Metro Bank’s shares fell almost ten per cent in early trading after the struggling lender was forced to ditch a £250m bond offering yesterday after a lack of demand from investors.
The challenger bank’s shares fell as much as 12 per cent in morning trading, but then trimmed its losses to 6.8 per cent.
The bond offering, launched yesterday morning, failed to attract investors despite offering a hefty 7.5 per cent yield on the four-year bond. The bank was attempting to raise cash to meet a regulatory deadline in January next year.
Orders had only reached £175m by 1pm yesterday, leading the bank to rescind the offer.
After the offer was scrapped, a Metro Bank spokesperson said: “Given current market conditions we have decided not to continue with the transaction at this time.
“Metro Bank has a strong capital position and therefore the flexibility to raise new capital at the right time between now and the end of the calendar year.”
Barclays analysts said the issue cancellation “raises immediate questions on if/how Metro can return to the market for what is a mandatory issuance before year-end in challenging market conditions.
“However, regardless of whether Metro can eventually issue, we think there’s an increasing likelihood – and need – for Metro to dispose of ‘non-core’ assets,” they added.
The bank has been struggling since it disclosed an accounting error in January that wiped £1.5bn off the value of its stock.
Its share price has dropped nearly 90 per cent since the start of the year, when it admitted a batch of commercial loans had been misclassified and should have been among its “risk-weighted assets”.
The error sparked two regulatory probes, and led Metro Bank to issue an emergency cash call.