An interview with Dan Frumkin, CEO, Metro Bank

Daniel Frumkin, I'm chief executive with Metro Bank. Thank you so much indeed for joining us.

Yeah, it's a great question, John, and one we actually get a fair amount now both from the press. And I think it's an interesting consideration. As you know, Metro was formed out of the last crisis 10 years ago, and there's little from this crisis that doesn't make us believe that we're well positioned to move forward post-pandemic. I mean, community banks play a huge role in growing the economy. We're very focused on SME businesses; we have local business managers in every store. That's going to be hugely important as the UK gets through this cycle and comes out and tries to grow again as a country. I mean, I think we're going to see more startups over the next 12 months than we've seen in any period in the history of the UK. So you know, we think we're really well positioned. Again, we really focused on communities and customers and colleagues through the pandemic. We were NHS drop-off points; every store stayed open throughout the whole pandemic. We delivered cash to those who were having to quarantine. We've done everything we can do to try to solidify our position. And you know, I am American, which I accept, although I do have a British passport. The reality is that I fundamentally believe community banks are hugely important to how an economy grows. I mean, the analogy I like to use, which is always a bit goofy, but what I like to use: you know, before Walmart was Walmart, it was a single store five and dime in Rogers, Arkansas. And it banked with a local community bank, and that community bank helped it open its second five and dime, its third five and dime. And I fully accept that Walmart doesn't bank with that community bank anymore, but it wouldn't exist today if it wasn't for that local community bank. And I think the UK needs more of that, not less.

Yeah, again, I've seen a lot of the press over the weekend. I've had a few conversations with UK Finance, so I'm pretty aware of what they're talking about. And you know, the magnitude of this, I don't think should be missed. I mean, even Metro, which is quite a small bank, we did over 30,000 BBLS loans, over 1.1 billion pounds of lending. I mean, almost 10% of our loan portfolio is now in BBLS loans. It's a huge undertaking for us. And we fully understand that not all those loans are going to repay. I mean, it's just inevitable that all those businesses aren't going to survive. And I hope, John, that over time the commentators get in the mode of realizing how great it is that the businesses that do survive — I mean, even if 20% of those loans go bad, that means 80% of those businesses are here to employ people and drive economic activity, and they may not have been without the BBLS scheme. So I do think the Treasury deserves a lot of credit for BBLS and CBILS and the furlough scheme. I think they positioned us well in terms of what happens in month 13, as we all affectionately like to call it. I think month 13 is going to be an interesting moment. It's the moment where people need to start paying back their BBLS loans themselves instead of the government. And we fully expect that there'll be a significant amount of defaults. And I know that this collections function has been discussed as the banks trying to insulate themselves, and you know, they don't want to be held responsible, and this is the possibility of a debt collection agency being set up. Yeah, and I think, listen, I can get how the papers would get in there and inevitably, you know, RBS has past issues, Lloyds' past issues come up as part of that story, and all that I get. I think I don't think that's the core reason, at least in my conversations with people, that it needs to happen. I think the country needs a bit of a utility. I think it needs a collection engine that will treat people fairly and consistently. I mean, the reality is, if I've done 30,000 of these loans across the UK, there's hundreds of thousands of these loans. And the reality is that Lloyds and RBS and Metro will collect them slightly differently. We're just humans; we will do it slightly differently. And actually, given the scale of the issue, what we really need is consistency for every borrower. And the best way to do that is to create a collections function that's a bit of a utility where we all sort of put our loans in together and go from there. But you know, there's a lot of room between the lip and the cup before that gets done.

Yeah, so listen, the second wave will be painful. I mean, I think the reality is, not only for the personal impact — and we shouldn't lose sight of the tens of thousands of people who've lost their lives through this, which outweighs any sort of economic cost, and it's been terrible — but the reality is that a second lockdown, if it were to occur, would be really difficult for the macro economy to get through and come out the other side. And you know, banks, we're just a macro economic play, right? I mean, at the end of the day, we're as good as the economies we operate in, and therefore we need the macro economy to be strong. And yeah, a second lockdown would be difficult. Do I think the banks are in jeopardy? I don't. I mean, the amount of capital we're all carrying is significantly in excess of anything anybody carried pre-crisis. And the reality is that even under a very stressed scenario, I'm pretty confident in the banking infrastructure to exist and play a key role in how we grow out of it. And even if there is a no-deal Brexit, which of course we're heading towards at the moment — there's little signs, you know, contacts with Europe, etc. Yeah, I must admit, I now dream of a period where all we were talking about was no-deal Brexit. I must admit, you know, at this point, in September we would have all been in full-on panic about a no-deal Brexit. We would have been like, 'It is the end of the world as we know it, the economy is gonna...' And actually, it can't even get airtime because of the COVID situation. Listen, we're a small little community bank. I mean, we're preparing for no-deal Brexit; we've been preparing for some time for no-deal Brexit. I think we understand the effect, but in terms of magnitude, a second lockdown significantly outweighs any no-deal Brexit economic impact. Yeah, gotcha.

So listen, you know, we refer to our branches as stores. We really try to differentiate ourselves from the UK banking market, and we've really managed to grow to over 2 million accounts and over 15 billion pounds of deposits by being different than the other UK banks. So I like to think that Metro wasn't painted with the same brush as the other banks. And I actually think a lot of the negativity around Metro last year was really, you know, it was own goal after own goal after own goal. I mean, it wasn't macro, it wasn't anything; we just couldn't get out of our own way. And I think our customers really appreciate the differentiated service: the extended hours, the seven-day week, the dog-friendly, all of that stuff that really differentiates us, the store focus. I hope we're not painted with the same brush as the rest of the industry. And to be clear, the industry has a lot of work to do before I think the image of banks fundamentally shifts. Yeah.

Yeah, and John, I don't think we have a firm answer. So we're still working on — we have a whole return to the office program. Again, who thought you'd need one of those? So we have a whole return to the office program underway where we're looking at cultural issues, we're looking at training issues. You know, I worry about a 23-year-old kid who joins the bank and wants to have a career. I mean, personally, my career advanced over cups of coffee, a pint in the pub, meeting people in a meeting and having a casual conversation. And you know, they thought I could do basic math, so they gave me an opportunity. I don't know how to do that in this remote setting. So you know, there's a lot of issues on return to the office. I think fundamentally though, I don't see us going back five days a week. I think the reality is it'll be some mix of working from home and working from the office. I think working from the office will feel different too. I think it'll be a collaborative workspace. I think we'll use it to do more cross-discipline meetings. I think it's going to have a very different feel to it than it did historically. But you know, it's early days and we need to let it play out. And for Metro, the single biggest thing that we have is our culture, and we need to hold our culture. And that requires us to interact as human beings. And so I'm a bit worried about it, but as you say, I've been stunned with how productive we've been remotely. Yeah, this really has worked. I've had numerous exec committee members join the team who've never been in the office, who've never met people face to face, and they've been wildly productive and settled in the organization really well. The one trick I'd give everybody who's listening is: if this is the way you're working, you need to use it casually as well. So I miss bumping into people in the hallway. One of the things I do is I actually ring people on Teams randomly. I will literally call them out of the blue, make them turn on their camera, and we will chat for 15 minutes, usually not about work. If you don't do that and you stick to just a meeting schedule on Teams, it's not going to work. You need to figure out a way to keep those casual interactions. Have a cup of coffee with somebody over Teams, have a pint after work. You need to do all of those things even though you're not physically together.

Thanks, John. I really enjoyed it.