Metro Bank plc is a retail and commercial bank operating in the United Kingdom, founded by Anthony Thomson and Vernon Hill in 2010. At its launch it was the first new high street bank to launch in the United Kingdom in over 150 years. It is listed on the London Stock Exchange. After a period of rapid growth, Metro Bank hit difficulties in early 2019 when it announced it had insufficient capital to meet regulatory requirements. This followed the discovery of an error in the way it categorised its commercial loans for capital adequacy purposes. As a result, it had to raise an additional £350m of capital. Concerns over the announcement and the bank's ability to raise the capital resulted in the bank's share price falling by 75% in less than four months and large depositors withdrawing cash because of “adverse sentiment”.
History
Metro Bank was granted its licence by the Financial Services Authority on 5 March 2010, the first high-street bank to be granted such a licence for over 150 years. It planned to open between 200 and 250 branches in Greater London within ten years of starting up. Its first branch opened on 29 July 2010 in Holborn. In 2012, Metro Bank raised an additional $200 million in funding from investors including Fidelity, Steven A. Cohen of hedge fundSAC Capital Advisors, and New York real estate investors the LeFraks and David and Simon Reubens. In the same year, Forbes magazine reported that Metro's flagship Holborn branch had "...garnered $200 million in deposits, four times the total at the average mature American branch." On 2 May 2013 the Daily Telegraph reported that, following a loss of £8.8 million in the first quarter of 2013, Metro Bank's pre-tax losses had exceeded £100 million in less than three years since its launch, but the bank stated that these were planned for, and were "a result of its growth initiatives". In an interview with the Financial Times, Hill said the bank was "...in line with the business plan to rapidly grow this company,” he added. "Our primary goal is to expand the business ... and profit certainly will come." Metro Bank increased its account holders by 50% in the first half of 2013 for a total of 200,000 customer accounts, including 15,000 business accounts. It was aiming to have 200 UK branches open by 2020. Metro Bank acquired SME Finance in August 2013, and rebranded the business as Metro Bank SME Finance in May 2014. In January 2019, Metro Bank admitted classifying a portfolio of commercial loans for capital purposes incorrectly, thereby failing to hold sufficient capital to meet regulatory requirements. The error applied to around 10% of its loan book. The miscalculation was identified through a review by the Prudential Regulation Authority but Metro Bank erroneously gave the impression that the bank had identified the incorrect classification itself. To correct the error in the capital classification, Metro Bank announced a £350m share issue and that it would reduce its growth plans. It was also reported that the PRA and the Financial Conduct Authority were to investigate the circumstances of the error. As a result of the admission and the share issue announcement, Metro Bank's share price fell sharply, losing 40% of its value in the month after the announcement and 75% in less than four months. By March 2019, the BBC reported that Metro Bank shares were the second most shorted shares on the UK stock market. Additionally, large depositors began withdrawing funds. Metro Bank admitted that there had been a 4% drop in its deposits in the first quarter of 2019 because of “adverse sentiment”.
Services
Metro Bank provides banking services to personal and business customers. It is authorised by the Prudential Regulation Authority and regulated by both the Financial Conduct Authority and the Prudential Regulation Authority.
Management
Hill received the Institute of Economic Affairs’ Free Enterprise Award in April 2013. The organisation cited him as "a remarkable entrepreneur who has identified a clear opportunity and entered the UK banking scene at a time when the sector has been under constant fire". Craig Donaldson, the Chief Executive Officer, started his career on the Barclays graduate scheme in 1995. Later he worked for the Royal Bank of Scotland where he met Hill. Together they decided to set up a UK equivalent to Commerce Bancorp. This idea grew into Metro Bank. In 2015 Michael Snyder joined Metro Bank's board with a view to developing Metro Bank's small business lending operations. In October 2019, Vernon Hill stood down as Chairman. He was replaced by Sir Michael Snyder who was appointed Interim Chairman. Craig Donaldson also stepped down as CEO in December 2019. Daniel Frumkin replaced him as Interim CEO.
