US private equity giant Carlyle has walked away from talks to buy British high street lender Metro Bank, prompting markets to spit out the lender.
Its shares plummeted over 19 per cent today. However, they are still above where they were before Metro Bank announced it was being courted by Carlyle.
However, that take did not chime with City analysts, who dismissed the lender’s prospects under its current ownership structure.
“Management of Metro bank highlight that they strongly believe in the standalone strategy and future prospects of the bank,” Shailesh Raikundlia, an analyst at Liberum, said
“However, we continue to believe that the business model is challenged and expect the group to be loss making throughout our forecast period.”
Analysts at Goodbody predicted news of the tie up breaking down would trigger “significant selling pressure” and markets unduly delivered.
The lender, famous for its 7 day a week branches, announced Carlyle was mulling a takeover earlier this month. Metro Bank’s shares soared on the news, but have since tanked.
Carlyle reserves the right to come back with a proposal, but only according to City takeover code rules for the next six months.
Mid market lenders have been squeezed by a prolonged record low interest rate environment, making them a less attractive prospect for buyout firms. Digital banks have also eaten into their market share.
However, the growing likelihood of central banks lifting interest rates has brightened the outlook for smaller banks.
Analysts suggested Metro Bank could be targeted by other buyout firms now that Carlyle has pulled out of talks.
John Cronin, banking analyst at Goodbody, said: “There is also, of course, the prospect that other would-be buyers emerge from the woodwork in the wake of the Carlyle approach.”