Shareholders turn on Metro Bank founder: Legal & General leads bid to oust Vernon Hill after £375m cash call
Metro Bank last night warned it could face criminal charges over an accounting error as it suffered a backlash from disgruntled investors.
The lender has been under fire since January when it admitted it had miscalculated the riskiness of property loans, which saw its share price collapse.
Metro secured a £375m lifeline from investors on Thursday night to shore up its position following weeks of speculation about its future that saw worried savers pull out cash from their accounts.
Friends in high places: Major backers are demanding the removal of founder Vernon Hill
But a significant shareholder rebellion is expected at its annual general meeting next week, with some major backers demanding the removal from the board of chairman and founder Vernon Hill.
The rebellion is being led by City investor Legal & General Investment Management, which looks after £1 trillion of savers’ money and raised concerns about ‘accounting errors’ and the ‘significant’ fall in the share price.
Fellow investor Royal London said it will also vote against Hill, chief executive Craig Donaldson and another six directors.
The stock has tumbled from a high of 4040p last year to as low as 475p earlier this week.
Shares rose 26.2 per cent, or 140.5p, to 677p yesterday after the fundraising was secured.
But one insider predicted that up to 20 per cent of shareholders may vote against the reappointment of Hill, who set up the bank in 2010. In documents released last night detailing the terms of its fundraising, Metro spelled out for the first time the possible consequences of a probe by regulators into its accounting error.
The lender said: ‘The investigation may lead to a public censure, financial penalties or compensation payments, a variation or suspension of Metro Bank’s regulatory permissions and possible criminal liability for Metro Bank.’
Sources said criminal action was unlikely, but it casts another shadow over the bank ahead of Tuesday’s AGM.
BILLIONAIRE BOSS: VERNON HILL
Metro founder Vernon Hill made his fortune running a Burger King franchise in his native America and then took this retail expertise into banking.
The 73-year-old – pictured with former golfing partner Donald Trump – launched Commerce Bancorp before being ousted in 2007 over alleged conflicts of interest.
Hill then set up Metro nine years ago, making it the UK’s first new High Street lender for more than a century.
LGIM, which has a 2.02 per cent stake in Metro, has said it will vote against Hill’s reappointment at the meeting, and it is thought others could follow suit.
Metro secured its £375m lifeline by selling new shares for 500p each, almost 90 per cent down from its peak. The bank said the money came from a mix of new and existing investors, although it is not yet known who the new supporters are.
Its biggest shareholder before the placing, US hedge fund chief Steve Cohen, handed over an extra £30m and will have a holding of 9.12 per cent. American investment firm Fidelity pumped in £36.5m more, taking its stake to 8.5 per cent. Chairman Hill also stumped up £5m.
Sacha Sadan, head of corporate governance at LGIM, said they hoped that in sharing their voting intentions early, and after the results of the AGM, ‘this will help encourage Metro Bank to strengthen their governance structures’.