the times | Thursday August 6 2020 1GM 39
Business
Metro Bank warned yesterday that it
might breach capital rules as it reported
a £241 million first-half loss because of
loan impairments, crunched margins,
an abortive expansion in London and
the cost of addressing last year’s
accounting blunder.
The bank, which was set up in 2010 to
take on the traditional high street len-
ders, told shareholders that it might
temporarily drop below a key capital
ratio known as MREL, or minimum
required eligible liabilities.
The loss for the six months to June
compared with a £3.4 million profit last
time and included a £112 million charge
for borrowers that it expected to default
in the coming months.
The provision was boosted because
Metro took a comparatively gloomy
view of the economy, assuming that
house prices will fall by 14.5 per cent this
year and that the unemployment rate
will rise to 8.4 per cent.
Metro also disclosed a £26.6 million
Arm’s blueprints have been used to de-
velop more than 165 billion chips, inside
smartphones and supercomputers. The
company has more than 6,000 staff
around the world.
Interested parties have been granted
sight of select financial data and fore-
casts as they weigh up an investment or
a takeover bid. Arm said last night that
it “does not comment on rumour or
speculation”.
This week Samsung dismissed as
groundless reports that it is considering
the acquisition of a small stake in Arm.
Talks over a deal have been hit by a
row at Arm China, which threatens the
British company’s position in a market
that brings a fifth of its revenue.
Staff at the subsidiary, of which Arm
owns 49 per cent and Chinese investors
the rest, claim that the parent company
tried to cancel customers’ contracts.
The allegations were made in an open
letter on Wechat, the messaging app.Bid battle hopes
fade as Hastings
accepts suitor’s
takeover offer
Patrick HoskingPressure builds on Metro Bank funding
Patrick Hosking write-off associated with the closure of
its luxury offices in central London and
another £17.8 million bill for the reme-
diation programme put in place after
the accounting scandal. A final blow
was the sharp narrowing of the net in-
terest margin — the difference bet-
ween borrowing rates and lending rates
— from 1.62 per cent to 1.15 per cent.
Metro Bank was the first new high
street bank in more than 100 years
when it ewas established and now has
2.1 million account-holders and 77
branches. It was floated in 2016. How-
ever, it was thrown off course when it
admitted that it had misclassified
£900 million of high-risk loans in
January 2019. That led to an investi-
gation by the Prudential RegulationAuthority and the Financial Conduct
Authority, two fundraisings last year
and a clearout of the board, including
the exits of Vernon Hill, 74, the bank’s
founder and chairman, and Craig
Donaldson, 48, its chief executive.
The bank’s shares, which were as
high as £40 in 2018, fell 7½p, or 6.7 per
cent, yesterday to 107p.
The Bank of England is reviewing
MREL levels required of banks. “De-
pending on the outcome, the board
may consider raising £200 million to
£300 million further MREL in the first
half of 2021. Ahead of this, MREL
resources may fall below the sum of the
firm’s MREL requirement and buffers
[loss-absorbing capacity] for a period of
time,” Metro said. Banks are allowed to
temporarily breach some capital rules.
Dan Frumkin, 56, Metro’s new chief
executive, said that the bank’s transfor-
mation plan remained on track and
took heart from the 8 per cent growth in
deposits in the six-month period to
£15.6 billion: “We’re pretty happy, even
though the numbers look difficult.”JONATHAN TORGOVNIK/GETTY IMAGESBig two suppliers to Apple
locked in an Arm wrestle
Callum Jones Trade CorrespondentTwo leading suppliers to Apple have
been linked to the race to buy Arm
Holdings, Britain’s most valuable tech-
nology business.
Foxconn and Taiwan Semiconductor
Manufacturing Company (TSMC)
have expressed interest in investing in
the Cambridge-based company, which
designs semiconductors used in the
iPhone, according to the Nikkei Asian
Review, the Japanese publication.
Softbank, the Japanese technology
investor, which bought Arm for $32 bil-
lion four years ago, is holding talks with
potential suitors for Arm about a sale.
Talks have also involved Qualcomm
and Nvidia, the US technology groups,
according to reports, while Apple walk-
ed away after judging the opportunity.
