Metro Bank is holding discussions regarding the sale of its £3bn residential mortgage portfolio as part of an attempt to “shore up its balance sheet further”.
In an announcement this morning, Metro Bank said it is holding talks regarding an asset sale of up to £3bn of residential mortgages in Q4 this year.
The troubled bank also confirmed a deal with investors comprising of a £325mn capital raise and £600mn debt refinancing package.
RBC Brewin Dolphin senior investment manager, Zoe Gillespie, explained that Metro Bank’s share price rebounded this morning after the news it had secured the £925mn funding deal.
Spaldy Investments Limited is contributing £102mn and will become the shareholder of Metro Bank upon completion of the transaction with a 53 per cent shareholding.
“Investors may breathe a sigh of relief, but the deal comes at a cost to shareholders due to the £150mn equity-raising, which is being priced at a discount to the current price,” Gillespie added.
Metro Bank comments
Speaking on the deal, Metro Bank chief executive, Daniel Frumkin said: “Today’s announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years.
“Metro Bank made a statutory profit after tax in Q3 2023, and continues to demonstrate ongoing momentum as we strive towards our ambition to be the UK’s number one community bank."
Frumkin added that the bank’s “strong franchise” is underpinned by its local customer base and engaged colleagues.
As a result, he said the bank will continue to develop the Metro Bank offer to provide the digital and physical banking services customers expect.
“We thank our shareholders and noteholders for their continuing support of Metro Bank and our customers,” he added.
Additionally, Spaldy Investments Limited founder, Jamie Gilinski Bacal, stated: “I have been an active investor in Metro Bank since 2019.
“The opportunity to become the Bank’s major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service."
Bacal added that he believes the announced package will enable the Bank to pursue growth and build on the foundational work undertaken over the past three years.
Brokers' reactions
Brokers also shared their opinions on the deal with Self Employed Mortgage Hub founder, Graham Cox, stating: “I hope Metro can weather their current troubles.
“This refinancing and capital raise will provide short-term relief, but confidence in banking is everything, as we saw with Northern Rock."
A similar sentiment was shared by Yellow Brick Mortgages managing director, Stephen Perkins, who stated: “It's welcome news that Metro has managed to stabalise itself through further investment."
However, Perkins cautioned: “They still need to address the underlying issues of a lack of deposits so that they are not in the same predicament in 12 months’ time.”
MortgageShop.com financial adviser, Gary Bush, added: “Like a lot of companies who cross over the pond, the journey can often be bumpy.
“Metro Bank, with its refreshing alternative to traditional UK banking, seemed to start off well but has become very vanilla in recent years.
“I hope that it manages to weather this storm and not fall by the wayside like fellow US counterpart Best Buys when they made a move on the UK.
“We need an alternative view from bankers.”
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tom.dunstan@ft.com
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