NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART IN, OR INTO
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN METRO BANK HOLDINGS PLC OR ANY OTHER ENTITY IN ANY JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE
Metro Bank Holdings PLC (LSE: MTRO LN)
8 October 2023
Metro Bank Holdings PLC ("Metro Bank") (the "Company")
Legal Entity Identifier: 984500CDDEAD6C2EDQ64
Metro Bank Announces Successful Capital Package:
Highlights
· Secured
· Capital Package significantly strengthens CET1 ratio, takes Metro Bank out of the CRD IV Combined Buffer and is expected to support Metro Bank's delivery of RoTE in excess of 9% in 2025 and low double-digit to mid-teens thereafter over the medium term.
· Delivers a pro forma 30 June 2023 CET1 ratio in excess of 13% and MREL ratio in excess of 21.5%.
· Provides opportunity to grow assets significantly over the coming years, via a gradual shift in asset side growth towards specialist mortgages and commercial lending to optimise risk adjusted returns; supported by continued success in raising deposits and driving current account growth.
· Equity raise led by Spaldy Investments Limited, Metro Bank's largest shareholder, which is contributing
· Refinancing extends the call date of the existing MREL Senior Instrument to 2028.
· In discussions regarding an asset sale of up to
· Continued positive trading in Q3 2023, made a statutory profit after tax and continued momentum in Personal and Business Current Account growth and customer acquisition.
· The Capital Package also allows Metro Bank to continue to evolve its products and services to meet the banking needs of its customers both digitally and in-store.
· The Capital Package is subject to certain customary conditions and regulatory approvals.
Daniel Frumkin, Chief Executive Officer at Metro Bank, said:
"Today's announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years. Metro Bank made a statutory profit after tax in Q3 2023, and continues to demonstrate ongoing momentum as we strive towards our ambition to be the
Our strong franchise is underpinned by our loyal customer base and engaged colleagues and we will continue to develop the Metro Bank offer to provide the digital and physical banking services our customers expect. We thank our shareholders and noteholders for their continuing support of Metro Bank and our customers."
Jaime Gilinski Bacal, founder of Spaldy Investments Limited, said:
"I have been an active investor in Metro Bank since 2019. The opportunity to become the Bank's major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service. I believe that the package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years."
Update on Recent Trading
Metro Bank made a statutory profit after tax in Q3 2023 with continued momentum in Personal and Business Current Account growth and customer acquisition, in line with expectations. The Company's Q3 2023 trading update will be published in early November 2023.
Agreed Capital Package
Metro Bank announces that it has secured a
As part of the Transaction, a number of existing shareholders have given commitments to provide
The liability management exercise via consent solicitation has secured 100% support from noteholders identified and is expected to reach 75% voting thresholds required for 100% noteholder participation involving the
The Debt Refinancing involves:
· a 40% haircut on the notional amount of the Tier 2 Instrument, 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, resulting in an increase to Metro Bank's CET1 capital of up to
· the exchange of the balance of the notional amount of the Tier 2 Instrument on a par for par basis for a new subordinated 10NC5 Tier 2 instrument to be issued by Metro Bank Holdings PLC with a coupon of 14%, a call date of April 2029 and a maturity date of April 2034; and
· the 100% (falling to 95% % if 75% (by value) of noteholders of the MREL Senior Instrument do not enter into lock-up agreements supporting the Debt Refinancing by 13 October 2023) exchange of the existing MREL Senior Instrument on a par for par basis into the New MREL Senior Instrument.
Metro Bank expects the Transaction to complete in Q4 2023.
Separate to the Transaction, the Company is in discussions regarding an asset sale of up to
The Transaction and Asset Sale will put Metro Bank in a strong position to accelerate earnings growth. Metro Bank is expected to deliver a RoTE in excess of 9% in 2025 and low double-digit to mid-teens thereafter over the medium term.
Details of the Capital Package
The Capital Package comprises three key elements: the Equity Raise, the new MREL Raise and the Debt Refinancing.
1) Equity Raise
·
· To complete in Q4 2023, subject to shareholder approval.
· The Equity Raise has been led by Spaldy Investments Limited, Metro Bank's largest shareholder, which is contributing
· The Equity Raise includes a subscription by Daniel Frumkin, Chief Executive Officer at Metro Bank, of up to
· The Equity Raise includes a subscription by James Hopkinson, Chief Financial Officer at Metro Bank, of up to
· The shares will be issued at a price of
2) Debt Refinancing and Maturity Extension
· Liability management exercise via consent solicitation securing 100% support from bondholders identified and expected to reach 75% voting thresholds required for 100% noteholder participation in:
o 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
o A 100% (falling to 95% % if 75% (by value) of noteholders of the MREL Senior Instrument do not enter into lock-up agreements supporting the Debt Refinancing by 13 October 2023) notional exchange on the existing
· To complete in Q4 2023 subject to noteholder approval.
