LONDON — Shares of the U.K.’s Metro Bank were sharply higher Monday morning, after the lender on late Sunday announced it had secured a £325 million ($395.6 million) capital raise and £600 million in debt refinancing.
The capital raise includes £150 million of new equity and £175 million of “MREL” issuance, a form of bail-in debt. The bank said it will also undergo a debt restructuring that will extend the maturity of its borrowings. Holders of its £250 million of tier 2 bonds, due in June 2028, will take a 40% haircut.
Metro Bank shares were 26% higher at 9:10 a.m. London time.
The deal comes after investors were last week spooked by news that the bank was searching for a large financing package. Crunch talks took place over the weekend, with several large banks approached for potential offers, according to multiple reports.
The raise was led by Colombian banker and real estate developer Jaime Gilinski Bacal — an existing shareholder through Spaldy Investments Limited — which contributed £102 million to the initiative. Gilinski Bacal is now the bank’s controlling shareholder with a 53% stakehold.
“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,” he said in a statement.
“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.”
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Metro Bank share price.
Metro Bank said the raise will provide the opportunity to shift towards specialist mortgages and commercial lending, as well as continuing growth in current accounts and raising deposits.
The bank further said it is in discussions over the sale of up to £3 billion of residential mortgages.
Regulators last month said they were unlikely to allow Metro Bank to use its own internal risk models for some mortgages — raising concerns for investors, as this would result in higher capital requirements.
Shares of the London-based bank were highly volatile and finished 22.5% lower last week, according to LSEG data.
The challenger bank launched in 2010 and has a market capitalization of less than £100 million. It faced a major blow in 2019 when a major accounting error resulted in the resignation of its founder and in fines for its former CEO and CFO.
A number of ratings agencies and investment banks downgraded the bank’s stock amid the turbulence last week, with investment bank Stifel saying it may have capital needs of up to a billion over the next two years.
Metro Bank, a UK-based lender, announced a significant capital raise and debt refinancing plan, causing its shares to rise sharply. The plan includes a £325 million ($395.6 million) capital raise and £600 million in debt refinancing. The capital raise consists of £150 million in new equity and £175 million in “MREL” issuance, a form of bail-in debt. The bank will also restructure its debt to extend its maturity, with holders of its £250 million tier 2 bonds facing a 40% haircut.
The deal was led by Colombian banker and real estate developer Jaime Gilinski Bacal, an existing shareholder through Spaldy Investments Limited, who contributed £102 million. As a result, Gilinski Bacal now holds a controlling 53% stake in the bank. The bank plans to use the capital to focus on specialist mortgages, commercial lending, and expanding its current accounts and deposits. It is also in discussions to potentially sell up to £3 billion worth of residential mortgages.
Metro Bank had faced challenges recently, including regulatory concerns about its internal risk models for certain mortgages, leading to higher capital requirements. The bank’s shares were highly volatile and had finished 22.5% lower the previous week, and some ratings agencies and investment banks had downgraded its stock. Investment bank Stifel even suggested that the bank might need up to a billion in capital over the next two years.
Metro Bank, a challenger bank, was founded in 2010 and faced significant issues in 2019 due to a major accounting error that led to the resignation of its founder and fines for its former CEO and CFO. Its market capitalization is currently less than £100 million.
Metro Bank, founded in 2010 as a challenger bank in the UK, has had a tumultuous history marked by both successes and challenges. Here are some additional details about the bank’s recent developments:
1. Founder Resignation and Accounting Error: In 2019, Metro Bank faced a major setback when an accounting error was discovered in its financial statements. This error led to concerns about the accuracy of the bank’s financial reporting and resulted in a sharp decline in its share price. As a consequence of this crisis, the bank’s founder, Vernon Hill, resigned from his position.
2. Fines for Former Leadership: Following the accounting error, both the former CEO, Craig Donaldson, and the former CFO, David Arden, faced fines from the UK’s Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). The regulators held them accountable for the oversight failures that contributed to the accounting error.
3. Capital and Regulatory Concerns: Metro Bank had been facing regulatory scrutiny, particularly regarding its use of internal risk models for some mortgages. Regulators expressed doubts about the adequacy of the bank’s capital buffers and raised concerns about its ability to calculate its capital requirements accurately.
4. Capital Raise and Debt Refinancing: To address its capital and funding needs, Metro Bank initiated a £325 million capital raise, with £150 million in new equity and £175 million in “MREL” issuance. Additionally, the bank secured £600 million in debt refinancing. These measures were aimed at shoring up the bank’s financial position and addressing regulatory concerns.
5. New Majority Shareholder: Colombian banker and real estate developer Jaime Gilinski Bacal emerged as the leading participant in the capital raise, contributing £102 million. This significant investment made Gilinski Bacal the bank’s controlling shareholder, holding a 53% stake.
