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Metro Bank IPO (end Feb 2016): What you need to know It’s been a good couple of years for the ‘challenger banks’. In 2014, OneSavings Bank and Virgin Money both launched high profile IPOs. Then last year Aldermore and Shawbrook both listed in London and saw their shares climb quickly. Now, following on from their success, it’s Metro Bank’s turn to go public. Metro has confirmed it plans to float in London by the end of this month, with a valuation of around £2 billion. That’s a lofty price tag for a bank that’s yet to turn a profit, but its impressive growth prospects will appeal to many investors and demand is likely to be high. If everything goes to plan, the IPO could see Metro catapulted straight into the FTSE 250, which will help to raise its profile even more. In this free report we’ll give you the low-down on why Metro has been so successful, its prospects for the future and what we know about the IPO... The original challenger bank Metro’s floatation comes just over five years after it became the first new bank to launch in the UK for more than 100 years, making it the ‘oldest’ of all the challengers. It was founded by Vernon Hill, a charismatic American with some unusual ideas about banking. Hill began his working life in the fast-food industry helping Ray Kroc, the founder of McDonald’s, to set up new locations across the US. He then took the insights he gained and applied them to banking. Using a ‘fast-food’ approach Hill set up Commerce Bank in the States, focusing on speed of service. It proved to be very successful – Commerce Bank grew at breakneck speed and by the time he sold the company it was worth $8.5 billion. In 2010, Hill set out to replicate his success in the UK by founding Metro. The business model remained beautifully simple; snap up prime high-street locations with high-footfall and then try to win deposits by competing on convenience. As part of a strategy to disrupt traditional UK banking, Metro has targeted new customers through its seven day-a-week service and good accessibility. S P E C I A L R E P O R T T: +44 (0) 1872 262622 F: +44 (0) 1872 265326 E: email@example.com W: www.galvan.co.uk Galvan Research and Trading is authorised and regulated by the Financial Conduct Authority no. 401179 2 At a time when most banks have been frantically closing branches in a bid to cut costs, Metro has been busy opening new ones. These branches, which Metro prefers to call ‘stores’, are quite different from those of other high street banks. They’re open plan with no glass barriers between the customers and staff. Dogs are allowed too; each ‘store’ is stocked with bowls of dog biscuits and water (Hill and his wife are both dog fanatics). Incredible growth story Hill is betting there are plenty of customers out there who still want to bank somewhere with a local high street presence. So far it looks like he’s been right. In the last five years, since Metro first opened its doors, customer account numbers have soared from zero to 655,000. The latest set of full-year figures, released last month, showed that deposits grew by 78% during 2015, taking the total to £5.1 billion, with loans more than doubling to £3.5 billion. Heavy spending on new branches (sorry – ‘stores’) and more customer service staff have prevented the bank from making a profit so far. But prospective investors won’t be focusing too much on the bottom line just yet anyway. It’s far more likely they’ll be looking to buy the bank based on its growth prospects. After starting with just four ‘stores’ in Holborn, Earl's Court, Fulham and Borehamwood, the bank now operates at 40 locations across Greater London, employing more than 2,000 people. It’s looking to accelerate this growth even more, with nine new ‘store’ openings planned for 2016 and a target of 110 in total by 2020 (more than double the current number). Demand is expected to be high Whilst full details of the IPO are yet to be confirmed, it’s been reported that Metro haspencilled in 24th of February for the start of conditional trading, with full admission taking place five days later. The bank has enlisted the help of Goldman Sachs, Royal Bank of Canada and Bank of America Merrill Lynch to run the float and aims to raise £500 million. But it won’t be asking institutions to stump up the cash. In true Metro style, it’s going about things in a rather unusual way. S P E C I A L R E P O R T T: +44 (0) 1872 262622 F: +44 (0) 1872 265326 E: firstname.lastname@example.org W: www.galvan.co.uk Galvan Research and Trading is authorised and regulated by the Financial Conduct Authority no. 401179 3 The 450 existing shareholders will be offered the new shares first in what’s known as stock market ‘introduction’. It’s a cheaper way to do things with no underwriting fees and little need for advertising. It’s thought Metro will be asking investors for £24 per share, which is almost double the £13 they cost when the bank last raised capital in December 2013. Previous rounds of fund raising have been very well received and early indications suggest this time won’t be any different - demand is expected to be high. Other challenger banks that have floated in recent years, such as Aldermore, Shawbrook and OneSavings Bank, enjoyed significant share rises during the months that followed their IPOs. Now all eyes will be on Metro to see if it can do the same. How you could take advantage Once Metro Bank shares are listed they should be offered by most leading stockbrokers. However, if demand is particularly high it may be difficult to buy the amount you require. If you’re looking to gain more exposure to the potential upside offered by Metro Bank, then CFDs could be a way to do so. With a CFD, there’s no size restrictions on position you can hold and they’re leveraged which means for a deposit of just £1,000 you could take a £10,000 position. Here at Galvan Research and Trading we specialise in CFDs. We’re the UK’s leading CFD advisory broker and have won 18 industry awards over the last decade. We provide investors with professional advice and an approachable service backed by an expert team of in-house analysts. Each client at Galvan is looked after by their own personal trader. We tell you specifically what we’re recommending, where to take profits and how to manage your exposure. Galvan is part of Gain Capital, a global trading and technology group listed on the NYSE. For more information on how you can benefit from our service please call Galvan on 01872 26 26 22. S P E C I A L R E P O R T T: +44 (0) 1872 262622 F: +44 (0) 1872 265326 E: email@example.com W: www.galvan.co.uk Disclaimer This report is provided for information purposes only. It is general in nature and does not constitute an offer or a recommendation to enter into any transaction. The research may be unsuitable for certain investors, depending on their specific objectives and financial position. No responsibility is taken for any losses, including, without limitation, any consequential loss, which may be incurred by acting upon the contents of this report. Trading in Contracts for Difference (CFDs) and forex may not be suitable for all investors due to the high risk nature of the products. You may lose all of your initial stake through the use of leverage and may be required to make additional payments by way of margin on a frequent and sometimes daily basis. Failure to do so can result in the closure of part or all of your position. Past performance is not necessarily a guide to future performance. Tax may be subject to change. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. The value of securities mentioned in necessarily a guide to future performance. S P E C I A L R E P O R T T: +44 (0) 1872 262622 F: +44 (0) 1872 265326 E: firstname.lastname@example.org W: www.galvan.co.uk Galvan Research and Trading CMA House, Newham Road, Truro, Cornwall, TR1 2SU Galvan Research and Trading Authorised and regulated by the Financial Conduct Authority WINNER Best