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Presumably they wish to avoid the 28 day “put up or shut up” rules, because it’s genuinely too early for a formal offer, but denying a bid in under those circumstances puts Pollen offside for at least six months. The question is why someone briefed Sky. Seems highly unlikely to have been the buyers.

I guess if there is no evidence that Pollen or Metro behind the leak then strictly speaking there is no requirement to announce if there is no formal offer. But it’s clear that your man at Sky is the go to when certain parties want to shake things up (broke the recapitalisation news which prompted the run for example). But I doubt there will be any meaningful investigation into the source of the leaks.

Five: £4:37p is not a price target. It’s a random technical point where the outrageous option of paying Frumkin £60m tops out. The only formally adopted targets are the guidance. And the current share price a good basis for valuing the bank albeit you would want a control premium/share of the synergies. But more importantly the board will either do what galinski wants or he goes round them. The ball is entirely in his court

Worth considering that this may not be an all cash offer. May be a combo with Shawbrook at say 2:1 (ie shawbrook owners get 2 shares for every 1 for Metro assuming shawbrook valued at c.2b and Metro c1bn). But if it’s take private, you have a less liquid holding until IPO.

Not sure where you would find £470m of synergies. On the cost side Metro's total cost base is c.£500m most of which ultimately relates to the current account business which has no synergy with Shawbrook cost base. You could maybe get to £100m across central functions etc. Plus there is some balance sheet optimisation from replacing Metro's excess liquidity with Shawbrook assets, and possibly a lower marginal cost for funding additional growth in Shawbrook- possibly worth another £100m. Against that, you have to fair value the branch related assets, which might drop CET1 by c£150-£200m which will need to be pumped straight in (i.e. if you bought it for £1b it would cost you £1.2b in cash) . That said, I agree that £200-£250m of standalone profit is not that tough a target for Metro to get to if rates hold up- but I would value that at £1.6bn (8x earnings so £2.30 a share) not £4.37 which in my understanding is more of a technical price at which the CEO's upside tops out. Not a target really (i.e. certainly not where current guidance gets you). Galinski could try and hold out for "full value" but he will have to find an exit at some point and Pollen have been the only persistently interested party. So I reckon a bit of a discount to full value, but more than the £1.20-£1.30p where we are trading now would be the likely take out price if it happens, which is 50-50 at best

While the outrageous incentive scheme might disincentivise management to a point, its got to be Galinski's call in the end. And Frumkin likely to walk away with a total of more than £20m for his efforts (he's already been paid more than £8m and sitting on 8m shares and will no doubt get another payout on exit). Given the bank has failed to print a genuine profit at any point in his tenure (cumulative cash losses >£800m), taken the bank from #1 on service to #5 and killed the retail franchise I would say that's a tidy gain- puts the Brinx Matt boys in the shade

I think the takeover code will oblige them to say something today. I actually think the delay suggests something might happen given how quickly things shut down last time the talks with Shawbrook leaked. While there may be some upside in the organic plan, its not clear how Galinski could credibly crystalise that value. Outside bet he might take a run at TSB given his past interest (and relationship with Sabadell) but the price looks pretty rich on that one. Pollen have been looking at this for so long now, its hard to think they would come back a 4th/5th time. I think Galinski is tempted at anything over £1.50

A typical 30% control premium would suggest £1.50 a share (by my reckoning a 70% IRR on Galinski's investment). If the bank hits its target of "high double digit ROE in 2027" so call it £200m PAT on a BV of around £1.1b, I would reckon on a valuation of c1.3x book or 8x earnings so a £1.6b valuation (£2.30 a share) in 2027, given the issue of quality of earnings/exposure to lower rates. There remains a fair but of risk in that given poor management capability. That makes the most likely range about £1.70-£1.80 a share, which given limited cost synergies, is pretty rich for the acquirer but not terrible if you believe in a higher for longer environment.

I think I read they have 3 new stores on the go. They are notionally committed to the remainder, but completely outside the (already renegotiated) timeline agreed for the C&I funds- so unclear if they will get any C&I funding beyond those 3 (I doubt it). The question is whether new branches make economic sense post the restructuring (and without C&I funds). As noted new PCA volumes have halved, and BCA down a third. Offsetting that, new opening hours will have taken 25% off the cost of a branch. I suspect time to payback will be about the same, but long term ROI much lower

I am not sure about the value in incentivising a management team with a track record of failure. The CEO used all the tricks in the book (i.e. front loading huge losses in 2020/21/22 and keeping equity below critical levels to support ROE vs target) and still failed miserably to hit his last LTIP. Giving the same leadership the opportunity to make £60m by getting to the same share price that should have been delivered in 2024 without diluting the original shareholder down by 70% is corporate governance at its worst

Big banks being valued at 1x book is essentially the market suggesting they are meeting their cost of equity, but don't have much room to grow book value without diluting those returns (hence a high payout ratio which is essentially distributing equity at 1x book). To be valued above book you either have to be seen as consistently generating returns above the cost of capital (e.g. specialist lenders with ROEs above 20%) or to be seen as able to grow BV substantially without diluting long term returns (e.g. Revolut). Metro is not meeting its cost of capital, but there is a credible pathway to this which is being priced in (risk adjusted hence 0.7x book). Where Five and I diverge is on future growth prospects. I do not see Metro as a growth stock- it was when it was significantly growing current accounts because these provide a very clear path to returns above the cost of equity. But it has (for time being) killed this capability. Five presumably believes either a) there is plenty of room as a specialist lender to continue to reinvest returns to grow BV and deliver returns above the CoE (credible to a point but this is a competitive market and I don't see Metro as a skilled player here) or b) once it is generating good profits it can re-invest in its current account capability and this then becomes a platform for sustained growth in BV. These are not stupid beliefs. But you need a good management team and a benign credit environment for this to come to fruition

