Metro Bank plans £500m sale of loan book to private equity firm

Metro Bank is beefing up its senior management and preparing to sell a £500 million portfolio of mortgages to restore confidence among investors.

The struggling lender is set to sell the portfolio, which is thought to be mainly made up of loans to landlords, to Cerberus Capital Management, the private equity firm.

Shares in Metro bounced 27¾p to close at 500p on the news, which comes two days before it reports its results for the first half of the year. Sky News first reported the talks with Cerberus.

Metro announced two appointments to its executive committee yesterday. Daniel Frumkin, a Briton has who worked at Royal Bank of Scotland, Northern Rock and, most recently, the Bermuda-based Butterfield Bank, will join as chief transformation officer with a brief of improving efficiency and customers’ experience. Cheryl Newton, a Canadian technology specialist who has worked for banks including JP Morgan and Lloyds, will become chief information officer. Both are 55.

The bank is searching for one or more new directors to join its board. Critics are pressing for Metro to replace Vernon Hill as its chairman.

Metro was set up by Mr Hill, 73, in 2010, winning the first new banking licence in the UK in more than 100 years. It now has 67 branches, 1.7 million customers and a £22 billion balance sheet, built on its customer-friendly model of seven-day opening and high service levels. At its peak in spring last year, Metro was worth £3.5 billion.

However, it has been struggling with scepticism about its business model and criticism of its corporate governance. It shocked the stock market in January by revealing that it had wrongly assessed loans to companies and landlords, requiring it to increase its risk-weighted assets by £900 million and to hold more capital than it had expected.

Metro has lost four fifths of its value from its £3.5 billion peak in March last year. The London-based lender raised £375 million in May at £5 a share, but last week dipped below that level.

The bank yesterday confirmed that “discussions regarding the potential sale of a loan portfolio are taking place”. Metro did not give details of what loans it is in talks to sell. John Cronin, an analyst at Goodbody, the broker, said they were likely to be among those whose riskiness was underestimated.

Metro appears to be unwinding part of two earlier deals where it bought assets from Cerberus for £1.1 billion.

Selling all the miscategorised loans at their face value of about £1.6 billion would increase its core equity tier 1 capital, a key measure of financial strength, by 2.4 per cent, Mr Cronin said.

Analysts at Exane BNP Paribas said Metro could also free up capital by securitising about £2 billion of its loan book, but both moves would reduce revenues and profitability.

Asos issues loses a quarter of its value overnight as sales plummet

Asos lost almost a quarter of its value yesterday after a bungled warehouse overhaul knocked the online retailer’s sales growth off course and prompted its third profit warning in a year.

Investors fear one of the brightest names in retail is coming under intense pressure from rivals while its investment-hungry business model stumbles.

Asos was founded in 2000 by Nick Robertson, 51, grandson of the founder of fashion label Austin Reed, and his brother Nigel.

It listed on Aim in 2001 at 20p a share and enjoyed an explosion in sales and value as it cornered the fast-fashion market. It has 18.4 million customers, more than a billion visits to its website and employs about 4,400 people.

Yesterday’s warning sent the shares down by 636p, or 23.2 per cent, to £21.07, meaning the company’s value has fallen by 65 per cent this year.

Investors appeared to be unmoved by the chairman Adam Crozier’s attempt to support the business by buying £100,000 worth of shares.

Asos said that its pre-tax profit will now be about £30 million to £35 million this year, £20 million less than analysts expected. Total sales grew 12 per cent to £919.8 million in the four months to June 30, far below its typical growth rate of 25 per cent.

The company blamed a disastrous IT upgrade at its Berlin warehouse which meant its automated software couldn’t cope with the volume of returned clothes. This resulted in stock clogging up its supply chain, a shortage of goods and customers not being able to buy what they wanted from its website. Nick Beighton, the chief executive, said: “The European customer experience has not been as good as it once was or should be”.

He said the problems should be fixed by September, although analysts at Investec warned that if they remained by November’s peak trading during Black Friday the company would face “calls for management changes and further severe downgrades”.

Asos’s US ambitions have been hampered as its Atlanta warehouse has only been able to stock half the fashion ranges the retailer sells in the UK after third-party brands ran into border control difficulties.

US customs require extra details about the chemical composition of clothes and manufacturer documentation, which a clutch of smaller brands did not have the resources to handle.

Mr Beighton, 50, said there wasn’t an issue with customer demand and highlighted that the number of visits to the website had grown by almost a fifth, but order volumes lagged at 11 per cent.

“In any business of scale there is complexity, it’s unavoidable,” he added. “We are turning from a UK-centric seller into a local international operator and that requires proper muscle and infrastructure to deliver.”

The collapse in the share price means that Asos is worth £1.7 billion, significantly less than its smaller rival Boohoo’s £2.4 billion market value. Boohoo made sales of £856.9 million compared with its rival’s £2.4 billion revenue.