Metro’s Accounting Errors Cost Bank Top Clients

Some of Metro Bank’s largest customers left the institution following revelations of accounting mistakes, according to Wednesday (May 1) reports in the Financial Times.

The FI’s Chief Executive Craig Donaldson said “adverse sentiment” caused the departure of some of those clients in the first quarter of the year, resulting in a 4 percent drop in deposits quarter-over-quarter. “A small number of large commercial and partnership customers” decided to leave the bank, he said.

Earlier this year, the Bank of England discovered the misclassification of a significant number of commercial loans within Metro Bank, leading to a 54 percent drop in share price and calls for the resignation of top executives, including Donaldson.

“There has to be a new chief executive,” said one unnamed fund manager in an interview with the news outlet in January. “The regulator spotted this, but now they need to follow through.”

Donaldson has stayed on board, and reports this week said the financial institution is working out a share issue to raise capital, though Metro stayed mum on specific details of the initiative. Its Q1 earnings report noted plans to complete the share issue in the second quarter.

Despite the “challenging” start to the year, Donaldson said the bank posted a 17 percent year-on-year revenue increase for the first quarter, though interest expenses on recently issued debt and accounting changes halved the FI’s profits to $5.63 million. The bank highlighted low default levels and a small portion of non-performing loans, which account for 0.18 percent of its portfolio, reports said.

Personal accounts increased 24 percent year-on-year, and business accounts increased by 23 percent during that same time, the bank said.

Earlier this year, Banking Competition Remedies awarded Metro Bank a portion of RBS funds to boost competition in the small business banking sector, a decision that caused some controversy and raised questions over why Metro secured the award despite the accounting error.