Its interesting to see how Edison gets to the £60m PBT implied in the guidance- not just very low loan losses of 11bp, but a further £75m off the cost base. Some of that is annualising the £80m of cuts across 2024, but by my reckoning that is worth about £25m. Some of the rest will be reducing the £30m spent on consultants in 24. But at the same time, there is lots of talk of investing in digital which won't come for free. And it is worth noting the damage done to the retail franchise with a run rate of 80k new accounts opened vs 200k before the run (i.e. its market share has more than halved). But to be fair, its stronger SME franchise looks to be holding up albeit at a rate that broadly keeps account numbers flat given current levels of attrition. A shift on MREL will lead to a positive re-rate, otherwise i think its going to be a challenge for management to deliver on the first set of numbers they can actually be held to account on

I suspect that the Q1 results will demonstrate the level of performance seen in Q4 (i.e. profit of about £10m). What that does to the SP is anyone's guess!

What is of more interest to me is that they have not revised guidance since the AT1 issuance. Given that 9 months of £250m AT1 at 13.5% is a £25m hit to NII/P&L that is a significant upgrade (i.e. guidance is pointing to £50-£60m of PBT in 2025). So essentially - unless the AT1 was implicit in the original guidance, which I think unlikely- there must be some other positive trends. The brokers report from Edison [?] that you can see if you click on company research in the menu above, provides one explanation- which is they reduce anticipated loan losses from £33m to £11m in 2025. That reduction makes little sense to me. If the bank puts on £1b on new commercial lending at a coverage ratio of 1% that would account for £10m of ECL. So there would essentially be no losses anywhere else in the book (In 2024 the roll off of provisions on the unsecured book provided a significant positive offset of ECL charges- but now they have sold the good book there is no offset from shrinkage going forwards). The only credible explanation is that they have completely revised their models for commercial and are essentially substantially reducing coverage while at the same time significantly expanding their risk appetite (i.e. growing the book rapidly at above market average yields of 350bp vs

Be interesting to see how this plays out in next couple of weeks. On fundamentals Metro is the UK bank most exposed to short term rate cuts, and its charge into higher risk SME lending might wobble. But my instinct is that as a closely held, highly manipulated stock, its something of a safe haven. Looks to me that they want to keep the price over 80p. And if there is a relief rally I am sure MTRO will get the full upside

Not sure that shrinking the balance sheet by £5b (20%) and halving sales of new current accounts in the last year is evidence of a growth stock. But agree that the investor confidence in the AT1 not fully reflected in the SP i.e. as noted before, if the bank does not need to raise new equity to do a fairly rudimentary job of cycling assets, it should get to £200m or so of profit by 2027- this transaction takes the capital constraint off the table and so makes the profit outcome more likely (if a little delayed)- assuming that is, that credit conditions are benign and they don't blow it all on "digitizing" the bank.

So it looks like they have grasped the nettle on the capital issue I have been banging on about, with this somewhat leftfield issuance of AT1 at a coupon of 13.5%. It takes away the threat of dilution from the equivalent share issuance albeit at a cost of £33m p.a. which would more than halve the implied guidance for 2025 profits. That does depend on what they do with it though. They could use it to pay back sub-debt that has a higher coupon, although presumably that is trading above par now, so may have to wait until the call date. Hopefully its to allow lending growth. I hope it isn;t to fund an infrastructure overhaul. Overall, I am a fan of "fixing the roof while the sun is shining" so cant complain about raising AT1 as a tactic given the not unattractive pricing. Be interesting if they have to re-issue guidance and market reaction to that. Exposes what a massive mess up they made of capital when they had better profitability and prospects at the half year in 2023. I suspect much of that related to the tactics of the now majority owner

The branches are there to gather low cost deposits which should be the source of competitive advantage vs other specialist lenders. The issue is that post restructuring the branches are getting half as many retail current accounts and 33% less business accounts. I agree that it seems illogical to hugely reduce the productivity of existing branches and then open more branches. I think it speaks to the poor thinking of the CEO, who one minute suggests that Ratesetter is the future and within a year is closing it down etc etc etc. The challenge is that the new owner wants to focus on cost-out, which is fine but has not been done strategically. So you are left with a model that is still more expensive than a non-current account business but has destroyed the service model that was enabling rapid growth in current accounts. So they are left trying to shrink their way to glory, while marching up the risk curve.

Having chucked 3 previous CFO's under the bus to cover up the CEOs own failings, maybe that's the cost of getting a new one!

As per notes below the pre-emption rights refer specifically to contingent capital, not core equity. So they are not able to dilute shareholders by issuing new shares (although with 75% of shares being owned by a small cabal, its not huge protection). The pre-emption rights are with regard to AT1, which is a form of debt that is easily converted to equity, and there is significant discretion over whether to pay the coupon. So it can count towards core capital requirements. It does not dilute shareholders directly but with typically a very high coupon it will dilute earnings. But it looks like the bank recognises it can not continue to shrink, and there is not a lot of room for RWA growth given the huge losses that have reduced CET1 by £200m since October (almost all the new equity raised then). SO its giving itself some room to raise AT1 to support some RWA growth if necessary. It shouldn't be that big a deal other than essentially highlighting how tight CET1 is getting now requirements have been raised (as per note below)

More detail available now on IR site (if you hold shares you should have had an email). My read is not a big issue. They may be looking to issue AT1 capital. Don't have a problem with that per se, although be interesting what it prices at, given what they are paying for sub-debt (14%). Does suggest ongoing reticence of the majority shareholder to put any more equity in unless its at the expense of existing shareholders. But it should allow for a bit more growth, which was clearly constrained by the £200m of CET1 they have burned through since October 2023