Metro Bank quashes fears its finances are in trouble
MetRO Bank has hit out at ‘ false’ rumours about its financial situation amid pictures of long queues forming in branches.
the claims are thought to have spread on messaging services such as Whatsapp among customers using Metro’s safe deposit boxes to store gold and jewellery.
these customers then went to branches in large numbers over the weekend to check on their boxes. It led to pictures of packed branches circulating online.
Sources said cash deposits in accounts with the bank have been unaffected and there is no suggestion the lender is short of funds. Metro said: ‘We want to reassure our customers there is no reason to be concerned. We’re a profitable bank.’ the lender is signed up to the Financial Services Compensation Scheme, meaning up to £85,000 of each customer’s money is legally protected.
the bank’s shares have fallen sharply since January, when it revealed it had miscalculated how risky some property loans were. Its stock is now down almost 87 per cent since it peaked in March last year.
It is now raising £350million from investors to pay for further expansion and quell doubts over its future. But many investors are demanding a change in leadership over concerns about the role of the bank’s chairman Vernon Hill.
the american entrepreneur, 73, founded Metro in 2010 and has sought to run it differently from traditional High Street banks, with branches open seven days a week and a focus on good service and gimmicks such as free treats for dogs.
However, he has also been accused of acting as if the lender is his personal business rather than a publicly-listed company. Metro has come under fire for paying more than £25million in fees to Interarch, an architecture firm run by Mr Hill’s wife. the bank insists it is charged a competitive rate.
and Mr Hill has attracted criticism for receiving a £10,000 monthly allowance to cover his travel and living expenses in Britain – on top of an annual salary of £385,000. In an unusual stock market announcement this weekend, Metro said it is on track to raise the £350million being sought.
METRO Bank has insisted it will be able to raise the £350m it needs from investors, in a bid to stamp out speculation over its future.
The troubled bank has faced weeks of questions over whether it can secure the extra money as its share price plummeted.
But in a highly unusual stock market announcement over the weekend, Metro said its bid to secure the extra cash is on track.
Metro suffered a huge sell- off in January after admitting it had miscalculated the riskiness on about £1bn worth of property loans, and profits plunged as commercial customers pulled out.
Shares are down almost 87pc since they peaked in March last year.
The weekend’s announcement came while it axes almost 70 jobs after scaling back lending to big businesses. It said: ‘Further to press speculation, Metro Bank confirms its plan to raise £350m of equity capital to support its growth is well advanced.
‘Metro Bank has commenced final discussions with shareholders and new investors, and the feedback continues to be positive.’
The lender has an underwriting agreement which means the investment banks running its fundraising effort will step in and stump up the £350m if it cannot be secured on the open market.
Also over the weekend, photographs emerged of long queues at Metro branches, which the bank said were caused by false rumours about its financial health circulating among customers who use its safe deposit boxes rather than normal bank accounts.
Ordinary savers’ deposits of up to £85,000 are protected under the Financial Services Compensation Scheme.
The lender is now considering selling the £1bn of loans on which it miscalculated risks, which account for more than 10pc of its overall book.
Since Metro revealed it planned to raise £350m from investors in the wake of its accounting error, analysts have warned it could have to give away a 50pc stake to get this amount.
One senior bank debt investor told Reuters there is widespread distrust of Metro, while Barclays analysts claim the bank may struggle to get a good price because investors could believe it has no option other than to sell.
There is also growing concern over the lender’s management – particularly the role of its chairman, flamboyant US billionaire Vernon Hill, who founded Metro in 2010. He has been criticised for a £10,000 a month travel and accommodation allowance he is paid on top of his £385,000 salary. It is also under fire for paying architecture firm Interarch – run by Hill’s wife Shirley – more than £25m to design its branches.
Last week, 68 staff in the bank’s commercial department – which serves big businesses – were told their jobs will be cut as it ploughs funds into its mortgage and small company operations.
Sources said the bank will try to find other jobs for all staff affected, and that it currently has 200 vacancies.