EY approaches lenders in push to find Metro Bank buyer

Consulting firm Ernst & Young has been hired to find a buyer for the UK’s Metro Bank as early as today as the challenger bank races to strengthen its balance sheet, according to people familiar with the matter.

The adviser has approached several lenders with the aim of agreeing a deal before the markets open on Monday, the people said, asking not to be identified discussing private matters. The Bank of England is monitoring the situation.

JPMorgan Chase was among the lenders approached but has decided not to proceed, one of the people said. Metro was previously approached about a possible merger with fellow mid-tier bank Shawbrook, but those talks did not progress although Shawbrook remains interested in doing a deal, according to three people familiar with the matter.

Spokespeople for Metro Bank, EY and JPMorgan declined to comment.

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At the same time discussions are continuing with bondholders about an equity injection by existing investors that would be carried out alongside a debt restructuring. Other options being considered include asset sales.

The talks come weeks after the BOE’s Prudential Regulatory Authority informed Metro Bank that it had more work to do before it would be allowed to use a new, internal model for calculating risk-weighted assets that would likely boost the firm’s capital ratios. That left executives racing to figure out how to fill the impending hole on its balance sheet having sounded out existing investors in the summer about potential options for raising capital.

Metro Bank’s shares seesawed this week on reports the lender was exploring a variety of options. The company is in talks to offload a portion of its mortgage portfolio to rivals and there have been discussions with investors about raising more than £500 million (€575 million) through a mix of equity and debt, people familiar with the matter have said.

Metro Bank, which was cofounded by Vernon Hill, opened its doors in 2010 and is one of the most prominent British challenger banks that emerged to take on incumbents such as Barclays and Lloyds. While others focused on expanding their online banking offerings, the firm has become known for building a branch network, including in expensive locations like the King’s Road in Chelsea.

The bank, which had £22 billion of total assets at the end of June, had a market value of about £78 million, compared with £3.2 billion at the end of 2017.

“The company continues to consider how best to enhance its capital resources, with particular regard to the £350 million senior non-preferred notes,” Metro Bank said in a statement on Thursday. “The company is evaluating the merits of a range of options.” – Bloomberg