Metro Bank - capital ratios and stock price

jonnygee2

I think it depends on the consequences of losing the money. The risk of Metro failing and not being bought out is low, but not zero.

If you are 20k over the limit and its just surplus cash, then I'd consider the risk tolerable. But if the amount is large and losing it could cause serious cash flow problems or bankruptcy, I wouldn't be taking any risk at all with that and would have moved it already.

colsten

jonnygee2 wrote: »

The risk of Metro failing and not being bought out is low, but not zero.

I am not sure why people are so confident that someone would want to buy Metro. The hundreds of millions of pounds loans wrongly classified as lower risk won't attract any buyers, not even if Metro can be bought for a pound. These loans are toxic and can't be detoxed by changing the lender.

System

colsten wrote: »

I am not sure why people are so confident that someone would want to buy Metro. The hundreds of millions of pounds loans wrongly classified as lower risk won't attract any buyers, not even if Metro can be bought for a pound. These loans are toxic and can't be detoxed by changing the lender.

It's unlikely that Metro (as is) would exist post-takeover - tranches of the business would be migrated to a new provider/s.

e.g. when Dunfermline BS miscalculated business loans - most of the customer base & operations were migrated to Nationwide BS.

jonnygee2

The hundreds of millions of pounds loans wrongly classified as lower risk won't attract any buyers

The loans are still profitable. The problem is that there is not enough capital set against them to satisfy regulators, and Metro cannot easily raise the required capital.

A large bank could easily satisfy the capital requirements (they need around £350m, which frankly to the likes of LBG or Barclays is small change) and potentially pick up a large and profitable loan book and/or aquire a large retail customer base for a very decent price.

But, most likely, Metro will raise the capital via investment and carry on as normal.