Metro Bank

[Mike4]

Some odd things being written on this thread. Last time I looked there were some 8000 bank branches in the UK, in 2012 there were even more, about 13,000. So the idea that the cost of branches is "extortionate" or that customers are unwilling to pay to use a branch simply does not stack up. NIM is recovering so banks will have plenty of income to cover the cost of their branches.

Metro Bank has about 80 branches some 1% of the total -- that doesn't seem crazy to me. Having been recently opened they are probably largely in optimum locations.


GS

I mostly bank online, but for some things at least occasionally I need a branch. Occasionally I need to pay in a cheque, or cash for the small local charity I am treasurer for. Or recently I was given an old English 20quid note by a Polish colleague visiting for a meeting to change, and I needed to take in some documents with ID for an insurance policy that was maturing that needed certifying by a member of the bank. The branch I visited was busy, mostly older people, but some business people get or paying in cash. Clearly some branches are required, but they are disappearing fast, perhaps a banking hub in towns that would cover all the banks where the last bank branch has closed.

Same here. I once needed a Banker's Draft and my bank would only give it to me in person, at my home branch. Another time I wanted to settle a mortgage of (something like) £100k and they demanded I attend my branch in person to make the transfer.

[BondSquared]

Back to Metro Bank, it's now Santander's turn to consider the White Knight role, and the sticky point seems to be, as expected, the valuation of the mortgages - they're all under water following the rise in sterling interest rates, but accounted for in Metro's books at par, where noone will take them on.

I still believe the T2s will, unfortunately for some TLF investors, need to written down, and with every hour that passes without a rescue offer, the seniors are more and more likely to go down a similar fate. Metro Bank simply doesn't have much to bail in otherwise - next in line are depositors >£85k (if there are any left), i.e. the voting public. Sorry, but ignoring the handful of bondholders here who are voters, too ...

[Alaric]

Back to Metro Bank.

The Guardian is speculating that the Bank of England is trying to set up a merger/takeover/rescue
https://www.theguardian.com/business/20 ... ng-natwest

[BondSquared]

Back to Metro Bank.

The Guardian is speculating that the Bank of England is trying to set up a merger/takeover/rescue
https://www.theguardian.com/business/20 ... ng-natwest

Santander has allegedly hired George Osborne to advise them on a Metro Bank bid. Well, given his part fiscal policies, what are the chances of him telling them to freely spend money without any sweeteners ...

[Dod101]

Times they are changing. There was a time when large parts of society were excluded from using financial services due to being illiterate. The response to that was, quite rightly, a massive campaign of bringing literacy to the masses - even a good old cheque requires the ability to read and write words and numbers - rather than going back to banking with shells and pebbles.
I feel sorry for people, often elderly, who are afraid of technology, but the best response to that is to help them getting over their fears. A perfect example is contactless payments - I know more than one example where an elderly or disabled person has swiched from cash to contactless payment upon the realisation that it is so much simpler and requires much less dexterity than handling banknotes and coins of different shapes and sizes and colours, and wallets with zippers, and old banknotes getting rejected because they have been replaced, and counting change etc.
How about everyone in this conversation picks one person to help them just with that?

But then I stood at a check out recently in maybe a Tesco. In front of me was a guy maybe about my age, who then had to fish in his wallet to find the bank card he was going to use, then the store card, both of which seemed to take an age and then the card was rejected and he had to try to remember his PIN number. It would have been quicker had he paid in cash. I have not used a wallet since I stopped working a long time ago and just carry a couple of cards in my pocket. Accessed in 20 seconds.
Dod

[BondSquared]

Times they are changing. There was a time when large parts of society were excluded from using financial services due to being illiterate. The response to that was, quite rightly, a massive campaign of bringing literacy to the masses - even a good old cheque requires the ability to read and write words and numbers - rather than going back to banking with shells and pebbles.
I feel sorry for people, often elderly, who are afraid of technology, but the best response to that is to help them getting over their fears. A perfect example is contactless payments - I know more than one example where an elderly or disabled person has swiched from cash to contactless payment upon the realisation that it is so much simpler and requires much less dexterity than handling banknotes and coins of different shapes and sizes and colours, and wallets with zippers, and old banknotes getting rejected because they have been replaced, and counting change etc.
How about everyone in this conversation picks one person to help them just with that?

