More trouble ahead for Metro
TENSE times are ahead for Metro Bank as it searches for a new chairman to take over from vernon hill, who launched the bank in the aftermath of the financial crisis in a blaze of razzmatazz.
Whatever critics may say about him now, he was nothing if not bold to open the first new high Street bank in Britain for more than a century – and to do it in 2010, when the established lenders were on their knees.
Metro was colourful, it was optimistic and, best of all, it was opening branches when the Big Four were shutting theirs down.
Yes, hill’s devotion to his little dog seemed a touch eccentric and shareholders were irritated by the bank’s use of his wife’s architecture firm. But it was still nothing on Fred Goodwin with his corporate jet and his scallop kitchen.
Despite all its woes, Metro is ploughing on with its ‘banking revolution’. it recently opened new outlets around Birmingham, with more in Manchester and Liverpool scheduled by the end of the year.
in truth, though, it is fighting for its future after an enormous accounting error. hill, who is a top ten investor, has lost heavily on his shares, and announced last week he will step down entirely from the board.
Previously he had promised to quit as chairman but wanted to remain as president. That idea was untenable, as has now been acknowledged. his presence would have been a stumbling block in recruiting a new chairman – no city heavyweight worth their salt wants a back-seat driver.
The rumours that hill is trying to take Metro private, presumably with himself at the helm, will make the search for a new chairman even harder. Possible candidates include Lord Myners and richard Pym, both veterans of the financial crisis and both involved in sorting out the co-op Bank debacle.
IF a replacement for hill is not found by the end of the year – and assuming it has not been taken private – then one of the non- executives will step up, probably senior independent director Sir Michael Snyder, a former top accountant.
other big hitters on the board include Lord Flight, city grandee and former shadow chief secretary to the Treasury, ex-Friends Provident director Ben Gunn and building society luminary Stuart Bernau.
Metro has averted an immediate crisis, as it managed to raise much-needed capital last week, with a £350m bond issue – although the interest costs are likely to wipe out profits until 2021. But more trouble lies ahead.
city regulators are investigating the accounting error and, ominously, their probe has been widened to look at the conduct of senior managers.
The traditional solution for small banks that run into difficulty is to be taken over by a larger one. however, the big high Street players will not find Metro an appetising prospect, as the last thing they want is more branches. it might be a target for private equity or it could be picked up by an overseas operator wanting a presence in the Uk.
challenger banks were meant to be part of the post-crisis solution to the toxic dominance of the big banks. it hasn’t worked.
co-op Bank was the victim of its own poor management, TSB was hit by an iT meltdown and now Metro is another ninepin.
We have to hope the fintech challengers fare better. Whatever the outcome for Metro, it would be a tragedy if, after all the scandal and disgrace, customers remain at the mercy of the Big Four.