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Goldman Sachs builds stake in Metro Bank, strengthens UK presence

Goldman Sachs has built an 8.5 per cent voting rights stake in ailing UK lender Metro Bank, according to the challenger bank’s regulatory filings.

The share price of the UK challenger bank has collapsed by almost 90 per cent since early 2019, when it disclosed an accounting error of just under £1bn. Last month, it posted a £130.8m pre-tax loss last year, compared to £40.6m pre-tax profit in 2018. Deposits fell by 8% to £14.48bn.

The lender, founded in 2010 to offer competition against the UK’s Big Four high street banks, said it will slash new branch openings to 24 over the next three years from a planned 71.

The US investment bank has built up 6.18 per cent in Metro voting rights attached to shares, and a further 2.30 per cent through financial instruments, leaving it with a total of 8.48 per cent, according to Metro’s London Stock Exchange filings. It is unclear when Goldman began its stakebuilding.

 

Goldman strengthens foothold in UK retail banking

However, the investment from Goldman Sachs is in line with its efforts of increasing its presence in UK retail banking. It launched its online retail savings bank, Marcus, in the UK in 2018, and has since taken around £13bn of customer deposits by initially offering a market-leading interest rate of 1.5%.

Metro still faces regulatory probes after it classified £900m of loans as less risky than they were last January. Its then chief executive Craig Donaldson and founder and chairman Vernon Hill left the bank, which was once regarded as one of the best run of the challenger banks that sprung up in the wake of the 2008 financial crisis to freshen up competition.

The lender also took a £27m hit to cover the costs of that investigation and a review of its compliance controls, having also breached US sanctions in Iran and Cuba between 2017 and 2019. It also took a £68m charge after scrapping old IT projects that it said were no longer part of its strategy.

Chief executive Dan Frumkin said “There is no doubt there is a steep hill to climb. The core strategy is not the problem. Execution has been poor — we’ve not been driving revenues where we should, costs are too high, and we underinvested in certain areas.”

Goldman Sachs builds stake...

Metro Bank shares are currently trading at their lowest ever level. Its shares plunged from £10 to around 180p in the past twelve months.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.