March 7, 2020 | Posted by

Dear Mr Frumkin (

We have been one of the very few positive voices surrounding Metro Bank during the last several months as evidenced by our commentary HERE.

It is thus with dismay and incredulity that prompts us to write with regards to what seems, on the face of it, to be an abject disregard for the fate of your long (and indeed recent given the speed of the market capitalisation decimation this last 6 months) suffering shareholders.

The events of the last 12 months have been well rehearsed in the media but, at the close of play on the 6th March, the price to book of less than 0.15 times illustrates just how far sentiment has dropped in regards to Metro Bank. In a career spanning near 30 years in the markets involving the witnessing of the Scandi bank crisis in the mid 90’s, the GFC in 2007/09 and the Greek banking crisis between 2012-2016, I cannot find a single example of a bank that, in your own words, has a profile of a “fortress balance sheet” and no issue with NPL’s or a requirement to raise fresh equity capital where the price to book has been lower. This is a travesty of epic proportions for your shareholders.

Given your comments in the extensive post results conference call of near 2 weeks ago, it perplexes us why you do not enter into a share buyback given the clear surplus capital. This would firstly enhance ROE and secondly address the continued heavy short position by various hedge funds in the stock. Additionally, it is also perplexing why the Board does not show some solidarity with shareholders in buying stock at this lowly price. If the reason is that there are, as has been speculated (with numerous names in the frame including the ex Chairman & CEO Vernon Hill, Lloyds Bank, Clydesdale Bank, Virgin Money and even private equity), real takeover interest, then given your seeming inertia to the plight of your shareholders we urge you to engage constructively with such parties in extracting reasonable value for us. From raising fresh equity less than a year ago at £5 per share to see a stock price now hovering over just one pound frankly defies belief. At what stage do you act?

We note investors including The Spruce Partnership, Ennismore and Jamie Gilinski Bacal all increasing or being new entrants on the shareholder register in recent months and all now nursing material losses running to tens of millions of pounds. We find it hard to believe that these same investors are not putting pressure on you for decisive value enhancing action. A share buyback is the first step together with coming clean regarding the well placed speculation of takeover interest in the wider press.  Both you and your predecessor Mr Donaldson’s evasive comments on analyst calls when asked on this subject does your shareholders a disservice Mr Frumkin. At a price of, incredibly, 126p at the close of play on Friday and to quote Mr Donaldson, it is indeed your fiduciary duty to entertain any such offers. I am certain that most shareholders would jump at an exit at a realistic level of book value and we repeat, if you believe that there is meaningful upside here then buy some stock and align with your shareholders.

If you really do expect to be in this for the long term as you proposed in the conference call of 10 days ago and proceed to grow Metro Bank back to profits of your stated target of high single digits RoTE, then you need to start by addressing the ultimate litmus test of a quoted business – the market’s perception of it evidenced by it’s market capitalisation. Act now before it is too late on many counts.

Align Research