Metro Bank is reportedly considering a potential £2 billion offer for Aldermore, a challenger bank recently placed on the market following its involvement in a motor finance mis-selling scandal. The London-listed lender is reportedly in the preliminary stages of evaluating whether to submit a formal bid for Aldermore, amid interest from several other financial institutions.

Aldermore, which was acquired by South African banking group FirstRand in 2017 for £1.1 billion and was formerly a member of the FTSE 250, was put up for sale in April. FirstRand made the decision after estimating that the motor finance mis-selling scandal could result in compensation costs of approximately £750 million. The scandal centers on car finance agreements that involved discretionary commission arrangements, commonly referred to as “hidden” commissions, which the Financial Conduct Authority (FCA) says led to customers not receiving fair terms when securing loans for vehicles.

The FCA had established a £9.1 billion redress scheme intended to compensate affected motorists, with payments scheduled to begin this year. However, a recent tribunal suspended the scheme in order to hear ongoing legal challenges, delaying payouts and leaving many consumers uncertain about when they might receive compensation.

Alongside Metro Bank, other potential bidders reportedly include Lloyds Banking Group and Shawbrook, which are said to be conducting their own assessments of Aldermore’s value and prospects.

Metro Bank, founded in 2010, has faced significant challenges over the past several years. In 2019, the bank was hit by an accounting error that undermined investor confidence, and in 2023, it experienced a capital crisis that prompted a wave of deposit withdrawals. This episode culminated in a rescue by Colombian businessman Jaime Gilinski, who now holds a controlling stake of 53 percent in Metro Bank.

Since 2020, CEO Dan Frumkin has led efforts to stabilize the bank through cost-cutting measures, including branch closures and staff reductions. Metro Bank reported a pre-tax profit of £87.2 million in the last fiscal year, marking a turnaround from a £212 million loss the previous year.

Metro Bank has not issued any comment regarding the reports of its interest in acquiring Aldermore.