£3.5billion sell-off at troubled Metro
How lender’s shares have crashed 88pc in just 14 months
When Metro Bank opened its doors in 2010, it was the first new high Street lender in more than a century.
Set up by a flamboyant American billionaire, it promised to put customers back at the heart of finance, and inject some razzmatazz into a flagging industry still reeling from the financial crisis.
Almost a decade on and Metro is certainly proving to be different, although perhaps not in the way founder Vernon hill had hoped.
An accounting error, repeated calls for investors to stump up extra cash and concerns over its management have sent shares plummeting.
hill, 73, is now understood to be ringing round the bosses of major institutions seeking their support. ‘I got a late-night call from Vernon asking us to invest,’ one leading City figure told the Mail.
Vulture hedge funds are circling and there have been pictures of long queues in branches, evoking memories of the northern Rock crisis. Metro – which has nearly 70 branches, mostly in London – blamed ‘false rumours’ on social media for sparking panic, and insisted customers’ money is safe.
But with shares down another 11pc yesterday, taking losses since the peak in March last year to more than 88pc, the future of the bank is far from clear. The stock market rout has sent shares crashing from 4040p each to just 475p, wiping £3.5bn off Metro Bank’s value to leave it worth just £463m.
Russ Mould, of savings firm AJ Bell, said: ‘While Metro Bank has done its best to reassure customers that their money is safe, pictures of one of its branches packed with individuals wanting to cash out is damaging to its reputation and could hurt new customer growth, at least in the short term.’
It all looked so different in 2010, when Metro burst on to the scene. hill gave bombastic interviews pledging to fight back against the discredited players responsible for the financial crisis.
With memories still raw of the taxpayer rescues of Lloyds and Royal Bank of Scotland, the public was inclined to believe the brash billionaire from new Jersey when he said he could provide a better alternative.
hill initially made his money running a Burger King franchise, an industry where showmanship is essential, and it showed.
his terrier, Sir Duffield II, is the bank’s official mascot, and every branch opening is greeted with an extravaganza of stilt walkers, face painters and music. Staff must take part in a conga line dance on their first day, and make up a song about Metro to sing together. Customers are ‘fans’, and branches are ‘stores’. For a while it looked to be a winning strategy, albeit a slightly unorthodox one.
hill used his contacts book to line up mega- rich investors, including the charitable foundation of media tycoon Michael Bloomberg, Tiffany’s chairman Roger Farah and hedge fund mastermind Steven Cohen.
he made former senior RBS banker Craig Donaldson chief executive, as a safe pair of hands to quieten concerns that hill himself was too much of a maverick.
In 2016, Metro listed on the stock market at 2000p a share. But there were already questions over what was going on behind closed doors.
Investors were concerned by a contract between Metro and architecture firm Interarch, owned by hill’s wife Shirley, for design services. Interarch has been paid more than £25m by Metro in an arrangement which it insists is above board and competitively priced.
And hackles were raised over the £10,000 a month paid to hill to cover travel and accommodation expenses, on top of the £385,000 annual salary he gets as chairman. nonetheless, it was not until July last year that serious doubts began to emerge. Donaldson stunned investors by announcing plans to raise an extra £300m on the stock market – despite insisting, earlier in the year that there were no plans to do this.
Shares dropped over the next few days and the fall continued for the rest of the year. Then, in late January, Metro revealed that it had miscalculated the riskiness of some property loans.
Shares crashed as investors worried about what this meant for the health of the lender, wiping around £1.5bn off its value in a single day.
Days later Metro was saddled with new questions over its credibility after the Mail revealed this mistake had first been discovered by regulators at the Bank of england, not the lender’s own staff as it had initially claimed.
Metro further infuriated investors by burying a revelation that watchdogs are investigating what happened pages into a presentation for analysts.
Donaldson said he had offered to resign over the debacle but this had been rejected by the board.
Metro is now raising another £350m to ensure its reserves are large enough to support future growth. Meanwhile, the impact of all this turmoil on customers has started to become clear.
In the first three months of 2019, £566m was pulled out of deposits. The bank said this was driven by large businesses going elsewhere rather than retail users, and that deposits are growing again.
hedge funds have scented blood, making it the most short- sold stock in London as bets mount up on a further share price fall.
Concerns are likely to remain over hill’s role at Metro.
And it may take more than a sprinkling of razzmatazz to restore the bank’s battered reputation.