Metro Bank needs some big ideas to move on up6 Aug 2020 10:59
Lender booked M People singer to celebrate its 10th anniversary, but if it is really wants to prosper it must dig much deeper https://www.telegraph.co.uk/business/2020/08/05/metro-bank-needs-bigger-ideas-hiring-small/
etro Bank marked its 10th anniversary last week with a video starring M People’s Heather Small. The singer gamely belted out the hits – Moving On Up chiming nicely with the bank’s aspirations – from the echoey interior of the mostly deserted Holborn branch, intercut with dancing staff members.
Such giddiness from bank employees has not been seen since the heyday of “Howard” in the Halifax adverts. Not the most edifying spectacle for Small, but in her defence, with live music venues closed, you have to take the work where you can get it.
During much of the last decade, it seemed as if Metro Bank was making a good fist of its fight against the big players. The bank, which floated in 2016, caught the eye with its glitzy, dog-friendly branches. Then, a little over 18 months ago, the lender admitted it had miscalculated the riskiness of some of its assets. The share price cratered and its chief executive departed, closely followed by founder and chairman Vernon Hill.
Now newish boss Daniel Frumkin has to steer his bank through the worst economic downturn in living memory. At least Hill and wife Shirley were invited back for a cameo in the valedictory video, the latter proclaiming: “We must never lose the magic, but make it stronger.”
Well, she’s not wrong. Metro gave clues to its bright new ideas earlier this week, with the acquisition of peer-to-peer lender Ratesetter. Metro wants to move more into personal unsecured loans and Ratesetter is a means of doing this. Metro also sees value in the technology Ratesetter provides.
Unfortunately Metro’s half-year results were a blizzard of bad news, with seemingly all of the numbers going in the wrong direction. There was the £112m provision for bad loans, pushing it to what one analyst called an “eye-watering” £241m pre-tax loss. Its net interest margin, a key measure of profitability, sank to 1.15pc, and its capital buffer ratio shrank too. Customer deposits have risen by 8pc since December, but that is happening across the board, with people choosing to stash money away rather than spend.
Metro isn’t giving any guidance about when it will make a profit. Analysts at Goodbody note the bank is “particularly susceptible to the performance of the UK economy”; it’s not a great time to be hitching your cart to that horse. Despite the rising risk of customers defaulting, Frumkin is bullish on the move into unsecured lending, insisting the bank will know how to spot the good prospects from the bad.
Although he is slowing the pace of branch openings, now the bank has hit 77, Frumkin sees them as a key strength. Metro’s branches are spacious, making it slightly easier to manage social distancing; from these, it can sell more products to its “fans”, with Frumkin hinting at partner
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