The Bank of England’s regulatory arm is understood to have approached a number of big lenders in the past few days, including NatWest and JP Morgan Chase, to see if they had any interest in the embattled high street rival Metro Bank.
JP Morgan Chase examined a potential bid to take over the whole of Metro after speaking to the Prudential Regulation Authority (PRA) but decided on Saturday night not to go ahead with it, a source said.
NatWest was also asked to look at buying the total business, and may yet consider a sale of Metro’s mortgage book, as previously reported.
The PRA has hired the consultancy EY for the process of sounding out potential buyers and it is understood it is seeking a buyer for the whole of the business rather than selling off parts.
Metro has reportedly spent the weekend trying to thrash out a rescue package with investors before markets reopen on Monday. Bloomberg News reported that the bank has been holding talks with bondholders about a debt restructuring to be carried out alongside an injection of new equity from shareholders.
It also emerged that Metro received an approach in recent weeks from the digital-only rival Shawbrook Bank, although it was unclear if Shawcross was one of the banks approached by the PRA.
JP Morgan decided against a bid for Metro because it was deterred by the extra capital it would have to put in, according to the Financial Times, which first reported the news. A deal would have been done through its UK digital banking business Chase UK, which launched two years ago and has more than a million customers.
Metro’s board was approached by Shawbrook in recent weeks about a potential deal, first reported by Sky News, but did not respond to the offer, sources familiar with the matter said.
Shawbrook, a UK specialist savings and lending bank, has been exploring a number of possible tie-ups with banking peers, having also approached the Co-operative Bank for one earlier this summer.
Metro Bank, NatWest, JP Morgan, EY, Shawbrook and the PRA declined to comment.
The reports follow a tumultuous week for Metro. Its shares plummeted by a quarter on Thursday, the day after it revealed it was considering raising hundreds of millions of pounds from investors. However, they rebounded 21% to 45.25p on Friday after reports that it had been sitting on an offer for a £600m capital injection from bondholders since Monday.
Metro is also considering selling off up to 40% of its mortgage book, in order to shore up its balance sheet and ensure it can continue to expand. Without that extra funding, its ability to lend could be put at risk.
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Metro is still operating within the regulator’s capital limits but is doing so within a “buffer”, meaning it will need to raise more cash from investors to grow the business in any meaningful way.
The lender was founded in 2010 by the American billionaire Vernon Hill, the first new high street bank to launch in the UK in more than 150 years. It has 2.7 million customers, 76 branches – mostly in the south of England – and holds about £15.5bn-worth of UK customer deposits.
Victoria Scholar, the head of investment at the trading platform Interactive Investor, said Metro “has long been facing financial difficulties resulting in a dismal share price performance, down over 98% in five years”.
She added: “After the US mid-sized banking crisis as well as the forced rescue deal for Credit Suisse earlier in the year, Metro is yet another worry in the sector.
“However, it is a problem unique to the bank itself rather than a sector-wide issue. But it highlights just how difficult it is for a challenger bank to compete with the longstanding dominant heavyweight lenders.”