Metro Bank

[BondSquared]

There is definitely demand for brick-and-mortar branch banking, just like there is demand for brand new Porsche sportscars at £1000. The problem is that those who want branches aren't willing to pay for the extortionate cost of running them.
If someone doesn't use a cash machine, wouldn't the solution be to help/educate them, rather than put a building in the most expensive part of town and staff it, and do it again in the next town and then next? Makes me think Martin Lewis has a point in campaigning for compulsory financial education in school.

In any case, back to Metro Bank - their capital position was always weak, and even in the best case outcome from this mess their profits will be gone after selling the top performing assets from their balance sheet (they can't sell the underperforming assets as that would require a discount, eating into their thin capital base). Difficult to see a positive outcome.

[88V8]

It's said there is/was a bondholder meeting today to thrash out a deal for market opening Monday.

For some reason I was not invited.

V8

[GeoffF100]

he problem is that those who want branches aren't willing to pay for the extortionate cost of running them.

The technophobes that I know do pay more. They have bog standard current accounts with no perks, because they cannot manage to move them. They get miserable rates of interest on their savings too. The big banks did not charge more when they did operate a full branch service. The building societies are still offering a full branch service.

If someone doesn't use a cash machine, wouldn't the solution be to help/educate them, rather than put a building in the most expensive part of town and staff it, and do it again in the next town and then next?

That is easier said than done, even if they have good eyesight and dexterity. There needs to be some provision for the people who cannot cope.

[Kantwebefriends]

A few years ago the Nottingham BS opened a couple of branches near us, having persuaded themselves that there would be a demand for their services. I thought that was resourceful, brave, and probably wrong-headed. They closed some time ago.

[Lootman]

It matters if enough people think that it matters. I do most of my banking in person at branches and they are frequently crowded with people trying to get their business done.

In my case when I withdraw cash I usually want specific denominations of banknotes. I do not want what the machine gives me by default.

If I am paying in a large cheque I much prefer to have a human being do that for me than trust a machine to not swallow it without trace.

And so on. It is a service and I expect to be served.

Understood. How much extra are you willing to pay for the brick-and-mortar service? I assume you don't want to freeride on the cost savings generated by those bank customers who prefer online and telephone banking, so just wondering what premium you're willing to pay. There are plenty of private wealth management focussed banks serving the market for customers requiring a personal service.

Nothing extra. I expect those who want extra convenience to subsidise me in return for being given extra choices.

[genou]

He's spent the bulk of his adult life walking past them if he's lived in the UK.

Yes, but he has always considered them to be far too challenging for him to tackle.

That makes him quite a niche market, which takes us back to

I am afraid that most would see Lootman's requirements as somewhat eccentric and I cannot see the average bank being very concerned about not being able to service him.

[Lootman]

Yes, but he has always considered them to be far too challenging for him to tackle.

That makes him quite a niche market, which takes us back to

I am afraid that most would see Lootman's requirements as somewhat eccentric and I cannot see the average bank being very concerned about not being able to service him.

I use cash machines. Although I was a late adopter - I think I started using them around 30 years ago. I still prefer to withdraw cash in the branch so that I can specify my denominations.

Eccentric or not, there are still plenty of bank branches and people who want to use them. And in fact I could argue that I get better value out of my bank and its in-person service offerings than someone who does all their transactions online. After all, in both cases, current account banking is "free", the only cost being the forgone interest on any balances. I certainly do not buy any of their junky paid products and services. Banking is a utility.

[Dod101]

That makes him quite a niche market, which takes us back to

I use cash machines. Although I was a late adopter - I think I started using them around 30 years ago. I still prefer to withdraw cash in the branch so that I can specify my denominations.

Eccentric or not, there are still plenty of bank branches and people who want to use them. And in fact I could argue that I get better value out of my bank and its in-person service offerings than someone who does all their transactions online. After all, in both cases, current account banking is "free", the only cost being the forgone interest on any balances. I certainly do not buy any of their junky paid products and services. Banking is a utility.

Yes. I am not being critical simply pointing out that nowadays your requirements will be seen as eccentric. I am not sure when I last used a cash machine. I use one every two or three months to extract maybe £100 to cover small items of expenditure where the shop will only take cash. Without really thinking about it I am now almost cashless and pay for everything by card if possible. In fact I would probably find it difficult not to.

Dod

[genou]

Eccentric or not, there are still plenty of bank branches and people who want to use them.

But all the branches that close do so on the basis that footfall in them has fallen to the point where having staff on hand is a dead loss. And that's across all the banks, and all locations. So the question remains whether the number of people who want a branch is enough to support a particular branch. Then you have to work out whether there can be enough such branches to support a business at decent scale. And if you are not cross-subsidising the people who want to turn up in person from the people who don't, you need to persuade your customers to pay a premium for the service.

[Lootman]

I use cash machines. Although I was a late adopter - I think I started using them around 30 years ago. I still prefer to withdraw cash in the branch so that I can specify my denominations.

Eccentric or not, there are still plenty of bank branches and people who want to use them. And in fact I could argue that I get better value out of my bank and its in-person service offerings than someone who does all their transactions online. After all, in both cases, current account banking is "free", the only cost being the forgone interest on any balances. I certainly do not buy any of their junky paid products and services. Banking is a utility.

