28 November 2008 was the date. And one of the most agreeable headlines to write. I mentioned in an earlier editorial that I was looking back on 20 years on this desk. In that time, few senior bankers were quite so much fun to interview as Vernon Hill. It was in that November 2008 feature that we broke the news that Hill would launch a new bank in the UK. The headline ‘Vernon is back’ wrote itself.
Fast forward 17 years and the history of Metro Bank has been quite a rollercoaster. Column inches declined, it would be fair to say, when Hill stepped down in October 2019. The press coverage had been brutal ahead of his departure. Metro Bank’s share price suffered after news broke of an accounting error relating to misclassifying loans made to companies and landlords. The regulators were not impressed and the market reaction was unforgiving.
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Around 1,000 staff in total left the bank and the seven-day branch opening model was pared back to cut costs. It does now seem that it has turned a corner by reporting an underlying profit in the second half of 2024. For the full fiscal, it announced an underlying loss before tax of £14.0m, much better than forecast.
Metro Bank momentum is positive
Comparing second half revenues to the first half, there an increase of 15%. The net interest margin rises by 58 basis points. There are no capital concerns. The end 2024 CET1 ratio of 12.5% rises to 13.4% after adjusting for the upcoming sale of consumer loans. And on that point, there is quite a change in the business model. Specifically, Metro Bank is selling a £584m portfolio of personal loans as it ramps up its drive to prioritise specialist lending.
Business model pivots to specialist lending
That means commercial, corporate, and specialist mortgages and loans for small and medium-sized businesses. It is quite a switch in operating model when one considers that the bank has not undertaken any personal and unsecured lending since late 2023. A few of the analyst community that has spent the past few years bashing Metro Bank will now need to rethink its strategy. They might even take time out to revise their forecasts, target prices and recommendations.
There are however a few constants that bear repeating. Notwithstanding all of the negative press, share price woes and management challenges, the Metro Bank service ethos, has been at the core of the bank. That strategy was of course crafted by Hill himself.
Metro Bank retains fans but CMA rankings dip
Metro Bank remains one of the better performing banks in the twice annual IPSOS/CMA survey for overall service quality. It has however slipped in the latest rankings to 8th from 5th a year ago and 4th in February 2023. Bluntly, it is inconceivable that Metro Bank would have ranked as lowly as eighth with Hill still in charge.
In the branches category, Metro Bank ranked top in the first 11 surveys from August 2018 to August 2023. In the 12th survey, Metro Bank ranked joint top with Nationwide but since then, Nationwide has overtaken Metro Bank.
It also bears repeating that without Hill, Metro Bank would never have got off the ground. It was Hill that raised the £750m to launch the bank in the first place. It was Hill who viewed the opportunity to take on, at the time a bunch of complacent incumbent banks, with lousy branches, limited opening hours and poor levels of customer service. He did all of this, well into his 60s, and with no need to take financial risk himself. Just in case any of his younger critics have forgotten, he pulled off one of the banking deals of all time when he sold the US bank he founded, Commerce Bank to TD just before the financial crisis, for some $8.5bn.
