Metro Bank, the UK high street lender, is reportedly in talks about a potential takeover by private equity group Pollen Street. The company, which is also a major shareholder of unlisted lender Shawbrook, has approached Metro Bank about acquiring it.
Analysts at Keefe, Bruyette and Woods (KBW) have upgraded their recommendation for Metro Bank to “market perform” after the news sent shares soaring 16% to 129.8p. They believe that there is commercial logic in a takeover, given Shawbrook’s high deposit costs and Metro Bank’s cheap current account funding.
Shawbrook has been delivering commercial loan growth, but its funding costs are relatively expensive at 5.6%. Meanwhile, Metro Bank has ambitious plans for growing its commercial lending, which have yet to gain traction. KBW noted that the potential benefits of a takeover include reducing deposit costs and maintaining asset growth momentum.
However, challenges remain, including whether Metro Bank’s management and shareholders are willing to retire their strategy early and if Pollen Street can agree on a price with Shawbrook’s owners, the Gilinski family. The group owns around 53% of Shawbrook’s shares and would face a significant gain of over 330% if they sell.
Source: https://www.proactiveinvestors.co.uk/companies/news/1073054/metro-bank-deal-with-shawbrook-owners-looks-logical-say-analysts-1073054.html