The pandemic has only accelerated the shift towards online banking and most rivals are closing stores at lumpy rates
Atro Bank has been left in limbo by Carlyle – now what?
The US private equity giant said today that it was walking away from deal talks that began at the beginning of the month, without assigning any reason. Metrobank’s shares immediately crashed.
The unofficial ending hits the subway in trouble. The bank will now go back under Mr. Fix It CEO Dan Frumkin to execute a tough turnaround plan that was brought in to rescue the bank in the wake of accounting issues that surfaced in 2019.
Frumkin has made some progress in shrinking the bank and pushing it into new more profitable areas, but he is operating with a mill around his neck: bank branches.
Metro’s colorful American founder Vernon Hill II bet people missed out on the old-fashioned branches when he founded his Challenger in 2010. That call now sounds not only misguided but devastating. The pandemic has only accelerated the shift towards online banking and most rivals are closing stores at knots.
Meanwhile, Metro Bank is stuck in paying rent at its 78 ‘stores’ expensive locations. It is tied in long straps without brake clause. On an underlying basis, costs accounted for 153% of revenue in the first half of the year. Ian Gordon at Investec expects Metro to run at a loss until at least 2024.
Mergers can help increase revenue and share costs. Or a private equity sale to deep-pocketed backers who can afford to invest. But who will buy? The background is a consolidated UK banking sector that will strengthen rivals as Metro settles its mess.
Metro’s board says it believes strongly in the bank’s “standalone strategy and future prospects”. Will say so Others might not be so sure.