The embattled high street lender Metro Bank has agreed a rescue deal with investors to shore up its balance sheet after a weekend of negotiations.
The bank announced late on Sunday that it had secured a £925m package. That consisted of a £325m capital raise, including £150m of new equity from shareholders, and £600m of debt refinancing.
The equity raise will be led by its largest shareholder, the Colombian billionaire Jaime Gilinski Bacal’s Spaldy Investments, which will contribute £102m. His stake will rise from 9% to 53%, making him the controlling shareholder.
Metro is also in discussions about selling up to £3bn of residential mortgages.
The Bank of England’s regulatory arm, the Prudential Regulation Authority, is understood to have been approaching a number of big lenders in the past few days, including NatWest and JP Morgan Chase, to see if they had any interest in buying Metro.
A spokesperson for the PRA said on Sunday evening: “The Prudential Regulation Authority welcomes the steps taken by Metro Bank to strengthen its capital position.”
Daniel Frumkin, Metro’s chief executive, said: “Today’s announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years.”
Bacal said: “I have been an active investor in Metro Bank since 2019. The opportunity to become the Bank’s major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service. I believe that the package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years.”
JP Morgan Chase examined a potential bid to take over the whole of Metro but decided on Saturday night not to go ahead with it, a source said. NatWest was also asked to look at buying the total business, and may yet consider taking on Metro’s mortgage book, as previously reported.
HSBC, Lloyds and Santander UK were also reported to be among the banks approached as potential Metro buyers.
The PRA hired the consultancy EY for the process of sounding out potential purchasers and it is understood it had been seeking a buyer for the whole of the business rather than selling off parts.
It also emerged that Metro received an approach in recent weeks from digital-only rival Shawbrook Bank.
EY, NatWest, JP Morgan, Shawbrook, HSBC and Santander declined to comment. Lloyds has been approached for comment.
The rescue follows a tumultuous week for Metro. Its shares plummeted by a quarter on Thursday, the day after it revealed it was considering raising hundreds of millions of pounds from investors. However, they rebounded 21% to 45.25p on Friday after reports that it had been sitting on an offer for a £600m capital injection from bondholders since Monday.
Metro is considering selling off up to 40% of its mortgage book to shore up its balance sheet and ensure it can continue to expand. Without that extra funding, its ability to lend could be put at risk.
The lender was founded in 2010 by the American billionaire Vernon Hill, the first new high street bank to launch in the UK in more than 150 years. It has 2.7 million customers, 76 branches – mostly in the south of England – and holds about £15.5bn-worth of UK customer deposits.
Victoria Scholar, the head of investment at the trading platform Interactive Investor, said Metro “has long been facing financial difficulties resulting in a dismal share price performance, down over 98% in five years”.