Metro Bank, once known for its flamboyant branch openings and prominent high street presence, is undergoing a strategic shift under the leadership of Dan Frumkin, the American turnaround specialist who took the helm as chief executive in 2020. In a recent interview, Frumkin revealed that the bank’s priorities are now centred on attracting small business and corporate customers, marking a departure from its previous emphasis on retail banking.
Frumkin acknowledged that while personal current accounts and savings remain a crucial aspect of Metro Bank’s identity, the institution will no longer be rushing to open new outlets in prime locations. Instead, the bank will adopt a more calculated approach, ensuring that each new branch makes financial sense and caters to the needs of its target customer base.
This strategic pivot is exemplified by the bank’s recent branch opening in Gateshead, situated in a more industrial area than the bank would have previously considered. Frumkin explained that this location was chosen after careful screening, taking into account the strong presence of small businesses and commercial entities in the vicinity.
The shift towards business banking is driven by Frumkin’s belief that this segment offers a more promising path to profitability. As part of this transition, Metro Bank has streamlined its workforce, cutting 1,000 jobs and reducing branch opening hours. Despite these changes, Frumkin maintains that the branch model remains viable and anticipates opening an additional 10 to 15 branches over the next three years, albeit in less prominent locations.
Metro Bank’s recent sale of a £2.5 billion mortgage package to NatWest underscores its intention to focus on niche lending, positioning itself as a competitor to specialised lenders like Shawbrook. This move comes as the bank continues to navigate the challenges posed by an accounting error in 2019 and increased capital requirements imposed by the Bank of England.
Last October, Metro Bank secured a complex rescue package, with Colombian billionaire Jaime Gilinski Bacal acquiring a 53 per cent stake in the institution. Despite reporting a pre-tax loss of £33.5 million in the first half of this year, Frumkin’s recent statement that the bank will return to profitability in the last quarter has ignited investor interest. He also boldly predicted that by 2027, Metro Bank will rank among the most profitable banks in Britain in terms of return on equity.
The market responded positively to Frumkin’s optimistic outlook, with Metro Bank’s shares surging 37 per cent to close the week at 54.4p, resulting in a market value of £344 million. However, the bank still has significant ground to cover, as its shares remain well below their 2018 peak of over £40.
As Metro Bank embarks on this new chapter, its success will hinge on its ability to effectively serve the needs of its corporate and small business clientele while maintaining a strategic presence on the high street. The coming years will be crucial in determining whether Frumkin’s vision can restore the bank’s fortunes and establish it as a leading player in the UK banking landscape.
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