Exclusive: Metro's biggest shareholder open to selling stake, sources say

Jaime Gilinski Bacal, the majority shareholder of Metro Bank with a 52.87% stake, is reportedly open to selling his stake following a 140% share price increase since the October 2023 recapitalization. Private equity firms Pollen Street Capital and BC Partners previously made an offer for Metro Bank but ceased efforts due to valuation disagreements and board rejection; a merger with another lender is also a possibility for Metro Bank, which returned to profit in the second half of last year and anticipates further profitability improvements through 2025.

Analysis

Metro Bank's majority shareholder, Jaime Gilinski Bacal, is reportedly exploring a sale of his 52.87% stake, effectively putting the bank in play. This consideration follows a significant 140% rebound in the bank's share price since the October 2023 recapitalization which he led. Recent M&A interest from private equity firms Pollen Street Capital and BC Partners resulted in a rejected offer due to valuation disagreements, signaling that the board and its primary shareholder have a high valuation threshold. Beyond an outright sale, a strategic merger to foster growth is also being considered as a viable option. This corporate activity is underpinned by a notable improvement in the bank's fundamentals, having returned to profitability in the second half of 2023. Management has provided a confident outlook, guiding for a return on tangible equity (ROTE) to reach mid-to-upper single-digit levels in the current year and double-digit levels in 2025. A further catalyst for profitability is expected as over £2 billion of low-yielding treasury investments mature, with the capital to be redeployed at higher rates, boosting the bank's net interest margin through 2026 and 2027.

Key Decisions for Investors

• Investors should consider that Metro Bank is an active M&A target, which could support a valuation premium, but be aware that the board has already rejected one offer, indicating a high price expectation.
• Closely monitor the bank's progress toward its stated goals of mid-to-upper single-digit ROTE this year and double-digit ROTE in 2025, as achieving these targets is crucial to justifying a higher valuation, with or without a deal.
• Acknowledge the speculative nature of the takeover reports; the stock's valuation remains vulnerable if a transaction fails to materialize, at which point it would trade primarily on its fundamental recovery trajectory.
• Watch for an expansion in Net Interest Margin over the next two years, as the flagged migration of £2 billion in maturing investments to higher-yielding assets represents a tangible catalyst for bottom-line growth.