But then I stood at a check out recently in maybe a Tesco. In front of me was a guy maybe about my age, who then had to fish in his wallet to find the bank card he was going to use, then the store card, both of which seemed to take an age and then the card was rejected and he had to try to remember his PIN number. It would have been quicker had he paid in cash. I have not used a wallet since I stopped working a long time ago and just carry a couple of cards in my pocket. Accessed in 20 seconds.
Dod

There's always the one exception to the rule. We can probably trust Tesco - or any other retail store or shopowner - that they wouldn't offer contactless payments if it wouldn't speed things up for them, they know what makes sense for them much better than any of us, me thinks.

[Mike4]

Times they are changing. There was a time when large parts of society were excluded from using financial services due to being illiterate. The response to that was, quite rightly, a massive campaign of bringing literacy to the masses - even a good old cheque requires the ability to read and write words and numbers - rather than going back to banking with shells and pebbles.
I feel sorry for people, often elderly, who are afraid of technology, but the best response to that is to help them getting over their fears. A perfect example is contactless payments - I know more than one example where an elderly or disabled person has swiched from cash to contactless payment upon the realisation that it is so much simpler and requires much less dexterity than handling banknotes and coins of different shapes and sizes and colours, and wallets with zippers, and old banknotes getting rejected because they have been replaced, and counting change etc.
How about everyone in this conversation picks one person to help them just with that?

But then I stood at a check out recently in maybe a Tesco. In front of me was a guy maybe about my age, who then had to fish in his wallet to find the bank card he was going to use, then the store card, both of which seemed to take an age and then the card was rejected and he had to try to remember his PIN number. It would have been quicker had he paid in cash. I have not used a wallet since I stopped working a long time ago and just carry a couple of cards in my pocket. Accessed in 20 seconds.
Dod

I no longer need even to carry my personal account card with me as it is installed on my phone. So all I need to do is put my phone on the supermarket card terminal to pay. Takes a lot less than 20 seconds!

I still carry several other cards around with me in my wallet though, including my driving license. Been glad to have it with me as I still find I need to produce it on the odd, rare occasion. My wallet also fills up with the receipts I always get. Once, I was challenged in the car park at M&S and virtually accused of stealing my bag of shopping. Very pleased to have had the paper receipt that day. Could have been very time-consuming proving I'd paid otherwise!

[NeilOne]

Looks like there will be a 40 percent haircut on the subs and rest to be exchanged into a new bond due 2034 and the seniors to be exchanged into a new bond due 2028 (not sure what the rate is for the new senior).

[hiriskpaul]

Looks like there will be a 40 percent haircut on the subs and rest to be exchanged into a new bond due 2034 and the seniors to be exchanged into a new bond due 2028 (not sure what the rate is for the new senior).

Yes, 40% haircut unfortunately. The new T2 will have a 14% coupon, callable in April 2029. No mention of step up/down if not called. Full details of the restructuring deal on the investor relations page:

https://www.metrobankonline.co.uk/investor-relations/

Edit: essentially that means a drop in running yield from 9.139% to 8.4% and 60k back for each 100k nominal in 2029/2034. My concern now is whether retail get shafted in some way. At least with the capital issues put to bed the new T2 should trade higher.

[BondSquared]

Much softer bail-in than I had expected. In essence, both the T2 and senior bond got bailed in via a forced maturity extension, increased coupon, and, for T2 only, haircut. Will that be enough? They're still trying to sell £3bn mortgages in Q4/23 (what a timing ...), which, if they really go through with it, will come with a hit for them undoing some of the capital generation from the restructuring.
From a bondholder perspective things could have played out a lot worse.

[Dod101]

But then I stood at a check out recently in maybe a Tesco. In front of me was a guy maybe about my age, who then had to fish in his wallet to find the bank card he was going to use, then the store card, both of which seemed to take an age and then the card was rejected and he had to try to remember his PIN number. It would have been quicker had he paid in cash. I have not used a wallet since I stopped working a long time ago and just carry a couple of cards in my pocket. Accessed in 20 seconds.
Dod

I no longer need even to carry my personal account card with me as it is installed on my phone. So all I need to do is put my phone on the supermarket card terminal to pay. Takes a lot less than 20 seconds!

