Metro Bank co-founder Vernon Hill stepped down as chairman with immediate effect on Wednesday, as the UK challenger bank’s latest quarterly results showed further fallout from a major reporting error earlier this year.
Chief executive Craig Donaldson refused to rule out accepting a takeover as it prepared to outline a new strategy to cut costs and return to profit after reporting a net loss of £4.9m for the third quarter.
“We are focused on an organic way forward but . . . should something occur we will treat it with the right respect because that’s the fiduciary duty of the board,” Mr Donaldson told analysts on Wednesday evening.
The company’s third-quarter loss widened from £1.2m in the previous quarter, but compares with a £10m profit in the same period last year.
The bank said a bungled bond issue in late September led customers to make net deposit withdrawals of £213m for the month, setting back its efforts to return to deposit growth. Overall customer deposits increased £428m over the third quarter to £14.2bn, but remained well below the £15.7bn figure achieved at the end of last year.
Some large customers began withdrawing funds from Metro earlier in the year after it revealed it had been miscategorising commercial loans when calculating how much capital it needed against them, forcing it to raise new equity.
Its efforts to win back customers by increasing interest rates offered to savers weighed on its net interest income, which fell 10 per cent in the third quarter from a year ago to £77m.
The reporting error and subsequent share price collapse exacerbated long-running criticism of Mr Hill, who had founded US lender Commerce Bancorp. He had previously agreed to stand down by the end of the year, but on Wednesday said he would leave the role and then step down from the board at the end of the year.
Michael Snyder, the bank’s senior independent director, will take over as chair on an interim basis, subject to regulatory approval. Mr Hill would be given the honorary title of “chairman emeritus” to recognise his “extraordinary contribution” to the bank.
Sir Michael said Mr Hill “leaves a lasting legacy of creating fans through exceptional customer service and has revolutionised British banking.”
Metro and some of its senior managers are being investigated by the Financial Conduct Authority and Bank of England over the reporting mistake and the way it was communicated to investors.
Concern about the investigations meant that last month the bank initially failed to attract investors to buy a new bond that was required to meet new EU regulations. However, it pulled off the deal the following week after offering a higher interest rate. The high interest payments on the debt will weigh on the group’s income for the next few years, which Mr Donaldson said would be a factor in the group’s strategic review.
Joseph Dickerson, analyst at Jefferies, predicted Metro would look to cut costs by curbing its store expansion plans.
Mr Hill said: “I wish all of our fans — Metro Bank’s customers, colleagues and shareholders — every success for the next stage of the journey. As always, the best is yet to come.”
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