Foxconn is the world’s biggest con-
tract electronics manufacturer and
TSMC the largest contract chip maker.Hastings has agreed to a £1.66 billion
cash offer from a consortium led by
Sampo, the Scandinavian insurance
group.
The motor insurer recommended a
250p-per-share offer from Sampo and
Rand Merchant Investment, the South
African fund manager that already
owns 29 per cent of the business.
Shares in the company raced more
than 17 per cent, or 37¼p, higher to
252¼p last night, a level that suggests
traders think there is no chance of a
rival deal being flushed out. Hastings
shareholders stand to be paid 254.5p
after including a 4.5p interim dividend.
The offer is at a 47 per cent premium
to the Hastings price on the day last
week before details of the approach
leaked out, forcing the company to
issue a holding statement. It is also
41 per cent higher than the price at
which Hastings was floated in 2015.
The independent directors judged
the offer price “fair and reasonable”
after taking advice from Barclays,
Fenchurch Advisory Partners and
Numis. There is no break fee, meaning
that a rival bidder could make an
approach. However, that is thought un-
likely because RMI is backing the deal
and will be a 30 per cent shareholder in
the business, a junior partner to Sampo
with 70 per cent.
Hastings, which is led by Toby van
der Meer, 43, its chief executive, has
about three million policyholders and
3,300 staff and is based in Bexhill-on-
Sea in East Sussex. It is focused mainly
on selling motor cover and has been
pushing into home insurance, a strate-
gy that Sampo plans to accelerate. It is
a member of the FTSE 250 index.
The deal will create some big
personal gains. Neil Utley, who led a
management buyout of Hastings in
2009, owns 4.4 per cent of the company,£241m
Metro Bank’s first-half loss
Metro Banka stake worth £73 million at the offer
price. Gary Hoffman, the former chair-
man and chief executive, has eight mil-
lion shares worth £20 million. Mr van
der Meer has 3.5 million shares and
potentially another 1.5 million in un-
vested bonus arrangements.
Sampo is based in Helsinki, Finland,
and has operations spanning life,
property and casualty insurance. It also
has a wealth management unit and is
the biggest shareholder in Nordea, the
largest bank in the Nordic countries. It
is quoted on Nasdaq Helsinki with a
€17.6 billion market value.
Motor insurers including Hastingshave struggled recently, hit by fierce
price competition and a change in the
official formula that determines com-
pensation paid to accident victims.
In a vote of confidence in post-Brexit
Britain, Sampo said that it had been
considering a geographic expansion
beyond its existing Nordic footprint
and believes that “the UK, as the
second largest retail property and
casualty market in Europe, offers an
attractive scale opportunity.” Sampo is
issuing a €1 billion bond to finance its
offer.
Shareholders will vote on the offer
before the end of September and the
deal is expected to be completed before
the end of the year.Hastings has built a strong position in
the British motor insurance marketT
he New York Times
generated more
revenue from
digital sources
than its print business for
the first time during the
second quarter (Simon
Duke writes).
In his swansong results
as chief executive, Mark
Thompson, the former
BBC director-general,
hailed the tipping point as
a vindication of the
publisher’s investment in
its online offerings.
“We’ve proven it’s
possible to create a
virtuous circle in which
whole-hearted investment
in high-quality journalism
drives deep audience
engagement, which in
turn drives revenue
growth and further
investment capacity,” said
Mr Thompson, 63, who
stands down next month.
The company said it had
added 669,000 subscribers
to its digital products,
which include news,
podcasts, crosswords and
recipes. It has more than6.5 million subscribers, of
whom 5.7 million pay for
online services.
The Gray Lady, as the
paper is nicknamed, made
$189 million from digital
products, higher than the
$175 million it made from
print subscriptions in the
three months. Revenue
from subscribers rose by
8.4 per cent, helping to
cushion the blow from a
44 per cent slump in
advertising. Total revenue
fell by 7.5 per cent to
$404 million. Under MrThompson, the publisher
has shifted towards a
subscriber-backed model
in an effort to cut its
reliance on advertising.
Founded in 1851,
The New York Times is the
second most-read
American newspaper,
after the national
USA Today. President
Trump has repeatedly
dismissed the title as “the
failing New York Times”,
yet it has been a
beneficiary of his time in
the White House.