Metro Bank Backer Toll to ‘Sit, Hold and Pray’ as Shares Hit Low

(Bloomberg) -- A wealthy investor in Vernon Hill’s Metro Bank Plc is hoping the American tycoon can revive the British lender despite a 82% share price plummet this year.

Bruce Toll, one of a coterie of U.S. investors who have repeatedly backed Hill, took part in a 350-million pound ($425 million) capital increase in May that was supposed to shore up the lender amid a regulatory probe. Yet, the shares have tumbled by about 43% since then and traded at an all-time low of 294.4 pence on Wednesday in London.

“I really don’t understand it,” Toll, the 76-year-old founder of luxury property firm Toll Brothers Inc., said in a phone interview. “So for the moment, for the time being, I’m going to sit and hold and pray.”

London-based Metro Bank grew rapidly after launching in 2010 and now has more than 1.8 million customers. However, depositors and some investors fled this year as regulators probe how management applied a risk weighting that was too low on some of its mortgages, while analysts question its future profitability. The debacle has perplexed loyal backers such as Toll, whose family controls about 3% of the firm.

“I come to England once every couple of years, love the place, but I have no idea why the finance investors in the country have pushed down stocks so much,” said Toll. ”I’m hoping that it will go back up. I’ll sit and hold and hope that things recover.”

Toll has experienced his own roller-coaster ride on the stock market.

“One day you’re in favor, next day you’re out of favor, but as long as you turn around and make money, your stock will come back up,” he said. “Back in 1991, I thought we were going to go bankrupt, but we didn’t. We were able to hang on and we made more money than we ever thought in 2005. These things change.”

Hill, 73, signaled in July he would step down as chairman but remain as non-executive director at Metro, pleasing investors such as Toll who invested because of the founder and his track record. Before establishing Metro Bank, Hill founded New Jersey-based Commerce Bancorp Inc. with one outlet in 1973 and sold it 34 years later for $8.5 billion.

Metro’s latest capital raise received the support of several major backers including U.S. hedge fund billionaire Steve Cohen, who bought 6 million shares in the placing and remains the bank’s biggest shareholder. Fidelity Investments purchased about 7.3 million shares.

“I still have faith in him and I’m hoping that he’ll be there to guide them,” Toll said of Hill.

Meanwhile, the proportion of Metro Bank’s stock being used for short bets, or wagers that it will fall, soared to 18% in May and is now at around 9%, according to IHS Markit data. Hedge funds including Odey Asset Management, Marshall Wace LLP and ENA Investment Capital have made bets on further declines, Bloomberg data show. All three funds declined to comment.

Willett Advisors LLC, the investment arm for the personal and philanthropic assets of Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP, held shares in Metro Bank as of July 2018 that are now worth 1.5% of the company.

For Toll, the price slump could simply be an opportunity to acquire more stock. “If I have faith, I guess I ought to buy more,” he said.

--With assistance from Harry Wilson and Nishant Kumar.

To contact the reporter on this story: Donal Griffin in London at dgriffin10@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Marion Dakers, Keith Campbell

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