Metro Bank Chairman Hill Cuts Stake In Lender

By Mark Kleinman, City Editor

The founder and chairman of Metro Bank has reduced his stake in Britain's first new high street lender for more than a century as part of a £385m fundraising.

Sky News has obtained documents circulated among Metro Bank shareholders on Tuesday which reveal that Vernon Hill has opted not to take up his entitled allocation of shares during the cash call, which is aimed at accelerating the company's expansion.

The documents show that Mr Hill now holds just under 4.6m shares, compared to more than 3.8m a month ago. However, the volume of new shares being issued means that the chairman now owns just under 9% of Metro Bank's 'A' shares, a sharp reduction from the 13% he owned prior to the latest capital-raising.

Metro Bank confirmed to existing investors this week that it had secured nearly £300m in the initial phase and would now proceed with a further £100m to provide funds to expand its rapidly-growing branch network.

"The previous offer, which closed on December 6 2013, successfully raised £287.5m and was oversubscribed with exceptionally strong demand from both existing and new shareholders. This additional capital raise will be used to further support Metro Bank's continued unprecedented growth in deposits, lending and accounts and offers the opportunity to further strengthen our shareholder base," Mike Brierley, chief financial officer, said.

"A number of significant international investors subscribed or wished to subscribe in the last round. We hope to be able to fulfil their orders in this follow-on offer."

Sky News revealed last month that Metro Bank was seeking £285m to accelerate its growth, following the introduction of rules aimed at making it easier for customers to switch current account providers.

Among the lender's existing shareholders are the billionaire Reuben brothers and Steven Cohen, the head of the US hedge fund SAC Capital, which was last month the subject of the biggest-ever insider trading settlement in the US.

The documents circulated this week also name Brave Heart Connection, an American connection, as a major Metro Bank shareholder, while Wellington Management has doubled the size of its stake.

A recent circular to shareholders outlined the escalating losses at Metro Bank, which lost £14.3m before tax in the three months to September and £38.6m in the year-to-date. That took the lender's total losses since being set up to nearly £140m.

However, Vernon Hill, chairman, and Craig Donaldson, chief executive, told shareholders that the second quarter of 2013 "will therefore have marked the peak quarterly loss and that quarterly losses will now fall until the bank achieves profitability".

The losses underline the costs associated with breaking into the UK's retail banking sector at a time when Government ministers are attempting to foment new competition through a string of new policy measures, including reducing capital and liquidity requirements for new entrants.

Metro Bank declined to comment.

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