Troubled Metro Bank has finally managed to shore up its balance sheet as chairman Vernon Hill agreed to leave by the end of the year.
Metro, forced to pull a £200million bond issuance last week after failing to garner enough interest from investors, launched a new £350million bond yesterday.
The bank promised investors a yield of 9.5 per cent, even higher than the 7.5 per cent it was advertising on its last failed fundraising.
Exit: Metro Bank chairman Vernon Hill said will leave by the end of the year even if a replacement has not been found
The bond launch came as Hill, Metro’s founder, said he would step down as chairman of the lender by the end of the year even if a replacement has not been found.
And he will leave the board altogether. This summer, the US businessman said he would retire as chairman but only once a replacement was found. He also planned to remain as a non-executive director.
Metro shares rose 26.7 per cent, or 48p, to 228p, but are still 86 per cent down since the start of the year.
Ashley Hamilton Claxton of Royal London Asset Management, which owns a stake, said: ‘We hope this change in leadership will help the board draw a line under the governance issues and focus on restoring shareholder trust and improving financial performance.’
Metro fell into trouble this year after it misclassified the riskiness of some of its loans. John Cronin at Goodbody said it was ‘notable that Hill did not comment’ on the update regarding his departure.
Troubles: Metro was forced to pull a £200m bond issuance last week after failing to garner enough interest from investors
He added: ‘We suspect that a majority of the board members wanted to see this happen.
‘While Hill’s vision has been constructive in the context of securing equity backing for the Metro story, the ever-increasing challenges that the bank is facing (including regulatory challenges) mean that board refreshment seems necessary.’
Metro said it would appoint an existing non-executive director as interim chairman if no replacement for Hill had been found by the end of the year.
Sir Michael Snyder, senior independent director, said: ‘Vernon is the inspiration behind Metro Bank, the first high street bank to open in the UK in 100 years.
‘The board shares Vernon’s view that Metro Bank has reached a point where an independent chairman is appropriate to oversee the next stage.’
Many of Metro’s backers are friends or business associates of Hill, including hedge fund boss Steven Cohen and media mogul Michael Bloomberg.
Along with Hill himself, they bought £375million of new shares in May after the bank’s discovery of its accounting error left it short of spare cash.
But since that money was ploughed in, further worries over Metro’s financial health and increased competition in the banking space have pushed Metro’s shares down by 55.8 per cent.
Analysts are speculating that Metro, with 2m customers, could be picked off by a competitor – especially now that its share price has tumbled.
Royal Bank of Scotland, Lloyds or HSBC could be suitors, Cronin suggested.
However he added that yesterday’s fundraising will stabilise the bank’s financial situation and ensure its compliance with regulatory requirements.
Last week, Metro admitted it had only received £175miller of orders for its cancelled 7.5 per cent bond.
Yesterday’s attempt was more successful, as the bank said it had received £550million of orders from 60 accounts.
Metro is still being probed by the Financial Conduct Authority over its accounting error, and the probe has extended to include senior managers.