Metro Bank starts a formal sale process

Metro Bank’s board announced on 12 November a strategic review that includes a formal sale process, inviting expressions of interest for the whole of the company’s share capital. Morgan Stanley is running the process as lead financial adviser, with Citigroup and RBC Capital Markets as joint financial advisers. The bank said it is not in active discussions with any potential offeror and is not considered to have received an approach.

The bank said it has “successfully completed a substantial transformation over recent years” and, having reported the highest profits in its history for 2025, is “well positioned to consider a broader range of strategic opportunities for its next phase of growth”. The board said it remains highly confident in the standalone growth prospects and will keep executing the standalone plan during the review. The announcement repeats the return on tangible equity targets: more than 13% in the fourth quarter of 2026, increasing each year to more than 18% in 2028.

Return on tangible equity was 7.5% in the six months to 30 June, the latest actual figure the bank has published. The guidance the board says it is confident of delivering is for returns Metro Bank has yet to report, the first of them for the quarter now under way.

The third-quarter update on 4 November gave no return figure for the quarter and described a “clear path for further NIM and RoTE expansion” over the fourth quarter and 2027, as low-yielding fixed-rate treasury assets mature and lending moves into the target segments. In it, chief executive Daniel Frumkin said: “We enter the final quarter of the year with confidence and clear momentum and reaffirm all guidance.” In the sale announcement, the board said it unanimously believes that running a sale process alongside the standalone plan will “maximise the value creation opportunities available to shareholders”.

Shawbrook kept its guidance on 12 November for an underlying return on tangible equity of about 17% in 2026, and chief executive Marcelino Castrillo said Shawbrook remains on track to meet it. Metro Bank calculates its own return from statutory profit after tax.

The lending shift

Lending in the segments Metro Bank targets – corporate, commercial, SME and specialist mortgages – reached £6.6bn at the end of September, up 37% on a year earlier. Metro Bank reported strong credit quality alongside the growth, with low arrears and a loan book mostly secured on property.

Those segments made up about 70% of gross lending at the end of September. Run-off lending, which includes the prime mortgage book, fell 32% over the year, and Frumkin said the capital and liquidity this frees up is being put to work in the target segments.

“Our relationship banking model is delivering a clear competitive advantage,” Frumkin said with the half-year results in August, and in November the bank said the model continues to support growth in business and personal current account balances, and that it has the lowest cost of deposits of any high street bank. Its cost of deposits was 0.98% in the first half, down from 1.16% a year earlier.

Net interest margin reached 3.45% in the third-quarter figures, up 42 basis points on a year earlier and already within the bank’s guidance range for the end of 2026. Operating costs for 2026 are expected to be broadly flat on 2025, reflecting planned technology investment in the second half, the bank said in August.

Gilinski’s stake

Metro Bank’s shares rose 6% in morning trading after the announcement, PA reported. Jaime Gilinski Bacal became the majority shareholder, with a 53% stake, through the bank’s 2023 rescue and joined the board as a non-executive director.

In comments carried by PA, Gary Greenwood, banking analyst at Shore Capital, said the sale follows the bank’s recovery since that bailout. He credited Frumkin with a strong turnaround and said the recovery in the shares has given Gilinski a substantial paper profit. “An all-cash sale to private equity appears the cleanest outcome,” he said, because it would allow Gilinski to exit his controlling position.

Greenwood said a combination with a specialist bank could make strategic sense and would probably be paid for in shares. He said a larger bank may be reluctant to pay up for Metro Bank’s expensive branch network. Metro Bank signed leases for new stores in Leeds, Newcastle and Nottingham in the first half and said it continues to look for new locations.

Terms of the sale

The announcement started an offer period under the Takeover Code, which brings in the code’s dealing disclosure requirements. Parties that want to take part must sign a non-disclosure and standstill agreement, and they need not be publicly identified.

The Takeover Panel has agreed that parties taking part are not held to the usual deadline to announce a firm offer, for as long as they stay in the process. The board said it may change or end the process at any time, and that there can be no certainty that any offer will be made. It told shareholders to take no action for now.

Chairman Robert Sharpe left at the end of October, and senior independent director Catherine Brown was appointed interim chair, subject to regulatory approval, as the bank began looking for a permanent replacement, City AM reported.

For now, Metro Bank is not in active talks with any potential buyer, and the most recent return it has reported is less than half its target for 2028. The bank said further announcements will be made as appropriate, including as to timetable.