Dozens of Metro Bank staff will miss out on a share bonanza worth nearly £4m after market turmoil forced bosses to slash the price of the lender’s forthcoming listing.
Sky News has obtained documents sent to shareholders on Tuesday which disclose that the value of B-shares allocated to roughly 70 current and former Metro Bank executives will convert into ordinary shares worth just over £18m.
The payout will be worth £3.7m less than the price originally envisaged by Metro Bank’s advisers, who have decided to cut the price and scale of the new share sale.
Instead of raising at least £500m at £24-a-share, the high street lender now aims to raise at least £400m at £20-a-share.
The stock market listing has been delayed until next month, with Metro Bank founder and chairman Vernon Hill telling investors that it was a consequence of “market volatility” affecting the valuation of European banks.
Metro Bank’s revised share sale terms, which continue to include a prospective £100m top-up offer, would value it at around £1.6bn – still a healthy premium, in terms of book value, to its London-listed peers.
A circular to investors last month set an ambitious target for Metro Bank to expand its branch network from 40 to 110 by 2020.
Its board’s determination to list follows a turbulent start to the year for bank stocks in particular, with George Osborne, the Chancellor, saying recently that he would postpone a £2bn retail offering of Lloyds Banking Group shares because of the volatility.
Known for its dog-friendly branches and commitment to opening customer accounts within a few minutes, Metro Bank has convinced its roughly 450 private shareholders that it has stronger growth prospects than rivals.
Its premium valuation reflects the faith of Metro Bank’s investors in its founder and chairman Vernon Hill, but is likely to arouse some scepticism from institutions holding shares in other banks trading at well below their book value.
The lender’s quarterly results were published last month and revealed that deposits had increased by 78% to £5.1bn in the final quarter of 2015, while total loans more than doubled to £3.55bn.
Bank of America Merrill Lynch (BAML), Goldman Sachs, KBW and Royal Bank of Canada (RBC) are working on the IPO, while Moelis is advising the company.
Metro Bank is pursuing a public listing despite the threat of a future hit from the Treasury’s new Corporation Tax surcharge, which will target lenders earning more than £25m in annual profits.
Although it has made substantial losses since its launch because of the investment required to open new branches, Metro Bank’s board is confident that it will ultimately be highly profitable.
The bank’s internal forecasts suggest it is likely to make more than £25m in profit within a few years, meaning that it would fall within the new tax threshold.