I still carry several other cards around with me in my wallet though, including my driving license. Been glad to have it with me as I still find I need to produce it on the odd, rare occasion. My wallet also fills up with the receipts I always get. Once, I was challenged in the car park at M&S and virtually accused of stealing my bag of shopping. Very pleased to have had the paper receipt that day. Could have been very time-consuming proving I'd paid otherwise!

My kids laugh at me for not having the banking app on my phone but I would feel uncomfortable with that. Call me old fashioned. As for the receipt I always put it in my shopping bag just to cover the situation you mention. Anyway to remain vaguely on topic, digital banking in its different forms is definitely the future I am sure.

Dod

[BondSquared]

Another way of looking at it: none of the big banks the PRA had lined up (JPMorgan Chase, Santander, Lloyds, NatWest) could be convinced to come in at these terms. Instead, the Colombian billionaire daddy of one of Metro Bank's board members had to ride to he rescue, giving a whole new meaning to the term Bank of Mum&Dad.

Will this be enough?

At the extreme other end of the spectrum would have been a full wipeout of shareholders, T2s and seniors, which may have just been enough for a large bank to step in, if only to monetize the assets in an orderly way and transfer the customers across.

Metro Bank in no way is out of the woods yet..

[Lootman]

I no longer need even to carry my personal account card with me as it is installed on my phone. So all I need to do is put my phone on the supermarket card terminal to pay. Takes a lot less than 20 seconds!

I still carry several other cards around with me in my wallet though, including my driving license. Been glad to have it with me as I still find I need to produce it on the odd, rare occasion. My wallet also fills up with the receipts I always get. Once, I was challenged in the car park at M&S and virtually accused of stealing my bag of shopping. Very pleased to have had the paper receipt that day. Could have been very time-consuming proving I'd paid otherwise!

My kids laugh at me for not having the banking app on my phone but I would feel uncomfortable with that. Call me old fashioned. As for the receipt I always put it in my shopping bag just to cover the situation you mention. Anyway to remain vaguely on topic, digital banking in its different forms is definitely the future I am sure.

Yes, the only vaguely financial thing I will do on my phone is book travel if I do not have my laptop with me.

And re paper receipts, my other rule is to always have a paper backup, and never get myself in a situation where I am 100% reliant upon my phone. This was brought home to me the time my phone froze at the station when my train ticket was only on my phone.

[Dod101]

My kids laugh at me for not having the banking app on my phone but I would feel uncomfortable with that. Call me old fashioned. As for the receipt I always put it in my shopping bag just to cover the situation you mention. Anyway to remain vaguely on topic, digital banking in its different forms is definitely the future I am sure.

Yes, the only vaguely financial thing I will do on my phone is book travel if I do not have my laptop with me.

And re paper receipts, my other rule is to always have a paper backup, and never get myself in a situation where I am 100% reliant upon my phone. This was brought home to me the time my phone froze at the station when my train ticket was only on my phone.

I never get travel tickets on my phone. For short day trips I buy a ticket at the station and for long journeys I always carry paper tickets printed at home.

Dod

[GeoffF100]

As for the receipt I always put it in my shopping bag just to cover the situation you mention.

I always collect my receipt for that reason. Nonetheless, the digital banks provide instant notifications of card transactions, so you can always show security that you have just paid. I have a MasterCard debit card and a Visa credit card with a different bank. I also have a building society account that provides branch access if I need it.

[GeoffF100]

What I do find odd is that the clerks in the bank are always (unsuccessfully) trying to get me to "go online" or "download the app". Don't they realise that they would be out of a job if we all took their advice?

They get fired if they do not make themselves redundant.

[88V8]

Looks like there will be a 40% haircut on the subs ...