Yes. I am not being critical simply pointing out that nowadays your requirements will be seen as eccentric. I am not sure when I last used a cash machine. I use one every two or three months to extract maybe £100 to cover small items of expenditure where the shop will only take cash. Without really thinking about it I am now almost cashless and pay for everything by card if possible. In fact I would probably find it difficult not to.

To my mind the issue of whether or not to be cashless is a bit different from the issue of whether or not to bank online or in person.

Also bear in mind that I spend all my time in towns and cities. There are a dozen bank branches within walking distance of where I spend much of my time. So it is really no more of a hardship to visit my bank branch than it is to visit the greengrocer or the barber.

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?

[Alaric]

I certainly do not buy any of their junky paid products and services.

For a number of years, banks seemed to regard their branches as outlets for selling these. Perhaps over time they realised how much the inevitable mis-selling claims were costing and thus one of the points of having High Street premises was removed.

[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?

[BondSquared]

... and back to Metro Bank, we are indeed in the end game, and more and more are advocating a PRA-led writedown / "sweetener":

https://www.ft.com/content/fe6f375e-c52 ... 34e64cb581

JPMorgan Chase studied a bid for Metro Bank before opting not to proceed, as the UK challenger bank seeks to shore up its balance sheet.

The US banking group decided on Saturday night that it would not proceed with a potential deal because of the extra capital a new buyer would have to put in, according to two people familiar with its deliberations.
The lender, which set out a decade ago to challenge the dominant players in UK retail banking, is hoping to finalise a deal that would secure it new funds before the stock market opens on Monday.
Metro, which opened its first branches in 2010 and floated six years later, sought to shake up the UK banking sector with its flashy branding, its branches offering free dog biscuits and coin counters it branded Magic Money Machines. But the lender’s shares cratered in 2019 after a serious accounting error.
If the talks with bondholders fail, potential acquirers are watching closely to see whether there is any political or regulatory intervention that would improve the terms of the deal.
Analysts at Autonomous said in a note on Friday that it was “very hard to see how the maths makes sense for any buyer absent material sweeteners”, estimating that the bank would be short about £500mn in equity if it were sold because any buyer would have to revalue assets.

The great benefit of hindisight - had I known that they offered dog biscuits at their branches to lure customers into their brick-and-mortar museums then I would have properly shorted the ords.

[Lootman]

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.

Don't make the mistake of thinking that everyone who uses cash or visits bank branches is a clueless geriatric.

I am getting on but I have some online-only savings and investment accounts, so they do not scare me. For that matter I have worked on online systems in the City.

But for day-to-day banking I still use (some) cash and still visit bank branches. A few reasons for that:

1) I always prefer doing business face-to-face when I can
2) If I have a problem I want to be opposite a bank employee. It is too easy to get ignored on the phone; in person I am not going anywhere until I get what I want.
3) A lot of people and businesses still like or prefer to be paid in cash.
4) You can still get discounts for cash on occasions.
5) I may not want my entire financial life being known to others.

[BondSquared]

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.

Don't make the mistake of thinking that everyone who uses cash or visits bank branches is a clueless geriatric.

I am getting on but I have some online-only savings and investment accounts, so they do not scare me. For that matter I have worked on online systems in the City.

But for day-to-day banking I still use (some) cash and still visit bank branches. A few reasons for that:

1) I always prefer doing business face-to-face when I can
2) If I have a problem I want to be opposite a bank employee. It is too easy to get ignored on the phone; in person I am not going anywhere until I get what I want.
3) A lot of people and businesses still like or prefer to be paid in cash.
4) You can still get discounts for cash on occasions.
5) I may not want my entire financial life being known to others.

and yet you're not willing to pay for 1) through 5), even though times have changed. There are plenty of banks who will come visit you at home, face-to-face, if it makes financial sense to them.

[GoSeigen]

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

[Mike4]

The great benefit of hindisight - had I known that they offered dog biscuits at their branches to lure customers into their brick-and-mortar museums then I would have properly shorted the ords.

I was never offered any dog biscuits when I tried to open an account at the Newbury branch of Metro Bank. But then it wouldn't have worked with me as I don't really like them.

[BondSquared]

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

wait - almost 40% reduction in bank branches since 2012? That's a lot more dramatic than I had thought. Gee.

Fully agreed that legacy banks use their recovering income stream to cover the cost of their branches.

[daveh]

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.

[Lootman]

Don't make the mistake of thinking that everyone who uses cash or visits bank branches is a clueless geriatric.

I am getting on but I have some online-only savings and investment accounts, so they do not scare me. For that matter I have worked on online systems in the City.

But for day-to-day banking I still use (some) cash and still visit bank branches. A few reasons for that:

1) I always prefer doing business face-to-face when I can
2) If I have a problem I want to be opposite a bank employee. It is too easy to get ignored on the phone; in person I am not going anywhere until I get what I want.
3) A lot of people and businesses still like or prefer to be paid in cash.
4) You can still get discounts for cash on occasions.
5) I may not want my entire financial life being known to others.

and yet you're not willing to pay for 1) through 5), even though times have changed. There are plenty of banks who will come visit you at home, face-to-face, if it makes financial sense to them.

Competition is such that banks compete even to offer free current accounts. I guess banks consider that as a loss leader to draw you into their ecosphere, hoping to sell you stuff. Ditto branches. My credit cards are free as well.

And in a sense I do pay since I get no interest on my current account balances.