U.K. challenger financial institution Metro Bank is struggling to find a buyer as potential suitors are turned off by the bank’s expensive business model, the Financial Times reported Friday (Dec. 27).
Metro Bank emerged as a possible acquisition target in the months following an accounting scandal earlier this year resulting in the ousting of senior leadership and a regulatory investigation. The bank still lacks a permanent chief executive officer or chairman, reports noted.
Potential bidders for the bank included Blackstone, Centerbridge, Warburg Pincus and BC Partners, but none had decided to submit an offer, the publication said, citing unnamed sources who explained that investors are deterred by Metro’s reliance on physical bank branches and an expensive bond issue earlier this year. Metro Bank may not be able to record a profit until 2021 because of the costs of servicing the more than $458 million in debt raised in October, reports said.
One unnamed source that reportedly considered a bid for Metro said the bank’s focus on physical branches — a departure from competitors’ focus on digital banking — is “the reason nobody’s invested.” Reports said Metro Bank is planning to further expand its physical network, which currently includes 70 bank branches across the U.K.
Ropes & Gray London attorney Kiran Sharma told the publication that Metro’s lack of revenue generation could deter private equity investors, though could encourage other investors specializing in distressed assets, or another bank, to submit a bid.
Despite the barriers, some analysts say the current political climate in the U.K. could ramp up the U.K.’s M&A market and encourage investors to reconsider their interest in Metro Bank.
“The fact that some of the [political] uncertainty has been removed will give some people more confidence,” said one unnamed source close to Metro Bank in an interview with the publication. “But you have to believe in the model, there’s no getting away from that.”