10 years of Metro Bank: From the first banking licence in over 150 years to now

It hasn’t all been smooth sailing...

Metro Bank, which is often hailed as one of the first, and most successful, UK fintechs, is celebrating its 10th birthday this week. 

The bank is getting Heather Small (of M People fame) to help the institution celebrate by performing an exclusive (remote) concert via Metro Bank’s YouTube channel. 

So, as the milestone birthday is just around the corner, we thought it a good idea to take a look back at the last decade of Metro Bank. 

Strong Foundations 

Metro Bank made headlines in 2010 after founders Anthony Thompson and Vernon Hill secured a banking licence, making Metro Bank the first high street bank in over 150 years. 

Hill and Thompson spent two years pulling together the cash needed to open the bank, to the tune of £75m, which included funds from investment fund Fidelity. 

On 29 July 2010, the bank opened its first branch in Holborn, London, with plans to open more than 200 stores in its first two years. 

Despite having grand plans to open over 200 branches, to date, Metro Bank only has 70 branches across the UK. 

Just three years after its grand opening, Metro Bank announced the opening of the UK’s first drive-thru bank in Slough. 

Following a strong first-two years, Metro Bank raised an additional £126m to open further branches in London. 

By September 2013, Metro Bank had amassed over 250,000 accounts and was on track to open a new branch every month. 

However, the massive growth the bank saw didn’t last forever. 

Rocky waters ahead 

In the first quarter of 2013, the bank suffered a loss of £8.8m, taking its total loses to more than £100m in its first three years. 

Metro Bank claimed that this was planned and just a result of the extreme growth the new bank was planning. 

To date, Metro Bank now has just over 1.7m customers, including nearly 20,000 SME customers. 

Despite the slowdown in growth, Metro Bank filed for an IPO in March 2016 and hit an initial valuation of £1.6bn. 

Shares in the high street bank began trading at around the £2.20 mark.  

However, in 2019 the bank began to lose the trust of its hordes of customers following an accounting blunder that wiped £800m of the bank’s value and also saw its shares plunge by over 40 per cent. 

Shares in the company now trade at just £1.13. 

Accounting error 

Metro Bank’s blunder saw customers queue outside branches to withdraw their money from the bank, as Metro Bank tried to raise £350m to correct the accounting mistake.  

Following the turbulence, Metro Bank’s profit’s halved and customers move their accounts elsewhere after losing trust in the bank. 

Metro Bank’s woes deepened even further after it was ejected from the FTSE 250 after the bank’s shares tumbled by 90 per cent in a year following the accounting blunder. 

Several executives exited the bank following its ejection from the FTSE 250, including CEO Craig Donaldson, founder and Chairman Vernon Hill.  

Chief risk officer Aileen Gillan, who was responsible for “management and oversight of the risk and control framework across the bank” and also “ensuring that Metro Bank fulfils its regulatory obligations”. 

In 2019, the bank fell into a £113m-deep hole of losses, following a profit of £40m the year previous. 

Tides Turning? 

Following the accounting error, which saw the bank falsely classify what was later discovered to be £900m worth of loans as less risky than they actually were, it looked as if Metro Bank would struggle to regain momentum. 

However, following a rocky end to 2019 and start of 2020, the bank looked to be moving in the right direction. 

In mid-February, interim CEO Dan Frumkin scored the top job and has since set about turning the fortunes of the struggling high street bank. 

Under Frumkin’s leadership, Metro Bank has been one of the standout lenders under both the Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan scheme, although they were accredited to the latter rather late in the game.  

Metro Bank has also recently moved to acquire peer-to-peer lender RateSetter to bolster its SME banking offering even further, although a deal is yet to have been struck. 

So, what can we expect from the UK’s first challenger bank in the next ten years? Who knows? But, let’s hope it goes a bit smoother than the first ten.