Santander UK drafts in Osborne to advise on Metro Bank supply

Santander UK has been approached to revive its monetary crisis-era position as a white knight for failing British lenders as regulators search to safe a quickfire non-public sector deal to shore up Metro Bank.

Sky News has learnt that the Spanish-owned financial institution, NatWest Group and Lloyds Banking Group are amongst these approached by banking regulators this weekend about mounting a takeover of the 13 year-old excessive road department community.

City sources stated that Santander UK, Britain’s fifth-biggest retail financial institution, had engaged Robey Warshaw – the advisory agency the place former chancellor George Osborne is a associate – to work on a possible supply.

There was no certainty on Sunday afternoon that any of the banks approached would make a proposal for Metro Bank given the truncated timetable and the restricted alternative to conduct due diligence.

Some of the banks which have been approached are extra fascinated about taking up the majority of Metro Bank’s belongings and liabilities – probably with out its costly department leases – moderately than the whole firm.

A variety of them are considered unwilling to amass the enterprise with no authorities funding backstop given the implications of so-called honest worth mortgage accounting guidelines.

By their calculations, Metro Bank wants a whole lot of thousands and thousands of kilos – and probably greater than £1bn – of recent capital to make the numbers on a deal work.

NatWest, itself nonetheless partly owned by British taxpayers, and Santander UK are each endeavor work on a possible deal, though a few of that work is believed to be targeted on buying belongings if Metro Bank is positioned right into a decision course of by regulators.

It was unclear whether or not Lloyds was critical about any type of transaction.

The Financial Times reported that each HSBC and JP Morgan had “studied” bids however determined towards lodging formal provides.

For Santander UK, any deal would revive reminiscences of its position in the course of the 2008-09 monetary disaster, when it stepped in to take over each Bradford & Bingley and Alliance & Leicester when each stood getting ready to nationalisation.

Metro Bank has been working a parallel course of over the weekend to thrash out a capital-raising answer with bondholders that will place it on a extra sustainable monetary footing.

Its board has drawn up a posh mixture of plans, together with asset gross sales and an equity-raise, to supply it with greater than £500m of recent funding.

However, the sharp fall within the firm’s shares final week has made a share sale a lot tougher to drag off.

Sky News revealed final week that Metro Bank had employed Morgan Stanley to discover capital-raising choices weeks after it had been dealt a blow by regulators to its hopes of adopting a extra capital-efficient mannequin.

This channel subsequently revealed that Metro Bank had kicked off talks a couple of sale of a £3bn chunk of its mortgage e-book, and that Shawrook, one other mid-sized lender, had had a string of takeover approaches rebuffed, together with one within the second half of September.

Both Metro Bank and the Prudential Regulation Authority are eager for a deal to be struck earlier than markets open on Monday morning.

It was unclear what the choices for regulators and the financial institution’s board could be if a non-public funding answer fails to materialise earlier than that time.

While there has to date been no signal of deposit flight, and Metro Bank has sought to reassure shareholders that it’s working in accordance with its minimal capital necessities, the absence of a funding answer has important dangers hooked up to it, banking specialists consider.

The so-called challenger financial institution endured a torrid week, with its share worth crashing almost 30% on Thursday within the wake of a Sky News report that it’s working with funding bankers on asset disposals, the sale of recent shares and the refinancing of a £350m bond due subsequent yr.

On Friday, the inventory rallied 20% to shut at 45.25p, giving it a market capitalisation of lower than £80m.

Metro Bank is being suggested by Morgan Stanley, Moelis and Royal Bank of Canada.

At one level in 2018, the lender – which promised to revolutionise retail banking when it opened its first department in London in 2010 – had a market capitalisation of £3.5bn.

Metro Bank grew to become the primary new lender to open on Britain’s excessive streets in over 100 years when it launched in 2010, quickly after the final monetary disaster.

It has 2.7 million buyer accounts, making it one of many ten largest banks in Britain, and provides present accounts, enterprise accounts, private loans and insurance coverage merchandise.

The firm employs about 4,000 folks, working from about 75 branches throughout the nation.

Rumours have circulated for years about its funds.

In 2019, clients shaped sizeable queues at a few of its branches after options circulated on social media that it was in monetary misery.

Days later, it unveiled a £350m share inserting in a transfer designed to allay such issues.

Metro Bank has had a chequered historical past with City regulators, regardless of its comparatively transient existence.

Last December, it was fined £10m by the Financial Conduct Authority for publishing incorrect info to buyers, whereas the PRA slapped it with a £5.4m penalty for related infringements a yr earlier.

The lender was based in 2009 by Anthony Thompson, a monetary providers entrepreneur, and Vernon Hill, an American who ultimately left in controversial circumstances in 2019.

Metro Bank has been compelled to promote belongings up to now, saying a deal in December 2020 to promote a portfolio of owner-occupied residential mortgages to NatWest Group for as much as £3.1bn.

Lloyds, NatWest and Santander UK declined to remark, whereas Metro Bank didn’t reply to enquiries on Sunday afternoon.