The informal offer from Pollen Street indicates interest but current negotiations are at an early stage and no deal is certain. If successful, this acquisition could result in Metro Bank being privatized after experiencing difficulties as a public company.
Potential takeover details
Metro Bank faces vulnerability due to regulatory challenges, particularly a significant breach in 2019 where it misclassified commercial loans, leaving the bank short on capital. A GBP 350 million share issue was prepared for the Financial Conduct Authority (FCA), and the Prudential Regulation Authority initiated an investigation.
In 2023, the lender had to raise emergency capital due to its shares dropping more than 50%, following the admission that regulators did not approve a change in capital requirements on its mortgage book. Since then, Metro Bank has shifted focus away from retail banking towards lending to businesses and small and medium-sized enterprises (SMEs). While its share price has tripled since the lows during restructuring, it remains significantly below its 2019 peak.
Impact on London’s stock market
This potential takeover may further impact London’s stock market, as a quarter of major listings in 2021 were delisted, and those that remain have lost GBP 10 billion in value. The move also highlights the challenges faced by challenger banks in the UK market, with other notable examples including Nationwide Building Society’s acquisition of Virgin Money for GBP 2.9 billion and Shawbrook, another Pollen Street investment, being rumored to be involved in a potential deal with Starling Bank.
Conclusion
The discussions between Metro Bank and Pollen Street Capital reflect the ongoing difficulties faced by challenger banks within the UK financial landscape.
