Metro Bank secures a £925M financial aid
The U.K. lender Metro Bank has agreed to a significant £925 million rescue deal, according to reports on Sunday night. This move comes as the Prudential Regulation Authority (PRA), the regulatory arm of England's central bank, has welcomed the steps taken by Metro Bank to strengthen its capital position.
At the heart of this deal is Jaime Gilinski Bacal, a Colombian banker who has built one of Latin America's largest banking empires through a series of mergers and acquisitions. Bacal's firm, Spaldy Investments Limited, will contribute £102 million to the rescue deal, which will see his stake in Metro Bank increase from 9% to 53%.
The rescue package consists of a £325 million capital raise and £600 million of debt refinancing. Bacal's acquisition of the largest bank in his home country was partially funded by George Soros in a $50 million deal, as reported by Forbes.
Metro Bank, founded by serial entrepreneur Vernon Hill, who also founded Commerce Bancorp in New Jersey and TD Bank adopted its slogan "America's Most Convenient Bank," aims to grow its assets in the coming years through a "gradual shift in asset side growth towards specialist mortgages and commercial lending to optimize risk-adjusted returns."
In light of the deal, NatWest may consider acquiring £3 billion of Metro's residential mortgages, which is approximately 40% of its mortgage business. Metro CEO Daniel Frumkin is also in discussions with Barclays for a potential sale of a portion of its mortgage portfolio.
The PRA approached several lenders, including NatWest, HSBC, Lloyds and Santander UK, and JPMorgan Chase, in pursuit of a bailout for Metro Bank, according to reports from The Guardian and the Financial Times. However, JPMorgan has decided not to proceed with a takeover of Metro Bank.
Founder Vernon Hill, who created Metro Bank in 2010, resigned from Republic First Bank in 2022 following a power struggle within the bank. The goal for Metro Bank is to eventually become the U.K.'s "number one community bank."
The news of the rescue deal comes as a relief for Metro Bank, which has been grappling with financial difficulties in recent years. The bank has faced challenges in its mortgage business, prompting discussions with both Barclays and NatWest about potential sales of a portion of its mortgage portfolio.
As Metro Bank moves forward with its new ownership, it is expected to navigate the complexities of the U.K.'s banking landscape and continue its growth strategy. The bank's focus on specialist mortgages and commercial lending could position it well for the future, as it seeks to optimize risk-adjusted returns and solidify its position as a leading community bank in the U.K.
