2 May 2013 – The Times
Metro Bank almost tripled in size in 2012, adding to evidence that customers are switching to start-up banks. Loans at Metro Bank increased 300 per cent to £168 million, while deposits rose 279 per cent to £576 million. The bank, which was set up three years ago by American billionaire Vernon Hill with a single branch in Holborn, central London, is still tiny compared to the UK’s big banks, but said its rate of growth showed “no signs of slowing”.
Yesterday Aldermore, another new bank started by former Barclays executive Phillip Monks, said it had increased overall lending by more than 75 per cent last year and increased its balance sheet by 60 per cent to more than £2.5 billion. Unlike Metro, which is still making losses, Aldermore posted a maiden net profit of £800,000 compared with a £900,000 loss in the previous year. During 2012, Aldermore, which is backed by private equity firms AnaCap and Morgan Stanley Alternative Investment Partners, loaned more than £1 billion to small businesses and more than £1 billion to homeowners. Aldermore is now the sixth-biggest net lender in the Government’s Funding for Lending scheme, which provides cheap funding to banks on condition they lend to businesses and households.
In comparison, Metro has kept a brake on growing its loans, saying that it wants to build a strong reserve of deposits first. Sceptics have said the strategy will make it hard for the business to break into profit as it is impossible to generate a return on deposits because interest rates are so low. Metro made a £34.6 million loss after tax for the year to December 31 following heavy investment in new branches, which it calls “stores”, and was in line with its expectations, the company said. After much wrangling with the Financial Services Authority, Mr Hill won the first new banking licence after the financial crisis. The venture was backed by investors including the Reuben brothers in Britain and Richard LeFrak, the New York-based property developer.
In June 2012, Metro Bank raised a further £126 million in growth capital from new and existing institutional and personal investors. Several investors backed Mr Hill’s original banking venture Commercebank, which he started in 1973 and sold to Canada’s Toronto-Dominion Bank in 2008 for about £4.25 billion. Mr Hill plans to float Metro on the stock market next year.