Metro Bank shares tumble on reports it needs £600m to shore up balance sheet
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Metro Bank shares tumbled by more than 20 per cent this morning after reports that the challenger is in talks to raise hundreds of millions of pounds in an effort to shore up its balance sheet.
Metro has reportedly hired bankers at Morgan Stanley and Moelis to raise £600m in extra financing, which includes £250m in equity funding and £350m in debt.
Royal Bank of Canada, Metro Bank’s corporate broker, is also involved in the equity raise, while a possible £100m in share sales is also being considered.
Ratings agency Fitch placed Metro Bank on negative watch on Wednesday, citing concerns over its capital strength, funding and business model.
Metro Bank’s shares have plummeted more than 50 per cent in the past month after regulators refused a request to lower the capital requirements attached to its mortgage business.
In early trading Metro Bank shares fell to 38.5p, valuing the company at £66.5m. The bank was valued at about £3.5bn in 2018.
Russ Mould, investment director at AJ Bell, said: “Metro as an individual institution is certainly being pushed into existential territory with the shares now at all-time lows.
“Existing creditors and investors may feel they have no choice but to participate, though they are unlikely to do so with any great enthusiasm.”
Metro, founded in 2010, was hit by an accounting scandal in 2019 when £900m of loans were classed as less risky than they were, prompting the resignation of chief executive Craig Donaldson.
The co-founder Vernon Hill also stepped down as chairman that year.
The resulting share price collapse was the biggest single-day fall of any UK bank since the 2008 global financial crisis, and Metro has been attempting to restore its reputation since.
The challenger bank has 76 “stores” across England and Wales and plans to open 11 more across the north of England by the end of 2025.
A spokesperson for Metro Bank told City A.M last night that it was continuing “to consider how best to optimise its capital resources to allow it to take advantage of the deposit and asset origination platform that has been built”.