May 21, 2019 / 5:01 PM / 25 days ago

Metro Bank dodges major shareholder rebellion

LONDON (Reuters) - Metro Bank escaped a potential investor challenge at its annual meeting on Tuesday, but there were sizeable votes against several of its most senior directors.

The bank, which was set up nine years ago to take on Britain’s established lenders, disclosed in January it had under-reported the risk on its loan book, which hit its capital and shares and put its management under pressure.

Ahead of the annual meeting, Legal & General Investment Management and Royal London Asset Management had both said they would vote against key directors. Shareholder advisory groups Glass Lewis and ISS had urged investors to block or withhold support on several resolutions.

But despite this opposition, chairman and founder Vernon Hill has retained the support of a close-knit group of private shareholders in the United States.

At the annual meeting, the re-election of Hill was opposed by more than 12% of investors who voted, while CEO Craig Donaldson was opposed by just over 10%.

Metro’s pay report was opposed by 21% of investors who voted, while 28% voted against the re-appointment of board directors Stuart Bernau and Eugene Lockhart.

The bank’s loan book error had wiped more than 1.5 billion pounds off the company’s market value and forced it into an early 375 million pound fundraising.

Some customers also pulled their money out of the bank, although Metro said last week the situation had stabilized and the Bank of England said the lender remained robust.

The crisis has been the first major test for Metro Bank since its launch in 2010 to try to shake up Britain’s banking market and which unusually focuses on rolling out brick and mortar branches.

In opening remarks at the meeting, Hill and Donaldson said the bank would adapt its strategy by slowing its growth and cutting more costs, but defended the bank’s business model.

FILE PHOTO: A logo is seen on the outside of a branch of Metro Bank in central London July 28, 2010. REUTERS/Toby Melville/File Photo

“The last few months have been somewhat of a challenge for us. We’ve had a few ups and downs but our model remains strong,” Hill said.

John Cronin, analyst at Goodbody, had commented ahead of the meeting: “To be fair, the founder and CEO were clearly instrumental in Metro’s successful 375 million pound placing last week.

“The U.S. shareholders are particularly supportive of the chairman and the strength of their collective vote will outweigh the dissenters in my opinion.”

Reporting by Iain Withers, editing by Huw Jones and Jane Merriman

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