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

Jaime Gilinski Bacal is considering selling his majority 52.87% stake in Metro Bank after a rebound in the bank's share price following a £325 million recapitalization in 2023. Private equity firms Pollen Street Capital and BC Partners made an offer for Metro Bank, but the offer was rejected due to a valuation disagreement. Metro Bank's shares have risen approximately 140% since the recapitalization, and the bank anticipates improved profitability with return on tangible equity expected to grow to double digits in 2025.

Analysis

Colombian billionaire Jaime Gilinski Bacal is reportedly exploring strategic options, including a potential sale, for his 52.87% majority stake in Metro Bank, held via Spaldy Investments. This consideration follows a significant rebound in the bank's share price, which has risen approximately 140% since its £325 million equity recapitalisation in October 2023, an event where Gilinski was a key participant. Despite this rally to 125.8 pence per share, giving the bank a market value of £844 million, the stock remains considerably below its March 2018 peak of £40. M&A interest has materialized, with private equity firms Pollen Street Capital and BC Partners recently making an offer for Metro Bank; however, this was rejected by the board due to valuation disagreements, highlighting active but challenging strategic discussions. Gilinski is also reportedly open to a merger to expand Metro Bank. Operationally, the bank returned to profitability in the second half of 2023 and forecasts its return on tangible equity (ROTE) to reach mid-to-upper single digits in the current year, accelerating to double digits in 2025. Further underpinning its positive outlook, Metro Bank anticipates a boost to its net interest margin through 2026-2027 from the repricing of over £2 billion in maturing treasury investments into higher-yielding assets. This potential corporate activity occurs within a dynamic UK banking M&A landscape, and while analysts suggest regulatory capital reforms could benefit mid-sized banks like Metro, the timing and impact of such changes remain uncertain.

Key Decisions for Investors

• Investors should evaluate Metro Bank considering both the potential for a control premium from a successful M&A transaction initiated by the majority shareholder and the ongoing operational improvements indicated by projected ROTE growth and NIM expansion.
• Careful attention is warranted on valuation expectations, as evidenced by the rejected bid, and any future developments regarding new offers or alternative strategic combinations for the bank.
• Monitor the progress of anticipated regulatory capital requirement reforms for UK mid-sized banks, as these could materially impact Metro Bank's financial flexibility and investment case, alongside the inherent risks associated with a stock still significantly below its historical highs.