Metro Bank to Expand Branch Network Following Rescue Package
By Calum Muirhead Updated: 22:01 BST, 9 October 2023
Metro Bank has pledged to continue its expansion plans for opening new branches after securing a rescue deal to bolster its financial situation. In a lifeline deal worth £925 million, the bank sold £150 million worth of new shares, obtained £175 million in fresh debt, and refinanced existing loans worth £600 million. This rescue package effectively hands control of Metro Bank to its largest shareholder, Colombian billionaire Jaime Gilinski Bacal, who injected £102 million into the bank.
Gilinski, 65, now holds a 53% stake in the company, a significant increase from his previous ownership of just over 9%. While concerns have been raised about the bank’s branch network, Metro Bank has reassured that all 76 existing branches will remain intact. Furthermore, the bank plans to open 11 additional sites in the north of England over the next two years. This commitment sets Metro Bank apart from its competitors, as nearly three-fifths of bank branches (approximately 5,600 sites) have closed in the past nine years, according to consumer group Which?
During a call with analysts, Metro CEO Daniel Frumkin expressed confidence in the bank’s branch-based approach. He stated, “There’s nothing wrong with the Metro business model. With the capital we’ve just obtained, we’re very confident in where we go next.”
Following the announcement of the rescue deal, Metro Bank’s share price rose by 10.9%, reaching 50.2p. Gilinski, who holds his stake in Metro Bank through his investment vehicle Spaldy Investments, emphasized his belief in the importance of physical and digital banking, underpinned by exceptional customer service.
Regulators have given their approval for the deal. However, Gilinski must now seek an exemption from takeover rules that would typically require him to make a bid for the entire company if his stake exceeds 30%.
Gilinski, who made his fortune in banking and real estate, is known for building one of Latin America’s largest financial empires. He resides in London with his wife and four children and owns properties in New York, Panama, Miami, and Colombia. His estimated net worth is £4.3 billion.
Metro Bank faced a significant decline in its share price last week as it urgently sought a rescue package before the opening of financial markets. Shareholders and lenders will pay a substantial price to keep the bank afloat. The £150 million fundraising was priced at a discount of 30p per share, significantly lower than the 45.3p closing price on Friday. The £600 million debt refinancing will impose a haircut of at least 40% on some creditors.
Concerns have arisen about Metro Bank’s long-term sustainability, despite the additional cash injection. The bank will have to pay substantial amounts of interest on the new debt, with some rates as high as 14%. To alleviate pressure on its balance sheet, the bank is reportedly in talks to potentially sell a £3 billion mortgage book.
Founded in 2010 by US businessman Vernon Hill, Metro Bank opened its first branch in the UK and has since expanded to 76 branches.
Russ Mould, investment director at AJ Bell, acknowledged that a crisis in the banking sector had been averted for the time being. However, he warned that questions remained about Metro Bank’s future. Mould stated, “The past week will have been extremely damaging for the company’s reputation, and there will undoubtedly be customers who may still prefer to shift their money to a different bank. Metro Bank needs to find a way to keep its clientele happy and win new business, which will be a tough job. It is time for a radical rethink of how the company operates. A high-cost base is unsustainable, so something has to change. If not, Metro Bank might find itself acquired by a larger company whose first task would be to shut down its expensive branch network.”
The Billionaire behind the Bailout
Jaime Gilinski Bacal, a Colombian billionaire, gained a 53% controlling stake in Metro Bank by injecting £102 million through his investment vehicle, Spaldy Investments, based in the British Virgin Islands. An alumnus of Harvard, Gilinski is a prominent banker and real estate developer. He first invested in Metro Bank in 2019, and his daughter, Dorita, serves on the board of directors. Born in Cali, Colombia, Gilinski is the country’s second wealthiest individual, having built one of Latin America’s largest banking empires in collaboration with his father, Isaac Gilinski Sragowicz, who currently serves as Colombia’s ambassador to Israel. Gilinski’s investments in Colombia include Grupo Nutresa, one of the country’s leading food groups.
Gilinski and his wife, Raquel, are based in London but own properties worldwide, including a residence on the luxurious island of Indian Creek in Florida, which is often referred to as the “billionaire bunker” due to its wealthy residents.
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