Metro Bank shares staggered to a record low this morning after it revealed profits halved in the aftermath of its £900m loans error.
The challenger bank’s share price lost 19 per cent of its value after the market opened following last night’s revelation, falling to 630p, a record low for the company.
It later trimmed losses to stand 13.6 per cent down at 669p after closing at 774p last night.
An exodus of large commercial customers quit the bank due to "adverse sentiment" in the wake of its accounting blunder, it admitted yesterday evening.
Pre-tax profit dropped to £4.3m for the first quarter of 2019, down from £8.6m this time last year, Metro said.
It attributed the drop to a change in accounting standards, which caused a £2m hit, and £3.5m in quarterly interest paytments on Tier 2 debt it issued in June.
The bank also recommitted to issuing a £350m rights issue – first revealed two months ago as a result of the accounting error – by the end of June.
“Adverse sentiment following January's update impacted deposit growth in the quarter, with a small number of large commercial and partnership customers making withdrawals, but we are pleased to see a return to net inflows in April,” said chief executive Craig Donaldson.
He also told Reuters: “It’s been the most chastening experience of my career, a chastening experience for the organisation but people know we are taking this exceptionally seriously.”
Shares plunged 40 per cent to wipe £800m off Metro Bank’s value after admitting in January that many commercial loans had been incorrectly classified in an accounting error.
Metro Bank’s share price sank an overall 65 per cent since the error was revealed, not including today’s fall after the figures came after the stock market closed yesterday – and just ahead of a call with analysts.
“If management were hoping to avoid greater scrutiny by giving analysts limited time to peruse the numbers then this morning’s share price action suggests that while they may have avoided some difficult questions, the numbers more or less speak for themselves,” said CMC Markets chief analyst Michael Hewson.
“They also raise important questions over not only the quality of managements oversight policies but also the auditors themselves.”
Metro Bank faces multiple regulatory probes over its accounting error, which it initially said it had spotted when it divulged the issue back in January.
However, it later confirmed that the Prudential Regulation Authority had noticed the issue and informed the bank.
Donaldson had offered to resign in the wake of the discovery but the board asked that he stay.
As shares slid following the revelation Donaldson told City A.M.: “Obviously I’m disappointed but we don’t control the markets.
“What we do control is the business, which continues to grow and was recently named the number one by the Competition and Markets Authority for personal banking.”