6. Strategic Focus: With the fresh capital, Metro Bank expressed its intent to shift its focus toward specialist mortgages and commercial lending. The bank also aimed to continue growing its current accounts and raising deposits. Furthermore, it was exploring the possibility of selling up to £3 billion in residential mortgages.
7. Stock Performance: Metro Bank’s stock had experienced high volatility, with shares finishing 22.5% lower the week before the capital raise announcement. The bank’s market capitalization had fallen to less than £100 million, reflecting the challenges it faced.
8. Analyst Concerns: Following the turbulent period, several ratings agencies and investment banks had downgraded Metro Bank’s stock. Investment bank Stifel even suggested that the bank might need additional capital of up to £1 billion over the next two years to address its capital requirements and support its growth plans.
In summary, Metro Bank has been grappling with financial and regulatory challenges, including a major accounting error, leadership changes, and concerns about its capital position. The recent capital raise and debt refinancing, led by a new majority shareholder, were aimed at stabilizing the bank’s financial position and supporting its strategic initiatives, including a shift toward specialist lending and continued growth in retail banking.
Certainly, here are some more details and context about Metro Bank and its recent developments:
9. Challenger Bank Status: Metro Bank is often referred to as a “challenger bank” in the UK. These banks were established to compete with traditional high-street banks by offering innovative products, better customer service, and more competitive rates. Metro Bank was one of the first new banks to receive a banking license in the UK in more than 150 years.
10. Customer-Centric Approach: One of Metro Bank’s key selling points has been its customer-centric approach. It emphasized longer opening hours, seven days a week, and a commitment to providing excellent customer service. This approach aimed to differentiate it from established banks and attract customers looking for a more modern and convenient banking experience.
11. Market Conditions: Metro Bank’s struggles and challenges were not unique in the banking industry. Many banks, both traditional and challenger, have faced pressures from low-interest rates, increased regulatory scrutiny, and changing consumer preferences in the digital age. These factors can make it challenging for smaller and newer banks to compete effectively.
12. Capital Raising in Banking: Capital raising is a common practice in the banking industry. Banks raise capital to strengthen their balance sheets, meet regulatory requirements, and support business growth. The infusion of new equity and debt refinancing helps bolster a bank’s financial position, ensuring it has enough capital to cover potential losses and to support its lending and investment activities.
13. Regulatory Oversight: The financial services industry is heavily regulated, with authorities like the FCA and PRA in the UK monitoring and supervising banks to ensure their stability and adherence to rules and regulations. Regulatory concerns about capital adequacy and risk management are crucial factors for banks’ financial health and stability.
14. Residential Mortgage Market: The discussion of potentially selling up to £3 billion in residential mortgages indicates that Metro Bank may be reshaping its portfolio to focus on areas where it sees greater growth potential. This strategic move aligns with its goal of specializing in certain lending sectors.
15. Investor Confidence: The fact that an existing shareholder, Jaime Gilinski Bacal, took a significant stake and became the controlling shareholder signals a degree of investor confidence in Metro Bank’s future prospects, despite recent challenges. Gilinski Bacal’s statement about the importance of physical and digital banking and exceptional customer service reflects a vision for the bank’s future direction.
In conclusion, Metro Bank’s recent capital raising and debt refinancing efforts were critical steps in addressing its financial challenges, improving its capital position, and charting a new strategic direction. While the bank has faced difficulties in the past, it is taking steps to adapt to changing market conditions and regulatory requirements while aiming to provide a customer-focused banking experience. The financial industry, particularly in the UK, remains dynamic and competitive, and Metro Bank’s actions reflect its determination to remain a player in this landscape.
Certainly, I can help you create an FAQ-style article about Metro Bank and its recent developments. Here’s a structured FAQ article on the topic:
FAQs https://www.pinterest.com/pin/672091944417754409/
1. What is Metro Bank, and why is it in the news?
– Metro Bank is a UK-based lender that was founded in 2010 as a challenger bank. It is in the news because it recently announced a significant capital raise and debt refinancing plan to address its financial challenges.
2. What does the capital raise and debt refinancing plan entail? https://seocompany1.com/fintech-giant-revolut-appoints-new-uk-boss
– Metro Bank’s plan involves securing £325 million in capital, which includes £150 million in new equity and £175 million in “MREL” issuance. Additionally, the bank will undergo a debt restructuring to extend the maturity of its borrowings.
3. Who led the capital raise, and what is their stake in the bank now?
– The capital raise was led by Colombian banker and real estate developer Jaime Gilinski Bacal, an existing shareholder through Spaldy Investments Limited. He contributed £102 million to the initiative, making him the bank’s controlling shareholder with a 53% stake.
