Shares in Metro Bank closed over 35 per cent down at a fresh record low after the lender cancelled a crucial £250m bond issue designed to bolster its balance sheets to meet regulatory demands.
The challenger bank’s shares opened down as much as 17 per cent before trimming losses slightly, but then crashed again in the afternoon. Shares closed 35.8 per cent down at 175p.
Metro Bank has struggled to regain investor confidence since disclosing a major accounting error in January that wiped over £1.5bn off its stocks.
The bank’s shares have crashed over 90 per cent since disclosure of the error, which sparked two regulatory probes.
“The scrapping of an important financing operation, combined with a record-low share price is not a good look for a bank, as confidence is clearly weak,” said CMC Markets’ David Madden.
The lender dropped a £250m bond issue designed to attract investment yesterday after a lack of interest, despite Metro Bank having offered investors a substantial 7.5 per cent yield.
The bond was issued on Monday morning, but orders had only reached £175m by 1pm yesterday, leading the bank to rescind the offer.
“It’s crazy to think it was offering 7.5pc on these notes and still couldn’t get the demand,” said Markets.com’s Neil Wilson. “This is a worrying sign that the bank is not able to raise fresh debt and/or capital when the going gets tough.”
Metro Bank is required to raise bail-in debt known as MREL to meet a regulatory deadline next January.
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 analyst Aman Rakkar said the 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.”
Rakkar also warned of “an increasing likelihood – and need – for Metro to dispose of ‘non-core’ assets”.