Difficult second decade ahead for Metro Bank

Linda J. Dodson

One fast-track ticket to growth could be through takeovers. Sources said the board will this week decide on whether to snap up peer-to-peer lender Ratesetter, which matches those who want to borrow with those who want to lend and, like Metro, was founded in 2010.

The board has been weighing up whether to go ahead with the deal given the current climate, fearing any further negative publicity if it acquires the business and things go sour.

Insiders said that if a takeover does go ahead it will be in part because Metro has hashed out a deal that keeps it free from any risks associated with Ratesetter’s historic loan book (although there is no suggestion there are any – it has £70m protecting investors’ capital).

One appeal for Ratesetter is that Metro plans to keep its entire workforce if it pushes ahead with a deal, sources said. Its expertise in personal loans could be a big boost to the embattled bank, which is eager to expand in this area.

If the board walks away from Ratesetter then it may be because it is eyeing other deals. Chief executive Dan Frumkin is believed to be keen on expanding through acquisitions while Hill’s replacement – building society “bad boy” Robert Sharpe, one of the sector’s key figures during the financial crisis – previously turned Bournemouth-based mutual Portman from the 13th largest society into the third biggest through multiple takeovers, before it merged with Nationwide in 2007.

Sharpe, famous for his lucrative pay-off at Portman Building Society and a scandalous affair with a colleague half his age, was credited with transforming Britain’s seventh-largest society West Bromwich after the 2008 crash.

Another option being considered by the board is whether to start selling insurance. Customers who store expensive items in the bank’s safe deposit boxes must buy policies from a third party, and Frumkin’s team are considering “cutting out the middle man” so the bank can do so itself. This idea is “very much on the to-do list”, says one person close to the plans.

Any expansion the bank does go ahead with, however, will be against a backdrop of steep cost cuts and a banking landscape that has changed significantly since 2010. Investors won’t appreciate any more branch parties featuring dancers on stilts, free dog biscuits and popcorn stands if they continue to lose money, and any new ideas that get nodded through will face intense scrutiny. The next decade will not be easy.


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