Troubled Metro Bank halts loans to property developers

metro bank fundraise

Struggling Metro Bank has stopped lending money on commercial property as it tries to shore up its finances.

The FTSE 250 bank, chaired by American Vernon Hill, has stopped lending against assets such as shopping centres to focus on small businesses and residential mortgages.

Commercial property was at the heart of Metro’s accounting debacle in January, when it failed to measure the risk of some of its loans correctly. The error meant the bank had not set aside enough capital as a safety buffer and triggered a collapse in its shares, then an emergency cash call.

Sources said Metro had suspended lending to new commercial real estate customers in recent weeks. Business and commercial property lending represents about a third of its book.

The accounting crisis, which has derailed Metro’s growth plans, led to a £375m fundraising last month.

“Are they going to be disposing of their commercial real estate book?” said Ian Gordon, an analyst at Investec. “It’s an option they could consider, but the price would be sub-optimal. Everything has snowballed from the accounting issue.”

The bank said it remained committed to other types of commercial lending such as asset finance.