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Metro Bank’s nightmare and joy for clothing retailer, Joules

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Metro Bank’s nightmare

So yesterday, challenger bank Metro Bank admitted that it had made serious errors in its loan book which sparked investor panic that sent its shares down by almost 40%.

Basically, it mis-classified commercial property and commercial-buy-to-let loans by giving them a lower risk weighting than they should have had.

The bank compounded the bad news by saying that tricky trading conditions meant they fell about 20% short of their profit targets, although they were still 136% higher than the previous year.

This is clearly not great for the bank and I would have thought that other banks may well be scurrying off in the background to make sure they haven’t made the same error otherwise, if they have, this thing could snowball.

I think that investors headed for the exit because they thought that the latest news would make another capital raising more likely only months after the last one, but they were also probably disappointed by the shortfall in profits.

Joy for Joules

The second thing I wanted to talk about today was Joules after the clothing retailer bucked the generally gloomy trend for the UK high street by announcing sales up by 17% in the six months to November versus the previous year and pre-tax profits up by 11%.

It seems to me that Joules has managed to strike a good balance between its offline and online offering and will be adding to this by licensing deals with third parties to provide things like DFS branded sofas, toiletries at Boots and glasses at Vision Express.

I’m personally not that convinced by the licensing, but it’s all going to be money in the bank for Joules in the meantime and that’s got to be a good thing!

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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