Metro Bank (United Kingdom)

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Metro Bank plc
Public limited company
Traded asLSEMTRO
IndustryBanking
Financial services
Founded2010
FounderVernon Hill
Headquarters,
Number of locations
67 Stores
Key people
Vernon Hill
(Chairman)
Craig Donaldson[1]
(Chief Executive Officer)
ProductsCredit cards, consumer banking, corporate banking
Revenue£404.1 million (2018)[2]
£40.6 million (2018)[2]
£27.1 million (2018)[2]
Total assets£21,647.0 million (2018)[2]
Total equity£1,403.0 million (2018)[2]
Number of employees
2,831 (2017)[3]
Websitemetrobankonline.co.uk

Metro Bank plc is a retail bank operating in the United Kingdom, founded by Anthony Thomson and Vernon Hill in 2010.[1] 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.

After a period of rapid growth, Metro Bank hit difficulties in early 2019 when it announced it had insufficient capital to meet regulatory requirements. This followed 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[edit]

Metro Bank stores in Sutton, London (above) and Borehamwood (below)

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.[6]

In 2012, Metro 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] Metro Bank acquired SME Finance in August 2013, and rebranded the business as Metro Bank SME Finance in May 2014.[12]

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.[13][14] The error applied to around 10% of its loan book.[13] 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.[14] To correct the error in the capital classification, Metro Bank announced a £350m share issue and that 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.[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]

Services[edit]

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.[19]

In addition to traditional banking services, the bank offers non-traditional services, including:

  • quoting a time of 15 minutes to open an account at a Metro branch[20]
  • a "pet-friendly" policy at stores, such as free dog biscuits and water for customers' dogs, of which Hill said, "Customers think that if we take care of their dogs then we will also take care of them."[21] Metro Bank is the official banking partner of The Kennel Club. Metro Bank also won the Kennel Club's Open for Dogs Competition 2011.[22]
  • coin counting machines for customers to sort and deposit change[23]

Management[edit]

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".[24]

Craig Donaldson, the Chief Executive Officer, started his career on the Barclays graduate scheme in 1995.[1] Later he worked for the Royal Bank of Scotland where he met Hill.[1] Together they decided to set up a UK equivalent to Commerce Bancorp. This idea grew into Metro Bank.[1] In 2015 Michael Snyder joined Metro Bank's board with a view to developing Metro Bank's small business lending operations.[25]

References[edit]

  1. ^ a b c d e Chris Harlow, Metro Bank’s chief executive Craig Donaldson reveals what he looks for when hiring new talent, City A.M., 5 March 2013
  2. ^ a b c d e "Annual Report 2018" (PDF). Metro Bank. Retrieved 18 March 2019.
  3. ^ "Metro Bank". City Wire. Retrieved 18 March 2019.
  4. ^ a b "Computer says no". 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. ^ a b Tully, Shawn. "The bank that's rising amid Europe's ashes". Fortune. 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.
  10. ^ Sakoui, Anousha. "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. ^ "Metro Bank Launches Metro Bank SME Finance". Press AT. 20 May 2014. Retrieved 12 December 2014.
  13. ^ a b "Metro Bank shares crash after loans blunder revealed". The Guardian. 23 January 2019. Retrieved 22 March 2019.
  14. ^ a b c "Regulators probe Metro Bank's possible false market creation". Financial Times. 27 February 2019. Retrieved 22 March 2019.
  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 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.
  20. ^ "New High Street bank Metro Bank debit cards 15 minutes". Daily Mail. London. 23 July 2010. Retrieved 22 August 2013.
  21. ^ Salmon, James. "CITY INTERVIEW: The Metro maverick who's teaching new tricks to old banks". Daily Mail. Retrieved 20 August 2013.
  22. ^ "Dogs Rule". Metro Bank. Retrieved 20 August 2013.
  23. ^ Armitstead, Louise (28 April 2013). "Monday Interview: All-American shake-up comes to UK banking". The Telegraph. London.
  24. ^ "IEA awards Free Enterprise Award to Vernon Hill". Institute of Economic Affairs. Retrieved 20 August 2013.
  25. ^ Wallace, Tim (2015). "City grandee Sir Michael Snyder joins Metro Bank's board" (17 October 2015). The Telegraph. Retrieved 6 November 2017.

External links[edit]