The next focusIR Investor Webinar takes places on 14th May with guest speakers from WS Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
This is the risk, if current rental values are 30-50% lower than pre-covid then the auditors will be forcing them to write-down their IFRS-16 lease asset by £190m-£300m. This is a real possibility and one of the analysts mentioned in the Q2 call.
"The Metro business model is a busted flush if it wasn’t then Metro would be opening more banks every week on new Covid Rental levels (30-50%) lower than the rents Metro agreed to tie themselves into Precovid lock down. All in my opinion of course and people should do their own research."
Campbell good points, just need some clarification:
Average remaining lease is 20 years
They have spent £5m on leasehold improvements in each location. Are they really going to abandon sites where they have invested a kings ransom making improvements to the landlords property?
Remember this is a bank which has to hold minimum capital so is constrained in doing things other retailers can.
Looks like no one told Neil Faulkner about the 20 year average lease term on those stores.
“An acquirer might look to retain as many of Metro Bank’s customers as possible, while closing as many branches as it can get away with. RateSetter’s technology and people would certainly be an efficient way for another bank to expand its lending too.”
This for you Theo:
https://www.p2pfinancenews.co.uk/2020/11/02/analyst-speculates-metro-bank-could-become-the-target-of-an-acquisition/
Jinny I would say better quality management and a business model with is sustainable. Hopefully one of them takes this out at £1 and that will be the end of this pile of dog poop.
Theo, business rates are the least of Metros problems. Metro branches are usually 2-3 times the size of other banks most of which were signed and locked in at cyclically high rents for 25 year terms with zero breaks. Now those market rents are coming down 30%+ leaving metro with operational leverage which the rest of the industry are eager to get rid. I don't think anyone else in the industry has such a ridiculous property portfolio, compare to the financials of the other banks and the problem becomes glaringly obvious.
https://www.avisonyoungretail.co.uk/uploads/media/Clients/Metro%20Bank%20April%202016.pdf
"Saga eventually locks in a loss I'll just add 'travel' to my list of uninvestable sectors."
Fundamentally this is the issue with SAGA, punters think it is a travel company, whilst the lions share of earnings £70m is made in insurance segment. Insurance companies with such earnings usually have an enterprise value of £1bn+.