Yes, 40% haircut unfortunately. The new T2 will have a 14% coupon, callable in April 2029. No mention of step up/down if not called...
Edit: essentially that means a drop in running yield from 9.139% to 8.4% and 60k back for each 100k nominal in 2029/2034. My concern now is whether retail get shafted in some way. At least with the capital issues put to bed the new T2 should trade higher.

The subs were already trading around 60% before the latest hooha, and although the eventual 60% redemption is a pity it could have been a lot worse. At least the capital hierarchy has been respected.

It says in the announcement the subs haircut will be 45% unless they get a 75% vote by 13 October... presumably this needs a corp action, the brokers will have to get their skates on, I shall message ii in a mo. Or perhaps the 75% is already in the bag.

Anyway, 14% coupon is rather nice, so long as Metro can pay it. I appreciate why one might regard it as 8.4% but depending where one bought it's probably around 14% on capital committed.
Imagine we had been fully bailed in, that's the downside of a QCB, all very nice paying no CGT but equally no loss offset.

V8.... this outcome also means that I don't need to explain to OH where a little chunk of dosh has gone...

[88V8]

Yes, 40% haircut unfortunately. The new T2 will have a 14% coupon, callable in April 2029. No mention of step up/down if not called...
Edit: essentially that means a drop in running yield from 9.139% to 8.4% and 60k back for each 100k nominal in 2029/2034. My concern now is whether retail get shafted in some way. At least with the capital issues put to bed the new T2 should trade higher.

The subs were already trading around 60% before the latest hooha, and although the eventual 60% redemption is a pity it could have been a lot worse.
Anyway, 14% coupon is rather nice, so long as Metro can pay it. I appreciate why one might regard it as 8.4% but depending where one bought it's probably around 14% on capital committed.

Having read the announcement again, it says A 40% haircut, rising to 45% if 75% (by value) of noteholders of the Tier 2 Instrument do not enter into lock-up agreements supporting the Debt Refinancing by 13 October 2023, on the existing £250m Metro Bank Tier 2 Instrument, combined with a 60% notional exchange into a new Holdings 10NC5 Tier 2 Instrument at a 14% coupon; so unless there is a drafting infelicity it looks as if £100k of 44VG will become £60k of 10NC5.
In that case the coupon goes from 100 x 9.139% to 60 x 14% = which is as hirisk says a cut to 8.4%.

V8

[GeoffF100]

Metro has 2.8m customers and 76 branches according to recent articles. The UK has 75 million accounts according to the FCA. There are 5,500 bank and building society branches:

https://www.thisismoney.co.uk/money/sav ... treet.html

Metro has at least 3.7% of the customers, and 1.4% of the branches. It would not be accurate to describe it as a branch based bank. It is more than twice as digital as the market as a whole. Metro is opening branches while others are closing theirs, but they can hope gain a bigger share of the customers.

[hiriskpaul]

The subs were already trading around 60% before the latest hooha, and although the eventual 60% redemption is a pity it could have been a lot worse.
Anyway, 14% coupon is rather nice, so long as Metro can pay it. I appreciate why one might regard it as 8.4% but depending where one bought it's probably around 14% on capital committed.

Having read the announcement again, it says A 40% haircut, rising to 45% if 75% (by value) of noteholders of the Tier 2 Instrument do not enter into lock-up agreements supporting the Debt Refinancing by 13 October 2023, on the existing £250m Metro Bank Tier 2 Instrument, combined with a 60% notional exchange into a new Holdings 10NC5 Tier 2 Instrument at a 14% coupon; so unless there is a drafting infelicity it looks as if £100k of 44VG will become £60k of 10NC5.
In that case the coupon goes from 100 x 9.139% to 60 x 14% = which is as hirisk says a cut to 8.4%.

V8

I don't think T2 holders have been treated as fairly as they could have been here. T2 put in £100m, shareholders only £150m. I suspect that the larger T2 holders were also big holders of the £350m senior, which was left whole and got a coupon uplift in exchange for maturity extension. They also get the opportunity to buy more senior with a 12% coupon. So overall bondholders did not do too badly out of this.

I might consider buying more tomorrow, but need to see where the price settles first. Provident/Vanquis 5.25% maturing today, but knowing HL the proceeds will not arrive until 5 seconds before market close.