Metro to open more branches after rescue… but analysts warn costly plan is unsustainable
Metro Bank vowed to press on with plans to open more branches after clinching a rescue deal to shore up its creaking finances.
The lender secured a £925million lifeline that included the sale of £150million of new shares as well as £175million of fresh debt on top of a £600million refinancing of existing loans.
The bailout hands effective control of Metro to its largest shareholder, Colombian billionaire Jaime Gilinski Bacal, who provided the bank with a £102million cash injection.
It means Gilinski, 65, saw his stake in the business surge to 53 per cent from its previous level of just over 9 per cent.
As part of the deal, Metro pledged to cut costs by £30million a year, sparking fears over the future of its branch network.
Rescue deal: Metro Bank secured a £925m lifeline that included the sale of £150m of new shares as well as £175m of fresh debt on top of a £600m refinancing of existing loans
But the bank insisted that all 76 branches were safe – and said it would stick to plans to open 11 more sites in the north of England over the next two years.
That stands in stark contrast to its rivals, with consumer group Which? calculating that almost three-fifths of bank branches – or 5,600 sites – have closed in the past nine years.
In a call with analysts, Metro chief executive Daniel Frumkin said the bank would stick with its branch-based approach.
‘There’s nothing wrong with the Metro business model,’ he said. ‘With the capital we’ve just obtained, we’re very confident in where we go next.’
Metro shares surged 10.9 per cent, or 4.95p, to 50.2p. Gilinski, who owns the stake in Metro Bank through his vehicle Spaldy Investments, said: ‘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.’
Regulators gave the deal their seal of approval. However, Gilinski must now secure an exemption from takeover rules that normally require an investor to make a bid for the entire company if they raise their stake above 30 per cent.
Gilinski made most of his money in banking and real estate, creating one of the largest financial empires in Latin America.
The tycoon, who is married with four children, lives in London but has a property portfolio that includes houses in New York, Panama, Miami and Colombia. He is estimated to have a net worth of £4.3billion.
Metro’s share price plunged last week as bosses scrambled to agree a rescue package before financial markets opened yesterday. But shareholders and lenders will pay a heavy price to keep the bank afloat.
The £150million fundraising was priced at 30p per share, a hefty discount to the 45.3p closing price on Friday, while the £600million debt refinancing will inflict at least a 40 per cent haircut on some creditors.
But there are growing concerns about how long Metro will be able to sustain itself even with the additional cash as it will be required to pay painful amounts of interest on its new debt as part of the deal with some rates as high as 14 per cent. T
he bank also confirmed reports that it is in talks about potentially selling a £3billion mortgage book to alleviate the pressure on its balance sheet.
Founded by US businessman Vernon Hill, Metro opened its first High Street branch in the UK in 2010.
Russ Mould, investment director at AJ Bell, said ‘another crisis in the banking sector has been averted – for now’. But he warned questions remained over Metro’s future.
He said: ‘The past week will have been extremely damaging for the company’s reputation and there will undoubtedly be customers who may still prefer to shift their money to a different bank.
Metro Bank needs to find a way to keep its clientele happy and still win new business, which is going to be a tough job. It is time for a radical rethink of how the company operates.
‘A high-cost base is unsustainable, so something has to change. If not, Metro Bank might find itself gobbled up by a bigger company whose first job will be to shut down its expensive branch network.’
The billionaire behind the bailout
Luxury: Jaime Gilinski Bacal with wife Raquel
Colombian billionaire Jaime Gilinski Bacal gained control of 53 per cent of Metro Bank yesterday after injecting £102million through his vehicle Spaldy Investments which is based in the British Virgin Islands.
The Harvard-educated banker and real estate developer initially invested in the lender back in 2019 and his daughter Dorita sits on the board of directors.
Born in the city of Cali, he is the country’s second richest man after building one of Latin America’s largest banking empires while working alongside his father Isaac Gilinski Sragowicz, who serves as Colombia’s ambassador to Israel.
Gilinski’s investments in Colombia include Grupo Nutresa, one of the country’s biggest food groups.
The tycoon and his wife Raquel are based in London but own properties around the world including on the affluent island of Indian Creek in Florida, nicknamed the ‘billionaire bunker’ for the many wealthy residents.
Gilinski and his wife own properties around the world including on the affluent island of Indian Creek in Florida, nicknamed the ‘billionaire bunker’
