Metro Bank is replacing its chairman, Vernon Hill, after pressure to overhaul its leadership following a major accounting error.
On Wednesday the bank reported an 84% drop in pre-tax profits to £3.4m over the first half of the year after being hit with the costs of introducing an efficiency programme and improving internal controls in the wake of the blunder.
The bank said £2bn of deposits had been withdrawn, largely by commercial customers, since the beginning of the year when it had begun to attract negative headlines.
Hill, 73, survived two shareholder revolts over the accounting mistake and had said he would probably die before stepping down from the bank he founded in 2010.
He will still hold a non-executive director role and take a position as president. The bank said it would now launch a search for his replacement as chairman.
Metro Bank said: “Mr Hill believes that the bank has now reached a size and scale where it is appropriate to appoint an independent chair. This transition will also ensure that the board continues to evolve in line with best-practice corporate governance guidelines.”
About 12% of shareholders voted against Hill’s re-election at the bank’s AGM in May after ISS, an influential shareholder adviser, had urged them to withhold support for Hill and the chief executive, Craig Donaldson, over the accounting mistake.
In January Metro Bank revealed it had misclassified loans worth £900m as being less risky than they were. The discovery meant the bank had a smaller capital cushion to protect it from a larger pool of risky loans in the event of a downturn. The mistake prompted investigations by City regulators.
The bank later announced plans to tap shareholders for £350m to shore up its balance sheet and fuel further growth. It would eventually raise as much as £375m, but not before the spate of negative headlines sparked customer panic over the bank’s financial health. Rumours spread on social media resulted in queues at some west London branches where people tried to empty their safety deposit boxes and withdraw cash.
Hill, who counts Donald Trump among his golfing buddies, dodged a shareholder rebellion last year over contracts handed to his wife’s architecture firm, InterArch, now worth a total of £25m. The arrangement attracted criticism from shareholders who said it posed a conflict of interest.
In May the lender quietly announced in its annual report that it was severing ties with InterArch, saying it hoped to find “alternative suppliers” for architectural, branding and marketing services by the end of 2020.