3) New MREL Raise
·
· To complete in Q4 2023, subject to noteholder approval.
The Equity Raise, new MREL Raise and Debt Refinancing are inter-conditional and are subject to shareholder, noteholder approval as well as a number of additional conditions. Shareholder approvals will include special and ordinary resolutions, together with an ordinary resolution of the independent shareholders (being those not participating in the Equity Raise) to approve a waiver of Rule 9 of the City Code on Takeovers and Mergers.
Asset Sale
In addition, Metro Bank is in discussions to execute the Asset Sale, which will further enhance its capital ratios.
· Metro Bank is in discussions regarding the sale of up to
· The sale is expected to be CET1 ratio and MREL ratio accretive, reducing RWAs by c.
Morgan Stanley is acting as Lead Financial Adviser, Debt Financial Adviser and Asset Sale Adviser. RBC Capital Markets is acting as Financial Adviser, Sponsor and Sole Bookrunner on the Equity Raise. Moelis is acting as Debt Financial Adviser. Linklaters LLP is acting as Legal Adviser.
Background to and rationale for the Capital Package
Metro Bank was founded in 2010 as the first full-service, independent, new high street bank to open in the
Metro Bank has built a platform with scalable and robust infrastructure, while staying true to the Company's community banking model. However, current capital levels constrain the Company's ability to grow lending balances significantly in the near term.
Metro Bank's existing
The Board of Metro Bank believes that subject to easing of capital constraints, there is opportunity for the Company to grow assets significantly over the coming years. The envisioned growth strategy includes a gradual shift in asset side growth towards specialist mortgages and commercial lending to maximise risk adjusted returns and would be supported by continued success in raising deposits and driving current account growth, with planned store openings in the North of
The Company expects to deliver[1]:
· Asset rotation towards specialist mortgages (with average LTVs assumed to be in-line or below current profile) and commercial lending
o Loan book contraction in 2023E owing to the portfolio sale; double digit CAGR from 2024E to 2028E driven by shift towards specialist mortgages and commercial lending
· Overall deposit balances are expected to experience low to mid-single digit growth in 2025E and 2026E
o An increase in share of Instant Access and cash ISA products is expected over time. Current account balances are still expected to grow notwithstanding the recent increase in deposit outflow rates in advance of the announcement of the Capital Package
· NIM step up approaching 3% in 2026E
o Steady growth in 2024E NIM supported by the loan portfolio sale whereby additional cash is redeployed into treasury portfolio at higher yields
· Cost reduction plan launched in Q4 2023, cost savings of
o Cost:income ratio will continue to reduce y-o-y but expected to remain above 60% until 2027E
· RoTE in excess of 9% in 2025 and low double-digit to mid-teens thereafter over the medium term
· 40% blended risk weight
· Transaction results in an illustrative pro forma 30 June 2023 CET1 ratio in excess of 13% and MREL Ratio in excess of 21.5%
Spaldy Investments Limited
Spaldy Investments Limited, which currently has a 9.2% shareholding in Metro Bank, is owned and controlled by Mr Jaime Gilinski Bacal, who has had long-term investments in the banking sector including in
Timetable
· Publication of a prospectus and shareholder circular in the coming weeks.
· Launch of consent solicitation process in respect of the Debt Refinancing and documentation of the new MREL Raise in the coming weeks.
· Expected completion of the Capital Package in Q4 2023.
· Further announcements will be made in due course.
