Overnight, Metro Bank announced it has confirmed a deal with investors comprising a £325m capital raise and £600m debt refinancing package.
But one expert said “Metro Bank could still be Northern Rocked” while another criticised the regulator for “being asleep at the wheel”.
The equity raise was led by Spaldy Investments Limited, Metro Bank’s largest shareholder, which is contributing £102m. Spaldy Investments Limited will become the controlling shareholder of Metro Bank upon completion of the transaction with a c.53% shareholding.
The bank has ecured £325m capital raise, comprising £150m of new equity and £175m of new MREL issuance, alongside £600m of debt refinancing, enhancing balance sheet strength and accelerating earnings potential.
The capital Package significantly strengthens CET1 ratio, takes Metro Bank out of the CRD IV Combined Buffer and is expected to support Metro Bank’s delivery of RoTE in excess of 9% in 2025 and low double-digit to mid-teens thereafter over the medium term.
Metro Bank will deliver a pro forma 30 June 2023 CET1 ratio in excess of 13% and MREL ratio in excess of 21.5%.
This, “Provides an opportunity to grow assets significantly over the coming years, via a gradual shift in asset side growth towards specialist mortgages and commercial lending to optimise risk-adjusted returns; supported by continued success in raising deposits and driving current account growth.”
In the bank’s discussions regarding an asset sale of up to £3bn of residential mortgages which are expected to reduce RWAs by c.£1bn (assuming a c.£3bn Asset Sale), increase Metro Bank’s CET1 ratio and be earnings accretive in 2024, subject to pricing.
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.”
According to Ranald Mitchell, director at Norwich-based 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. In the worst case scenario, we could see a repeat of 2007. Metro Bank could still be Northern Rocked.”