4. Why did Jaime Gilinski Bacal invest in Metro Bank?
– Jaime Gilinski Bacal invested in Metro Bank because he believes in the need for physical and digital banking underpinned by exceptional customer service. He sees an opportunity for the bank to pursue growth and build on its foundational work.
5. What does Metro Bank plan to do with the raised capital?
– The bank intends to use the capital to shift its focus towards specialist mortgages and commercial lending. It also aims to continue growing its current accounts and raising deposits.
6. What is the significance of discussions about selling residential mortgages?
– Metro Bank is exploring the possibility of selling up to £3 billion worth of residential mortgages as part of its strategic realignment. This move may help reshape its portfolio to focus on areas with greater growth potential.
7. Why did Metro Bank’s stock experience significant volatility and downgrades?
– Metro Bank’s stock faced volatility due to concerns about its capital position and regulatory issues, such as the use of internal risk models for some mortgages. These concerns led to downgrades by ratings agencies and investment banks.
8. What is the history of Metro Bank’s challenges?
– Metro Bank faced a major setback in 2019 when a significant accounting error was discovered, leading to the resignation of its founder and fines for its former CEO and CFO. This event had a lasting impact on the bank’s reputation and financial stability.
9. What does the future hold for Metro Bank?
– The recent capital raise and strategic realignment indicate that Metro Bank is taking steps to address its challenges, strengthen its financial position, and adapt to changing market conditions. The bank aims to remain competitive in the dynamic UK banking industry.
10. How can investors and customers stay informed about Metro Bank’s progress?
– Investors and customers can stay informed about Metro Bank’s progress by following news updates, official announcements from the bank, and regulatory reports. Monitoring the bank’s financial performance and strategic initiatives will provide insights into its future direction.
This FAQ-style article provides an overview of Metro Bank’s recent developments and answers common questions about its capital raise and strategic plans.
Certainly, here are more FAQs and information about Metro Bank’s recent developments:
11. What led to Metro Bank’s need for a capital raise and debt refinancing?
– Metro Bank faced regulatory concerns regarding its internal risk models for some mortgages, which could have resulted in higher capital requirements. Additionally, the bank had ongoing challenges stemming from a major accounting error in 2019.
12. How significant is Metro Bank in the UK banking landscape?
– Metro Bank is considered a challenger bank in the UK. While it has a smaller market capitalization compared to traditional high-street banks, it gained attention for its customer-centric approach and efforts to compete with established players.
13. What is “MREL” issuance, and why is it included in Metro Bank’s capital raise?
– MREL stands for Minimum Requirement for Eligible Liabilities. It’s a regulatory requirement for banks to have a sufficient amount of loss-absorbing debt that can be used to recapitalize the bank in case of financial distress. Metro Bank included MREL issuance as part of its capital raise to meet regulatory standards.
14. How did Metro Bank’s stock perform before and after the capital raise announcement?
– Metro Bank’s stock had experienced significant volatility and finished 22.5% lower in the week preceding the capital raise announcement. However, following the announcement, the stock saw a sharp increase, rising by 26% at one point.
15. What challenges does Metro Bank face in the competitive UK banking industry?
– Metro Bank, like other challenger banks, faces challenges such as low-interest rates, regulatory scrutiny, and the need to compete with well-established banks. Customer acquisition and maintaining profitability in a dynamic market are ongoing challenges.
16. How does Metro Bank plan to differentiate itself in the market moving forward?
– Metro Bank aims to differentiate itself through a focus on exceptional customer service, a mix of physical and digital banking offerings, and specialization in areas like specialist mortgages and commercial lending.
17. How has Metro Bank’s leadership changed in recent years?
– Metro Bank experienced leadership changes in the wake of the accounting error in 2019, with the founder resigning, and the former CEO and CFO facing fines from regulators. The recent capital raise led to a change in the bank’s controlling shareholder.
18. What should investors and customers consider in light of Metro Bank’s recent developments?
– Investors should closely monitor Metro Bank’s financial performance, regulatory compliance, and strategic initiatives. Customers should stay informed about any changes in the bank’s products and services and how they might impact their banking experience.
19. What are the potential implications of Jaime Gilinski Bacal becoming Metro Bank’s controlling shareholder?
– With a majority stake in the bank, Jaime Gilinski Bacal may have a significant influence on its strategic direction. His focus on customer service and growth suggests potential changes in how the bank operates and competes in the market.
20. How can Metro Bank rebuild its reputation following past challenges?
– Rebuilding reputation often involves transparent communication, adherence to regulatory requirements, and consistent delivery of quality services. Metro Bank’s commitment to customer service and its strategic realignment could be steps toward rebuilding trust.
This expanded set of FAQs provides a more comprehensive understanding of Metro Bank’s recent developments, challenges, and strategic plans, offering valuable insights for investors, customers, and those interested in the UK banking industry.
