Metro Bank shares

Shares in Metro Bank have plunged 97 per cent from their 2018 peak, leaving it with a market value of just £200m, but one private equity executive who has studied the company said it was still “not cheap enough” to offer the kind of returns that buyout groups typically seek. The New York-based buyout group, which approached Metro Bank about a possible takeover this month, said yesterday that it had “agreed to terminate discussions”.

Private equity group Carlyle has pulled out of talks to acquire Metro Bank, the latest blow to a company once hailed as a challenger to the handful of lenders that dominate British retail banking.

Metro Bank’s commitment to building branches as established lenders are closing theirs has looked increasingly out of step with the wider industry, especially as the pandemic has driven digital adoption. When they did, the UK’s takeover regulator imposed a December 2 deadline to announce a firm intention to bid or walk away, leaving the buyout group with little time to confirm any offer. Carlyle’s interest came as the Bank of England’s Monetary Policy Committee signalled that interest rates would need to rise “over coming months”, in what would be a fillip for the banks. The group’s struggles also reflect the broader difficulties of challenger banks, which have looked to gain scale and reduce costs in an age of record-low interest rates.

Carlyle’s talks with Metro Bank were at an early stage when the details became public this month, according to a person familiar with the matter. In response, Metro said that its board continued to “strongly believe in the standalone strategy” and its prospects.

Metro in 2010 was the first new bank in a century to open branches in the UK, and listed six years later. While the bank has since been a potential target for buyout groups, its branch-focused model has proved a deterrent.

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