British challenger bank Metro put up for sale

By Iain Withers and Muvija M

LONDON, Nov 12 (Reuters) - Britain's mid-tier lender Metro Bank put itself up for sale on Thursday as part of a strategic review, opening the door to a potential takeover after a years-long drive to change its fortunes and sending its shares up 7%.

The bank, which had a market capitalization of £1.2 billion ($1.6 billion) as of Wednesday's close, said in a statement it was not in active discussions with any potential bidder and had not received any offer.

Colombian billionaire Jaime Gilinski Bacal owns a majority stake in the bank after leading an equity recapitalisation of the Metro three years ago.

Reuters reported last year that Gilinski was open to selling his stake and around that time had received interest from investors.

Metro Bank opened in 2010 as Britain's first new retail bank in more than a century, forming part of a wave of so-called challenger banks seeking to disrupt the dominance of the UK's established high-street lenders. It listed on the London Stock Exchange six years later.

It has undergone a turnaround under CEO Dan Frumkin, who took the helm in 2020 after a series of major setbacks for the bank, including disclosing an accounting error in 2019 that pummeled the company's share price.

Gary Greenwood, an analyst at Shore Capital, said in a note that the bank had enjoyed a "remarkable recovery" since its recapitalisation.

"In our view, an all-cash sale to private equity appears the cleanest outcome, allowing Gilinski to exit his controlling position," he said.

"A specialist-bank combination could offer strategic logic but would likely require paper consideration, while a larger bank may be reluctant to pay up for Metro Bank’s expensive branch network," Greenwood said.

Metro Bank has drafted in investment bank Morgan Stanley to advise it on the potential sale.

If the formal sales process does not lead to a transaction, Metro Bank will continue to execute on its strategy as a standalone business, the statement said, adding it was on track to hit its performance targets through to 2028.

Turnaround efforts at the bank have included cost cuts, acceleration into higher-return lending for companies and offering specialist mortgages.

($1 = 0.7543 pounds)

(Additional reporting by Rishab Shaju and Shashwat Awasthi in Bengaluru; Editing by Mrigank Dhaniwala, Tomasz Janowski and Emelia Sithole-Matarise)