Metro Bank Faces Shareholder Revolt Over Executive Pay Hikes

Metro Bank, the UK’s largest challenger bank, is facing a potential shareholder rebellion over its decision to award hefty pay rises to its top executives despite posting a £271 million loss last year.

The bank, which has been struggling to recover from an accounting scandal and a customer exodus, has proposed to increase the base salary of its chief executive, Daniel Frumkin, by 25 percent to £750,000, and the base salary of its chief financial officer, David Arden, by 20 percent to £600,000.

It has also proposed to increase the maximum annual bonus for both executives from 100 percent to 150 percent of their base salary, and the maximum long-term incentive plan from 150 percent to 200 percent of their base salary.

The pay rises, which would take effect from April 1, would make Frumkin and Arden among the highest-paid executives in the UK banking sector, despite Metro Bank’s poor performance and shrinking market value.

Metro Bank, which was founded in 2010 as a customer-focused alternative to the big high street banks, has been plagued by a series of problems in recent years. In 2019, it admitted that it had misclassified some of its loans as less risky than they were, triggering a regulatory investigation and a sharp drop in its share price.

The lender also faced a backlash from customers who complained about its high fees, poor service and branch closures. It lost more than 300,000 current account customers last year, and its deposits fell by 15 percent to £10.8 billion.

Metro Bank reported a pre-tax loss of £271 million for 2020, compared with a profit of £11 million in 2019. Its total assets fell by 12 percent to £21.4 billion, and its return on equity was negative 23 percent. The bank also suspended its dividend and warned that it would not return to profitability until 2024.

Its share price has fallen by more than 90 percent since its peak in 2018, and it is currently valued at less than £300 million, making it one of the smallest listed banks in the UK.

The bank’s remuneration committee, which is chaired by independent director Monique Melis, said that the pay rises were justified by the need to retain and motivate the executives, who had taken on “significantly increased responsibilities” amid the Covid-19 pandemic and the bank’s turnaround plan.

The committee also said that the pay rises were benchmarked against comparable banks in the UK and Europe, and that they were subject to “challenging” performance conditions and shareholder approval.

However, some of the bank’s shareholders have expressed their opposition to the pay rises, saying that they are excessive and out of touch with the bank’s reality.

One of the bank’s largest shareholders, who asked not to be named, told The Independent that they would vote against the pay rises at the bank’s annual general meeting on April 27.

“We are very disappointed with the remuneration committee’s proposal. It is completely tone-deaf and insensitive to the situation of the bank and its stakeholders,” the shareholder said. “We do not think that the executives deserve such generous pay rises when they have failed to deliver on their promises and when the bank is still in crisis mode.”

Another shareholder, who also asked not to be named, said that they were considering voting against the pay rises as well.

“We are not convinced by the rationale of the remuneration committee. We think that the pay rises are too high and too soon,” the shareholder said. “We think that the executives should focus on restoring trust and confidence in the bank before rewarding themselves.”

Metro Bank declined to comment on the shareholder feedback. A spokesperson for the bank said: “We have engaged extensively with our shareholders on our remuneration proposals and we look forward to receiving their support at our AGM.”