Metro Bank has secured a multi-million-pound rescue deal to shore up its balance sheet following days of intense speculation last week.
In a statement released on Sunday, the challenger bank said it had secured £325million capital raise, comprising £150million of new equity and £175million of new minimum requirement for own funds and eligible liabilities, known as MREL, issuance. It also managed to refinance £600million of debt.
Spaldy Investments Limited is leading the equity raise by contributing £102million, making it the controlling shareholder of Metro Bank owning around 53 percent.
It also listed a £30million cost reduction plan as part of the deal, but the details of this are yet to be shared.
Metro’s chief executive, Daniel Frumkin, said the deal marked “a new chapter” for the bank, facilitating the delivery of “continued profitable growth” over the next few years.
Mr Frumkin continued: “Metro Bank made a statutory profit after tax in Q3 2023 and continues to demonstrate ongoing momentum as we strive towards our ambition to be the UK’s number one community bank.
“Our strong franchise is underpinned by our loyal customer base and engaged colleagues and we will continue to develop the Metro Bank offer to provide the digital and physical banking services our customers expect. We thank our shareholders and noteholders for their continuing support of Metro Bank and our customers.”
Jaime Gilinski Bacal, founder of Spaldy Investments Limited, said: “I have been an active investor in Metro Bank since 2019. The opportunity to become the Bank’s major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service.
“I believe that the package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years.”
Commenting on the deal, a spokesperson from the Prudential Regulation Authority said it “welcomes” the steps taken by Metro Bank to “strengthen” its capital position.
Is my money safe?
Metro Bank has maintained that its finances are strong and it continues to meet all regulatory requirements.
The bank is also protected by the Financial Services Compensation Scheme (FSCS). The FSCS was set up by the Government in 2001 and protects deposits of up to £85,000 a person has saved (£170,000 jointly) per UK-regulated financial institution.
This means if a UK bank, building society or credit union were to fail, the FSCS would automatically compensate its customers within seven days.
It also protects certain qualifying temporary high balances, such as a property purchase, up to £1million for six months from when the amount was first deposited.
While the bank has confirmed it is looking at selling up to £3billion of its residential mortgages to other banks, homeowners don’t face any immediate change.
It may just mean some customers will have their loans managed by another bank in the future.
