Getting a slug of free cash appears is going down well with investors in challenger bank Metro Bank (MTRO). The high street business revealed today that it has been awarded £120m from the Banking Competition Remedies (BCR) scheme.
The £775m BCR fund was belatedly launched last year by Royal Bank of Scotland (RBS). It was part of the deal struck with the UK government as part of its bail-out a decade ago with the aim of encouraging competition in small enterprise lending.
LUKE-WARM RESPONSE
What is worth noting is that today's seemingly positive response - Metro Banks shares have rallied 5% to £13.69 - adds only £63.5m to Metro's market value, implying a fairly lukewarm response overall.
This is perhaps unsurprising given the bigger picture. Metro Bank shocked the market last month by revealing that it had miscalculated the amount it needed to set aside for ‘risk-weighted assets’, sending its shares down almost 40% in a day.
Worse still, the miscalculation wasn’t picked up by the bank but by the regulator which suggested that internal controls are not all they might be.
COMPUTER SAYS 'NO' TO CYBG
But there will be sad faces at rival, and larger, lender CYBG (CYBG), the owner of Yorkshire Bank, Clydesdale and Virgin Money. It missed out on its own BCR windfall despite the bank's claim of to be ‘a more effective competitor than any other eligible bank’.
CYBG's share price has slumped 5.5% to 186.3p in response.
As well as Metro, the BCR is paying out £100m to unlisted Starling Bank and £60m to ClearBank, with the idea of improving their own lines of lending product for small and medium-sized companies.
