Metro secures £375m lifeline

Founder stumps up £5m after worried savers pull out cash

TROUBLED Metro Bank last night struck a £375m rescue deal as it admitted customers have been scrambling to withdraw their money amid fears for its future.

The lender raised the cash last night by issuing new stock at 500p per share – almost 90pc less than the 4040p peak it hit in March last year.

Metro had planned to raise £350m but said demand was so strong among investors it raked in an extra £25m.

Sources close to the bank claimed that investors controlling more than $1bn (£780m) wanted to take part.

Metro also revealed last night that a weekend panic over its stability had led to savers withdrawing funds, but that the situation is stabilising.

Shares have tanked since January when it revealed a major accounting error. They dropped again during trading yesterday, by 8.1pc, or 47.5p, to 536.5p.

A mix of existing and new backers have pumped in money to support the bank, with Metro’s bosses agreeing to hand over cash themselves as part of the deal. And it will slash up to £120m of annual costs.

Chief executive Craig Donaldson will be hoping the agreement ends widespread concern over Metro’s financial health, sparked by a revelation in January that it had miscalculated the riskiness of some property loans.

But the firm risked being labelled disingenuous as it sought to partly blame its troubles on a weak economy.

It also took aim at watchdogs for imposing a string of costly rules – a claim likely to raise hackles at the Bank of England where Metro is already thought to be treading on thin ice.

In an announcement released after markets closed, the bank said: ‘The macro-economic backdrop in the UK has been particularly challenging over recent quarters and Metro Bank has not been immune to these pressures.’

The economy grew by a robust 0.5pc in the first three months of the year, and employment is at record highs.

Metro did concede that its problems were also partly due to the mistake over loans.

The Mail exposed how this error was discovered by regulators at the Bank of England, not Metro’s own staff as it had initially suggested. This triggered further questions over bosses’ credibility.

ordinary savers picked up on the problems at the weekend, resulting in long queues at some branches after rumours were spread on messaging service WhatsApp that it was going bust.

A spokesman for the lender said: ‘As may have been expected, Metro Bank experienced a short period of deposit net outflows following the intense press speculation between May 10 and 13. The position is stabilising.’

Metro raised the £375m by 8pm last night through a quickfire issue of new stock overseen by investment banks RBC, Jeffries and Keefe, Bruyette & Woods.

Metro’s chairman and founder, flamboyant US billionaire Vernon Hill, 73, is putting in £5m while Donaldson is forking out £350,000 and its finance chief David Arden will buy £75,000 of stock. Nonexecutive directors will stump up another £405,000 between them.

The bank also said it plans to save up to £75m by slashing costs in branches and at its head office. It is already cutting 70 jobs in its commercial lending arm, and would not be drawn on whether further positions could go. Up to £45m more will be saved by opening smaller branches in future.

The 500p offer price is 6.8pc lower than Metro’s closing share value last night, even after months of falls, suggesting investors drove a hard bargain before agreeing to take part.

New stock will account for 43pc of the total shares in the bank, meaning any investors who do not take part will see a steep cut in the size of their existing stakes.

once the deal has gone through, attention is likely to turn to the future of Hill and Donaldson. Even before the drama of the past few days, investors were seeking management change at Metro – and those calls are likely to intensify.

There are also questions over whether City regulators will demand fresh blood at the top of the bank.