Conditions of the Capital Package
The Capital Package is subject to a number of conditions, which include:
· Interconditionality between the Equity Raise, new MREL Raise and the Debt Refinancing. Metro Bank has received commitments from shareholders for the Equity Raise and commitments from investors for the
· Shareholder approval of the Equity Raise (special and ordinary resolutions), including independent shareholder approval (ordinary resolution of independent shareholders) of a Rule 9 waiver for the purposes of the City Code on Takeovers and Mergers;
· Approval of the consent solicitations for the Debt Refinancing by the requisite majorities of the holders of the existing MREL Senior Instrument and Tier 2 Instrument. Note Metro Bank has received 100% support from noteholders identified and expects to achieve the 75% voting thresholds required for 100% noteholder participation (enabling 100% take-up of the debt refinancing);
· Formal PRA Change of Control approval for Spaldy Investments Limited having been received; and
· Formal PRA notifications and permissions having been made and granted, as applicable.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (which forms part of
For more information, please contact:
Metro Bank Investor Relations
Jo Roberts
+44 (0) 20 3402 8900
Metro Bank Media Relations
Tina Coates / Mona Patel
+44 (0)7811 246016 / +44 (0) 7815 506845
Teneo
Charles Armitstead / Haya Herbert Burns
+44 (0)7703 330269 / +44 (0) 7342 031051
Morgan Stanley
Lead Financial Adviser
Paul Miller / Colm Donlon / Nishil Bhagani / Matthew Jarman
Debt Financial Adviser
Alex Menounos / Matteo Benedetto / Charles-Antoine Dozin
Asset Sale Adviser
Noreen Whyte / Tristan Collier
+44 (0)20 7425 8000
RBC Capital Markets
Financial Adviser, Sponsor, Bookrunner and Corporate Broker
Oliver Hearsey / Elliot Thomas / Kathryn Deegan
+44 (0)20 7653 4000
Moelis & Company
Debt Financial Adviser
Matthew Prest
+44 (0)207 634 3567
IMPORTANT NOTICES
This announcement has been issued by and is the sole responsibility of the Company. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its accuracy or completeness. The information in this announcement is subject to change.
A copy of the Prospectus and Circular, once published, will be available on the Company's website at https://www.metrobankonline.co.uk. Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement. The Prospectus and Circular will provide further details of the Transaction, including securities being issued pursuant to the Equity Raise and the Debt Refinancing.
This announcement is not for publication or distribution, directly or indirectly, in or into
This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase or subscribe for, or any solicitation to purchase or
subscribe for any securities in any jurisdiction. No offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, any securities will be made in any jurisdiction in which such an offer or solicitation is unlawful. The information contained in this announcement is not for release, publication or distribution to persons in
No representations or warranties, express or implied, are made as to, and no reliance should be placed
on, the accuracy, fairness or completeness of the information presented or contained in this release.
This release contains certain forward-looking statements, which are based on current assumptions and estimates by the management of the Company. Past performance cannot be relied upon as a guide to future performance and should not be taken as a representation that trends or activities underlying past performance will continue in the future. Such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements. These risks may include, for example, changes in the global economic situation, and changes affecting individual markets and exchange rates.
The Company provides no guarantee that future development and future results achieved will correspond to the forward-looking statements included here and accepts no liability if they should fail to do so. Neither the Company nor any of its advisers undertakes any obligation to update these forward-looking statements or to publicly release any revisions that may be made to these forward-looking statements, which may result from events or circumstances arising after the date of this release.
This release is for informational purposes only and does not constitute or form part of any invitation or inducement to engage in investment activity, nor does it constitute an offer or invitation to buy any
securities, in any jurisdiction including
holding or selling any securities.
This announcement is an advertisement for the purposes of the Prospectus Regulation Rules of the
Financial Conduct Authority ("FCA") and not a prospectus and not an offer to sell, or a solicitation of an offer to subscribe for or to acquire securities. Neither this announcement nor anything contained herein shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the Prospectus to be published by the Company in due course.
RBC Europe Limited (trading as "RBC Capital Markets"), which is authorised by the Prudential Regulatory Authority (the "PRA") and regulated by the FCA and the PRA in the
Morgan Stanley & Co. International plc ("Morgan Stanley"), which is authorised by the PRA and regulated by the FCA and the PRA in the
Moelis & Company
Cautionary statement regarding forward-looking statements
This announcement contains forward-looking statements, including with respect to financial information, that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could", "is confident", or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this announcement and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Company's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. No representation or warranty is made that any forward-looking statement will come to pass.
You are advised to read the Prospectus and Circular in their entirety, and, in particular, the section of the Prospectus headed "Risk Factors", for a further discussion of the factors that could affect the Company's future performance and the industry in which it operates. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements, including statements regarding prospective financial information, in this announcement may not occur. These statements are not fact and should not be relied upon as being necessarily indicative of future results, and readers of this announcement are cautioned not to place undue reliance on the forward-looking statements, including those regarding prospective financial information.
No statement in this announcement is intended as a profit forecast, and no statement in this announcement should be interpreted to mean that underlying operating profit for the current or future financial years would necessarily be above a minimum level, or match or exceed the historical published operating profit or set a minimum level of operating profit.
Neither the Company nor any of its advisers is under any obligation to update or revise publicly any
forward-looking statement contained within this announcement, whether as a result of new information, future events or otherwise, other than in accordance with their legal or regulatory obligations (including, for the avoidance of doubt, the Prospectus Regulation Rules, the Listing Rules and Disclosure Guidance and Transparency Rules).
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