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AUTHOR
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8/13/19 3:57PM
Re: Re: Re: Any thoughts at this price?
49
Good question puppyeh. Before I answer, I should clarify that "I wouldn't be surprised" didn't mean I think an acquisition is the most likely case or imminent in any way. Just that it would surprise... login to read the rest
thanks wrangler for the detailed comments. i'm interested to hear why you think they would be acquired. they are a challenger physical bank in a saturated market with, as you say, perhaps a structurally challenged... login to read the rest
Since the write up, the capital issues have caused MREL costs to jump and increased the capital needs of the business above what I previously assumed; and at the same time the macro situation has... login to read the rest
I don't think they will have a problem getting the rights issuance done. There's £596MM of tangible book value excluding all the real estate. There's another £190MM of freehold land and buildings and another £236MM of leasehold improvements. At a... login to read the rest
I do think the original thesis is broken. The AIRB not until “at least” 2021 is a big deal. And their new guidance is basically that they’ll be an average bank in five... login to read the rest
At this point the thesis is completely broken- just for completeness, here's a summary of all the bad news they announced on Tuesday:
Raising 350M GBP of equity capital and have "standby committed underwriting" without clarifying... login to read the rest
Luckily no position here, besides the T2 bonds for some clients recently. Thx for pointing them out bdad!
I liked how after all that, he ended on how great 2018 was and how much more there... login to read the rest
What a disaster, that call couldn't have been worse. They went from projecting AIRB waiver H2 2019 to "not before 2021." As of the trading update 4 weeks ago they said the RWA issue would... login to read the rest
Page 20:
https://www.metrobankonline.co.uk/globalassets/documents/investor_documents/metro-bank-2017-pillar-3-disclosure.pdf
At 12/31/17, there were 8.51bn loans "Secured by mortgages on immovable property" with associated RWA of 3.32bn, a risk density of 39%. From the annual report, we know that resi mortgages were 6.23bn. If... login to read the rest
Thanks for the insights. Can you describe where and how you observe the variability in RWA intensity for the "secured lending other than resi mortgage"? Where is the Pillar 3 disclosure?
Wrangler, this was my interpretation as well. There are exceptions to the RWs that allow for CRE loans to be weighted at 50% and BTLs to be weighted at 35%. Presumably, they thought (or thought... login to read the rest
Disclaimer: I'm not a EU/UK regulatory expert... But perhaps there is a kernel of truth to the "misinterpeted" story... I still doubt it, but I found this http://www.prarulebook.co.uk/rulebook/Media/Get/78b537c5-5567-40c6-9c63-3493470b7d68/PRA_2014_26/pdf which could at least provide some basis for a... login to read the rest
I guess my word choice was wrong. That will be the second time this week as another CEO informed me that something illegal may not be criminal (there is a difference as well)...
You are correct;... login to read the rest
hkup, when you write, "seems unlikely this is an absolute fraud" because it is either stupidity or they "tried to play aggressively in order to grow the loan book faster," I consider the latter to... login to read the rest
Shareholders equity was 1,404MM as of 9/30/18, but that included ~176MM of intangible assets (from 6/30/18 balance sheet). So TBV is 1,228MM or 1,260/share.
How it happened is in my opinion either deception on the part of management, or more likely just gross negligence. I don't think there's any other possibility. This is the rule:
BIPRU 3.4.89 Exposures or any part of... login to read the rest
Thanks. Very helpful.
"That said, we're now trading at TBV and well below BV."
Please ignore my stupidity when it comes to banks. Isn't TBV around ~1400/shr? So we're around 78% of TBV 1090/1400 (I was wrong
While I agree that it's important who found it, I'm even more interested in how this happened to begin with. Was it an error of incompetence or an error of willful intent? To me, the
I posted about this at the same time as you, so see that other post for other thoughts, but respoinding directly to your post:
I agree they won't need to raise equity and can just park deposits... login to read the rest
Re: Re: Re: Re: Re: Q4 Pre-Announcement / Capital Issue
25
I think Craig Donaldson's days with Metro are numbered after this latest news:
https://www.ft.com/content/cfa9cfec-2532-11e9-b329-c7e6ceb5ffdf
"In a statement on Thursday, however, the bank acknowledged that “ongoing supervision by the PRA helped to identify” the issue. Mr Donaldson did... login to read the rest
Re: Re: Re: Re: Q4 Pre-Announcement / Capital Issue
24
Agreed that Clysdale IRB approval is very positive for Metro. Also I assumed 17.5% as a risk weighting and Clydesdale is at 16.25% and noted they expect to trend downward overtime as they take conservative... login to read the rest
"I believe the reason none of the challenger banks have been on the IRB approach is because without enough data over enough time, you can't have confidence that the models will hold up under changing... login to read the rest
I agree, your 2nd point is definitely a risk. Here are my preliminary thoughts:
They've been meeting frequently with the PRA (described by Donaldson as quarterly if not monthly) working on the AIRB modeling for more... login to read the rest
Thanks for the update wrangler, my 2 concerns coming out of the announcement were 1) capital requirements and 2) impact to AIRB waiver. On the first, I agree with you that I certainly hope they... login to read the rest
Assuming for a second that todays announcement is the only cockroach in the kitchen, I think the impacts are manageable. I was assuming this would be an 18-20% ROE bank at maturity, so the increased RWA... login to read the rest
moneytr33, I agree that there hasn't been any indication of lower credit quality.
2/3s of the loan book is residential mortgages which in the UK have historically had very low default rates even during the crisis because they... login to read the rest
Wrangler, what work have you done on the credit quality piece of the business? Our view is that NIM compression doesn't kill banks, loan losses do. So far there's been no indication of any deterioration... login to read the rest
It's definitely worth less the more likely a hard brexit becomes, which has become more likely. Although I still think it's highly unlikely.
Mark Carney estimated a hard brexit could cut housing prices by 35%... I'm... login to read the rest
Seems Like there is little to no floor for this stock. Do others think that Brexit and flattening yield curve impact metro’s prospects to the extent the market is pricing in?
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