Metro Bank Shares Plunge as Deal Talks End With Carlyle
Carlyle, Metro Bank End Deals Talks in Setback to Consolidation
(Bloomberg) --
Carlyle Group Inc. has ended talks to take over Metro Bank Plc, underscoring the challenges facing dealmakers in the U.K. banking sector.
Shares in the lender fell 20% as of 8:07 a.m. in London as the two sides said Thursday they had ceased discussions, two weeks after they were disclosed.
“The board continues to strongly believe in the standalone strategy and future prospects of Metro Bank,” the British lender said in response to a Carlyle release noting the talks had ended.
The U.K. lender said in a Nov. 4 statement that it was engaging with the private equity firm on a possible offer, confirming an earlier Bloomberg News report. Shares in the bank had surged as much as 43% on the news.
Calls for consolidation have been gaining momentum among smaller U.K. lenders, which themselves face new competition from branchless rivals like Monzo Bank Ltd. and Revolut Ltd. Metro Bank was started in 2010, becoming the first new retail lender to open its doors in the U.K. in more than a century.
What Bloomberg Intelligence Says:
Carlyle’s departure from Metro Bank talks highlights the challenges of M&A as a potential solution for the lender. Metro has limited capacity to solve its strategic obstacles without fresh capital, we believe. Volume growth is needed to return the bank to profitability, but the rapidly eroding CET1 ratio is a constraint, with Metro also on track to breach MREL requirements.
-- Georgi Gunchev, BI banking analyst
But deals for banks are hard to execute, as requirements to hold regulatory capital make it harder to squeeze out returns. Lenders’ branch networks can also be expensive to maintain. Spain’s Banco Sabadell SA said in October that it had rejected a bid from the U.K.’s Co-operative Bank Holdings Ltd. to gain control of rival lender TSB Bank Plc.
Willett Advisors LLC, an investment arm for philanthropic assets of Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP, is an investor in Metro Bank.
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