Metro Bank suffers big losses and reins in branch expansion plans

Metro Bank plunged to a massive loss on Wednesday as the ailing lender downsized its ambitions by handing back millions aimed at boosting challenger banks.

The dog-friendly bank has been reeling from a share price crash after accounting errors forced it to raise money from investors.

Founder chairman Vernon Hill and chief executive Craig Donaldson quit in the wake of the disaster.

New chief Dan Frumkin, who replaced Donaldson this month, today unveiled plans to get back on track with a cost-saving drive which will see the number of Metro store openings fall drastically. Sixty fewer branches will open than planned between now and 2024. The biggest cutback is in the north, where 15 will open instead of 30.

Because it will open fewer stores, Metro will return £50 million to the government backed fund set up to boost challenger banks. The Banking Competition Remedies, set up to redistribute money RBS was fined, originally granted Metro £120 million to help boost lending to smaller businesses.

Fewer branch openings means the money is surplus to requirement. Metro’s £50 million will be handed to other competitors this year.

Metro reported a statutory loss of £131 million for last year after writing off IT projects Frumkin will be scrapping and paying millions in legal fees to deal with regulatory probes. These include investigations into sanctions breaches with Iran and Cuba.

Eye-watering costs to run the company are damaging the bottom line. Although no jobs will be cut, Frumkin will axe costly back-office space and use more robots for automatic processing.

The firm pays £65 per square foot for a back office near St Paul’s, for example, which could be done at cheaper locations, he said.

Frumkin also said Metro Bank’s new stores could be smaller. The bank is known for its large open-plan branches in prime central London locations.

“We are really just going to do a momma bear store, a poppa bear store and a baby bear store,” he said. “We just need to have stores that are right sized for where we are going into, so it’s appropriate for the communities we are trying to serve.”