After a reporting error that caused the exit of its chief executive and chairman in 2019, Metro Bank has announced that it is scaling back its expansion efforts and moving away from lending for mortgages, according to a report by the Financial Times.
The bank’s new CEO Dan Frumkin said that “there is no doubt there is a steep hill to climb,” but added that the bank could turn things around even after posting losses that beat estimates.
“The core strategy is not the problem. Execution has been poor – we’ve not been driving revenues where we should, costs are too high and we underinvested in certain areas,” he said.
Frumkin is a restructuring specialist who was put in his new position last week after working on an interim schedule in 2019. The bank, which had a plan to rapidly expand its branches and lend heavily in the mortgage realm, was forced to curtail those objectives when it was revealed that it was miscategorizing some loans when figuring capital requirements.
After the error was revealed, the bank was forced to raise $484 million in new shares. The issue is being investigated by both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority.
Frumkin said on Wednesday (Feb. 26) that he didn’t know how long the probes would take, but that they “have got some time to run.”
Metro’s new plan involves growing deposits at a rate of less than 10 percent per year until 2024, and focusing on current inexpensive accounts instead of going after savings offers.
The bank also plans to cut back on opening new branches, and will instead remodel some branches to reduce costs. The bank’s lending business will focus on products that bring in more revenue, like specialist mortgages and unsecured consumer loans.
Although the move won’t require large job cuts, Metro said it will relocate many functions away from its large London headquarters.