Metro Bank faces challenge to reassure customers as rumours fly
Talk about its financial health has been doing the rounds on social media. This morning the bank sought to stop the rot
![Metro Bank has sought to reassure investors and customers that all is well with the institution](https://static.independent.co.uk/s3fs-public/thumbnails/image/2018/08/15/11/rtr2gtc7.jpg)
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Louise Thomas
Editor
“Meet the new bankers, same as the old bankers.”
That was The Independent’s headline at the top of a piece I wrote back in 2016, having delved into the backgrounds of the bosses of the challenger banks the government hoped would shake up Britain’s moribund banking industry. More than half of them were linked through having worked for Fred Goodwin’s Royal Bank of Scotland, which ended up nearly breaking the UK economy.
Given the rash of negative stories about Metro Bank (its boss Craig Donaldson is one of the RBS alumni who were featured in that story), would that headline today read “meet the new banks, same as the old banks”?
There was even, over the weekend, an incidence of people queuing to withdraw cash in west London, which brought back uncomfortable memories of a certain Northern Rock.
For goodness sake, calm down, said the bank this morning, in response to some of the wild rumours flying around social media. We’re not even close to being in the sort of situation the Rock was in. Yes, we’re raising £350m from our investors, but it’s to finance growth, not to bail us out and it’s going well. We’ll complete before the end of June. So move along, there really is nothing to see here.
The trouble for Metro is that it created a rod for its own back when it had to admit that it had messed up with the risk classification of some of its loans for regulatory purposes – a big no no – and reported some disappointing results at the start of the year.
The shares behaved as if they’d taken a right to the nose from Canelo Alvarez. They’ve been rolling around on the floor ever since. Shorting the stock has been a favoured tactic of hedge fund managers with their eyes on new yachts. In the space of not much more than a year, a stock that had reached the giddy heights of £35 has fallen back to just over £5. It was on the slide again this morning.
The world outside London’s financial centre has taken note of this. It has only added fuel to the brush fires that Donaldson and his team are now trying to put out.
They’ve pointed to the awards Metro has been winning for customer service, the fact that it’s opening branches when others are closing them, the profits it has declared.
Your money is safe, and the Financial Services Compensation Scheme covers you up to £85,000 anyway, has been the message.
Problem is, bitter past experience tells people there’s no smoke without fire and logic says that if they’re worried it’s safer to get out. Even though depositor protection has markedly improved since the Rock hit the rocks, getting compensation takes time and causes inconvenience and worry.
The best way, the only way, for the bank to prove that people’s concerns are unfounded and that this isn’t a case of “meet the new banks, same as the old banks” is to weather the storm and then meet, and better beat, the City’s forecasts while putting its future loans in the right regulatory box. Only then will the shares recover along with people’s confidence.
At some point in the near future, it might need to consider whether it needs a change at the top although right now such a move would only add to the bad mood music.
As for the government’s policy of encouraging “challenger” banks? After TSB’s IT snafu and now this, it’s looking challenged.
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