Metro Bank plunges on talk of big fundraising to fix finances

LONDON, Oct 5 (Reuters) – Metro Bank (MTRO.L) shares plunged more than 25% on Thursday following reports the British lender was exploring options to raise as much 600 million pounds ($728 million) in debt and equity to bolster its finances.

Shares in the bank have lost about two thirds of their value since mid-February. As of Wednesday’s close, the lender, which reported around 15.5 billion pounds in customer deposits at June 30, was valued at 87 million pounds.

The fundraising could include more than 100 million pounds from selling shares to bolster capital, three sources familiar with the matter told Reuters on Wednesday.

Metro said in a statement on Thursday it was considering its options, adding that it met its minimum capital requirements and had not made a decision on fundraising plans.

“The company is evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and/or refinancing and asset sales,” it said.

Shares in the bank dropped as much as 29.4% on Thursday, triggering two brief automatic suspensions in trading. They were last down 24.8% at 0819 GMT.

A 350 million bond due to mature in 2025 also fell sharply, according to MarketAxess, dropping by around seven pence on the pound from Wednesday’s close.

Some analysts were unconvinced by the bank’s prospects.

“Supporting a further capital raise for this struggling bank would be akin to throwing good money after bad, in our view,” Gary Greenwood, banking analyst at Shore Capital said in a note.

“Investors and bondholders may therefore be better served investing their money elsewhere.”

Metro Bank recently brought in Morgan Stanley as adviser, the sources said.

The lender, established to challenge the dominance of Britain’s top lenders, has encountered a slew of challenges since its 2016 listing.

Its shares dipped last month after the Bank of England’s Prudential Regulation Authority (PRA) – its principal regulator – signalled it was unlikely to allow the lender to use its own internal risk models for some mortgages.

Metro Bank is subject to higher capital requirements set by the regulator if unable to use its own models, a concern that has been weighing on the stock.

The PRA declined to comment on Thursday.

Metro Bank was also forced to raise shareholder equity in 2019 after an accounting error led to a misreporting of its risk-weighted assets, spooking investors and regulators and wiping hundreds of millions of pounds off its market value.

“The board retains conviction in the merits of Metro Bank’s customer-centric model and strongly believes that there is a significant opportunity set that the company can capitalise on, subject to renewed balance sheet strength,” Metro said in September.

($1 = 0.8239 pounds)

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