metro has managed to stabilise itself through further investment without having to sell the family silverware or be consolidated into another bank. However, they still need to address the underlying issues of a lack of deposits so that they are not in the same predicament in 12 months’ time, and this has not been helped by the events of the past week. The shift in focus to specialist and commercial likely reflects the greater margins to be found in these sectors and the fact they require less fluid capital.”
Riz Malik, founder & director at R3 Mortgages:
“When Metro first came onto the scene, their offering was refreshing and unique. Their mortgage products were not only competitive but backed by criteria that meant they had a place in the market. Unfortunately, over the years they have become less relevant and lost their way. This rescue deal may be short-lived if depositors have lost confidence and the outflows this week will show us if the steps they have taken are sufficient. It is sad that one of the challenger banks has got itself in this position but it shows you that being a bank is not as easy as it may seem.”
Ranald Mitchell, director at Charwin Private Clients:
“Metro’s much-publicised problems may not be fixed by this capital raise led by its largest stakeholder. Reputational damage will likely lead to further problems and its customers will need a lot more reassurances. Worst case, we could see a repeat of 2007 which could leave Metro Bank Northern Rocked.”
Graham Cox, founder at Self Employed Mortgage Hub:
“I hope Metro can weather their current troubles. This refinancing and capital raise will provide short-term relief, but confidence in banking is everything, as we saw with Northern Rock.”
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“This is further evidence that the financial services regulator isn’t just asleep at the wheel, but more like in an induced coma. How institutions are cyclically allowed to reach the precipice before getting emergency help shows a systemic lack of oversight when it comes to larger firms. The FCA should direct some of its onerous small firms team to larger caps and maybe they wouldn’t retain such a bad reputation.”
Ian Hepworth, director at Funding Solutions UK Limited:
“This deal looks to be good news for customers and employees of Metro Bank. However, there is blood on the carpet. Investors have been heavily diluted and at a price of 30p, which is a discount to the closing price of 45p on Friday. Some institutional bondholders are set to lose at least 40%.
“I hope these recent issues raise awareness of the Financial Services Compensation Scheme, which covers deposits of private individuals and businesses up to £85,000. This is per entity rather than per account. It is also per banking group so it is important to understand which banks operate within a group.”
