Metro Bank to Cut Costs, Sell Assets to Move Past Tough Year

(Bloomberg) --

Metro Bank Plc shares lost nearly a fifth of their value after the struggling British lender unveiled plans to cut costs and sell assets in the wake of an accounting scandal.

The bank reported a pretax loss of 130.8 million pounds ($170 million) for the year as it wrote off technology projects, vowed to move back-office jobs to cheaper locations and open fewer branches. Metro said it would focus more on specialty mortgages, small- and medium-sized business and unsecured loans.

The losses included 27 million pounds in remediation after Metro Bank revealed errors last year in how it accounted for risk in some of its mortgages -- a misstep that U.K. regulators are investigating. Metro Bank will also return 50 million pounds of the 120 million pounds it was awarded last year to boost competition in British retail banking.

“An enhanced focus on costs, improved productivity, and investment in our infrastructure will enable our deposit-led franchise to deliver profitable growth over the medium term,” Dan Frumkin, who became the bank’s permanent chief executive officer this month, said in a statement.

Frumkin told analysts there were “no sacred cows” in the revamp, saying Metro Bank could close branches if they fail to make money, in a departure from founder Vernon Hill’s bricks-and-mortar strategy.

The lender’s shares fell as much as 19.3% in morning trading in London. The stock has fallen almost 90% in the past 12 months.

“There is nothing concrete in any of this to support the revised 2024 targets,” John Cronin, an analyst at Goodbody, wrote in a note. “Radical action with the help of third party loan assets (or potentially a fast injection of much lower cost deposits, which feels unlikely) is needed.”

To contact the reporter on this story: Silla Brush in London at sbrush@bloomberg.net

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

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