Ernst & Young, the consulting firm, has been enlisted to seek a potential buyer for Metro Bank Holdings Plc, as the challenger bank endeavors to fortify its financial position. Sources familiar with the matter have indicated that the advisor is in discussions with several lenders with the goal of reaching an agreement before the markets open on Monday. These sources, who requested anonymity, cited the Bank of England’s vigilance over the situation.
Among the lenders approached, JPMorgan Chase & Co. was considered but has opted not to pursue the opportunity, according to one of the sources. It’s worth noting that Metro Bank had previously entertained merger discussions with another mid-tier bank, Shawbrook, although these talks did not advance. Nevertheless, Shawbrook maintains its interest in exploring a potential deal, as confirmed by three sources in the know.
Notably, representatives for Metro Bank, Ernst & Young, and JPMorgan have all refrained from commenting on the matter.
Simultaneously, negotiations are ongoing with bondholders regarding an equity injection by existing investors, which would run in conjunction with a debt restructuring. Additionally, other alternatives, such as asset sales, are under consideration.
These discussions come on the heels of the Prudential Regulatory Authority of the Bank of England notifying Metro Bank that it must complete additional work before being permitted to implement a new internal model for calculating risk-weighted assets. This new model has the potential to bolster the bank’s capital ratios, leaving Metro Bank’s executives scrambling to identify how to address the impending shortfall on its balance sheet. They had previously reached out to existing investors over the summer to explore potential avenues for raising capital.
Metro Bank’s share price has exhibited volatility in recent weeks amidst reports of the bank exploring various strategic options. The bank is currently engaged in talks to divest a portion of its mortgage portfolio to competitors, and there have been discussions with investors regarding raising over £500 million ($612 million) through a combination of equity and debt, according to informed sources.
Founded in 2010, Metro Bank, co-founded by Vernon Hill, stands out as one of the prominent British challenger banks that sought to challenge established players like Barclays Plc and Lloyds Banking Group Plc. In contrast to other banks that emphasized online banking expansion, Metro Bank distinguished itself by establishing a branch network, including in premium locations like London’s King’s Road in Chelsea.
As of the end of June, Metro Bank held total assets worth £22 billion ($26.6 billion), but its market value had declined to approximately £78 million, a notable contrast to the £3.2 billion valuation recorded at the close of 2017.
In a statement released on Thursday, Metro Bank stated, “The company continues to consider how best to enhance its capital resources, with particular regard to the £350 million senior non-preferred notes. The company is evaluating the merits of a range of options.”
It’s worth mentioning that Willett Advisors LLC, the investment arm for the personal and philanthropic assets of Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP, held shares in Metro Bank as of November 2021, according to regulatory filings.
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