Of course, retail banks can be sensitive to rumour, and I don’t want to be the person that shouts ‘fire’ in the metaphorical movie theatre. Metro’s retail deposits did, in fact, grow in the last reporting period, and overall deposits returned to growth in June and July. But having watched Metro’s problems mounting up this year, I will admit to concluding that late opening times and a few extra basis points of interest weren’t, for us, worth even the remotest possibility of a painful brush with the Financial Services Compensation Scheme. Cash is supposed to be risk-free after all.
A quick trawl of social media reveals others are similarly minded. And with growing nervousness about the security of those deposits, the bank’s comms team are again – after quashing similar rumours in May – responding to reassure customers that their money is safe. They are likely to be working harder still after the implications of this week’s failure to launch a £250m bond issue at a whopping 7.5 per cent coupon percolate through the market. As Alex Newman explains on page 10, we’re sticking with our view that you should sell the shares, which have fallen 93 per cent since we first suggested doing so.
In Alex’s final analysis, Metro Bank is executing a flawed strategy badly – and its failure to use a single punctuation mark in its latest regulatory news statement hardly suggests an organisation with its eyes on the detail. In fact, the company blamed the big picture of “market conditions” for its latest troubles, and in fairness this claim is not without merit. Signs of distress are everywhere, whether that be individual companies’ debt issuance struggles (Aston Martin offered an eye-watering 12 per cent coupon to raise $150m this week) or the outright collapse of others such as Thomas Cook, a ticking debt time bomb triggered by the start of a wider economic slowdown, as James Norrington explores in this week’s economics column. Bad companies have nowhere to hide when things get tough.
Against such a gloomy backdrop, it is all the more important that investors remain disciplined, and alert for the red flags that can steer us away from those companies – or, thinking more positively, indications that good companies have been unfairly sold off. That’s why we’ve recently started two parallel series on accounting from the two Phils – Ryland and Oakley – which continue this week – because paying attention to the important financial details means you’ll have a much better change of laughing all the way to the bank.
