Tuesday, February 9, 2016

Vernon Hill's bank raises $637M, delays IPO

Hedge, real estate, mutual funds double down

Vernon Hill's bank raises $637M, delays IPO

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Vernon W. Hill II  at  his Metro Bank office in London.
Vernon W. Hill II at his Metro Bank office in London.

Metro Bank Plc, the fast-growing 25-branch British bank started by Commerce Bancorp founder Vernon Hill, has raised $637 million (385 million UK pounds, corrected) from past investors including hedge funds SAC (Steve Cohen) and Moore Capital, mutual fund managers Fidelity Investments and Wellington Management Co. (whose clients include Vanguard Group), and real estate investors Reuben Brothers and Richard LeFrak, among others. 

UPDATE: Metro says it sold the shares at 13 UK pounts each, up 30% from its previous sale price in June 2012 and boosting total capital-raising to date above $1 billion. The money will be used to open more branches and make more loans, said Metro. The bank's "Tier 1" capital to loan ratio now tops 63%, roughly 10 times what regulators require. Metro has been seeking borrowers to put its capital to work and try to earn a profit. 

EARLIER: Metro had planned an initial public stock offering (IPO) this year, but that has been put off until at least 2016 as the company invests heavily in hopes of building future market share, and eventually showing a profit, when interest rates rebound, someday. The bank previously raised around $200 million in 2010 and another $200 million in 2012.

Instead of going public, Metro increased the private offering by more than 50% as investors oversubscribed. Hill's own holding dropped to 9%, from 13% before the latest sale.

British banks have been unprofitable in recent years, with low interest rates and low borrower demand squeezing earnings. The opposition Labor Party has urged breaking up Barclays and a handful of other dominant institutions; Hill, who says Metro is growing by poaching customers from the dominant banks, says government should stay out, British newspapers have reported.

With its glass-walled branches, fast-moving teller lines, and simple (though not cheaper-than-market) product offerings, Metro is modeled on the former Commerce Bancorp (now part of TD). Two other banks Hill backs in the U.S., Commerce of Harrisburg and Republic of Philadelphia, are also modeled on the old Commerce. 

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About this blog

PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, 215.854.5194, @PhillyJoeD. Read his blog posts at http://www.philly.com/PhillyDeals and his Inquirer columns at http://www.philly.com/philly/columnists/joseph-distefano/. Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

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