Down around 31% - thoughts?
Only that I noticed Metro was the most shorted company on this list a few weeks ago and had been high on the list for a while.
I wonder if long term it will lose out to digital start ups which have more innovative offerings
I think long term is going to be a challenge as things move more digital, but I’ve heard some good things about them and feel they may be better placed than some of the other high street banks, at least in the short term. As digital banks continue to improve, there will most likely be a push towards more differentiated / premium offerings such as FirstDirect / Metro - rather than Halifax / Santander.
I wonder if there will be a place for a physical branch in some capacity (e.g. safety deposit boxes) or if they will die out completely and be replaced by complementary services (e.g. post office branches, online services)? I guess a large component will be how long we maintain physical currencies.
Having said all of that, I think the stock was overpriced due to the growth story and more susceptible to problems such as this.
That coupled with the heavy short position is probably what’s caused such a big spike, I reckon today’s news isn’t actually a fair reflection of the effect this will have on future earnings.
They’re over-exposed to riskier loans that they thought, but the loans aren’t underperforming. They will need to increase their capital to cover theses loans as they’re viewed as higher risk, which will detract from some future profit. They also missed analyst expectations, but they were priced for ambitious growth so that’s to be expected!
They may still struggle to justify their price, but I think this particular move isn’t quite justified.
It may well drop further though!!
The important detail that, that story misses out is that
An error in the way Metro Bank accounted for risk in its loanbook was discovered by regulators at the Bank of England, not as part of a regular end of year review as it had previously said.
emphasis mine, quote from the FT
Business model aside, it’s the questionable governance i.e. things like this & the contracts with chairman’s wife’s company that concern me.
It’s getting worse:
I had a look into that, it’s not good but it’s not clear how many users are affected, even in the original story so I’m not sure it’ll have much of an impact -
Metro won the largest share with £120m. Others were Starling with £100m, and Tide ( in partnership with ClearBank ) with £60m. TSB, and CYBG didn’t succeed in their bid.
Quick summary -
& their share price just fell ~10%
It can use the RBS competition funds to plug the hole!
A post was split to a new topic: Removed posts 27.02.2019
It’s recovered a bit, back over £10 now, but if goes to £8 then I’ll think about buying some more. Not sure what the floor, or the ceiling is, it was over £15 yesterday. Should have sold then
It’s going a lot lower most likely. £7-£8 ish I guess.
What are your thoughts on the long term prospects of Metro Bank?
Not good, management is all over the place, banking is moving online. You don’t really need branches these days. The only thing going for them is the safe deposit boxes and even those are used by mainly the asian community (which is small in the UK compared to other races).
Metro Bank is going through an accounting scandal, so until the market knows how BAD it is, the price will keep falling.
I mean just look at what happened to Kraft Heinz, it’s a similar situation here. When people buy stocks with no concept of margin of safety, they lose a lot of money and never come back to the markets.
What signals indicated Kraft had issues say a few years ago? Or even that Metro Bank was bad at accounting until this scandal?
In terms of Metro, it’s a tricky one, it’s priced like a startup with potential growth which I guess it still is (?). Personally I’m not sure branches will ever fully stop, sure they’ll evolve, and there will be less of them, but in some cases they are needed. The good thing about Metro’s safety deposit boxes is they cover a large % of their branch rent. In other news they reported good numbers yesterday although maybe worth taking them with a pinch of salt given the accounting issues.