Major cost cutting to continue for embattled mortgage lender
When it launched fourteen years ago, Metro Bank arrived with much fanfare planning to shake up the high street. Now it is battling its way out of a deep hole that has seen a South American billionaire rescue it, an exit from mainstream mortgages, and a new focus on specialist lending.
Metro Bank has just announced that it is pushing forward with significant job cuts as part of its £80 million cost-saving initiative, marking the latest step in its ongoing turnaround strategy. The troubled lender is set to announce the elimination of around 300 roles, targeting business operations, IT, and support divisions. These reductions come on top of previous layoffs, as the bank grapples with its recovery following a £925 million rescue deal last year, which saw Colombia’s second richest man Jaime Gilinski Bacal take control of the company.
Earlier this year, Metro Bank cut 1,000 jobs—around 22% of its workforce—and ended seven-day trading across all its branches. The decision to trim even more positions follows an expansion of the bank’s cost-cutting goal, which rose from £50 million to £80 million in March after the lender reported a £17 million loss for 2023. At that time, CEO Daniel Frumkin who helped oversee the restructure of Northern Rock indicated that further job cuts were likely as part of the company’s efforts to return to profitability.
Read more: How specialist lenders are replacing the high street banks
Metro Bank, which made waves when it was co-founded by U.S. billionaire Vernon Hill in 2010 as the UK’s first new High Street lender in 150 years, has experienced a rocky journey. Initially lauded for its customer-friendly approach, which included seven-day branches and even dog-friendly locations, the bank has faced several challenges. These included missing out on the digital banking revolution, a major accounting scandal in 2019, and leadership shakeups that culminated in Hill’s resignation. By autumn last year, the bank was in crisis, forcing it to seek an emergency capital injection.
Under the direction of Gilinski, Metro Bank is now undergoing a transformation, moving away from its identity as a challenger to traditional high street lenders. As part of this shift, the bank has sold £2.5 billion of its £7.5 billion residential mortgage portfolio to NatWest and plans to wind down the remainder of its mortgages over the next five years. Borrowers will either repay their loans or refinance with other providers. This change signals Metro’s exit from the mainstream mortgage market, a key component of its original strategy.
Instead, Metro is pivoting to focus on specialist lending, particularly targeting small and medium-sized enterprises (SMEs). "We need to start to do a little bit less volume and a little bit more margin," Frumkin said, outlining a future where 70% of the bank's loans will be directed toward SMEs and 30% toward niche mortgage markets, including shared ownership, buy-to-let, and high-net-worth individuals who earn bonuses rather than traditional salaries.
Despite this new focus, Metro Bank intends to maintain its network of high street branches, known for their opulence, featuring imported Canadian wood and Italian marble—a rarity in an age when other banks are shuttering branches in favour of digital services.
This ambitious overhaul, combined with the bank's forecast to return to profitability by year’s end, has boosted investor confidence. Last week, Metro Bank’s shares soared over 35% to 55p, the bank’s largest weekly gain since its initial public offering (IPO) in 2016. Although the road has been challenging, Metro's management is optimistic about the future, aiming to cement the bank’s place in the UK’s financial landscape as a specialist lender rather than a traditional high street competitor.
So far in 2024, Metro Bank’s shares have increased by 64.75%, showing signs of recovery, though they remain significantly below their 2018 peak. With around 3,150 employees remaining after this latest round of cuts, the bank is hoping to stabilise and regain momentum after a tumultuous period.
