Metro Bank founder Hill to leave board early as stock slides
Metro Bank is saying goodbye to its outspoken American founder, Vernon Hill, sooner than expected after a year that saw the 10-year-old British bank's shares collapse.
Hill, the U.S. entrepreneur who founded Metro a decade ago, will step down as chairman on Dec. 31, the London-based bank said in a statement Wednesday. He had previously announced his intention to depart, but only after a replacement was found.
The move "could be a sign the lender is reaching the end of its independent existence," Georgi Gunchev, an analyst at Bloomberg Intelligence, said in a note.
Metro Bank's crisis deepened last week when investors balked at its attempt to sell bonds, despite a record coupon. Unless regulators waive the requirement, it has less than three months to raise money to boost its financial resilience. The lender has struggled to reassure investors since January, when it said regulators had discovered issues with the way it classified loans.
The search for a new chair is "progressing well," but if Hill's replacement isn't found by the end of the year, an independent nonexecutive director will take the role on an interim basis, the bank said.
"The board probably pushed for this to be accelerated," said John Cronin, an analyst at Goodbody. "It's positive from a regulatory perspective. The bank needs another restructuring to get back on track."
The shares were little changed at 9:37 a.m. in London. They're down 89% this year and touched a record low last week.
Hill, 74, founded the lender in the wake of the financial crisis at a time when British regulators were encouraging startups to challenge the big four legacy lenders.
While those big banks had been closing branches for years, eliminating front-line jobs and urging customers to do most of their business online, Metro Bank dotted England with new outlets on main shopping streets, aiming to scoop up deposits as quickly as possible. It now has 70 branches.
The bank needs to raise 500 million pounds ($613 million) by January in order to comply with a rule known as the minimum requirement for own funds and eligible liabilities, or MREL. Metro Bank said earlier this week that it was confident of meeting the MREL target and had other options to raise this money after the failure of the bond sale, whose pricing was described as "distressed" by one analyst.
Fitch Ratings downgraded Metro Bank to BB on Sept. 30, saying its ability to grow has been impaired and management's credibility was low.
The failed MREL sale makes "a sale of the business an increasingly likely outcome," Gunchev said.
Metro's original problems stemmed from the risk weightings placed on different kinds of loans — governing how much capital needed to be held against them. The bank put a 50% risk weighting on its commercial mortgages, and 35% for buy-to-let mortgages; both were much too low. Regulators are still probing how this happened. In May, rumors on social media led to lines of concerned customers at one London branch.
"The board shares Vernon's view that Metro Bank has now reached a point where an independent chairperson is appropriate," Michael Snyder, the senior independent director at Metro Bank, said in the statement. "Vernon is the inspiration behind Metro Bank."
Hill's departure from the front line of London finance was announced on the same day as that of Martin Gilbert, who built Aberdeen Asset Management into one of Britain's biggest fund managers. Gilbert, 64, vice-chairman of what is now Standard Life Aberdeen, will depart next year.