Metro Bank is exploring a potential £2bn merger with Aldermore, a British challenger bank currently on the market following its involvement in the motor finance mis-selling scandal.
Sky News has learned that Metro Bank is in the early stages of evaluating whether to submit a formal offer for Aldermore, which specialises in mortgages and business lending.
City sources said the high street lender is among several parties actively assessing a potential bid, though it has not yet committed to making one.
Aldermore’s owner, South African lender FirstRand, announced in April that it was selling the business after calculating the car finance affair would cost around £750m in compensation payouts.
FirstRand originally acquired Aldermore in 2017 for £1.1bn, meaning any deal at the reported £2bn valuation would represent a significant return on that investment.
Lloyds Banking Group (LLOY.L), the UK’s biggest retail bank, is also among parties engaged in the sale process, according to previous reporting, with Shawbrook Group and other major UK banks potentially entering offers as well.
Metro Bank’s decision to explore an offer for Aldermore signals how far the bank has come since its near-collapse crisis in 2023, when its survival was far from guaranteed.
The bank was rescued through a £325m fundraising effort led by Jaime Gilinski, a Colombian billionaire who now controls just over 50% of Metro Bank’s equity.
Reports last year suggested Gilinski would be open to selling his stake, adding another layer of strategic complexity to any potential acquisition move.
Metro Bank currently carries a market valuation of approximately £1.1bn, with its shares rising around a third over the past year as confidence in its turnaround has grown.
Chief executive Daniel Frumkin has earned recognition from investors for refocusing the bank on more profitable lending segments while simultaneously driving down operating costs.
One significant obstacle for Metro Bank is how it would finance any offer for Aldermore, given that FirstRand is not thought to be keen on a paper-based transaction.
Metro could seek to raise fresh equity or structure part of the consideration in stock, though that approach faces resistance from the seller’s side.
Banking sources also believe any buyer of Aldermore will likely need to negotiate an indemnity against further compensation liabilities tied to the motor finance scandal.
The Financial Conduct Authority’s £9.1bn redress scheme has faced considerable disruption from legal challenges, including from the finance arms of BMW and Volkswagen.
Nikhil Rathi, the regulator’s chief executive, has publicly criticised opponents of the programme and the claims management firms involved in pursuing cases against lenders.
Metro Bank declined to comment on the reported acquisition discussions or its strategic intentions regarding Aldermore.
