Metro Bank CEO Donaldson follows chairman out of door

(Reuters) - Metro Bank MTRO.L chief executive Craig Donaldson is leaving after a torrid year in which the British lender was engulfed in a damaging accounting scandal that has also cost it its chairman and wiped 90% off its market value.

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Donaldson, who has been in the role since 2009 and is one of Britain’s longest-serving bank CEOs, will be succeeded on an interim basis by Chief Transformation Officer Dan Frumkin from the start of next year, Metro said in a statement.

Metro said in October its chairman and founder Vernon Hill had quit two months early and warned it may have to curb its growth plans after posting a third quarter loss.

The bank is under investigation by regulators after disclosing it had under-reported its exposure to higher-risk loans by almost 1 billion pounds ($1.28 billion).

The lender has previously warned possible penalties could be substantial and could lead to criminal investigations.

Known for its glossy branch network and customer perks such as pet treats and weekend opening hours, Metro was the first bank to be granted a high street banking licence in Britain in 150 years in a bid to foster competition in the sector.

But Metro’s shares have fallen nearly 90% this year and the bank’s biggest backer, billionaire hedge fund manager Steve Cohen, has cut his stake in recent weeks to 6.46%, from 9.86%, regulatory filings show.

A Metro spokeswoman said on Wednesday that Donaldson was not leaving as a result of regulatory or investor pressure, adding that his departure had been a mutual decision with the board.

“While this has undoubtedly been a challenging year, it has been a privilege to serve. I committed to work with the Board until we felt that the Bank was sufficiently strong for me to step away. This has been achieved,” Donaldson said.

Metro said it would consider both internal and external candidates to replace Donaldson, adding that he will remain available to the board as an advisor until the end of 2020.

Donaldson will get full pay, pension and non-cash benefits during a 12 month notice period, although he is giving up bonuses for 2018, 2019 and 2020, Metro said.

Reporting by Noor Zainab Hussain in Bengaluru and Iain Withers in London; Editing by Susan Fenton, Christina Fincher and Alexander Smith