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They were not forced to ask the regulators to adjust anything. They have been in the process of gaining AIRB accreditation which will allow them to use their internal models instead of the standard one-size fits all model. But they lack the data and to be totally honest the know how based on how it's gone. They sound like they are going to abandon trying to get AIRB, they are selling their mortgage book because it was built up in the way it has been with a view that they will gain AIRB. The f'd up thing is they announced it before they even got written feedback from BoE/PRA, this was also a break in the way they had conducted themselves up to that point, in as far as they previously refused to provide any details. It's like they wanted to burn it all down.
Metro Bank is now changing going for higher yield products which also means higher risk. It's a new strategy, maybe it pays off, maybe it doesn't.
Metro Bank is also pulling away from RateSetter type of consumer lending.
The biggest risk is they burn through the money with nothing to show for it because they are hellbent on opening a chain of new stores. I get that it helps them gain new accounts and deposits, after all there are large number of people who only bank with institutions that have a high street presence. The reason they might go for Metro over Lloyds for example is the customer service and inviting atmosphere (subjective). This approach is expensive and if you wind up opening in the wrong areas then it's very costly.
Worth noting that Spaldy may not care, what they invested is a lot of money generally but contextually it's low single digit percentage of their available resources.
Nope. 53% is majority control. Full control is 100% ownership. Either way, this is a regulated sector there are strict governance rules. The bondholders will have break clauses in the event the ownership changes.
It’s not great to have a party with a controlling interest. However, this is where an effective board would work wonders. It would also be harmful for the bank if they started trying to sell assets as it interferes with the risk weightings, the PRA would pounce in that situation.
Dan reckons discount to par for the mortgage book. Sounds like a 3% discount is what they will accept. They will get close to £3bn back in cash which if they were conservative would return tens of millions a year in interest.
Metro Bank have not even received written feedback from the Bank of England. Just verbal feedback. They need the written feedback before they can update the models. Dan's now saying it's a cleanup job. Maybe 2024/25 if they keep pushing, they might abandon the AIRB program and reposition the balance sheet depending on what happens to the model. Basically he has no effing idea.
Dan said under 5% discount on the mortgage book sale. They won't get AIRB in the near-term. The mortgage book assets are better on a bank with AIRB's book. He's open to even selling furniture if it's profitable. Maybe Shawbrook will take them up on that. Metro won't go into the buffers, Dan seems traumatised.
Not necessarily. The share price has always been undervalued due to concerns around funding. Now that's sorted, albeit with the bank paying eye watering interest the value might start moving towards it's actual value. Plus Metro is soon to have half it's market cap in working funds just from Spaldy. Then more from the £3bn asset sale on the balance sheet which also reduces £1bn in RWA. It's a tough one to price.